Eircom is stalling broadband uptake

Considering the get-up-and-go thrust of this State's developments which made us the envy of other growing economies, it is surprising to see Northern Ireland wiping our eyes on broadband internet access. The statistics are telling.

Out of a population of 1.7 million in Northern Ireland, there has been a broadband uptake of 150,000; that represents 8.8 per cent. In contrast, Ireland has a population of 3.9 million, but there has been a broadband uptake of 130,000, or just 3.3 per cent.

While this is a substantial improvement on last year, our broadband penetration is still one of the lowest in the EU.

Figures released last July by the EU Commission showed us as the sixth worst, at 1.7 per cent out of the 25 states. We would have moved up the ladder since then - and so would many of the other states as they have broadband availability as a top priority.

However, we are still below the 6.5 per cent average EU rate, and well behind the leader, Denmark, which last year had a penetration rate of 15.6 per cent. Northern Ireland is ahead in other broadband areas.

There is, for example, 98.5 per cent broadband availability in that market, compared with 80 per cent in the Republic, according to a comprehensive report published last Friday in Business This Week. Significantly, BT Northern Ireland, the incumbent in that market, has less than 50 per cent market share; Eircom, the Republic's incumbent, has a commanding 77 per cent. Therein lies the crunch.

Korea and Japan became leading countries for broadband because they forced the incumbent phone companies to allow start-ups use their networks at reasonable, government-set prices. These start-ups, particularly Hanaro in Korea and Yahoo BB in Japan, aggressively took on their giant rivals head-on, leading to lower prices and increased speeds.

These developments were viewed enviously by operators in the US, which saw Bells winning an eight-year battle to stop competitors from using their networks at big discounts.

Competitive developments here have taken a step backwards following Eircom's decision to seek a judicial review on its appeals row with the Commission for Communications Regulation (ComReg). That could take months and, after that, there could be appeals to higher legal authorities, including the possibility of going to the EU.

Eircom is challenging the attempt by ComReg to take away its right of appeal to a new appeals panel for telecom companies.

This followed an earlier appeal by Eircom to the Electronics Communications Appeals Panel, which was set up by the Government to oversee decisions by ComReg on "unbundling", which gives competitors access to Eircom's network.

At issue is ComReg's understandable determination that the unbundled lines should have the option of offering data and voice as a package. Data is not affected, but the package is.

Eircom's moves are self-serving. It is understandable that it tries to protect its own patch, but fast unbundling and competition, is necessary for the development of the industry. So far, only 2,500 out of Eircom's 1.6 million lines have been opened to competitors.

Looking at Eircom's recent results, it is clearly at a crossroads. Revenue was flat at € 1.2 billion in the nine months to December 31st, 2004.

Reflecting competition, and the changing nature of its business, retail traffic was down by 11 per cent, while wholesale was up by 12 per cent. Retail traffic is still larger at 8,790 million minutes compared with wholesale with 5,847 million minutes. This gap should continue to narrow, particularly if total unbundling takes place.

On the surface, there is a big push to get subscribers to embrace broadband. Earlier this week, Minister for Communications Noel Dempsey issued a second call for proposals to local authorities to build advanced broadband networks in a further 47 towns under the current phase of the Government's broadband action plan.

He said this "will ensure the provision of high-speed broadband infrastructure in all towns in Ireland with a population over 1,500". Time will tell how effective this is, but it is could be hit and miss.

Potential subscribers have been bombarded with enticements to go down the broadband route. The most vocal is Smart Force Telecom, which is offering free line rental for the first 100,000 customers and a speed of 2mb - 40 times faster than a normal modem internet connection - at a cost of € 35, including VAT.

This is four times the 516kb (10 times the speed of an ordinary internet connection) speed offered by Eircom, in its standard package, and cheaper than Eircom's broadband offer of € 39.99 (including two months free trial until the end of this month).

Clearly, Eircom is facing robust challenges. After all, weren't the previous avaricious vulture capitalists (they took the company private, later to unload it), responsible for our decline in the international broadband stakes?

Its tactics now, on unbundling the loops, can only be seen as a delaying tactic. The longer the delay, the greater the capacity it has to sign up new subscribers to broadband, and its plan envisages 500,000 subscribers by 2007.

However, this plan will have a negative impact on an industry which offers a wealth of attractive packages.

It is worrying for Eircom that about 30 per cent of the telephone lines attached to enabled exchanges cannot have access, compared with about 1 per cent in Northern Ireland.

Eircom has only enabled 200 of its 1,400 exchanges for broadband - it says most of these are just sub-exchanges - and a further 200 are planned for this year. Is it spending enough on upgrading its network? Obviously not. The spending amounts to €200 million per annum, but an internal company document is understood to have said it needs to spend €400 million per annum. Doesn't that speak volumes?

While DSL (digital subscriber line - it transmits data over phone lines, without interfering with voice services) is the primary mode for broadband accounting for some 87 per cent of the market, fixed wireless, with 6.6 per cent of the market, is growing strongly but from a small base, as is satellite, with just over 1 per cent.

Indeed, it has to be said that the expansion of broadband services over the past two years has been substantial, with Eircom expecting to have over 80 per cent population coverage for DSL this month, rising to 90 per cent a year later.

Eircom agrees that the last 10 per cent should be addressed, and is working with the Government as to how it can be completed.

While 100 per cent should be the goal, usage is more important. Luxembourg, for example, has 100 per cent coverage, but only a 12 per cent take-up. The drive should be two-pronged: coverage and take-up. We are the second highest users of mobile phones in the EU after Sweden and the biggest users of text messages. Why can't we be among the best, with broadband?