Communications Insights: Trends and Cool Stuff

Mr Carter

Congratulations on your appointment.

As someone who lives in rural Ireland it is hard to put in words the frustration of the last ten years in trying to obtain broadband.

A Brief History

The whole of Ireland has now accepted that the sell off of the state telecommunications system has been a disaster. The original company Telecom Eireann was floated as Eircom with a clean balance sheet in 1999. The €5 B windfall from the sale has been invested in a National Pensions Reserve Fund which is to pay the future pensions of civil servants (politicians among them). The new company Eircom, was bought up and privatised by the Valentia consortium (George Soros, Sir Anthony O’Reilly and others) in 2001 and leveraged to ridiculous levels of debt while draining the cash and ignoring maintenance or upgrade of the network. Eircom was later re-floated but subsequently bought up again by Babcock and Brown in August 2006. While not as overtly rapacious as Valentia, Babcock & Brown continued to drain the cash and sell assets.

Current Broadband access and Government

There are about 1100 exchanges in the Republic of Ireland, nearly 600 of them have not been enabled for broadband. Of those, all are in rural areas. The wireless operators have restricted themselves in the main to areas of high population density. There is minimal wireless access in those same 600 exchange areas.

The minister maintains that there is 85% broadband access at present. He has no way of knowing whether this figure is accurate or not because he can only see what data Eircom choose to show him and he cannot independently audit the network.

The government has involved itself in a competing fibre ring network of the larger towns in Ireland known as the Metropolitan Area Networks (MANs)

The government involved itself in the subsidisation of local self-start wireless schemes – the Group Broadband Scheme (GBS). The GBS closed for new applications in April 2005. the scheme made just over 8000 new broadband connections.

Since April 2005 there has been effectively no government policy or involvement in broadband beyond the boundaries of the large towns or cities. The new National Broadband Scheme (NBS) is not due to start until July 2008; it hopes to provide broadband of 1Mb/128kB to remaining areas. The means of delivery is nominally technology neutral. The minister delayed the start of this Scheme so that he could use the first six months budget allocation to provide a subsidy instead for wood pellet boilers (wood pellets were already in shortage).

We remain in the bottom three of the Euro 15 for broadband penetration. We are 4th worst in the Euro 25.

Regulation

There have been two attempts at regulation of the market in the form of ODTR (Office of Director of Telecommunications Regulation) and the current Comreg. There have been three pieces of regulation legislation. In all aspects of their primary purpose i.e. to “put manners” on the incumbent Eircom, the regulator has failed. It has been ignored, appealed, challenged in the courts (successfully) and run into the sand in the Telecommunications Appeals Panel. The regulator failed to designate Eircom a ‘significant market player in the provision of fixed line telecoms’ despite its having over 80% of the market. You might ask Isolde Goggin (the regulator up to year ago) how successful she was in enforcing decisions against Eircom. Instead of regulating, Comreg has taken to issuing misleading statistics about broadband access/penetration and has effectively thrown in the towel.

NGN Forum

You have no doubt been presented with a pre-cooked discussion document which will direct you to a pre-determined recommendation. By inviting a group with varying interests a clear recommendation will be avoided and the government can continue as before.

Questions you should ask:

How much money is available from government and European Regional Development Funds for the development of broadband in the years that you are addressing.

The current state of the fixed line network.
What is the level of line failure in exchange areas that have not been enabled.
What is the level of pairgaining in those same areas.
What percentage of fixed line consumers are more than 4km from the exchange.

What is the percentage of wireless access outside the areas of the broadband exchanges.

The case for state-owned FTTP

Competing infrastructure in an economy this size is insane. Even Babcock & Brown accept this.

A privatised network means that both a wholesale and a retail margin must be maintained to keep both network owner and the retail provider happy.

If private ownership of the network continues then the question of state aid to industry (EU regulations) will re-occur every time there is a necessity to upgrade the network in areas where the market has failed or where the private owner cannot justify the investment. This is approximately 60% of the geographical area of Ireland. As you said the private owner will steal everything that’s not nailed down .That includes subsidies.

Much of Ireland is “drumlin country” ie small hills and valleys, which are death to most wireless, particularly LOS.
Satellite as you know is not appropriate for any interactive use of the internet – VOIP included.
You will know that in raw bandwith delivery any wireless system will be dwarfed by optical fibre – its simple physics.

Road works of one sort or another pass most doors in this country on a regular basis – I would reckon every five years. By co-ordinating the digging, the capital cost of fibre ducting could be reduced substantially.

Rolling out a national network has been done before. In the 1940s the rural electrification Scheme brought electricity to rural Ireland by an act of political vision and will.

The operation of a regulator in a small economy with limited experience in regulation will continue to be a wasteful experiment. A well motivated private incumbent with an unlimited legal budget will continue to run rings around it. Investment bankers have in the past put buy ratings on Eircom stock on the basis of its ability to bamboozle Comreg (the regulator). Remember too that no legislation can be passed in this country that restricts access to the courts, including the incumbent – its in the constitution.

Finally I would make the general point that high bandwidth connectivity is even more necessary for remote areas than cities, as travel to conduct business or simply to be physically present will become more and more economically and ecologically prohibitive.

On that point consider why it is that you, the great and good of telecoms, are all travelling to Ireland to essentially talk to one another. Why is it not being done by video-conference. I sincerely hope that your trip to Dublin will amount to more than a pleasant, all expenses paid sojourn to tell Minister Ryan what he wants to hear.

You should contact
Danny McLoughlin CEO BT Ireland re regulation

Brian McElligott CEO e-bay Ireland re government (in)action

Regards

Thank you for offering to pass on my concerns and commiserations on the state of US broadband (I presume). The former chairman of Eircom used to thrill the unwary by telling them that Ireland had ‘better broadband access than the United States’, safe in the knowledge that hardly anyone in Ireland would have a clue about broadband in the United States.

I did not mean to imply that the forum itself was colluding in any ‘pre-cooked’ outcome; my apologies if that’s what came across, but I understand that the role of the Forum was ‘to critique’ a document presented by the Department of Communications. The scope for blue sky thinking under such circumstances is limited, I would think.

Minister Ryan has promised that he will ‘update’ the document to ‘reflect’ your contribution for public consultation and refers to it in a recent debate.

“The forum critiqued draft options and recommendations on how to meet the challenges that lay ahead. The key challenge is getting higher speed broadband at lower cost to more subscribers. The forum members have provided valuable feedback. They supported the broad trust (sic) of the document. They also offered some additional recommendations and advice on the future trends of the telecommunications and ICT industries and proposed that certain suggestions be explored further. The draft paper is being updated to reflect the forum’s contribution. It will then be published for public consultation.”

I am looking forward to reading your contribution. I believe you should insist that it is published in full.

You may know the old Irish joke about the American tourist who stops a local passer-by to ask for directions and receives the response
“Well, If I were you, I wouldn’t start from here.”

In the case of the NGN forum, the roles are reversed, it is we, the locals, who are asking for directions, but I hope the response is the same.

Regards

Stephen