Sunday 23 September 2018

Another Angle: Three challenges new Eir chief Carolan Lennon must face

Carolan Lennon
Carolan Lennon
Adrian Weckler

Adrian Weckler

Eir has a new chief executive, the first new boss under the new reign of French billionaire owner, Xavier Niel. Carolan Lennon has some big challenges facing her. Here are three of the company's most pressing issues, both for Eir and for Ireland.

1 Will Eir lay fibre in cities or be caught maintaining a fading network?

This is arguably Eir's largest strategic infrastructural challenge. It badly needs a plan to bring its urban broadband services up to speed. This is because it still relies on old copper phone lines for the vast majority of its urban broadband. For example, its current maximum network speeds of 'up to' 100Mbs may have sounded fast three years ago but is distinctly mid-range today. Within five years, this will be an entry-level standard, hopelessly outgunned even by 5G mobile services. It won't be able to support new services being rolled out online. So what is Eir going to do? Two weeks ago, I asked Eir's outgoing CEO, Richard Moat, this exact question. The answer was that there is no current plan.

"Not in the short-term," he said. "We have acknowledged in various strategic reviews that we have looked at the potential for investing in fibre in urban areas. As for our existing infrastructure, we can look at vectoring and taking speeds beyond that which we have at present."

In the medium term, this isn't going to cut it. Senior figures in government have privately acknowledged this in recent weeks when comparing the rural fibre network to be built under the National Broadband Plan to what we currently have in cities and urban areas at present. It's fairly clear that the 540,000 rural homes and businesses to benefit will be streets ahead of Ireland's two million city and urban residents. Cities currently have one high-speed option, which exists through Virgin's cable network. That system looks to have a definite ceiling.

Telecoms is a medium-to-long term investment game. If Eir wants to remain as the country's largest telecom operator, it has to start planning more of its own fibre in Dublin, Cork, Limerick, Galway, Waterford and other built-up areas.

2 How will Eir deal with rival operators from here on in?

Competitively, Eir has been engaged in running battles with rival telecoms firms and the regulator for the best part of a decade. The main issue is that Eir still owns the country's main telecoms network, off which rival firms try to sell services.

But Eir has been found to have favoured its own retail arm over those of rivals on several occasions. These include unjustifiable delays in access to wholesale line rental systems to discriminating against other operators with regard to fault repair times.

Lennon knows this very well, as she has been in charge of the wholesale division, Open Eir, for several years. However, under her tenure, the company has made genuine efforts to address at least some of the issues at stake.

Specifically, it commissioned a report which highlighted a number of shortcomings in how it should fairly deal with rivals compared to its own retail arm. It did all this voluntarily, earning praise form the regulator, ComReg. But that doesn't mean that the company now has a competitive clean bill of health. Rival firms still complain bitterly about what they say are demonstrably over-the-odds pricing from Eir's wholesale division that stifle competition and development. Several major operators, including Sky and Vodafone, even go as far as saying that they can't offer broadband services on Eir's regional networks because the costs are simply too high.

Eir's answer to this is that its pricing is regulated and only approved after rigorous market-testing from ComReg. That being the case, why should it give up any more to private sector rivals? As ever, ComReg is caught in the middle, with a market review expected to move things along sometime over the next few months.

3 Will Eir compromise on access to rural poles for the National Broadband Plan?

After its withdrawal from the National Broadband Plan some weeks back, Eir now sits in a pivotal role as regards the success or failure of the state-backed scheme.

Specifically, how amenable is Eir to cutting a new deal on access to its rural infrastructure for Enet, once the national tender contract is awarded? Right now, we don't have a clear idea.

Moat recently told me that access to its rural poles is no problem - at the current rate of between €10 to €20 per pole. He pointed out that this is a regulated price.

"This is a cost-oriented price set by ComReg, and a fairly recent one," he said.

"We spent more than €100m maintaining fixed infrastructure last year, most of which was on poles and ducts.

"Last year we replaced around 45,000 poles. If we were to voluntarily reduce the regulated price, it may not just apply to the National Broadband Plan, but for other operators as well."

In other words: "Don't ask us, a private company, to subsidise a State rollout that we have just pulled away from."

But it's not that simple. Those regulated prices were set outside the current prospects for the National Broadband Plan. Taking into account the scale and volume of access required by Enet as part of a state-subsidised rollout, a lower price per pole might foreseeably be set by ComReg.

The difficulty here is that ComReg doesn't move quickly on these matters.

But time is not something this process has. "Accessing Eir's infrastructure is a critical issue for us," Granahan McCourt boss David McCourt told me.

The progress of the National Broadband Plan, already under intense pressure, can't really abide a fresh stalemate because of this issue. It will be interesting to see how Lennon deals with this matter.

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