ODTR Paper 0147 Question 3.1-A (actually the first one)

LegacyUser · 07-08-2001 6:15pm #1

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Well here is the first question of the consultative paper titled "The Internet in
Ireland - Communications Transmission and Delivery Issues" (ODTR 01/47). In an
effort to condense some of the text I have not posted it in its entirety (it is available at
www.odtr.ie/docs/odtr0147.doc ).

Although this question and the text with it are discussing business Internet use,
Appendix 1 of the report (which I will summarise and post also) discusses the
residential user.

Please feel free to address any topic you see fit in the following texts as we are hoping that points raised in this thread will help formulate an IrelandOffline members response. More info at http://www.boards.ie/community/Forum18/HTML/000316.html

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Question 3.1-A: Do you agree with the conclusions drawn on the state of Internet
deployment in Ireland? Are there other conclusions that you would draw? If so
please give reasons

The conclusions in section 3.1 are as follows:

There is considerable variation in internet use among businesses in Ireland.

A recent survey carried out by IDS Media Group, covering almost 50,000 private
enterprises in Northern Ireland and almost 150,000 business in the Republic of Ireland
conveyed a picture of low but rising levels of Internet connectivity among Irish
businesses.

Across a wide range of issues such as the cost of the Internet, its usefulness, its ability
to access new markets, the improvement of the information floor, its effectiveness as
a business marketing tool, security, legal issues, skills and competencies and training,
the IDS survey recorded low levels of awareness among firms that are not connected
to the Internet.

The ODTR has surveyed business use (both SME and Corporate) of broadband,
which becomes of increasing importance once businesses start doing any significant
business on-line. Among the larger corporates, 62% indicated that they use leased
capacity and 14% ISDN. According to the results in the recent SME survey carried
out by IMS for the ODTR, over six in ten (62%) of the companies surveyed do not
have any ISDN telephone line and around nine in ten (88%) companies indicate they
do not have leased lines.

It is clear from the larger corporates survey that there is substantial unmet demand for
broadband, which tends to confirm business interest in developing internet/data uses.

The ODTR's frameworks for alternative infrastructure and LLU are intended to help
alleviate this, and a long standing programme to require better delivery of leased lines
by eircom through its Service Level Agreement programme has been put in place.
The Measuring Licensed Operator Performance programme will result in the
publication of the first set of comparative statistics for service provisioning/fault
repair etc. very shortly.

The intention behind this programme is to give users information on how well
operators meet their promises to customers, thereby enabling users to make more
informed choices of service provider.

A review of the current state of deployment of the Internet at residential level in
Ireland is given in Appendix [1]. Ireland started later than the other countries
examined and although there has been an annual doubling in Internet penetration in
the last two years, Ireland still lags other developed countries.

There has been significant progress in the past few years creating the legislative and
competitive environment to encourage Internet adoption.

The government has enacted the e-commerce act and the copyright act.

Plans for e-government are well advanced with the allocation of IEP£100million over
three years to support projects in the public sector.

There are a number of agencies such as Forfas and Enterprise Ireland monitoring and
supporting the development of e commerce and actively benchmarking and
monitoring Irelands relative progress in the Internet environment.

The availability of international telecommunications connectivity which is required to
make Ireland attractive to large scale e-business ventures has also been addressed by
government with the part financing of international telecommunications links.

Progress has been made in developing the national telecommunications infrastructure
under the aegis of the National Development Plan.

On average usage generally falls into a band of between 5 and 9 hours a month in
countries with metered access compared to an average AOL (United States) user who
spent 32 hours per month online, and Telecom New Zealand users who spent on
average 20 hours per month online, where unmetered access is available. Unmetered
access has stimulated growth in the amount of time that people spend online.

The launches by major financial institutions and An Post of secure on-line payment
services may be helpful in stimulating further growth in this sector.

In a consumer survey carried out by IMS on behalf of the ODTR earlier this year, a
number of questions were asked specifically to identify the demographic and attitude
shifts of those that were both online and offline.

In the survey 37% said they had access to the Internet at home. We see low adoption
in the 55+ age brackets but healthy representation elsewhere. 47% of those surveyed
in the 15-24yr-age bracket have Internet access at home, while only 18% of those
over 55 had access.

Of those who were not yet online the main obstacles in getting connected to the net
were not interested (38%), not having a PC at home (23%) and too expensive (15%).

The picture emerging from the IMS survey is not unexpected. The early adopters of
the Internet are the young; those with third level education and those with disposable
income. Of those who are off net there is a high percentage who see little relevance in
being online.

Overall, Ireland has made progress, but there is still room for improvement.

In view of Ireland's experience to date and that of the other countries (see appendix 1)
studied it can be concluded that there are a number of elements to be considered when
devising strategies to increase online penetration.

