One doesn't have to be terribly old to remember the bad old days of Irish telecommunications. In the late 1970s having a telephone was somewhat of a status symbol - a badge of merit implying membership of some sort of "golden circle". Six-month waiting lists were the norm and thousands of people and businesses were waiting for telephone connections.
Such is the stuff upon which political legends are made and Albert Reynolds arrived on the scene in 1979 as Minister for Posts and Telegraphs and set about bringing the system up to date. Waiting lists were cut dramatically and automatic exchanges installed throughout the country. But that was then and this is now.
Today there are about 1.3 million telephone connections in Ireland in a market worth about £1 billion annually. The number of connections is growing at about 6 per cent each year - ahead of the European average - while the actual call market is growing by 14 per cent. And this trend appears to be accelerating rather than stabilising, due to one main factor - competition.
Under the terms of the EU single market telecommunications was to have been opened to competition in 1993, but Ireland and a number of other member states were granted a derogation until 1998, and in Ireland's case this was further extended to the year 2000. The reason for this derogation was relatively simple; the Irish taxpayer had poured a lot of money into its telephone system to bring it up to date and that investment could be endangered if the State company was not given more time to gear up for competition.
Over the past two years, that is precisely what Telecom Eireann has been doing. The company has been involved in a transformation programme during that time which has seen price cuts totalling £210 million, with significant cuts in international call rates. Calls to the US have fallen from £1.12 per minute to 30p, calls to the UK from 48p to 24p, and trunk rates in Ireland from 34p to 12p.
"We are aiming to have our prices at the lower end of the European spectrum by the year 2000," says a Telecom spokesman. "Our benchmark is the UK. UK call rates are now becoming very competitive in comparison to the US and we want to be in that price band. We want to have the lowest prices with the highest quality of service."
In the business market, Telecom Eireann is positioning itself as a "total solutions provider". "Whatever our customers require, we will be able to provide a solution," says the spokesman. "We are already facing competition in the market and we have to be able to meet that challenge. Our strategic alliance with KPN/Telia gives us access to the global network of Unisource, the AT&T backed alliance, and this enables us to deliver a wide range of added value services to our customers."
With profits of £127 million last year, despite the price cuts, Telecom Eireann's strategy is clearly working. So much so that the company is now welcoming competition. "Competition is here and it is good for the industry," the spokesman says. "It will result in overall growth in the market and it will be good for consumers. To be successful in a competitive market we must all improve continuously."
A standard bearer of competition in the Irish telecommunications market is Denis O'Brien's Esat Telecom. While its Esat Digifone mobile phone company has been making most of the headlines over the past year, the parent company has been quietly building a share of the fixed line telecommunications market for itself.
Until recently, the Esat services were largely based on leasing lines from Telecom Eireann at a discount and selling them on to customers. However, the leasing charges from Telecom Eireann have been quite high in terms of European rates and Esat is confident that these will fall in the short to medium term.
These charges have come under the scrutiny of the EU's competition directorate and there are hopes that they will fall soon. Esat is not sitting around waiting for such a price drop, however. "We have a three-step plan to provide services to our customers and be prepared for the new competitive environment in the year 2000," says O'Brien.
Esat is certainly making waves in its target marketplace. It now has more than 3,000 customers, up more than 60 per cent on 1996 levels, and has 20 per cent of its target market of businesses which spend more than £200 per month on telephone calls. Annual billings are now running at around £16 million.
The company is still losing money, however. "We are losing a lot of money at the moment," says Denis O'Brien. "But this is because we are investing a lot in our infrastructure and we are also paying quite high rates for our lines. When these charges drop and when our infrastructure is in place, we will be in a very healthy profit position."
Certainly, the Irish telecommunications market has been shaken up in the past year and, with the advent of further competition in the form of the ESB/British Telecom alliance, the shake-up is likely to be more pronounced over the next few years. Regardless of the identity of the winners and losers in the market, the ultimate beneficiaries will be the consumers.
