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ENN Year In Review 2004: Let's Talk Broadband

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ENN Year In Review 2004: Let's Talk Broadband

December 30, 2004

By Staff

At the end of 2003, the broadband situation in Ireland was not good. The Republic lagged in broadband take-up compared to most of the developed world, and Eircom-bashers insisted that the incumbent was to blame. A full 12 months later, the key industry metrics have risen, but the rhetoric is much the same.

In 2004, most talk of telecoms in the Irish market revolved around one issue: the rollout of ADSL, or broadband internet over the copper wires going to most homes and businesses. On an almost monthly basis, a new report from a government advisory body, the EU, a research firm or an industry group would hammer home the same message: most of the developed world leads Ireland by a wide margin in terms of broadband rollout and take-up -- a mantra that had been repeated in certain circles throughout 2003 and 2002.

Incomplete rollout of ADSL and feeble take-up of the service means that Ireland is becoming a less competitive place to do business, commentators told the media throughout the year. They argued that without ubiquitous broadband, we will all suffer, despite the fact that many people don't know what broadband is, or can't see a good reason to pay for it.

"I do think we saw something new this year," says Damien Mulley, the chairman of pressure group Ireland Offline, which itself had a tumultuous year and nearly disbanded during the summer. "This year, for the first time, a lot of people came out and admitted that we were not doing well enough. That alone was one of the biggest changes," he said, noting that the mainstream media, the government, ComReg and, to a lesser degree, Eircom, admitted that there is work to do.

For many, a November report from Forfas showed just how dire the situation had become. The government advisory body said that Irish telecoms will need to sign up over 700,000 new broadband customers in the next three years if the country is to match the progress of other developed states. Importantly, Forfas' figures sat in stark contrast with Eircom's recently stated target of 500,000 DSL subscribers -- including the 100,000 already signed up -- by 2007. To no one's surprise, the Forfas document also noted that out of the 21 nations it surveyed, Ireland ranked 18th, surpassing only Hungary, the Czech Republic and Greece.

It also became evident by September that Ireland would fail to meet former Minister for Communications Dermot Ahern's target of 350,000 DSL subscribers by mid-2005.

To be sure, the situation is bad, and Forfas' figures prove it. But it would be unfair to ignore the serious changes that have occurred since January 2004. One of the most significant has been the cuts in the cost of a basic DSL connection, which has gone from over EUR40 per month, plus about EUR90 for installation, to less than EUR35, plus free installation. Indeed, by the end of May, ADSL broadband in Ireland was, well, free, at least for the first two or three months for new subscribers. Also during the year, a raft of firms were hyping their own ADSL services, including long-time players Esat BT and UTV, as well as Smart Telecom, Digiweb and others.

And there were other successes during the year, including some important gains for fixed-wireless broadband firms like Leap Broadband, Irish Broadband and other players, who combined have about 6,100 customers in Ireland. Cable TV outfit NTL also said that it would spend EUR100 million in the next few years to deliver cable broadband services to its customer base in Waterford, Galway and Dublin, where only a few hundred are using the service now.

Perhaps the biggest infrastructural changes came from the government, which during the year lit up its 19 Metropolitan Area Networks -- to the dismay of Eircom -- and named E-Net as the company to manage the state-owned system. Smart Telecom has been one of the first companies to begin using the networks to provide services to customers, and has also joined Esat BT as one of the first telecoms to begin unbundling Eircom exchanges around the country -- a move that should allow it to deploy unique broadband services.

While local loop unbundling (LLU) has been one of the biggest sticking points for Eircom critics, it's worth remembering that unbundling prices have fallen. In fact, in the last days of December, ComReg announced a 50 percent cut in LLU prices, a decision that should go a long way to help telecoms that want to sell ADSL but don't want to re-sell an Eircom product.

Meanwhile, the government also pushed on with other initiatives, such as its Broadband for Schools programme and the Group Broadband Scheme, which allows small towns to apply for grants for broadband rollout if citizens express enough interest. Indeed, as late as 21 December, Ireland's new Minister for Communications, Noel Dempsey, approved outline broadband infrastructure investment plans for 35 regional towns and a North West Digital Corridor link between Letterkenny and Derry as part of the next phase of the Regional Broadband Programme.

