Ireland Broadband Market Report 2005
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Introduction
An island nation in the north west of Europe, Ireland has a
mostly level topography with low central plains surrounded by a
ring of coastal hills, with a population of 4 million people living
in 1.3 million households and a population density of 57
inhabitants per square kilometre.
GDP per capita at $45,675 was the fourth highest in the world
in 2004 according to the International Monetary Fund. This compares
with Luxembourg at $69,737 which is the world's highest GDP per
capita, and the UK placed fourteenth at $35,548
[1].
The telecommunications sector became fully liberalised in
December 1998 and is regulated by the Commission for Communications
Regulation (ComReg), which was established in December 2002 under
the Communications Regulation Act, replacing the previous
regulator: the Office of the Director of Telecommunications
Regulation (ODTR). ComReg promotes the rollout of broadband in a
liberalised and competitive market place. However, the regulator is
open to government intervention in instances where the delivery of
broadband services is unlikely through market forces alone
[2].
The Irish Government has taken a proactive approach to the
development of the broadband market, launching numerous initiatives
to further broadband infrastructure coverage, largely due to market
failure to address regional broadband infrastructure
deficits.
The National Development Plan 2000-2006 set aside around
EUR205 million to increase the coverage and penetration of
broadband, particularly in towns and areas outside Dublin that are
not commercially attractive. The money has been allocated in the
following way:
- To increase coverage, the government allocated EUR140 million
(EUR35 million a year between 2003 and 2007) to extend the
broadband network to 88 towns with a population over 1,500
each[3];
- Furthermore, the government is providing EUR64 million to
install fibre-optic networks in 19 towns (excluding Dublin) on a
public/private partnership basis. The local authority owned
metropolitan area networks (MAN) are designed to provide high-speed
connections to regional businesses, organisations, public
authorities, hospitals, schools and, to some extent, residential
users;
- The government has also provided EUR500,000 to assist the
development of infrastructure in 15 areas identified as declining
in population[4].
Ireland's Broadband Strategy, published in 2003,
states the government's ambition to provide 5Mbps to residential
users and higher speeds to business within ten years. However, the
Irish Information Society Commission warned at the end of 2004 that
this ambition was in danger of not being met
[5].
In March 2004, the government announced details of a EUR25
million Group Broadband Scheme to deliver high-speed broadband into
smaller communities over three years. The Scheme will be open to
communities of less then 1,500 people. It will empower local
communities to draw up and implement their own broadband plans in
partnership with broadband service providers. The government is to
provide 55% capital funding, the maximum allowable under EU rules,
with half of the funding payable at the commercial launch of
broadband services to local businesses and residents
[6]. By
September 2005, 119 projects had been approved, covering a
population of 355,000
[7].
Furthermore, the Broadband for Schools programme was launched
in 2004 to provide broadband connectivity to all of the 4,100
primary and secondary schools in Ireland by the end of 2005
[8].
With regards to privatisation of the telecommunications
market, the incumbent operator, eircom, was privatised by the
government in July 1999.
As regards international bandwidth, Ireland had the twelfth
highest level per inhabitant in the world in 2004, according to
theInternational Telecommunications Union (ITU), with over 6Mbps
per person. Denmark had the most at around 35Mbps per person and
the UK had the fourth highest bandwidth at around 13Mbps per
person
[9].
A public-private partnership entered into in 1999 has greatly
increased the levels of competitively priced international
connectivity from Ireland to Europe, Asia and to the United States.
As a result, Ireland is now one of the cheapest locations worldwide
for international leased lines. The success of Ireland's
international connectivity project is illustrated by the decision
of many high profile international operators, including Google, to
locate in Ireland
[10].
In terms of ICT usage, the latest available figures show that
in 2004 46% of households had a PC, while 40% of all households had
access to the internet. These figures place Ireland below the
average penetration levels for the OECD, for both PC and internet
penetration of households. Iceland has Europe's highest levels of
PC penetration, at 86% of households, and internet penetration, at
81% of households
[11]. As part of its
Broadband
Demandreview paper, the Department of Communications, Marine
and Natural Resources recognised that PC availability is a limiting
factor on the broadband market, as opposed to a demand driver, in
thatPC availability enables take-up of broadband but it is not
clear that it drives broadband take-up
[12].
