Small wheels on the broadband wagon
1 April 2005 | 0
The broadband situation in Ireland is a bit like the architectural relics of oul’ decency around this green and fertile – well connected but poorly plumbed – land. We have huge international telecommunications capacity connecting the island of Ireland with our inner island neighbour and the US. This is our legacy from the recent Silver Age of ICT as well as, it has to be acknowledged, some far-sighted Government investment decisions led by Mrs O’Rourke TD. We have an internal set of newly installed main pipes that are equally excellent in quality and capacity terms, even if not yet extended to all the main areas. Then the problems start.
Most of the rest of the country is drip-fed. If your business is not in a town or within about 5kms of one of the exchanges that has been ‘enabled’, you can forget about this newfangled DSL that’s generating so much hype. In fact broadband remains a dream or pious aspiration unless you are making enough profits to justify a leased line or satellite connection to the Internet. Actually, you may well be on a satellite or wireless service before DSL even reaches you.
‘Broadband Internet connectivity.’ Can you remember where you were when you first heard that phrase? JFK was certainly gone (and Elvis probably), but who was Taoiseach? You see, how quickly we forget. We are only just seeing it in the market for business, much less general consumer use, because DSL was at least two years’ late in being rolled out in this country. We will not venture into commercial dispute and ComReg territory, where it would be so easy to get lost.
ADSL is probably the best broadband option for any Irish business on the market today, now that the prices have come down to a not altogether unreasonable level. It works over most standard telephone copper lines (quality can be an issue as well as linear distance) and gives download speeds of up to 2Mbps and 512kbps upstream maximum. The entry level and sub-EUR50 monthly options are 512kbps down and 128/256kbps up.
Market take-up has been poor. The total number of ADSL connections at time of writing was just over 15,000 after almost 18 months of selling by eircom and rather less by Esat BT and Netsource, an established ISP offering ADSL since April. That is a paltry 0.9 per cent of our 1.6m or so phone lines and suggests access by less than 0.4 per cent of the population. That may very well be the nub of the problem.
This writer, for one, predicted with total confidence a couple of years ago, that when DSL finally reached the market the pent-up demand by business, hungry professionals and ‘early adopters’ of everything would see an instant surge. Only after that first fine careless rapture, I argued, would we see a dip in the curve and begin to perceive its real place in the new digital world, etc. Well, hind-sighted wisdom now tells us clearly that most of the business and consumer world – by a long way – still does not appreciate what broadband can do. There were other obstacles: wrangling over rights and rates between eircom and Etain Doyle and her team in both her former and new ComReg roles, caution on the part of both eircom and Esat BT in following through in a declining post dot.bomb market, perceived high price levels for benefits not understood nor – it has to be said – well explained and marketed by the operators.
Now we are well behind our UK neighbours, most of the rest of Europe and of course the USA. In the meantime, ADSL is already threatened by alternative broadband technologies, notably fixed wireless. It’s all a bit too reminiscent of ISDN: slow to market, slow to be rolled out and made available throughout the country (the complaints about service availability and delivery times continue to this day) and now superseded in many key respects by a younger and cheaper technology. DSL is unlikely to be trounced or displaced by fixed wireless, principally because it utilises the most ubiquitous connection channel – phone lines to practically every building in Ireland. But it is already a practical and price-competitive ADSL alternative in Dublin and rapidly spreading to many other urban areas.
Along the way, incidentally, we lost the cable alternative. In the USA and other markets, notably for close comparison the English urban prime markets where NTL and Telewest have been slugging it out, cable TV networks are a prime carrier for broadband and indeed telephony. Ireland has the largest penetration of cable per household in Europe, but the physical ‘plant’ is just a few years too old in most areas and the necessary investment in network upgrading was beyond the pocket depths of Cablelink/NTL and Chorus. Both have limited broadband and indeed telephony services in some pockets of their networks, but there is no sign of further investment.
‘International connectivity is second to none and with eircom, ourselves and now ESB, there is a very good fibre backbone,’ says Peter Evans, product director of Esat BT. ‘Maybe one more player at that level would be good for competition. But the distribution problem continues to be the local loop.’ He concedes that Esat BT is enthusiastic about the DSL product technically, but has set itself relatively low targets because the price and availability are still just not right. Esat BT has enabled 40 exchanges for its own ADSL service, grant aided by the EU, in addition to its forced sharing arrangements with eircom and clearly uneasy relationship on the ground. The wholesale price to Esat BT and other operators from eircom is EUR32.67 monthly for the entry level 512/128kbps service, so it retails the service at EUR49.49 as against eircom’s own EUR54.45. In the UK, BT’s wholesale rate is EUR21.84 and monthly retail EUR38.77. In fact, he is willing to point out, the Tiscali service is aggressively priced in the UK at just EUR22.98 monthly and BT’s market share is just 25 per cent of a market that now has 150 ISPs. He adds that the very fact that aggressive competitors like Tiscali, AOL and Freeserve have not made any moves into this market is in itself proof that the pricing structure is un-competitive.
‘So we believe that the broadband market reluctance is still largely based on price combined with people’s simple ignorance of its value. It’s a kind of chicken and egg situation, but we are already beginning to see strong signs that new business is being driven more and more by referrals – both business and consumers see and hear about the joys of broadband and take the step,’ says Evans.
