When the Government's advisory committee on telecommunications published its report in 1998, the Republic was a considerably different place. The telecommunications market was only just beginning to feel the impact of deregulation and the whole State had the feel of being raw and naive newcomers to the Internet era.

Many scoffed at the idea of the Republic becoming what the Department of Public Enterprise and the Taoiseach began to call "an e-commerce hub". How were we ever going to get the kind of fibre-optic broadband Internet networks that were required for such an undertaking? Why would any large e-commerce oriented multinational consider coming here? Who would bother with a very small European state that wasn't even directly connected to the Internet backbone?

One of the committee's principal recommendations was for the Government to become involved in a deal like the Global Crossing transatlantic fibre-optic cable project.

In an unusual arrangement, the Government bought initial capacity on the cable and offered it to Irish telecommunications providers at just above wholesale cost, not more than a quarter of the current retail price. Because the process has also been completely open - the basic price of £5 million (€6.35 million) for 12 single lines was public information - purchasers will have to compete tightly on price when they offer bandwidth to Irish companies. Everyone will know the telcos' margins, and predictions are that prices will drop by a tenth.

"The whole idea reflects the Irish Government's commitment to develop the network there," says Mr Hamish Mackenzie, telecommunications analyst with International Data Corporation in London.

"Ireland has embarrassed some of its much larger and supposedly more capable counterparts in this area."

Soon after Global Crossing, news came of a second transatlantic cable project, from Canadian company Network360. Company representatives stated optimistically that they felt the demand for bandwidth would far exceed that which Global Crossing could provide.

I'd wager they are right, and more than right, because the Global Crossing project suddenly gave the State the kind of broadband profile it had lacked. The promise of bandwidth whetted the appetite of companies looking for a European base and good Net connections.

That has raised interest in the Republic as an e-commerce location. Hence Network360 can be sure the demand for its additional direct-to-the-backbone connectivity will be snapped up when its cable goes live in spring. That's also why there's great interest at the moment in locating "data centres" in the Republic. Data centre companies are eyeing all that connectivity and predicting both multinationals and indigenous companies will rush to get online here.

Data centres are technologically sophisticated warehouses full of large computer servers that host websites and manage their traffic. Companies with heavily-trafficked e-commerce sites usually don't want to deal with that particular technology headache in-house. The news this week that Global Crossing data centre subsidiary GlobalCenter would open such a facility - and a massive one - here was particularly good news, since it is seen as one of the top two companies supplying this kind of service. Other facilities are either in existence or in the offing as well.

All of this suggests that the market is developing well in advance of most people's ability either to keep up with it or even to believe in it. Many people I talk to remain surprisingly sceptical of the State's ability to compete as a capable, much less significant, e-commerce player. They still speak of the lack of broadband connections as if we were back in 1998.

Yet analysts are saying that the Republic will have a quarter of all Europe's broadband capacity by the end of this year. And this is virgin capacity through a clean, relatively untrafficked new hub, not just new lines added to an already heavily-congested Internet centre like London or Amsterdam. One senior industry source says very large e-commerce companies want direct Net backbone access because indirect connections create minute delays, or "latency", which accumulate and noticeably affect data transmission speeds. "These guys want direct access to the backbone; it's a big issue for them," he says.

That is why Esat's decision not to purchase capacity on the Global Crossing cable is so baffling. "If they're offering this (connectivity) at these prices, it seems nonsensical," Mr Mackenzie says. "It just seems like a no-brainer to me."

He said that Esat might feel it had enough capacity already through its own networks (two fibre cables between the Republic and Britain) and those of parent company BT. But he points out that BT itself does not have its own direct connections to the US and that Esat has to go through several connection points to other networks to get on to the Net backbone - a potential latency issue. Esat says it is not buying now because the 12-line offering is an inflexible package of eight lines to Europe via Britain and only four to the US, when it wanted more to the US. "The business case to participate to the UK wasn't attractive to Esat," says Mr David Ralph, Esat's head of carrier services.

Yet at current broadband prices, Esat could ignore the eight lines to Britain and would still have a bargain on its hands for the lines to the US. The company seems to be willing to wait for the Network360 cable to go live for a backbone link, but that gives a nine-month marketing advantage to competitors - light years in Net time, and especially odd considering Esat is building its own multimillion pound data centre and presumably would like to attract big e-commerce projects.

NTL is also not participating but at the moment this is understandable - the company has a massive job ahead of it as it folds in its Cablelink acquisition and rolls out cable Net access and other digital services.

Both NTL and Esat said last week that the door was not fully closed on joining the Global Crossing project. But that's a bit disingenuous; they know that the initial offering of capacity is nearly closed and this is a decision that must be made in days, not months, to be meaningful.

One thing is certain: smaller competitors will become more formidable, since Global Crossing connectivity will make them, in effect, global carriers. And Esat, now part of BT, is no longer the small, nimble competitor it once was. As always, the Net changes everything.

Karlin Lillington is at klillington@irish-times.ie