Figure 1 - Residential PC and internet
penetration, OECD Science, Technology and Industry: Scoreboard
2005
As a result of the low basic ICT penetration, the government
has recognised that PC and internet penetration need to be factored
in to any overall broadband strategy. Furthermore, it has
acknowledged that the new generation of games consoles, such as the
Xbox 360 and the Playstation 2, are now broadband enabled, and due
to the high penetration of such consoles in Irish households, these
devices should also be factored into any approach to enhancing
further broadband penetration in the home.
At the end of June 2005, broadband lines were calculated to be
around 175,000. This represents growth of around 40,000
connections, or 30.1% over the first half of 2005
[13].
Figure 2 - Total broadband subscriptions by
country, OECD, June 2005
The market growth compares very favourably with the 15.2%
growth reported across the OECD
[14] and the 16% growth
worldwide
[15] for the same period; indicating that Ireland
is still some way from market saturation.
Figure 3 - Broadband growth over 1st half of 2005
and broadband penetration by population, OECD Broadband Statistics,
June 2005
The Information Society Commission has set a target of
reaching 400,000 broadband subscribers nationally by the end of
2006
[16]. With such favourable growth, this target
seems likely to be met. Analysys Research forecast that there will
be a little more than 400,000 broadband connections by the end of
2006.
Broadband penetration
Figures from the OECD place Ireland in twenty-fourth position
in the OECD in terms of broadband penetration per head of
population; with a take-up of 4.3% in June 2005. This is far behind
figures for the OECD as a whole, which had an average penetration
of 11.8% of the population. The Netherlands, with a broadband
penetration of 22.5% of the population, had the highest levels in
Europe, while Korea had the world's highest penetration at 25.5% of
the population. The lowest broadband penetration within the OECD
was in Greece at 0.8 broadband connections per 100 people
[17].
Figure 4 - Broadband penetration by population,
OECD Broadband Statistics, June 2005
As regards broadband penetration per household, Ireland had a
penetration of 13.5% of households in June 2005; this places
Ireland outside the top ten countries in the world. This is far
lower than the household penetration in Korea, the highest in the
world, which stood at around 81% of households at that time. The
highest household penetration levels in Europe were in The
Netherlands at 50% of all households. This indicates that Ireland
is a long way behind the world's most developed broadband nations
in terms of take-up
[18].
Figure 5 - Broadband penetration by
households (top ten countries), World Broadband Statistics Q2 2005,
Point Topic, June 2005
In terms of the business market, there are around 190,000
businesses in Ireland; with small and medium sized enterprises
(SMEs) accounting for around 99.4% of them. Latest figures in 2004
show that 92% of all enterprises with 10 or more full time
employees had internet access. The figures also show that 32% of
all enterprises with 10 or more full time employees used a
broadband connection. While the figure for internet penetration is
in line with the OECD average, the broadband penetration figure is
one of the lowest within the OECD
[19].
Figure 6 - Internet and broadband penetration of
businesses, OECD Science, Technology and Industry: Scoreboard
2005
Forfas, the national policy advisory board for enterprise,
trade, science, technology and innovation, has identified that a
lack of awareness among both residential users and SMEs of the
benefits of broadband is the single largest barrier to broadband
take-up in Ireland. Furthermore, it believes that the lack of
compelling content offerings, such as advanced e-banking services
and IPTV, have failed to provide incentives for end-users in
Ireland to subscribe to broadband services. Forfas also cites that
low availability and high prices have provided further barriers to
broadband take-up
[20].
As regards broadband infrastructure, in March 2005 eircom
stated that it had enabled exchanges covering around 80% of the
population, and by March 2006 it aims to have extended its coverage
to 90% of the population. eircom expects government
initiatives to provide broadband coverage beyond this level. In
terms of cable broadband, cable television networks pass around
1.25 million households, or 90% of households. However, most of
these networks have yet to be upgraded for broadband and, as a
result, cable broadband is only available to around 11% of the
population. Further investment in the cable networks has been
announced, which is intended to extend the coverage of cable
broadband far beyond this figure. Furthermore, in September 2005,
around 45% of households could access FWA services
[21].
Figure 7 - Estimated broadband coverage, Analysys
Research, September 2005
In terms of broadband services, the first in Ireland were
provided via cable and FWA connections. However, increasing
availability and decreasing prices has seen DSL take-up accelerate.
