The Republic is ranked 51st in terms of broadband penetration which is hardly likely to impress inward investors, writes Jamie Smyth,Technology Reporter

The Republic's ambitions to become a major technology hub looked somewhat foolish yesterday with the publication of an influential survey showing that the uptake of broadband is painfully slow.

Considerably less than one out of every 100 Irish citizens has currently subscribed to a broadband (high-speed internet) service, which is capable of transforming how people use their computers and technology.

The International Telecommunications Union (ITU) ranks Ireland 51st in terms of broadband penetration behind developing nations such as Peru and Croatia, hardly the kind of record that will impress inward investors.

The figures detailed in the Birth of Broadband report may be based on 2002 statistics but with the estimated take-up of broadband currently standing at just above 10,000 users, many analysts are concerned that the Republic may miss the next wave of the technology revolution.

"It [the ranking] is a pretty damning indictment and flies in the face of the IDA's message that Ireland is a technology centre with dynamic and skilled technology workers," says Mr Enda Hardiman, founder of the Irish telecoms consultancy Hardiman Telecommunications.

"Broadband is very important for firms that are considering investing in a country because they need high bandwidth for their communications systems... it will be difficult to sustain the IDA's message without it."

Over the past two years IDA Ireland has consistently lobbied both the Government and the main telecoms firms to roll out broadband at low cost.

It has also admitted that the lack of broadband infrastructure in the regions is a factor preventing it from persuading firms to locate outside Dublin. Just this week internet firm eBay admitted infrastructure was one of the reasons it chose to locate in Dublin rather than accept a better grant package in Athlone.

Even though broadband is now available to 55 per cent of the population, the Government believes now that uptake is being hindered by high prices set in the Republic at about €50 per month.

The Minister for Communications, Mr Ahern, says people will subscribe to broadband when prices come down.

He blames the poor results from the ITU survey on the historical position in the Republic, which had a lot to do with the sale of Eircom, the former State-owned Telecom Éireann. Eircom has only recently started to roll out its broadband programme, says Mr Ahern, who is currently considering more Government intervention to boost availability of broadband and reduce prices.

"I will bring forward a package of measures designed to promote the uptake of broadband shortly and one of the elements will include proposals to build new facilities," he says.

The Government is already spending €60 million in 2003 and 2004 to build fibre rings around 19 key development towns in the regions, which will be made available to carriers, including Eircom, on an equal basis.

The new facilities now being considered by Mr Ahern would probably only benefit Eircom's competitors and enable them to bypass the Eircom telephone exchanges that are required to provide broadband.

The reluctance of incumbents such as Eircom to allow access to these exchanges - and associated lines to offer broadband services - is a major factor in stifling growth of broadband in Ireland and across Europe generally, according to the ITU.

Instead of opening up their infrastructure to competitors the former state monopolies, such as British Telecom and Eircom, have sought instead to make rivals buy their broadband products wholesale. The issue is a constant source of friction between Eircom, on one hand, and its rivals together with the telecoms regulator, Comreg, on the other.

Eircom's main competitor in the Republic, Esat BT, says that Eircom has frustrated its attempts to set up its own viable broadband service. "I'd like to invest more in Ireland but we need the certainty of regulation to justify these investments," Esat BT chief executive Mr Bill Murphy says.

Some observers believe regulatory failure is behind the Government's new activism in the telecoms arena. Not surprisingly, Esat BT supports the Government's proposal to invest in new facilities. It believes the new telecoms assets would enable it to provide broadband at cheaper prices to consumers.

But the Minister has provided few details of the new broadband plan ahead of a Cabinet meeting to discuss the issue.

His Department estimates that it would cost €130,000 to build a single co-location facility, and with more than 200 main Eircom exchanges the final bill may reach up to €30 million.

There is also an extremely sensitive political question over the viability of building an alternative telecoms infrastructure to Eircom's existing exchanges just a few years after the State sold the company in a public flotation.

But in a speech in Rome this week Mr Ahern set forth a strong ideological belief that governments should intervene in markets where "conditions of market failure or of sluggish market responsiveness" exist.

The clear implication of the Government's policy is that Eircom is frustrating the process of liberalisation. Key industry sources suggest the current legal battle between Eircom and the regulator over the cost of accessing its lines and a two year delay in launching broadband because of other regulatory disputes has forced the Government's hand.

Mr David McRedmond, Eircom's director of strategy, would not comment directly on the Government's proposed strategy yesterday, but defends Eircom's role in promoting internet and broadband in the Republic.

He blames the slow pace of Eircom's broadband rollout on the telecoms regulator who would not provide the firm with a broadcast licence in 2000, when it first sought to launch broadband. He also stresses the positive role Eircom is playing with the roll- out of broadband.

This week Eircom cut the price of its wholesale broadband product for competitors to spur demand. And despite competitors' complaints that they now face a "price squeeze" from Eircom's retail arm, the removal of €200 set-up charges should make the service more attractive.

But as the ITU survey results demonstrate, the situation is now critical with the Government facing embarrassment over its claim to be a European e-hub. Eircom's belated move to cut the cost of its wholesale prices could be a case of too little too late, to prevent the spectre of Government intervention in the market.