ENN Year in Review

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From: ENN

ENN Year in Review: Telecoms suffer globally, offer hope locally
Tuesday, December 24 2002
by Andrew McLindon


After years of waiting for innovative Internet access products, 2002 saw both off-peak flat-rate Internet access and DSL introduced in Ireland. But the year's telecom scandals and bankruptcies will mark it as one of the worst in the sector's history.

Typical. You wait years for Internet usage to be made more attractive to Irish people, and then two initiatives come along in the same 12 months.

After years of false promises that saw Ireland plunge to 27th in the OECD top 30 table of broadband development, things started to roll in April. Eircom settled a long-running dispute with Ireland's telecoms regulator and finally introduced DSL. This move was quickly followed by Esat BT, who made DSL available in several cities and pledged to have 40 exchanges throughout the country unbundled by the end of the year.

Although generally regarded as a welcome development, both Eircom's and Esat BT's pricing levels for their DSL services put them out of range of most consumers and small businesses. Internet users in the UK may be able to use high-speed Internet access for around STG30 a month, but in Ireland they have to pay at least EUR90 per month (excluding VAT). It is hoped that prices will fall in 2003.

Businesses, however, could turn to alternative high-speed Internet offerings from companies such as Leap Broadband and Sky-Net. These enterprises introduced fixed wireless broadband access to parts of Dublin during 2002. The services only require businesses to have an antenna on their roofs and to be within a certain radius of a central broadcasting point to receive broadband connections. Leap, which is run by former Formus executives, recently said it had signed up 100 customers since its launch in mid-2002.

Moves were also made to belatedly introduce flat-rate Internet access to Ireland. UTV Internet debuted an off-peak flat-rate product in early September, which was the first such offering in the Irish market since Esat withdrew a similar product in 2001. Indeed, Esat BT quickly followed UTV Internet's initiative with a similar flat-rate offering of its own. In addition, Esat BT said that it plans to introduce a 24/7 flat-rate offering next year. A word of warning though -- we have heard this all before from telcos and Internet service providers, so believe it only when you see it.

The need for affordable Net access also finally struck home with the government, as Communications Minister Dermot Ahern actually took some action rather than following the example of previous ministers who talked the talk, but failed to walk the walk.

In October the Minister took the unprecedented step of issuing a directive to the new telecoms regulation body, ComReg, which was formally established in December, to introduce flat-rate Net access as an "absolute priority." Minister Ahern also said he wanted to see the widespread availability of inexpensive, always-on broadband infrastructure for businesses and citizens within three years. Of course, the question remains as to whether the telecoms sector is capable of delivering on this, as it has shown little urgency in doing so to date.

The establishment of ComReg, as outlined in the Communications Regulation Act (which was enacted in April 2002), as a replacement for the ODTR was welcomed by the telecoms industry, since the new body has greater powers to enforce its decisions and fine those who don't abide by its rules.

But groups like the Association of Licensed Telecommunications Operators (ALTO), which represents new entrant telecoms operators, warned that the regulatory body will have its work cut out for itself as competition in Ireland has stagnated over the last 12 months. According to ALTO, its members, which include Esat BT and Colt, had just 20 percent of the market in 2002 and several telecoms companies are considering leaving the Irish market because of the difficultly in making profits here. In addition, a ComReg report released in December noted that the sector had lost 600 jobs in 2002.

In its dying days though the ODTR did strike one blow for competition in Ireland when in October it found that Eircom was non-compliant with its legal obligations under voice telephony regulations, had undercut competitors and mis-managed discount schemes. The ODTR ordered Eircom to get its house in order and there was talk towards the end of the year that Irish-based telecoms companies were considering suing the incumbent for loss of earnings on the back of the ODTR's findings.

A YEAR TO FORGET

Globally, it was a year to forget for the telecoms sector, with many high profile companies being forced to declare bankruptcy and/or engage in massive restructurings, which usually involved large-scale layoffs, in order to stay alive.

First to shake the sector's foundations was Global Crossing. It started the year by filing for Chapter 11 bankruptcy in the US after clocking up USD22.4 billion in liabilities.

The company, which had previously signed two multi-million deals with the Irish government to provide high-speed communication links to cities around the world, may yet survive. Hutchison Telecommunications and Singapore Technologies have signed an agreement to acquire a major interest in the company for USD250 million when it comes out of Chapter 11, which is expected sometime in 2003.

Things went from bad to worse as the year went on. In June, WorldCom, the second largest long-distance phone company in the US and a major global carrier, admitted it had misstated its financial results by USD3.8 billion. The company promptly went into Chapter 11 bankruptcy protection owing USD41 billion to creditors. Senior executives at the company are now facing fraud charges in the US.

Another company forced to seek Chapter 11 protection was NTL, which employs nearly 500 people in Ireland, after running up debts of STG12 billion. Management of the company has said that it plans to emerge from Chapter 11 by the end of the year or early 2003.

After suffering such a rough ride, the telecoms and Internet sector will probably be glad to see the back of 2002. However, all indications are that 2003 may be just as tough.