Ireland warms to high speed internet

Back in 2002, internet surfers in Ireland who wanted high-speed access had only one choice: sign up with the national telephone company, Eircom Group, for broadband costing about €90 ($158) a month.

At those prices, it is no wonder that broadband penetration rates in Ireland were among the lowest in the developed world. By mid-2003, only about 3000 customers had signed up.

But since then, broadband internet has taken off.

In 2002, Ireland had just 0.3 broadband subscribers per 100 people, up from zero the year before, according to data compiled by the Organisation for Economic Co-operation and Development.

In 2003, the number edged up to 0.8, but then zoomed to 3.4 last year, the latest period for which data is available.

"It was a disappointing start. We certainly appeared to be later into the broadband market than most of the other European countries and most other countries through the world," said Mark Mohan, sales and marketing director at NTL Ireland, a cable operator that started selling broadband access last year.

"However, over the last year and a half or so we have made a lot of progress, and there have been a lot of stimuli for that progress, both in terms of things operators have done and in the response of the consumer market.

"The result is the market is moving on quite well now. We're still behind most European countries in terms of broadband penetration, but we're not as far behind as we were," Mohan told the Herald.

Ireland's example is instructive for New Zealand because it shows how a combination of more competition and government initiatives can rapidly boost a country's broadband access.

That's important for New Zealand and Ireland, which both have about 4 million people, if they are to remain competitive service economies whose workers rely on using information technology to do their jobs.

The OECD's annual figures, published in May, ranked Ireland 24th out of the group's 30 member countries. New Zealand was two spots higher in the rankings, with 4.7 broadband users per 100 people, up from 2.6 in 2003 and 1.6 in 2002.

In absolute terms, New Zealand and Ireland look to be neck and neck. But in percentage growth, Ireland more than quadrupled its rate of broadband users from 2003 to last year, while New Zealand grew by less than double.

At current growth rates, Ireland will surpass New Zealand within a few years, leaving us at the bottom with countries such as Mexico, Turkey and Hungary.

So how did the Celtic Tiger known for its booming software industry enter the new millennium without high-speed internet access? And why is broadband use now surging?

To understand the story, we have to go back to the mid-1990s, when Eircom and RTE, Ireland's public broadcaster, jointly owned (50-50) the country's cable television assets.

The Government then forced the two to sell the cable business. The sale coincided with the dot-com boom, and the subsequent bust meant that the buyers, NTL, did not have enough money to upgrade the cable system for broadband and instead went bankrupt.

That led to a unique situation, said John Doherty, a commissioner at Ireland's telecommunications watchdog, the Commission for Communications Regulation (ComReg). While other countries had telephone companies using DSL phone lines competing with providers using cable to sell broadband, Eircom found itself in a similar situation as Telecom New Zealand. It had the market to itself in Ireland, said Doherty.

"There was a lack of competition, no real threat.

"The incumbent [Eircom] was trying to maximise existing revenues. It didn't see broadband as strategic revenue for itself, and didn't capitalise," he said.

Eircom has a different version. The company said it had installed an advanced platform in 2001 to deliver not only broadband internet, but digital television as well.

But, says Eircom's commercial director, David McRedmond, ComReg rejected the company's application for a broadcasting licence and as a result, it had to rip out that system and install another, lower-tech system.

(Eircom's chairman, Sir Anthony O'Reilly, also owns a stake in APN News and Media, owners of the New Zealand Herald.)

Those and other delays kept the company from concentrating on selling broadband for a year. But by 2003, several factors led to the takeoff in broadband use.

For its part, Eircom set itself a goal of 100,000 broadband users by last December, McRedmond said

"We had fewer than 5000 broadband subscribers, so it was negligible at that point, at July 2003.

"We decided this isn't a tenable position, so we set ourselves a target," he said.

"There was a lot of scepticism at the time over whether we would do it. In fact we hit that target six weeks early.

"Yes, we were late to start, but we grew very rapidly."

But Doherty of Comreg said the regulator also played a part.

ComReg was not happy with the high prices Eircom charged at the beginning and forced the telco to lower them.

"Two years ago we got the price down to the sub-50 euro level," Doherty said.

At the same time, Eircom started selling its broadband service wholesale to other ISPs, who then resell to retail customers - a practice also known as bitstream.

McRedmond said this practice offered ISP resellers gross margins of 40 per cent. As a result, the number of ISPs offering fixed-line wireless broadband in Ireland has shot up to 11 from just one.

Another factor in the growth in broadband subscribers has been the cable providers, which have also made a comeback.

NTL Ireland, which was sold to Morgan Stanley following the tech bust, has been resurrected and is upgrading its cable network so it can provide broadband to all of the 470,000 homes it services, focusing on Dublin, Galway and Waterford.

NTL's Mohan said the company had already set up 130,000 homes for broadband and the number of subscribers had jumped to 14,000 from 1000 a year ago.

While all this was happening, the authorities went all out in promoting broadband as the way of the future. The Government was so keen it set up a special webpage where citizens could go for more information.

The site (see link below) provides useful tip on high-speed internet access, including a list of service providers and the prices they charge as well as a page where people can vote to have broadband enabled in their neighbourhood.

As well, the Government launched some initiatives of its own, including licensing 20 ISPs to provide fixed wireless broadband access in rural areas. Doherty said about 40 per cent of Ireland's population lived in rural areas, compared with 10 per cent in Germany.

Other initiatives include the construction of fibre-optic networks in cities and towns throughout the country, and an 18 million fund to provide broadband access to schools.

All these measures have helped to send Ireland's broadband rate soaring. The Government reckons there are now at least 160,000 users, or about 9 per cent of the market, while Doherty and McRedmond believe it is closer to 200,000.

Prices have also fallen, with companies offering monthly high-speed access for less than 20.

"Our regional broadband pricing is now on a par with the best in Europe [after Government intervention] and the price of basic broadband access is at the EU average," the Department of Communications, said in its latest monthly briefing paper.

To be sure, there is still a long way to go before Ireland can match the likes of South Korea, the most wired country in the world with 24.9 broadband users per 100 residents.

In a situation not unlike New Zealand's, Eircom, service providers and the Government have been battling on and off in the courts for nearly five years over local-loop unbundling.

Unbundling would allow outside operators to install their own equipment inside the phone company's exchanges, instead of simply reselling broadband service.

Eircom has only unbundled about 3500 of its 1.6 million phone lines and McRedmond said the practice was not as efficient as bitstream.

The other major barrier to higher broadband penetration in Ireland is a relatively low rate of computer ownership, ISPs and ComReg say.

A quarterly Government survey found about 48 per cent of Irish homes have a computer, and the biggest reason respondents gave for not getting home internet access was that they did not have a PC.

Still, that isn't stopping Ireland from aiming high.

Late last year, Communications Minister Noel Dempsey set a new goal for the telco sector, challenging companies to sign up half a million customers by the end of next year.

Will New Zealand do the same?

Pluck of the Irish

* A few years ago, Ireland's broadband internet situation was even more woeful than New Zealand's.

* Broadband growth has exploded, with the country looking to overtake New Zealand in international rankings in the next few years.

* Better regulation and the resulting increase in competition are fuelling the growth.