As a result, in June 2005, the dominant technology was DSL;
accounting for 81% of total broadband connections. Cable and FWA
account for almost the entire remaining share; cable accounting for
9% of the market and FWA accounting for 10%
[22].
Figure 8 - Western European broadband market by
technology type, Analysys Research, June 2005
Most of the alternative DSL service providers today offer
either wholesale reselling or bitstream products, resulting in
limited product differentiation in the market place. However,
increased investment in LLU and regulatory intervention prompted
eircom to upgrade its retail and wholesale ADSL connection speeds
for no additional cost in early 2005.
Local loop unbundling was made available in January 2001 in an
attempt to introduce greater infrastructure competition into the
market. However, the first loops were not unbundled until the
beginning of 2002. Analysys Research calculated that 2,270 local
loops were unbundled by the end of June 2005. This represents 1.6%
of the DSLmarket; one of the lowest LLU shares of the DSL market in
Western Europe
[23].
Figure 9 - Unbundled DSL lines as a percentage of
total DSL lines, Analysys Research, June 2005
The low share of LLU is the result of numerous problems that
have been encountered during the unbundling process:
- Inconsistent wholesale pricing that offers little
commercial advantage for LLU over bitstream services;
- eircom's ability to reject unbundling requests
from WLR (Wholesale Line Rental) lines due to there being no
contractual obligation for eircom to migrate WLR lines;
- eircom requiring a customer to cancel their existing broadband
service before being upgraded to a higher-speed unbundled
line. Consequently, customers can be left without any
broadband connection for a number of weeks;
- eircom's inability to process an unbundling request while
porting a telephone number. As a result, LLU operators have had to
issue new telephone numbers to migrating broadband customers[24].
eircom has issued a statement requesting that ComReg set up
and chair an industry forum to clarify and develop the processes
for a product that will enable the simultaneous processing of
an LLU request and porting a number. eircom has said that it
is unable to undertake this process, and it believes
that, once industry agreement has been achieved, such a
system would cost around EUR13 million and take 18 months to
implement
[25].
ComReg undertook a review of the wholesale broadband market in
July 2004, during which it concluded that eircom had dominant
market power. As a result, ComReg instructed eircom to reduce its
LLU process charges. ComReg's proposal of dropping the monthly
rental charge for shared loops from EUR9 to EUR0.39 could provide a
boost to LLU. However, the decision has been rejected by eircom,
and as yet there has been no decision on the price drop.
With regards to LLU operators, April 2005 saw BT Ireland
unbundle its fortieth exchange and announce that it intended to
invest a further EUR100 million in its Irish operations, including
unbundling further exchanges. As well as LLU connections, BT
Ireland is also reselling bitstream connections
[26].
Furthermore, Smart Telecom, one of the first operators to
begin unbundling exchanges, has announced that it intends to have
unbundled 64 exchanges by the summer of 2006
[27].
Magnet Networks are also unbundling exchanges as part of a
EUR65 million investment in developing its own network. Starting in
Dublin, their high-speed ADSL2+ services over unbundled lines are
also expected to reach Cork, Galway, Limerick and Waterford by
mid-2006
[28].
The cable market in Ireland has been consolidated by UGC's
purchase of the market's two cable operators, Chorus and NTL
Ireland. Chorus was purchased by UGC in 2004 for EUR55 along with a
debt of EUR80, and the purchase of NTL Ireland went through in May
2005 at a cost of EUR329
[29][30]. UGC has indicated that it will re-brand
the merged group and will invest EUR300-400 million in upgrading
the cable networks for new residential services
[31]. Cable broadband
tends to be rolled out to urban areas where DSL is also available,
which will enhance competition between broadband services.
FWA operators include Digiweb, Leap Broadband, and Irish
Broadband. Some of these have begun offering ADSL and SDSL services
in order to increase their footprints and to differentiate their
products. Digiweb is aiming to increase its footprint to 70% of the
population by the end of 2005 through a number of
technologies
[32].
There are also some fibre networks being built in Ireland. In
December 2004, Magnet Networks launched a residential broadband
service over an FTTH network to a 300 home property development in
Dublin. Magnet Networks have stated that they intend to invest EUR5
million in residential services over fibre and have signed
agreements with other property developers
[33]. Another operator, Smart
Telecom, started deploying FTTH networks in May 2005,
beginning with 7,000 new apartments in Dublin
[34].