A number of elements have recurred when benchmarking other countries' progress
that seemed particularly important in providing for internet growth, in particular the
multi-year programmes rolling out adequate high-speed telecommunications
infrastructure. However, equally important are the unique cultural factors that play a
part in determining what motivates people to connect to the Internet.

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[This message has been edited by Dangger (edited 07-08-2001).]

LegacyUser · 08-08-2001 9:54pm

Originally posted by Dangger:
The ODTR's frameworks for alternative infrastructure and LLU are intended to help
alleviate this, and a long standing programme to require better delivery of leased lines by eircom through its Service Level Agreement programme has been put in place.

My understanding:
1. Alternative infrastructure is not available to the incumbent or OLO's untill the developer has a 20% market share.
2. The incumbent is only obliged to offer OLO's services it provides internally to subsidiaries or business units.
3. Uneconomical infrastructure is provided via government subsidised contracts where the developer gains ownership.
4. Only the incumbent has service obligations.

If I am wrong in any of the above, it may effect some of the following but not the central point which is:

The consumer should direct who provides the services. The consumer can be Retail, Business or OLO. This requires that the consumer have a choice.

The current effect of the regulations are to perpetuate a situation where the predominant supplier of infrastructure to consumers is the incumbant.

Rather than seeking infrastructure at a lower price from 3rd parties the incumbant is prevented from accessing that infrastructure until they have lost 20% of their market share.

Rather than be forced to grow their infrastructure in response to consumer demand, OLO's are encouraged to protect highly profitable infrastructure and reject growth oportunities that would lower overall profitability in the short term. OLO's are encouraged to buy from the incumbant rather than build their own and sell to the incumbant and other OLO's.

Both OLO's and the incumbant are encouraged not to introduce services with lower margins, through a lack of universal service obligations. There is no need to fix prices if the regulations encourage/force participation by a large number of providers.
If incentives are enough to provide a market of 4+ providers, then USO's are not needed. Where consumers in any market do not have that much choice, USO's on providers in related markets should be considered. e.g. if Retail broadband is lacking competition introduce a Retail USO that applies to Business broadband providers. If Wicklow has a provider shortage in any market, introduce a USO on Dublin providers. The providers will suffer a short term loss but gain a larger market.

Currently only the incumbant has USO's, whether to retail customers or the OLO's.
There is a disincentive for the OLO's to grow large enough to be subject to USO's.
If they were subject to some USO's anyway they would be encouraged to grow larger and gain the benefits of scale.

For new purely service obligations (no infrastructure implications) differentiating between the incumbant and OLO's may not be appropriate.

Competition in Local Loop provision must be significatly increased via incentive and service obligation. Again the aim should be to have 4+ providers nationwide.

If the government wishes to provide direct investment, it should be on the basis of maintaining ownership and/or long term Return on Investment.

LegacyUser · 09-08-2001 12:46am

Originally posted by Neville:

2. The incumbent is only obliged to offer OLO's services it provides internally to subsidiaries or business units.

No. Certain services offered by the incumbent may be deemed 'regulatable'. In these cases, the incumbent is required to offer OLOs the same services it offers, on the same terms it offers them to itself. This is in addition to local loop unbundling, where the incumbent gives a physical copper pair, and the OLO can do basically whatever it likes with it - SDSL, PSTN, more or less anything.

The consumer should direct who provides the services. The consumer can be Retail, Business or OLO. This requires that the consumer have a choice.

Agreed. Absolutely.

The current effect of the regulations are to perpetuate a situation where the predominant supplier of infrastructure to consumers is the incumbant.

Huh? The predominant supplier of infrastructure to the consumer is the incumbent, because the incumbent owns the infrastructure. When LLU really kicks off, others will offer new services over the existing infrastructure.

Rather than be forced to grow their infrastructure in response to consumer demand, OLO's are encouraged to protect highly profitable infrastructure and reject growth oportunities that would lower overall profitability in the short term. OLO's are encouraged to buy from the incumbant rather than build their own and sell to the incumbant and other OLO's.

Thats a slightly nutty way of looking at it. Try looking at it this way: Ireland's local loop took about a century to build, at a time when chucking down cable was quite easy. It is not replicable. No company, even with billions of pounds, could ever hope to replicate this infrastructure, let alone profit by replicating it. End of story. If OLOs were to be 'encouraged' to 'roll their own', for example, by denying them access to Eircom's infrastructre, they just wouldn't bother, as they could never justify it (never mind the fact that it would be logistically impossible, as in, "Yeah, we're going to knock down your house, we need to put an exchange in..."). If the government foisted a USO on them, they would pack their bags and go to a country with a more progressive approach to telecoms. Like Iran.

