Broadband 'cannibalising' Eircom revenue

De Rebel

From The Sunday Business Post 15th Aug 2004 (Both paper edition and online edition)

Confirming whats been known here for a long time.

Broadband 'cannibalising' Eircom revenue

15/08/04 00:00

By Eamon Quinn
Eircom is losing money from the rollout of broadband as its new internet services ``cannibalise'' revenues from its fixed-line business, Merrion Stockbrokers has warned in new research.

Analyst Brid White said that the phone giant was running out of options to generate new growth from new businesses, and any plan to relaunch mobile phone operations by piggybacking on Vodafone, O2 or Meteor was a complete ``non-starter'' for the company.

The research is among the first since Merrion and other stockbrokers have been free to comment on Eircom. Their brokerages were involved in promoting the sale of Eircom shares last March.

Merrion Capital chief executive John Conroy is a director of Eircom.

Eircom is shedding both call units and millions of euro in revenues as customers use broadband instead of its traditional dial-up internet services, or use their fixed-line phones less by switching to mobile phones altogether, said White.

She predicted that Eircom would report an 8.5 per cent slide in its unit call volumes when first quarter earnings are reported on August 27.

Revenues in the quarter will drop by €10 million from a year ago, to €399 million, she said.

According to the analyst, Eircom's monthly broadband fee of €39.99 has not covered advertising and the high costs of providing sign-up fees, installation and a free router to customers. Together with the drop in revenues from its traditional fixed line business, Eircom is losing money from broadband.

White said that Eircom shares would continue to trade below their €1.55 offer price for ``the foreseeable future''.

© The Sunday Business Post, 2004, Thomas Crosbie Media TCH

damien

According to the analyst, Eircom's monthly broadband fee of €39.99 has not covered advertising and the high costs of providing sign-up fees, installation and a free router to customers. Together with the drop in revenues from its traditional fixed line business, Eircom is losing money from broadband.

Is that actually true ? I would have thought they were still making a profit. They make money from their own broadband products but they also make money from reselling their service to all the other ISPs too. You'd swear the broadband market was eating into profits. According to Comreg in that last Amarach Report 81% of people still get online using dial-up so they are still happily screwing over the consumer.

81% of households connect to then net via dialup Q2 2004
3% of Households connect to the net via ADSL Q2 2004


So if 3% of users are having them lose millions, what are they making from the 81% ?

LFCFan

Aw! Poor Eircon. Hopefully people will continue to leave them in droves and once NTL have completed their upgrade in Dublin it should eat more into their profits

seamus

It's all relative isn't it really? You can read "Eircom are losing money by having broadband", or you can say "Eircom are making less profit by having broadband". The two statements say exactly the same thing, but mean something completely different.

Broadband is performing exactly as expected. It's levelling out the playing field and bringing some normality to the profits generated from suplpying internet access to consumers.

Blaster99

I wouldn't be surprised if they're losing money on the line rental because people are switching to mobiles instead and it sounds like the article/analyst is implying that this is the case.

Losing money on broadband seems a bit unlikely when you consider that other broadband alternatives are typically cheaper and most of their competitors don't have existing infrastructure to fall back on. But I suppose they're not making the ridiculous amounts of money they made when everyone was dialing up, but that situation was never going to last.

Sleipnir

Blaster99 wrote:

I wouldn't be surprised if they're losing money on the line rental because people are switching to mobiles instead and it sounds like the article/analyst is implying that this is the case.

I'm moving house this week and won't be getting a phone line put into my new house.
€300 euro per year before you even make a phone call is just too expensive for a basic utility. I have a mobile and all the net access I need, I get in work.
I'd just rather not give them the money to be honest.

kida

Moving to NTL broadband next week and once its up and running I am leaving Eircon for good. Broadband is the only reason I have eircom(and even then its thorugh IOL). As more and more people switch to NTL and wireless broadband the amount of land -line subscribers will drop.

Cryos

i couldnt see eircon doing well in the mobile market not with the name they have for themselfs. They are royaly screwed when vodafone compleets its 3G coverage of ireland as its an amazing service. We have it on trial at the moment here in work and i can say hand to heart if vodafone get the price down an little and put the caps up loads they will have most of ireland on their service.

I hope eircom go tits up

Blaster99

If the mobile operators had any imagination beyond selling ringtones, they would have offered landline type of rates when people are calling from their homes. That would kill Eircom stone dead.