"I am fairly positive for 2005," Ireland Offline's Mulley commented. "There is a lot more to do; there is no question about that. But at least now everyone is talking and people have recognised that there is a problem. Now all of the stakeholders have to commit to make the changes needed to turn the situation around."

More than just broadband

Broadband was the hot topic in 2004, and will likely continue to be a pressing matter in 2005. But there were other notable shifts during the year, including the ComReg-forced introduction of single billing, or "wholesale line rental," which allows providers other than Eircom to bill customers for line rental -- the price of which was raised in February 2004 for the third time in a year. Prior to its introduction, most customers received a bill from Eircom for line rental and one from their Carrier Pre-Select (CPS) provider, a market dynamic that new entrants said made it impossible to win over customers. By the end of September, some 34,000 people had taken up single billing, with Access Telecom, Esat BT, Gaelic Telecom, Smart Telecom and UTV offering the service. And on the back of the new facility, the number of CPS lines increased by 8 percent in the June-to-September period, to stand at approximately 300,000 lines.

Abroad, the big global carriers had a fairly uninspiring year, which is probably a healthy sign given the woes that firms like AT&T and Level 3 have experienced since 2001. During the year, there was some consolidation -- with BT's purchase of Infonet the most notable -- while other global players such as Global Crossing raised hundreds of millions in new cash to keep afloat. MCI, for its part, spent much of the year polishing its new brand and "restructuring" -- a popular buzzword during 2004.

With fingers crossed, many analysts now say that the sector is one to watch in 2005, now that the worst of the slump has passed. Telecoms companies such as MCI are "vital to the national interest," said Bruce Berkowitz, Fairholme Capital Management, in a recent Financial Times interview. "Airplanes do not fly without MCI, the government does not work without MCI and AT&T."

The coming revolution

If a resurgence in the telecoms sector is on the cards, it is likely that it will be driven by (you guessed it) broadband. On a global basis, there are now some 128 million broadband customers, according to UK-based Quantum Web (with the DSL Forum reporting that 85 million use xDSL technology). This boom, some say, could send the sector into something of a tailspin, thanks to what many have pegged the new "killer app" for telecoms.

Voice over IP is, quite simply, the use of the internet, or internet protocols (IP), to make voice calls via a telephone or PC. The technology -- which requires a broadband connection -- as we know it today was born in the early days of the internet boom and, over the course of the last several years, it has picked up other monikers, including IP telephony, internet telephony, and even computer telephony integration.

Whatever the name, the technology made prominent gains around the world in 2004, with some of the world's biggest operators -- companies like BT, AT&T and Deutsche Telekom -- putting services in place. In large part, these firms are acting out of fear, since Voip allows customers to make cheap, or even free, phone calls. In fact, the big players have already detected the scent of customer defections to small-time operators like SIPphone, Vonage and Skype, as well as to cable TV providers with their own broadband networks.

Here in Ireland, several companies are already offering the service, including Esat BT, Voip Ireland and Blue Face, to name but a few. More importantly, Eircom is due to launch is own Voip services in 2005. The incumbent's decision, as well as the moves by its competitors, comes after the regulator ComReg in October laid down the first Voip rules for Irish operators, including a new "076" prefix.

"We are in the midst of a Voip communications revolution," said Jeff Pulver, chairman of Enterprises and pioneer in the Voip business. "The buzz surrounding the international Voip industry continues to grow, and it's important for everyone to understand and take advantage of the changes taking place. IP communications are 'disruptive' communications in the most positive sense, and it will dramatically enhance the ways in which we communicate."

Yet Pulver also admits that the technology is only now moving out of the early adopter phase and into the mainstream in the US; it may take several years for the Irish market to reach that point. What's more, regulation of Voip remains a contentious issue, with regulators the world over struggling to come to terms with what rules ought to be in place to govern the market.

Truth be told, there are more uncertainties surrounding Voip than can be counted. But one thing is for sure, without broadband, the technology will go nowhere -- nor will any other new innovation in the fixed-line telecoms business. Thankfully, that is a message that the vested interests in Ireland seem to have come to grips with in 2004. However, we'll have to wait to see if this year's rhetoric becomes next year's action.

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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

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