On a wider level though, you don't seem to understand what the problem is; We have tonnes of copper wire all over the country, some crappy, but it can be fixed. The problem is that only one company is allowed sell services over it, and that's causing our services to be shoddy. In order to increase the quality of what we get in our homes, we need to increase the number of companies that can offer services over it. Nobody gives a sh|t who supplied the wire - its just wire. We care about what's carried over it though. Yeah, there are problems with DACS boxes etc., but they can be better resolved through regulations or subsidies to upgrade the lines. Forcing other companies to build it again from scratch is like buying a new computer because the mouse broke.

If incentives are enough to provide a market of 4+ providers, then USO's are not needed.

Yeah, right, without a USO, companies would wilingly provide phone service to the ar$e end of Donegal or Mayo...

[This message has been edited by hudson806 (edited 09-08-2001).]

[This message has been edited by hudson806 (edited 09-08-2001).]

LegacyUser · 10-08-2001 1:58am

Originally posted by hudson806:

On a wider level though, you don't seem to understand what the problem is; We have tonnes of copper wire all over the country, some crappy, but it can be fixed. The

I am not suggesting that the OLO's have to start from scratch.
Maybe if I give an example:
Say ISDN service was subject to USO.
I decide to get ISDN, I want Esat to provide it. I contact Esat. Esat examines my line. If its up to par, they unbundle it and provide my service. If its not, one of two things happens.
1. They are under a USO because they laid and own copper or fibre nearby, and therefore must buy and upgrade or replace the line themselves. End result, their network just got one LL line bigger.
2. They don't have nearby infrastructure and therefore are not under USO, so they submit a upgrade request to Eircom, who is.

This is based around my idea of geographic USO's.
OLO's start with no infrastructure USO's, but as they put in infrastructure (AFAIK Eircom,Esat/Ocean,Chorus and NTL have all done so) that imposes a USO in the surrounding area. And as a result I get to choose (eventually) who upgrades my line.

I don't want to place an impossible burden on OLO's, but I do want to force them to enter the LL market if they enter any market that involves digging up roads. IMHO if they are willing to dig up roads for fibre or Digital TV, they should dig it up for copper.

Again, I don't expect them to duplicate the Eircom network, but I also don't want Eircom to always and forever be the only LL provider in rural Ireland.
And as LL needs to be upgraded for new services or new connections, there is an easy
way to slide the OLO's into LL provision.
It should also eventually lead to the situation where Eircom is providing services over unbundled Esat LL.

problem is that only one company is allowed sell services over it, and that's causing our services to be shoddy. In order to increase the quality of what we get in our homes, we need to increase the number of companies that can offer services over it.

Totally agree.

Nobody gives a sh|t who supplied the wire -

Ideally I should. If Esat have a better record than Eircom for installing and fixing LL (as reported in the ODTR surveys) and I knew an upgrade was required then I would choose Esat to do it. But since only Eircom do LL in rural Ireland currently...

with DACS boxes etc., but they can be better resolved through regulations or subsidies to upgrade the lines. Forcing other companies
to build it again from scratch is like buying a new computer because the mouse broke.

I think the market will always do better than regs and subs alone. Subs and/or risk equalisation may still be needed to justify USO's on new services, but subs always work better if there is consumer choice in who gets them. Just compare the UK NHS versus the French equivalent. IIRC the French have mandatory health insurance with the citizen choosing their insurer.

Yeah, right, without a USO, companies would wilingly provide phone service to the ar$e end of Donegal or Mayo...

Precisely

, So let the USO's force the telcos to gradually extend their cover to the ar$e end through upgrade and LL ownership transfer.

To re-iterate:
1. I don't expect the OLO's to start from scratch.
2. I do want both Eircom and the OLO's to be forced to compete for my LL buck; lets see how the market sets the LL rental price, rather than the ODTR.

dahamsta · 10-08-2001 3:29am

If the government foisted a USO on them, they would pack their bags and go to a country with a more progressive approach to telecoms. Like Iran.

Class hudson, absolute class. Magnificent delivery, perfect timing. I didn't Laugh Out Loud, but I did snicker, which in some ways has to be better.

FYI, I'm keeping my mouth shut on these topics because I'm going to - given the time - prepare my own response to the ODTR and send it in as an individual (although I wll supply it to Ireland Offline beforehand). I'm reading this all with interest though, and I'm appreciative of yours and Neville's balanced views. Keep up the good work. If I could award karma, I would.

adam

LegacyUser · 10-08-2001 10:08am

Say ISDN service was subject to USO.
I decide to get ISDN, I want Esat to provide it. I contact Esat. Esat examines my line. If its up to par, they unbundle it and provide my service. If its not, one of two things happens.

