The e|net Effect

Press release
27th Mar 2008

Sparking more competition and driving regional connectivity, e|net came out of one of the Government’s more successful broadband initiatives, but there is still a lot to play for.

Though Ireland is still playing catch up on broadband, there are signs that some of the heart has gone out of the controversy that has surrounded its snail-paced rollout. “The debate has moved on from who’s at fault to what we are going to do about it,” according to Conal Henry, chief executive of e|net. His organisation won the contract to manage Irelands MAN’s (Metropolitan Area Networks’s) soaking up €120m of government investment to remedy the broadband shortfall. Now there is more dialogue between communication providers and ComReg . “While there is very little agreement from the key players on the answer, there is significant engagement in trying to find an answer,” he says.

Henry is in doubt that the competitive gains are there to be had and cites e|net’s research as proof of the possibilities. Last year it analysed IDA Ireland job creation for any synergies with the rollout of the first phase of MANs.

The 27 towns that were awarded a high-fibre ring had increased their share of IDA Ireland inward investment from 24% of total towns in 2004 to 89% in 2007. “Is it just because of the MAN’s? Absolutely not; what I would say is the numbers wouldn’t have been so high if the MAN’s hadn’t been there,” he says. This is tangible evidence that the government strategy is working, which makes up for the initial decision to sell off Eircom and the state-owned network infrastructure. “The past two communications ministers, Noel Dempsey and Eamonnn Ryan have both said they think it was a mistake, but if the Government hadn’t sold it off we would have been the only EU member state at the time that didn’t. Hindsight looks fantastic, but we would have been out on our own,” says Henry.

The real problems started with an incumbent operator that proved exceptionally adept at protecting its business interests and market share, keeping at bay a toothless regulator and a growing number of new entrants who wanted a piece of the pie. Two regime changes later, Eircom is a very different beast according to Henry. “We see in the new management a significantly more pragmatic approach. There is a recognition that other operators are there and have to be dealt with no matter how much they wish that they weren’t.”

He is also heartened by Eircoms attitude to e|net; the telco expressed interest in running the MANs which he takes as a validation that the company must be doing something right. While e|net has its critics, it has provided a platform for competition. Companies such as Smart and Magnet have built business models on its infrastructure outside of Dublin, feeding in to the high-fibre networks as they provided last mile connections to businesses and homes.

Today 24 out of the 27 phase one MANs now operate as an integrated network, which means e|net can sell services across a national infrastructure. Not all of e|net’s initiatives have had the desired effect. Originally there was an aspiration to piggyback a Wi-Fi network onto every MAN, but the economics made it a non-starter. A trial in Carlow proved economically unsustainable. “We haven’t made enough money, but it has generated huge amounts of interest. Is that e|net’s fault or is that what Wi-fi is like around the world?” says Henry.
“Consumers will use it if it’s there, but they are not prepared to pay for it at a level to justify a wholesale business model. What we did in Carlow was elegant and works beautifully and it seems a shame not do something more widespread. But, to be blunt we haven’t found a way of doing it”

Phase two of the Government‘s MAN project will be to bring fibre rings to a further 66 towns. The population coverage will be about half of what it was in the first phase, which will call on even more stringent business models for telcos to make it profitable. While it might have been assumed that managing the next phase was a natural shoe-in for e|net, it is having to go through a tender process run by the Department of Communications after Eircom took a challenge to the EU, arguing that because it relies on state aid it must be put out to market to get the best deal. “We have absolutely no issue with that whatsoever,” says Henry. If somebody wants to come in and do a better deal, so be it.”

Such skirmishes will inevitably continue in a competitive market, but for Henry the bigger picture is about emerging technologies. “Globally, the future of telecommunications is about next-generation networks (NGNs). It raises two questions: how are we going to develop that infrastructure for Ireland and how is the competition going to work on the infrastructure?
“The easiest way to get a NGN is to spend all the money in the market on one network, but that’s the worst way to develop competition. It’s not viable to go out and build two. We have a problem in Ireland, but there is an opportunity to leapfrog from the back of the queue if we can agree on a solution and deliver on it”

Digital Ireland