Despite evolving technical possibilities for various grades of DSL, Peter Evans says that 90 per cent or more of the demand is for the basic 512kbps service. ‘Flat Rate access may be important now in developing the “always on” mentality, not worrying about call charges when using the Internet, so although it is not a technically competitive product, it is a step towards broadband and an important part of the learning process which the market has to go through.’
Funnily enough, eircom has a contrary view, pointing out vigorously that: ‘We’re not afraid of competition, but we are not going to be forced to subsidise our competitors.’ Those words from David McRedmond, eircom commercial director, put its position pretty clearly. He points to the example of Conduit and its 11850 enquiry service, acknowledging that its good marketing and success forced eircom to respond and compete – to the ultimate good of the consumer. His other example, ISPs in Ireland, seems less convincing given that the formerly competitive situation at the height of the early Internet boom has consolidated into fewer choices, although there is certainly competition. He is unequivocal that ‘eircom is tired of being blamed. We have made wholesale line rental available and have done what we have been required to do by the regulatory authority – which included changes to the specifications of the product. But of course we have to protect our investment in our own network. In the broadband market it would be nice to see our competitors getting behind selling the whole concept and educating the market instead of complaining about us.’ Eircom has ‘pulled out all the stops’ to promote broadband, he says, and is pleased with the take-up, now running at over 1,000 new customers per week.
There is so far only one brave trout swimming in the broadband lake with the two big pike. Netsource has been around as an ISP and web services consultancy since 1995. It got its broadband licence last year but launched its own product just last April. It is taking the eircom wholesale product and both selling direct and building up a network of value added resellers, targeting the business market exclusively. Sales and marketing manager, Louise McKeown claims its customer base is already ‘in the early thousands’ and although initial customers were in the Dublin area, reflecting its existing general customer base, its two dozen or so active resellers have brought the ratio to about 65/35 per cent Dublin/national.
‘There are ways of making the basic service more attractive to business users,’ she says, pointing to three particular features in all Netsource’s products: ‘We offer a fixed IP address with all products, a two-month rolling contract and no download limits.’ Queried about the latter, she concedes that Netsource applies an ‘acceptable use’ policy that caps traffic at 16 gigabytes monthly (about four times the quotas from their bigger competitors), but that exceptional circumstances in a customer’s business will always be recognised.
‘Our entry level product is aimed at the teleworker or SOHO, which is where we believe the fixed IP address is a big selling point because VPN is going to be huge as the standard remote access connection. We can offer an SME a broadband service with support for less than EUR100 monthly and a 60-day opt out – not that anybody ever goes back after experiencing broadband and we certainly have not lost any customers.’
In many respects the most interesting and, perhaps in time, the most significant aspect of the Irish Broadband situation is the growing number of resellers who are starting to use ADSL and related services to get into supplying business integrated ICT packages. All around Ireland there are experienced and battle-scarred companies that have long matured from their PC box-selling days to become trusted systems consultants, providers and managers for SMEs and even into the larger company sector. Smaller businesses do not manage their own networks any more, managed services is increasingly the name of the game from tiny firms all the way up to big bank level.
With convergence and a new world in which all technologies speak fluent IP, a single source for all systems connectivity (data/Internet and telephony as well as LAN/WAN/WLANs) is an attractive option for any organisation. ‘Just the one arse to kick’ is probably the way most commercial bosses would put it. Pricing of the basic commodity services, like broadband, is becoming more competitive (well, let’s assume) and remote management, systems integration and all that, are becoming easier with open standards and smart tools. So the supplier has a range of value added areas to make a good margin, while the customer can delegate (dump) the management of almost all ICT services with the benefits of SLAs and predictable costs.
All of this being true, with broadband as the final catalyst or driver, the runner that is rapidly gaining ground on the outside is fixed wireless. Market leader in a very short time is Irish Broadband, the venture into a different kind of infrastructure by the NTL Group that has just acquired another seven licences. ‘We already have 12 base stations in Dublin, so the service is available almost everywhere,’ says managing director Paul Doody, ‘and now we are going to progress rapidly to a nationwide service with services in Cork, Limerick, Galway, Waterford, Drogheda and Dundalk. Corporate business is coming principally as leased line replacement, he says, and as a flexible DSL alternative where that service is unavailable or subject to slow delivery.
Line of sight
Irish Broadband also offers lower prices for comparable speeds, like EUR35 monthly for home users at 512/128k. Contention rates down in the 4:1, 8:1 area also give a competitive edge to already attractive pricing in the business market.. ‘Looking at the costs of traditional leased lines, or of breaking into any of the metropolitan fibre rings and extending the pipe to your offices at EURX per metre, fixed wireless can win all the time on speed of set-up and price.’
Paul Doody points out that new technologies have overcome the ‘line of sight’ inhibition and speeds are increasing all the time: ‘You can be talking 12Mbps over ten miles and more without line of sight – that is just tremendous flexibility.’
He agrees with the others that educating the market about the benefits of broadband in the first place is still the big inhibiting factor, whatever the delivery channel. ‘Broadband is at the same stage as mobile telephony was a few years ago – on the brink of explosive growth to the point where it is just a taken for granted essential. I think the numbers will go to over 100,000 broadband connections in 2004 with the curve going up even more steeply after that. I also reckon that fixed wireless can take – and hold – 20 per cent or more of that market.’