Ripwave

Blaster99 wrote:

If the mobile operators had any imagination beyond selling ringtones, they would have offered landline type of rates when people are calling from their homes. That would kill Eircom stone dead.

And how would they tell that you were calling from your home?

jwt

With Broadband, VoIP and Mobiles all taking a chunk of of the fixed line market, all operators are painfully aware that the landline telephone days are numbered. There will always be a core requirement, in offices, hospitals etc but for joe public the above are the way to go. Given how quickly we adopted/adapted to mobiles do not be suprised to see VoIP take Ireland by storm once the connectivity issues are sorted. At that point telco's have two choices, shrink back to leased lines and critical landlines (there will always be a need for 24/7 guaranteed uptime secure leased lines ) or jump into the value added stuff broadband can deliver. (Video conferencing, combined mail/voice messaging with video etc)

It will happen, Intel is making big moves into this arena and have astronomical budgets set aside for this (WiMAX anyone). Big core players will speed up the delivery time of technology, drop prices and make GBS and GDS easier, more affordable and increase penetration.

You can be dammed sure that the bean counters in Eircom have seen the writing on the wall, and while they may kick and scream during the transition they know that sooner or later it will happen.
However every day that they can postpone it, another x number of euros is made.

I believe in 5 to 10 years time we will look back at these dark days and shake our heads ruefully.


John

seamus

Ripwave wrote:

And how would they tell that you were calling from your home?

Were a mobile telco in Britain not running a similar scheme, whereby you registered your home base station (i.e. the one nearest your home), and you got cheap calls whenever you rang from that base station?

Or was it a dream?

Tom Dunne

jwt wrote:

I believe in 5 to 10 years time we will look back at these dark days and shake our heads ruefully.

I think that will be 5 to 10 years time
in other countries . It will be 15 to 20 years time in Ireland.

Blaster99

I'm pretty sure T-Mobile has that "calling from home" scheme as well. Certainly technically possible.

jwt

tom dunne wrote:

I think that will be 5 to 10 years time
in other countries . It will be 15 to 20 years time in Ireland.

Hey!

We live in hope
Hope springs eternal

Quote:
Hope is a bad thing. It means that you are not what you want to be. It means that part of you is dead, if not all of you. It means that you entertain illusions. It's a sort of spiritual clap, I should say.

Author:
Henry Miller 1891-1980, American Author

The Insider

Ripwave wrote:

And how would they tell that you were calling from your home?

Its already available in cetain countrys, were you can use your home phone and mobile as one..

http://cityfido.ca/en/index.shtml

is one example

carrotcake

Ripwave wrote:

And how would they tell that you were calling from your home?

http://www.boards.ie/vbulletin/showthread.php?t=177671

Ripwave

seamus wrote:

Were a mobile telco in Britain not running a similar scheme, whereby you registered your home base station (i.e. the one nearest your home), and you got cheap calls whenever you rang from that base station?

Ah, so you meant "in your neighbourhood", rather than "at home".

Someone mentioned being withing 500 metres of your home - I can see how that might work in a densely populated area where the number of base statations would make that practical, but with even our biggest city being the least densely populated city in the EU, I'm not sure whether there would be practical issues with such a scheme in Ireland, with the base stations being more spread out than in other cities?

I'm sure it would be a big seller, all right. But with such a high penetration of mobiles already in use in Ireland, what would be in it for the Mobile companies?

seamus

Ripwave wrote:

I'm sure it would be a big seller, all right. But with such a high penetration of mobiles already in use in Ireland, what would be in it for the Mobile companies?

Higher revenues. For each person who ditches their landline and takes up the offer, the mobile telco is essentially stealing all of eircom's business.

Of course, to make sure people ditched their landlines, and didn't just make the same amount of calls for less money, you'd have to charge people to avail of it. €10 a month should do. "Save €12 on your line rental", etc.

DonegalMan

LFCFan wrote:

Aw! Poor Eircon. Hopefully people will continue to leave them in droves and once NTL have completed their upgrade in Dublin it should eat more into their profits

Whilst there would be something sweet about seeing Eircom get their comeuppance, we need to consider who is going to pay the real price.

The shareholders and bean counters will probably be last to suffer, what will happen is that Eircom will spend less and less on maintaining the infrastructure, let alone upgrading it, so we - the consumers - will pay the highest price.

