Telecom's two providers pitched at same market

Telecom Eireann is in the unusual position of owning two competing ISPs, but the man into to whom they both directly report stresses their independence. "Both absolutely have to operate at an arm's length from Telecom," says Mr Aidan Finnegan, Telecom's head of interactive services.

Both ISPs, Indigo and Telecom Internet, known as Tinet, (Subs: Tinet says this is the style of its spelling), will be moving into the same building in East Point later this year, fuelling speculation among competitors that they are to merge. But the recently appointed general manager of Tinet, Mr Fintan Lawler, rubbishes any such suggestion, explaining that the move is part of a bigger move of all of Telecom's Enterprises Directorate, which includes Indigo and Tinet. His boss, Aidan Mr Finnegan is more circumspect, saying there are "no plans to amalgamate Tinet and Indigo", and that rolling them together "doesn't necessarily make sense".

Indigo had a troubled history following its launch in late 1995. Debt laden, sources say it was sold "virtually free" by the Moyna family to Mr Shay Moran in August 1996, but was then hampered by Telecom's launch of Tinet at the end of 1996. Telecom then bought Indigo last November in a move which meant two semi-state companies controlled 80 per cent of the dial-up market, and Telecom itself had two competing ISPs.

Industry sources speculate Indigo was bought because Tinet had lots of money but only 4,000 to 5,000 customers, and that Indigo was struggling with debts. Rather than have Indigo go to the wall and see the lion's share of its 7,000 to 8,000 customers go to IOL, they say, Telecom protectively bought Indigo for more than £2.5 million, probably consisting of £500,000 cash and £2 million debt.

Aidan Mr Finnegan dismisses this version of events, saying Indigo was bought because it was available and was "too good an opportunity to pass up". He says Tinet was not expected to outgrow Indigo, and that both now have different images though pitched at the same market. However, Fintan Mr Lawler claims that Tinet's dial-up customer base is now bigger than Indigo's. He says Tinet has more than 20,000 dial-up accounts, the second largest customer base after IOL. His competitors dispute this, generally estimating Tinet has around 10,000 customers, and saying Indigo has not many more.

Tinet, a business unit within Telecom, is closely linked to Eirtrade, a Telecom Eireann Group company specialising in electronic messaging since 1990. Eirtrade and Tinet came to be seen respectively as the corporate and residential sides of the same business, and now Fintan Mr Lawler says they can now be "treated as one entity". Between them they have more than 60 staff and up to 1,500 modems in 26 POPs countrywide. Customer support has been outsourced to a Scottish firm in Limerick.

Tinet/Eirtrade says it has a total of 12Mbps bandwidth to the Internet, comprising a 4Mbps link to the US (MCI), 2Mbps to London (BT), and 6Mbps to Amsterdam (Unisource). However rivals Rivals question this , saying this amount of bandwidth saying it would cost millions of pounds more than the total revenue from Tinet's customers. Although Telecom is not allowed cross subsidise its ISPs, the modems are located in telephone exchanges, and countrywide access is provided using Telecom's frame relay network. Aidan Mr Finnegan stresses port and line capacity is purchased from Telecom.

Finnegan He says he is happy with Tinet's growth, although he won't discuss figures. "We are ahead of reasonably aggressive targets," is all he says.

And although he says a large part of the business plan for the current year is based on e-commerce, he is not making any announcements while "internal development work" is proceeding.

Indigo's boss, Mr Mark Beggs, doesn't agree with Fintan Mr Lawler. He also claims to be the "number two" ISP, and says he aims to be "number one" by Christmas. Like Mr Lawler, he reports into Aidan to Mr Finnegan, but stresses Indigo is a separate, wholly owned company. "Telecom Eireann is investing money," he says, "and ISPs need someone with deep pockets."

Mr Beggs claims Indigo had "left the 10,000 customer base" when Telecom bought it last November, and now has more than 20,000 customers, including more than 3,000 corporate accounts. He says the whole industry grew by 95 per cent last year, and that Indigo took 35 per cent of that business, while IOL took 45 per cent.

Indigo's current spate of advertising is aimed at the business person. It has put particular emphasis on a low-cost ISDN product which it claims is six times faster access, which is only true compared to older 9,600bps modems. Nor does it highlight It also neglects to point out the high cost of ISDN equipment and access, £1,000 for the first year, which, however, is expected to drop as Telecom reduces set-up charges.

In an effort to gain a large customer base, Indigo's original owners gave customers one year of nearly free access. Thus, says Mr Beggs citing a three-year plan, he has another one and a half years to break even. He expects bandwidth costs to drop in that time frame, and is looking to growth in the ISDN market which is aimed at SMEs and heavy home users. He says Indigo currently has 1,000 modems and 3Mbps bandwidth to the Internet, and will be launching a number of new services over the next six months.

In a possible sideswipe at IOL, Mr Beggs says down the line he expects all ISPs to align with telecoms companies, questioning whether PostGem will carry a loss-making company for long. He also expects smaller ISPs to be bought up, and says the money to be made in the ISP business is in ISDN, Web site design, Intranets intranets (company-wide networks), and Extranets, extranets, which link customers to company networks. Residential markets, he says, increase the customer base, many of whom go on to become corporate customers.