In terms of operators, the Irish telecommunications market has
a relatively high number for a country with such a small
population. Despite this, eircom has a large share of the broadband
market; eircom lines accounted for 79% of all wholesale broadband
lines in June 2005
[35].
Figure 10 - Wholesale and retail shares of Western
European incumbent operators, Analysys Research, June
2005
Despite the high number of operators, Ireland has relatively
few retail ISPs in comparison to other Western European markets. In
mid-2005 there were around 45 ISPs selling broadband
[36]. This
low level of competition has resulted in eircom having a high share
of the Irish retail market; in June 2005, eircom subscriptions
accounted for 61% of the retail market
[37].
In terms of content delivery, Magnet Networks offers an IPTV
service and video-on-demand in a triple-play package over
its FTTH network in Dublin. It also intends to offer triple-play
services over unbundled ADSL2+ lines. This announcement was
followed by an agreement with the national electricity utility
ESB to use its fibre-optic network in order to expand its network
coverage to a potential 700,000 households
[38]. Magnet strengthened
its triple-play offering in October 2005 after signing an agreement
with Sky Ireland to broadcast its premium sports and
movie channels
[39].
Furthermore, Smart Telecom also offers a triple-play
package, Smart Vision, which it began rolling out in May
2005 over its FTTH network in Dublin. Smart Telecom also has an
agreement with Sky Ireland to offer its premium sport and movie
content
[40].
eircom and BT Ireland have both launched VoIP business
services towards the end of 2005, while Smart Telecom introduced a
residential product. VoIP is expected to be successful in Ireland
due to the high costs of fixed-telephony.
One of the main threats in the market to eircom comes from
fixed-mobile substitution. Ireland has very high mobile penetration
levels – 100% population penetration in September 2005
[41].
The mobile market is relatively uncompetitive, with Vodafone
and O2 taking a combined market share of around 90%. In an attempt
to introduce competition, ComReg ruled in February 2005 that
Vodafone and O2 had dominance of the market. However, this decision
was overturned by the Electronic Appeals Panel. This creates
difficulty for other operators to compete against converged
services, as Vodafone and O2 will not have to open their networks
to MVNOs (Mobile Virtual Network Operators)
[42].
In an attempt to combat the threat of fixed-mobile
substitution, eircom bought Ireland's third largest mobile
operator, Meteor Communications, for EUR420 million in July
2005
[43]. This has backfired somewhat however, after
eircom lost out on Ireland's fourth 3G licence to new entrant Smart
Mobile, the mobile division of Smart Telecom
[44].
A single-bill wholesale line rental product was introduced in
June 2004 whereby an alternative operator can provide one bill for
both the line rental and the cost of the calls, leaving eircom out
of the customer relationship. This provides a danger to eircom due
to the loss of control over the customer relationship. The first
alternative operator to use wholesale line rental was Smart
Telecom.
As regards regulation of broadband pricing, ComReg has imposed
a permanent retail minus price control upon the wholesale broadband
market. This has been introduced in an effort to provide
predictability and transparency to the marketplace while preventing
the possibility of eircom foreclosing the retail market by means of
a margin squeeze
[45].
In terms of pricing, the cost of basic 'first generation'
broadband packages has decreased significantly since the launch of
services in 2002, falling from a high of around EUR140 per month
for a 0.5Mbps service in 2002, to around EUR30 per month for a
1Mbps service in 2005
[46]. As a result prices for 2005 are similar
to other Western European markets; in the UK and France similar
services cost around EUR25-30 per month
[47].
In June 2005, residential 'second generation' broadband
services were not widely available in the market. However, with
cable networks being upgraded for higher-speed services, and
investment into LLU by numerous operators, including the deployment
of ADSL2+, there is evidence that 'second generation' broadband
services will become available in the near future.
In order to allow users to receive information on broadband,
compare pricing from different providers, and obtain a list of
providers serving their area, The Department of Marine and
Communications has established a website (
www.broadband.gov.ie) that
lists all the available services in Ireland and gives impartial
advice to consumers.
Late liberalisation of the telecommunications market, low
basic ICT penetration and late launches of broadband services, have
all created barriers for broadband growth in Ireland. These have
been further compounded by the low availability of broadband
services and the low levels of competition in the market, evidenced
by DSL being very much the dominant access method, and the
incumbent having very high market shares in both the wholesale and
retail sectors.
