IF you think Eamon Ryan looks a bit hassled these days, broadband might have something to do with it. As minister for communications it’s his job to come up with a policy for Next Generation Networks – telecoms for the future and all that. But no-one seems to know what to do, least of all him.
There is good news though: I’ve figured out exactly what’s needed to build a country-wide information superhighway. The only snag is it’ll necessitate borrowing Hugo Chavez from the Venezuelans for a couple of
months. So what has gone wrong, and why? Astoundingly all parties involved in the process – operators, consultants, government advisors, economists and lawyers – agree on who is to blame for Ireland becoming the broadband backwater it is today. Take a bow Charlie McCreevy: everyone agrees you are responsible for leaving Ireland with a 20th century telecommunications network. What did the former finance minister do wrong?
Three things. First, he privatised Telecom Eircom, which inevitably became a vehicle for one set of venture capitalists after another to make cash by swapping ownership every few years. Having being foolish enough to sell the company, McCreevy could’ve bought it back but didn’t. That was the second mistake.
The third was decentralisation. This short-sighted political stroke has had disastrous consequences. One of them is that the Department of Communications can’t hire new staff unless they agree to work in Cavan.
It’s a wonderful county, but not everyone wants to move there. Ministers come and go, but every now and then Ireland has been blessed by civil servants who develop long-term public policies which over-ride
the short-term political interests of that day’s minister. We desperately need qualified technologists and communications experts to work for the government on a long-term basis serving only the national interest
and not their own agenda. We can get the right people, but they’re not all going to be in Cavan or agreeable to move there. So instead we have “government by consultants” – experts brought in on a short-term basis to provide advice to the minister that he can’t get from his own department.
As part of that process last week Ryan set up the “International Advisory Forum on Next Generation Broadband Networks”. This will be a two-day meeting of a small group of Irish and international experts.
For homework they’ve been given the government’s research paper on Next Generation Networks. The idea is they’ll swot up on the report, give the minister their considered opinion on how Ireland should improve its
telecommunications network within just two days, and then fly back, at our expense, to their real jobs. One member of the forum is Brian Thompson, the “international expert” installed as chairman of Telecom Eireann by Mary O’Rourke in order to guide it towards flotation. After four months he left for Global Telesystems causing huge embarrassment to the Minister.
The first item on the forum’s agenda will have to be the Metropolitan Area Network System (MANS) which the government established once they realised that a privatised Eircom had no interest in developing an adequate broadband system outside major urban areas. So far Mans has cost â‚¬160m and Ryan was
critical of it when in opposition. Now that Phase 3 of the project is imminent, his attitude to it is crucial.
Eircom says Mans only duplicates its broadband network. Others dispute this.
It turns out that “broadband” is a loose term. To one company “broadband” is between one and two megabits on old twisted copper lines. To another, broadband means a minimum of 8mbs on new fibre optic. It’s like the difference between a dirt track and a motorway. Eircom’s old dirt tracks do provide a means of transport in the regions, but you have to pull over if you meet another car and you can’t go fast. Mans serves the same towns but it’s a motorway on which you can drive as fast as you want.
Eircom counters that you can’t drive from your house straight onto a motorway and since Mans doesn’t serve houses, what use is it? A bad road is better than no road. Yet Mans, which is operated by Enet, has 660,000 users. Its customers include operators who compete with Eircom – companies such as BT Ireland
and Smart Telecom. Is it any wonder Eircom doesn’t like Mans?
Then there’s The Kiltimagh Problem. A new fibre-optic Mans network was built in Kiltimagh in Co. Mayo. No-one can use it though, because it can’t get connected to the “backhaul” network – the system that joins
Kiltimagh to the rest of the world. Eircom has a backhaul network there but ComReg, the communications regulator, has set the price to connect to Eircom so high that Mans won’t pay it. So all that fibre optic has
nowhere to go.
This is where Chavez comes in. Because one solution is to re-nationalise the backhaul infrastructure, taking back what we should never have sold off. As the EU might have a problem with that, we’ll probably have
to think of something else. Some argue that we should accept that Mans is a bit of a disaster and stop investing in it. I disagree. Eircom is a private company that will only serve its own interests. No doubt
they’d kindly offer to take Mans off the government’s hands. The minister should say “no thanks”. We sold off one network, we shouldn’t sell another. The problem with Mans is not that we spent too much money on it but that we didn’t spend enough.
The government could build its own operator-neutral backhaul network. That wouldn’t be as difficult as it
sounds because through the ESB, RTE, Bord Gais and even Irish Rail via BT Ireland, the state already owns a good deal of the necessary infrastructure.
There is a third alternative. Babcock and Brown, the current owners of Eircom, have been twiddling their thumbs wondering how they can make more money from an important national asset. They’d like to split up the business between its retail and wholesale (or infrastructural) divisions. The government could buy back that infrastructure. I imagine the EU will have something to say about that too, so we’ll need some smart
lawyers to convince them that market failure entitles us to do that.
Which brings us back to the Cavan problem. Perhaps the minister should have a forum on that.
Note: This is one of those columns that really needed 5000 words to adequately cover the complexity of this field. Here are just some background details I couldn’t fit in.
The telecoms market is sub divided so when people (especially Eircom) say things like “broadband”, “fibre optic” or the “the EU don’t allow for intervention” they are usually half right but wholly wrong.
Simply, telecoms consists of three main divisions – the first mile, the last mile and the middle mile. MANS is government intervention in the middle mile yet people criticise it because it doesn’t solve last mile problems ( ie doesn’t go to people’s front doors) and got screwed by first mile problems (getting onto the backhaul).
Here’s the main point – the EU will not only allow, but part fund intervention where there has been market failure. Since the government actually offered money to Eircom and other operators to build fibre optic in MANS towns and they were TURNED DOWN, the EU agreed to allow the gov to build it themselves and part fund it. AFTER MANS was announced and built Eircom began to upgrade its fibre in SOME of the MANS towns. (But not all – they’re good at weasel words and using loose terms which most business journalists don’t fully understand e.g. “we have fibre optic in all those towns”. But that’s fibre for backhaul – not for broadband).
Eircom will also criticise MANS on the grounds that it didn’t solve last mile issues. Eamon Ryan made the same criticism when in opposition which showed that he didn’t understand the brief. Let’s hope he does now. It wasn’t supposed to. MANS serves Industrial parks, institutes, schools (bringing the cables right up to the door and into their boxes) and large companies.
Here’s the bottom line – the Minister says only competition will solve the problem. But there IS no competition because of the backhaul problem which the regulator (who’s moving to Clonakilty btw) exacerbated by setting such a high access price. There has been clear market failure in backhaul – the first mile – and I don’t see why the government can’t aggressively go after taking it over and making it operator neutral – which would then achieve what Ryan says he wants – competition.
Finally, Eircom talks a lot of talk about good use of public money and a “public debate”. Who believes they care about public money and who believes they care about stopping the government invest further in MANS in order to ease competitive pressure on them? Unless of course they can buy it for a cheap price.
The Last mile is another separate issue and one that really does need a public debate. We can all have 25 mg lines into all our houses. It’d cost us billions. People quote Japan – but Japan is a densely populated country and its easy to access everyone. Not so here. It’s just like the energy issue I addressed a few weeks ago. We can have the best – but for a price.
The big problem is that without some hardcore thinkers at DoC driving this policy over the long term we end up with the disaster of Minister 1 supporting projects like MANS and Minster 2 getting all luke warm and wrecking it.