Are Irish firms paying too much for broadband services that are too slow? Seen through the lens of experiences in other European countries, the answer unfortunately is yes.

Whereas the belated rollout of broadband here is held as an achievement in itself, other countries are offering internet access at speeds and prices Irish users can only dream about.

Forfás’ latest broadband benchmarking report shows the speed most widely available to Irish users at present is 6Mbps. By comparison, broadband services in many other European countries are twice as fast – or more – and often up to four or five times cheaper.

According to Forfás, a typical Irish business pays almost €2,500 per year for a 6Mbps ADSL service, while its counterpart in Germany can get a 16Mbps service, depending on usage, for as little as €534.

In France, the annual cost is €530 for 18Mbps and in Sweden, 24Mbps costs just under €1,200 per year.

Ireland’s progress is being held back by the lack of comparable services, Forfás chief executive Martin Cronin says. “Optimum development of the enterprise sector and of e-business in Ireland will require a wider range of higher speed broadband services to be available for businesses.”

There are options for companies to order leased line connections with very high bandwidth, but these come at significant cost. Wireless providers such as Irish Broadband and Digiweb, as well as the cable operator UPC, offer these services, as do Eircom and BT.

This won’t solve the problems of most businesses without the deep pockets needed to finance such investment. As long as digital subscriber line (DSL) technology is the most widely used, experts say broadband speed increases will be incremental and not available to everyone.

“The theoretical maximum with DSL is 24Mbps and you’re not going to get that if you’re more than a couple of kilometres away from the exchange,” says Oliver Johnson, CEO of Point Topic, a UK broadband analysis firm.

“What’s happening in Sweden, France and Germany is they’re installing fibre-optic cable to buildings, that’s how you get 100Mbps. The trouble with the UK and Ireland is, that infrastructure isn’t there.”

A fibre-optic network rather than copper wire would allow really fast speeds as in other countries, but “Eircom needs to work within the budget that it has”, says Eoin MacManus, marketing director for business markets with Eircom. According to MacManus, improvements in the broadband network are also limited by the technology. “For us as an organisation to facilitate significantly higher broadband capacity, the network needs to be upgraded,” he says.

Eircom is in the process of upgrading its network “in a logically incremental rather than a revolutionary fashion”, MacManus says.

For the meantime the company has announced a 12Mbps service, due to be launched on a phased basis starting next month. “Our plan will be to target those [telecoms] exchanges where there is a higher mix of business customers,” he says.

The rollout will take a number of months and during this period Eircom has said it will review its pricing structure.

Service providers with their own networks have the advantage of being able to set prices on their own terms, which is good news for businesses. Initially Eircom has priced its 12Mbps service at the same cost as its 6Mbps package, at €2,453.88 per year.

Magnet Business recently announced a 12Mbps service using its own network and pitched slightly below Eircom’s offering at around €2,000.

BT Ireland also launched services of up to 8Mbps using its own infrastructure, which covers parts of Dublin as well as exchanges in Naas and Cork. The annual cost to a business customer would be €480.

Other operators can buy lines from Eircom wholesale and resell them to customers, with some flexibility to offer competitive pricing.

Even with this progress Ireland would still remain below the average advertised download speed in the OECD, which is 13.7Mbps. Subscribers in many other OECD countries can avail of much faster average download speeds such as 93Mbps (Japan), 44Mbps (France) 43Mbps (Korea) and 21Mbps (Sweden).

A popular mantra among many Irish telecoms executives is the lack of customer demand for fast broadband services. This doesn’t hold up to scrutiny. In countries where high-speed services are available, “there’s certainly demand,” says Johnson.

“If you have bandwidth you will find ways to fill it, like videoconferencing or teleconferencing. For companies, it means you can share a line among a couple of hundred people and have a decent speed for everyone,” he says.

Broadband would enable more Irish firms to use managed services – outsourcing some IT functions to a third-party provider – but the lack of widely available fast broadband is holding this back, claims Mark Kellett, CEO of Magnet Business, an independent broadband service provider.

“People do want to adopt managed services but if they are outside the major conurbations of Dublin, Cork or Galway that’s not really viable,” he says. “Ireland Inc is appallingly served. The products out there for an SME are pretty poor.”

Kellett claims higher broadband prices in Ireland compared to other countries were partly due to higher service overheads and the costs incurred by operators in rolling out these services.

The latest available data from ComReg shows a total of 793,600 broadband subscribers at the end of September last year.

A growth rate in the 12 months from June 2006 that was the highest among OECD countries seems commendable.

Instead of congratulating ourselves that we have broadband at all, the focus should change to getting faster speeds and greater variety of services as other countries have.

“The debate has to move on. We need to move away from talking about the number of broadband subscribers to the quality of product,” says Kellett.

“By the end of the year you’ll see a very different landscape compared to the market there is now,” says MacManus.

Ireland looks likely to pass the one million connections mark this year; given the recent, albeit belated, progress this should happen sooner rather than later.

If broadband providers make good on their promises and faster speeds become more widely available at competitive prices, that at least should be a more genuine reason for Irish businesses to celebrate than an ultimately meaningless milestone.

Broadband capacity and competition are key, says Chambers

While Forfás is understandably concerned about the bigger picture and how broadband affects the country’s competitiveness, business groups are worried about what it means for their members.

Chambers Ireland was quick to support the Forfás report’s findings. “Availability is still an issue throughout the country,” says Claire Cunningham, head of Chambers Ireland’s Digital Policy Committee.

High prices are a black mark, especially for cost-conscious small firms, she says. “Companies are going to have to be more competitive in their pricing. There’s no reason why they should be charging the prices they’re charging.

“Looking at the uptake of business broadband connections, there’s clearly more people who would take the service up, but perceive it as too expensive.”

While welcoming newly introduced 10Mbps and 12Mbps services from the likes of Eircom and Digiweb, she says, “We are still significantly behind on broadband capacity”.

Chambers Ireland is calling for faster next-generation networks to be rolled out as a priority.

“There’s no reason companies shouldn’t be providing fibre to homes and businesses in the next two years. Realistically, there is a lot of fibre in built-up areas,” she says. “The next few years are critical.”

Widely available high-speed broadband could also have additional beneficial effects by encouraging businesses to use a number of different applications, she adds.

© Silicon Republic Ltd 2008

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