As a result, take-up levels of broadband are amongst the
lowest in Western Europe, and are some way from reaching
tele-density levels. Analysys Research calculated that there were
53 lines per 100 people in Ireland in 2004.
Some of the issues that have restrained broadband growth are
beginning to be resolved. Government intervention has helped
increase broadband coverage, especially in rural areas, which is of
particular importance in Ireland due to the country's high rural
population.
Furthermore, regulatory intervention has helped bring down
prices in the market and has led to an increase in investment in
LLU by alternative operators. The increasing investment in LLU as
well as the upgrading of cable networks, are allowing optimism for
greater product differentiation and higher speed services in the
near future. Despite this the continued stalemate in the pricing
for shared loops and the numerous other problems regarding LLU
continue to hinder broadband growth, and until these problems are
solved Ireland is likely to continue to lag far behind the most
developed broadband country markets.
Key issues currently facing the Irish broadband market,
highlighted by Forfas' Benchmarking Ireland's Broadband
Performance report include the need to: increase broadband
availability; increase competition in the market place and create
awareness of broadband in order to stimulate demand.
In 2005, Ireland's broadband market is immature when compared
to the most advanced broadband markets. There are indications that
competition and take-up are increasing – high growth. Availability
and product differentiation are increasing, while price levels have
fallen dramatically, providing signs that the market is gaining
ground.
[1] International Monetary Fund,
World Economic
Outlook Database, September 2005
[2] Ovum and Beacon,
The BEACON Broadband Knowledge
Base Report, September 2005
[3] Ovum and Beacon,
The BEACON Broadband Knowledge
Base Report, September 2005
[4] Department of Communications, Marine and Natural
Resources,
Ireland's Broadband Strategy, 2003
[5] Department of Communications, Marine and Natural
Resources,
Ireland's Broadband Strategy, 2003
[8] Department of Communications, Marine and Natural
Resources,
Press release: €18m Schools Broadband Rollout
Announced By Government, 4,100 Primary and Secondary Schools to
Benefit from Industry and State Funding Programme,
24
th February 2004. Available at
/www.education.ie/servlet/blobservlet/sbpp_press_release.doc
[9] International Telecommunications Union,
World
Telecommunications Indicators, December 2005
[10] Department of Communications, Marine and Natural
Resources,
Ireland's Broadband Strategy, 2003
[11] OECD,
ICT database and Eurostat, Community
Survey on ICT usage in households and by individuals,
May 2005
[12] Department of Communications, Marine and Natural
Resources,
Broadband Demand: A Review of Demand in the Irish
Broadband Market, January 2006
[13] OECD,
OECD Broadband Statistics, June
2005, October 2005
[14] OECD,
OECD Broadband Statistics, June
2005, October 2005
[15] Point Topic,
World Broadband Statistics:Q2
2005, September 2005
[16] Information Society Commission,
Statement on
Broadband, December 2004
[17] OECD,
OECD Broadband Statistics, June
2005, October 2005
[18] Point Topic,
World Broadband Statistics:Q2
2005, September 2005
[19] OECD,
ICT database and Eurostat, Community
Survey on ICT usage in enterprises, May 2005
[20] Forfas,
Benchmarking Ireland's Broadband
Performance, November 2005
[21] Analysys Research,
Country Reports:
Ireland, January 2006
[24] Analysys Research,
Country Reports:
Ireland, January 2006
[25] Analysys Research,
Country Reports:
Ireland, January 2006
[31] Analysys Research,
Country Reports:
Ireland, January 2006
[32] Digiweb, Press release, 12
th August
2005
[34] Analysys Research,
Country Reports:
Ireland, January 2006
[35] Analysys Research,
Market shares,
2006
[36] Department of Communications, Marine and Natural
Resources,
Broadband Information Website, 2006. Available
at
www.broadband.gov.ie
[41] ComReg,
Irish Communications Market Quarterly
Key Data Report, March 2006
[42] Analysys Research,
Country Reports:
Ireland, January 2006
[45] ComReg,
Decision Notice: Retail minus
wholesale price control for the WBA market, January 2006
[46] Forfas,
Benchmarking Ireland's Broadband
Performance, November 2005
[47] Analysys Research,
Broadband Pricing
Study, December 2005