The hidden scandal in the original selling off Eircom wasn't the money lost by the ordinary investors, it was handing over a vital piece of the national infrastructure to a commercial company and allowing them to do whatever they wanted with it.

I shudder to think what the network is going to be like in 4 or 5 years time and the sort of money it will take to restore it (which we, the taxpayers, will probably have too pay for again)

bminish

The Insider wrote:

http://cityfido.ca/en/index.shtml
is one example

Another thing that is interesting about this one is
the option of transferring your current home number and a free white pages listing

I wonder will comreg ever allow that level of number portability ?

Blaster99

Assuming that's ca as in Canada and Canada uses a system that's compatible with the US, it's not very difficult to do it there as mobile numbers are indistinguishable from landlines and the receiver pays for the call, not the caller.

jwt

DonegalMan wrote:

Whilst there would be something sweet about seeing Eircom get their comeuppance, we need to consider who is going to pay the real price.

SNIP

I shudder to think what the network is going to be like in 4 or 5 years time and the sort of money it will take to restore it (which we, the taxpayers, will probably have too pay for again)

It's a fair question, but I don't see the GOV getting involved directly ever again. However by lashing out money on alternative last mile solutions including GBS the taxpayer is already paying out for the continued neglect. Just in a different guise.

Alas the deed is done and the network that was handed over is degrading as we speak. Financially there is no incentive to Eircom to spend money on it.

Perhaps defining a minimum rate for functional internet access speed would leave Eircom with no alternative but to improve the network but only if the rate set was of a high enough standard and the penalties a sufficient incentive.

Otherwise it aint going to happen IMHO

John

eircomtribunal

jwt wrote:

Otherwise it aint going to happen IMHO

John

ComReg have been given the clear and unambiguous policy directive to bring the Irish enduser broadband availability and usage to at least the EU average by mid 2005.
Currently Ireland is nowhere near the bb availability and take-up percentages of the other EU countries, bar Greece.

It is a disgrace that they still explicitly allow Eircom to build in these babies,

which make bb impossible on the lines.

Comreg have not even started to understand that broadband development is primarily a supply issue.

When Eircom showed this absolutely shocking slide

in the conference in Tipperary, the ComReg man there had nothing to say about it, but blamed the "disinterested" Irish user for the slow broadband development.

What makes Comreg think they can keep the rate of line failures for bb (for which they blindly rely on the figures Eircom are forwarding to them!) a State secret?

P.

Wassabi

The heck with DSL we need coast to coast availability of cable modems. - Was

DonegalMan

jwt wrote:

It's a fair question, but I don't see the GOV getting involved directly ever again.

And what would happen if Eircom were to become bankrupt in a couple of years time?

It's not beyond the bounds of possibility IMHO.

spongebob

Good,

Biddy will have her pad in Spain Repo-Ed

Do a Railtrack on the Rest of it

M

DonegalMan

I'm not the least bit worried about Eircom getting broke up - I'd welcome it in fact - but I'm seriously worried about how bad the infrastructure will be if and when this happens

Something á la Railtrack is what should have been done originally but no-one seemed to really think it through at that time.

jwt

DonegalMan wrote:

And what would happen if Eircom were to become bankrupt in a couple of years time?

It's not beyond the bounds of possibility IMHO.

The infrastructure would be flogged off to the highest bidder by the receivers/liquidators.

happens everyday to companies that go bang

john

damien

jwt wrote:

It's a fair question, but I don't see the GOV getting involved directly ever again.

I think that is what they are truely hoping, but they're clever people in the Dept of Comms and I'm sure they've at least looked into a "What would happen if " situation and it probably worried the heck out of them.

It would be one of the biggest messes ever, fiscally and vote wise. Who wants to be the person or group to answer for having a broken telecoms infrastructure and having to tell the taxpayer they have to pick up the bill ? It's a pity Eircom are not more like BT who acted the bollox for a while and then copped on (a bit at least) and now are giving the people what they want.

lucernarian

I had a great idea one day. It involves renationalising eircom and a panel of 12 experts running the entire network similar to the ESB and the national grid. I have to say, I'm seeing lots of poles and wiring being replaced in my area, which shows state-owned bodies can actually maintain something. My plan was much more complex than what I have mentioned here and through some connections I have the FF Ard Comhairle will be reviewing it (I hope). It has already been supported by an esteemed party member.