A national cable network capable of providing a full suite of broadband, digital television and phone services remains elusive, writes Jamie Smyth, Technology Reporter.

Money was cheap back in 1999 when the US-based cable giant NTL paid Eircom and RTÉ €680 million for Cablelink. The firm's largesse was highlighted by an extraordinary agreement during the auction, where NTL agreed secretly to pay 15 per cent more than the next highest bidder, Esat - which was then chaired by the entrepreneur Mr Denis O'Brien.

And the spending didn't stop there. At the height of dotcom mania in mid-2000, NTL Ireland unveiled an impressive €7.6 million rebranding campaign, prompting its managing director, Mr Ian Jeffers, to brag that the company was spending £500,000 (€635,000) a day upgrading its cable television network to enable it to offer consumers an unbeatable "triple play" of multimedia services.

"It's really bringing together the television, the telephone and the internet," Mr Jeffers told The Irish Times. "What we're doing is investing considerably in the network... to squeeze a lot more down it. We'll be creating a broadband network - a big fat pipe into consumers' homes, so that then they can get whatever services they want at a suitable speed."

A tumultuous four-and-a-half years later, which has seen the dotcom crash and NTL Ireland's parent's slide in and out of bankruptcy, there is still no "triple play" in Dublin, Galway or Waterford. Digital television, a staple product for most European cable operators, is still not available to 65,000 homes that are passed by NTL Ireland's cable and wireless networks.

NTL Ireland has weak customer relations and few new products. For example, it can still only supply broadband internet services to 66,500 homes, about one-seventh of homes within its franchise area, and even most customers with digital TV still have to order movies or sports programmes over the telephone due to the lack of interactive services on its cable.

Last year NTL Ireland - whose parent markets itself as a total communications company - withdrew from the residential telephone market. And unlike its energetic satellite competitor, Sky, there is still no sign of the introduction of hard disk recorders by the cable company.

So it is little surprise that, after adding just 5,400 broadband customers and persuading only 88,000 people to switch to digital TV, NTL has thrown in the towel and put its Irish unit up for sale.

So how did it all go so wrong?

"NTL came into town with all guns blazing, upgrading its network in Tallaght and Templeogue... But the cost of upgrade was colossal and they had to stop when the market collapsed," says Mr Roy Anderson, managing director of Cablecom Limited, a firm which upgrades and lays cable and telecoms systems.

The Government's decision in 1990 to force RTÉ to sell a 75 per cent stake in Cablelink to Telecom Éireann, its main rival in an era of converging communications technologies, was a serious blunder. Most Irish consultants agree that between 1990 and 1999 there was inadequate investment in Cablelink's network. After all, why would Eircom invest in a network that might soon be able to compete with it for customers.

"The design of the Cablelink network, the high cost of digging the roads and local authority regulations drove the cost through the roof for NTL," says Mr Anderson, who notes that most of the Dublin cable network runs above ground linking house to house in a "daisy-chain effect".

This type of cable system costs far more to upgrade than European-style cable systems, where companies tend to run cables into roadside cabinets and then only upgrade the final cable to the house when a user signs up.

Cablecom estimates that it costs €150-€300 to upgrade the cable running into a single house to enable it to carry broadband and provide interactive and telephone services. And this does not cover the cost of set-top boxes, which retail for €70-€150. So with 500,000 homes within its franchise area and a backbone network to upgrade for broadband, NTL faced a massive bill.

But with no upgrade to its network, NTL Ireland faced the conundrum of not being able to setup innovative services that would boost revenues. In its results for the third quarter of 2004, it reported £17.9 million sterling (€26 million) revenues, the same as the third quarter of 2003.

Late last year, NTL Ireland unveiled a plan for a €100 million upgrade but that was before its parent put it up for sale. Now it will be up to a successful bidder to deliver a decent network and services for the Irish consumer.

Mr Shane O'Neill, who led UGC's unsuccessful bid to buy Cablelink in 1999 and is heading the firm's bid team this time around, says it will invest heavily in NTL Ireland's cable network if it wins the upcoming auction.

"We [ UGC] are about the triple play. We are not interested in owning a purely analogue service... we offer voice over IP, digital TV, broadband and mobile telephony in some franchises."

UGC, which recently bought Chorus and has begun a new investment programme, wants to merge with NTL Ireland to create a national cable network.

Conscious of potential competition from other bidders - such as entrepreneurs Mr Denis O'Brien and Mr John Riordan - Mr O'Neill warns about the damaging effect of selling NTL Ireland's cable system to a private equity firm.

"There is a danger from a Government point of view that a private equity firm will buy it and just try to use the asset to generate cash," he says.

But UGC, which owns 14 cable networks throughout Europe and is controlled by US cable entrepreneur Mr John Malone, has inherited problems of its own through its purchase of Chorus.

Chorus also put its investment programme on hold in 2001 when its backers, Liberty Media - also controlled by Mr John Malone - and Independent News & Media, blanched at the costs involved.

The firm has upgraded its network in only a handful of the towns in which it operates so far, although it maintains it will have upgraded Cork by early 2006. It also offers only very limited interactive services to its customers.

The "cable guys" failure to upgrade networks to offer a full suite of broadband, digital television and phone products also had the damaging effect of reducing competition for Eircom. In early 2000 it had been developing a plan to offer television and video-on-demand services over its own copper network. But shortly after NTL Ireland halted its digital roll out, Eircom shelved its strategy.

The Commission for Communications Regulation blames a weak cable sector for the slow roll out of broadband in the Republic. But now, with the sale of NTL Ireland imminent again, there is a second chance to attract investment into the sector. Consumers will have to hope that whoever does buy the asset, will be able to pay for the cable upgrade as well.