So they have to do it, disregarding the amount of demand in your area for the service? So to give you ISDN, they have to terminate their fibre at the exchange, rent space from Eircom, install ISDN equipment. Then comes the easy bit: the pay for all that, and turn a huge profit, with your IEP30/month rental for the service. They'd better hope you're going to live for 500 years...

The overall problem here is that you seem to think that telcos just a have barrels of money, and their business model involves knocking on peoples doors and giving it to them for free.

You say that I'm the one who want to distort things with 'regs and subs', but in fact, it is you who wants to do that:- You want to regulate to force telcos everywhere to do blatently stupid and massively loss-generating things in order to provide you Internet services.

If your idea worked, it would bring broadband all over teh country, but, unfortunately, all your idea would do in reality is make it utterly unprofitable, forever to provide unbundled services.

The (almost) free-market approach suggested by LLU is the only way that you will ever see Broadband services in Mayo, or wherever you're from. Only when companies can judge business decisions based on their merits, rather than bizzare and arbitrary rules, will they ever start to move outside of the major cities (witness Esat providing SDSL in cities outside Dublin - they never would have if they thought that in 5 years they would have to also install million pound access multiplexers in the tiny hamlets around those towns

lets see how the market sets the LL rental price, rather than the ODTR.

If that were to be allowed, Eircom would set the price at IKP1000/month/line, drive the OLOs out of business, and nothing would change.

2. I do want both Eircom and the OLO's to be forced to compete for my LL buck; lets see how the market sets the LL rental price, rather than the ODTR.

Why, oh why, do you care? I've met a lot of Internet nerds in my life, but you're the first who cares what kind of copper his Internet service came in on....

[This message has been edited by hudson806 (edited 10-08-2001).]

[This message has been edited by hudson806 (edited 10-08-2001).]

[This message has been edited by hudson806 (edited 10-08-2001).]

LegacyUser · 10-08-2001 11:21pm

Originally posted by hudson806:
quote:
So they have to do it, disregarding the amount of demand in your area for the service?

In order for me to be able to demand that Esat do it, 20 miles of others also have to have demanded it. The rules would be the same for Eircom and Esat, but Eircom because of its extensive network would still have the largest obligation.
I am not looking for an overnight countrywide blanket obligation, but I would like to see a situation at some point in the future when anyone who wanted broadband could get it, and choose who provides it.
Where USO's are to stop creaming rather than to force provision.
That requires eventually multiple nationwide operators. Regional/sectoral monopolies don't work any better than national ones.
But to get to there, from here, I think we need growing pockets of competition in LL installation and upgrade, and the only way I can see to get it is to use tailored and confined USO's.

If the fully broadband market is to come about, it will take years and millions, no matter how it is done.
It can be achieved by LLU and SLA, but I think establishing an installation/upgrade market as well would bring it more quickly and more pervasively and therefore more profitably in the long run.

And if it is a national target to expand broadband to the regions, and subsidise it, then is it not better that customer requests inform who creates it and where rather than some politician? That Esat gets to draw down the money because they have 20 requests within 5 miles of their existing network whereas Eircom only have 10?

regulate to force telcos everywhere to do blatently stupid and massively loss-generating things in order to provide you Internet services.

I have said I don't want the obligations to be so onerous as to make the entire market unattractive. But I do think there are profitable business plans that involve higher infrastructure investment than the OLO's and Eircom currently engage in.

If your idea worked, it would bring broadband all over teh country, but, unfortunately, all your idea would do in reality is make it utterly unprofitable, forever to provide unbundled services.

Someone has to build it, someone has to rent it, someone has to create a business plan where the second pays for the first.
Profit remains absolutely central to the business plans. But will the business plans not be better when honed by competition?

If that were to be allowed, Eircom would set the price at IKP1000/month/line, drive the OLOs out of business, and nothing would change.

They wouldn't because that would make the market too attractive to third party investors.
They would choose a higher than justified price, while erecting barriers to entry, kinda what their trying now

.
If the ODTR concentrates on removing barriers to entry, and in fact forcing entry, then Eircom's high margin/low productivity price just makes them uncompetitive, and their new competitiors more attractive.

Why, oh why, do you care? I've met a lot of Internet nerds in my life, but you're the first who cares what kind of copper his Internet service came in on....

Because the existing stuff needs upgrading. And a competitive market is the best hope of some operators business plan including me.

With one upgrader the risk is my asking for a costly upgrade. With multiple upgraders the risk is my switching providers as part of an upgrade deal.

Living out in the back end of beyond, I expect a competitive market to take years to reach me. That doesn't stop one being created/forced now in urban areas with clear mechanisms for steady, demand led spread.

ODTR Paper 0147 Question 3.1-A (actually the first one)

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