Consumers set to benefit from new competition on broadband

The broadband-starved Irish consumer is finally being asked to log on to high-speed internet at a reasonable price, following…

The broadband-starved Irish consumer is finally being asked to log on to high-speed internet at a reasonable price, following a spate of summer promotions announced this week by firms.

Esat BT and UTV Internet are offering consumers a free three-month trial of broadband, with a fourth free month available if consumers sign up for a further year.

Both firms say there are no strings attached to the free promotions and consumers can simply switch off the service if they don't want it after the offer.

Even the incumbent operator, Eircom, which has a patchy record on pricing, got into the holiday spirit by announcing free rental and connection for three months. Customers must sign up for a year to avail of the offer, but significant savings are available.

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"We have always said that we would drive broadband through promotions. It isn't really like other products in other markets," says Mr David McRedmond, commercial director at Eircom. "Ultimately we had to decide what would make the market grow and price cuts and promotions do it."

The new promotions are possible because Eircom's wholesale arm offered rivals access to the same promotion as its retail arm.

Eircom is forced to do this by the regulator ComReg, which seeks to ensure that there is a competitive market. And given Eircom's track record over the past five years, few market observers will characterise the new offer as summer generosity.

Mr Scott Taunton, group business development director at UTV, says that Eircom has realised that it needs to drive the market for digital subscriber line (DSL) technology before other technologies take users.

"Eircom has made a big play for broadband and has set targets," he says. "It realises that if it leaves it too late, then wireless and other technologies could come in and take the market."

A host of fixed wireless providers, such as Digiweb, Leap Broadband and Irish Broadband, have sprung up around the State in the past year offering subscribers broadband without the need to use Eircom's local loop.

New, powerful, wireless broadband technologies such as Wimax are also in development and could potentially offer similar functionality to DSL without the hassle of copper wires.

Chorus, the cable television firm which went into examinership earlier this year, has also announced plans to upgrade its cable to offer broadband. And the ESB is currently trialing powerline technology, which supplies broadband over its electricity network. So there is a danger for Eircom that, after years of having the market to itself, the competitive landscape is getting tougher.

Belatedly acknowledging the threat over the past two years, Eircom has set itself ambitious DSL roll-out and user-acquisition targets. Meeting these targets could prove a challenge for it.

"The difficulty for a public company is when it sets a target of 100,000 broadband users, it must make it," says Mr Taunton, who refuses to disclose how many internet customers UTV has acquired.

The size of the Irish broadband market is difficult to judge until Eircom announces its financial results next Tuesday. But sources suggest Eircom has signed up more than 40,000 broadband subscribers, with rival firms, including Esat BT, UTV and cable firm NTL, netting a further 15,000 subscribers.

This is very poor when compared to other European states, although it represents a significant increase on the 19,343 customers signed up last September.

Mr Taunton says part of the problem of encouraging new customers to take up broadband in the Republic is the fact that there is little experience of flat-rate internet products. In Northern Ireland, these dial-up products, nicknamed FRIACO, have been around for years but Eircom only introduced this product last year.

"It is very difficult to explain the benefits of broadband to customers who have never used it," he says. "The free trial is a good way of doing this."

Mr McRedmond, while refusing to comment on specific broadband figures, says he is very pleased with the uptake of the service, but disappointed that Eircom has had to carry almost the full cost of advertising it.

He says the wholesale offer is a clear opportunity for rival companies to begin advertising and to deploy Eircom's wholesale broadband service more aggressively.

This represents something of a U-turn for Eircom, which previously resisted attempts to supply rivals with broadband services. But it makes good economic sense because, for every broadband subscriber that UTV or Esat BT gains, Eircom receives a wholesale rental fee.

Eircom's change of heart regarding its wholesale business is timely, given renewed pressure on it to open its local access network to competition. A decision by the European Commission earlier this week to sanction greater powers to ComReg to regulate Eircom could force it to "unbundle" its access network.

This would enable rivals to offer a range of new broadband services but undermine the revenues that Eircom generates from its wholesale division.

A decision on the new rates for opening Eircom's access network to rivals is expected shortly. So it is little wonder that Eircom is offering firms better terms to offer its own broadband service, as the alternative is much worse.