Monday 16 September 2019

Can Niel's Eir get up to speed?

Eir chief executive Carolan Lennon.
Eir chief executive Carolan Lennon.
Adrian Weckler

Adrian Weckler

Will Eir let its network rust away? Or is it about to surprise everyone with a massive wave of investment?

We're about to find out.

The company, one of the three most important infrastructure organisations in Ireland, reported cost-cutting results last week.

Lower revenue and higher profits were accompanied by no news of any new services or plans, other than a programme to let a quarter of its workforce go.

On paper, there is nothing to suggest any growth or advancement, just a professional strategy to manage down costs and defend existing products.

The exception is its current plan to build out 300,000 fibre-to-the-home broadband connections in regional towns.

So is the new owner, billionaire Xavier Niel, simply going to sweat what's there to make a fast buck? Maybe not.

Eir's new chief executive, Carolan Lennon, told investors last week that the company planned to invest €1bn over the coming five years.

This would likely include more fibre-to-the-home broadband and an extensive upgrade of the mobile network.

This would ease a lot of nerves.

Right now, the majority of Eir's broadband network isn't fit for what the future will bring. Eir has 919,000 broadband customers with 300,000 of these are stuck on slow landline speeds. At under 30Mbs, they're almost obsolete for broadband usage going forward. But at least these people have the state-backed National Broadband Plan. (If your only available speed is under 30Mbs, you get a state-subsidised 1,000Mbs fibre line into your house, to be delivered by Enet sometime over the next four years.)

As for the remaining 619,000 Eir broadband customers, all but 28,000 are on old-fashioned phone lines.

That means under 100Mbs. And many can't get more than 50Mbs, shrinking to about 20Mbs or 30Mbs over wifi.

These people are in the worst position. Because their broadband isn't slow enough to qualify for state intervention. But it definitely isn't fast enough for the world in four or five years' time.

Even now, try dividing a family home with three or four devices on the go between a 'future-proof' 30Mbs connection. You can expect periods of buffering and crawling on YouTube or Netflix - and it's going to get much, much worse.

This is where Eir's plans are crucial.

If it really is going to upgrade its network, it could make a huge difference.

It might also prevent the creation of a monopoly in Irish cities.

At present, Virgin is the only high-speed broadband service at scale in Irish cities, with rival services unable to exceed 100 megabits per second as they are based on Eir's legacy copper telephone lines.

Unless Eir (or Siro, or someone else) invests in fibre in urban areas, Virgin will have a complete lock with no competition.

Right now, many homes will accept a 50Mbs broadband connection from Sky or Vodafone, based on Eir's landlines. Much fewer of them will in a couple of years time, when 4K video and five or six (or nine or ten) connected devices per premises will be the norm.

There will only be one viable option.

"Ah come on," I hear you say. "You're exaggerating. 50Mbs is more than enough for Netflix and most other things."

Yes, but a 50Mbs line isn't 50Mbs signal strength. The actual connection speed that most people get on their devices is around half of what the line speed says. This is because almost everyone uses wifi, which gets only a percentage of the physical line speed quoted when tested.

So if your line is tested at, say, 50Mbs, you'll typically get around 25Mbs on a laptop or phone in the living room (beside the router) and around 15Mbs (or less) in the kitchen or bedroom.

And if you have a large home or the walls in it are very thick, a 50Mbs broadband line can trickle down to around 5Mbs in a bedroom. That's still just about manageable for most services today.

But if you're one of the many Eir customers that gets 35Mbs or 40Mbs, you'll find yourself increasingly phased out of contention for modern online services, especially in a situation where a family is trying to use the broadband one more than one device at the same time.

So is Eir serious about investing?

Communications Minister Denis Naughten recently gave the company's new owner the benefit of the doubt.

"The fact that the owner is a telecoms company and seem to be building out infrastructure in other jurisdictions is hopeful," he recently told me in an interview for The Big Tech Show podcast. "We now have a telecoms company taking over Eir. It's the first time for a long time that the owners of Eir are in the telecoms sector themselves. I hope and believe that it will look at a new phase of investment in telecoms here. Because we haven't seen it to any great extent in Eir in the past, other than the investment in the 300,000 regional fibre homes."

It's still early days in Niel's tenure as majority shareholder in Eir.

Clearly he has a choice: sweat the asset or invest in a new, modern business.

To do the latter will take a hell of a lot of money. But most market evidence shows that it is the only way to keep Eir in the strong infrastructural position it currently occupies.

Niel's executives have previously indicated that expansion of Eir's mobile infrastructure - which significantly lags that of Vodafone and Three in scale - is a priority area for the company.

But for most, it is the breadth and depth of advanced fixed line availability that is crucial to Ireland's near-future connectivity.

Only Eir is really in a position to address that. This is especially so if there are any future delays to the state-backed National Broadband Plan, which still does not have a formal commencement date for the rollout.

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