What next for rural broadband?

ANOTHER week, another National Broadband Plan (NBP) drama. But why did Eir really pull out? Can Enet complete the job by itself? What other blockages are waiting to intervene? With some dust settled, here’s a look at how things stand.

Was it really Eir’s prospective new billionaire owner, Xavier Niel, behind Eir’s withdrawal?

Representatives for the French tycoon, which this column has been in touch with, say no.

They say that it was purely a decision taken by Eir’s current management. They also say that Niel will pursue a balanced approach between rural and urban rollouts. But until they open up a little more about what that means for Eir’s network development (which they might not feel able to do, given the acquisition hasn’t been completed yet), we won’t know any more than that.

But there is a pattern with Eir every time it changes corporate hands, where it pares back any fresh national investment plan to sweat its most profitable assets. To be fair to the company’s new owners, there is some evidence to suggest that focusing a bit more on urban network infrastructure is as badly needed as tending to rural infrastructure.

In Ireland, cities are comparatively well served with broadband but largely through the cable infrastructure of one company — Virgin (formerly UPC).

Yes, Eir (and through it, Vodafone and Sky) offer DSL phone line broadband, but this tops out at a speed that’s far, far less than fibre. While its “up to” 100Mbs maximum speed seems fine today, it will be an entry-level speed in five or 10 years.

So what does it do then? 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. Presumably, Niel sees this. Maybe he thinks that it’s more of a business imperative than a 25-year NBP contract to service one-off bungalows in remote rural areas.

So Eir just changed its mind on rural broadband? Does this mean it won’t complete its own 300,000-premise rural fibre rollout?

No. It has explicitly said that this rollout will be completed, probably by the end of this year. Remember that this tranche of 300,000 homes and businesses is the ‘profitable’ portion taken from the Government’s state intervention list, which previously stood at 850,000 homes. (This is the same tranche of 300,000 premises that critics refer to as the ‘cherry-picked’ part of the NBP.)

Even if it wanted to back out of this rollout plan, which is already half done, it would be tricky to do given the agreed financial penalties that might result.

It also cannot aggravate relations with the government too much at the moment, as the Communications Minister Denis Naughten still technically has the power to intervene in the proposed takeover of the company by Xavier Niel.

Is Enet capable of taking on the entire National Broadband Plan rollout job?

Enet says it can and the Government certainly believes it. This column spoke to Enet chief David McCourt last week and put this question directly to him.

“These kind of projects are right in our sweet spot,” McCourt told me.

“We know how to scale. We understand the business and we understand public-private partnership. We’re committed to Ireland for the long-term.”

In effect, Enet isn’t relying solely on its own existing engineers. There are large European contractor firms with experience in telecoms buildout infrastructure that it will likely use.

However, there is one outstanding issue that it can’t handle completely itself.

“Accessing Eir’s infrastructure is a critical issue for us,” said McCourt. “That could be solved in a number of ways, but being able to access their infrastructure is obviously a critical issue for us.”

McCourt said that there was “still more work to be done for that to happen and that this will be done “between us and Eircom, or between us, the Government and Eircom”.

Does that mean access to Eir’s infrastructure is now a major sticking point for the National Broadband Plan?

If there is one issue that could hold things up in the short term, it may be this one. Despite McCourt’s emphasis, Eir is no mood to start reducing prices on access to its infrastructure.

Indeed, this was one of the reasons it pulled out of the NBP in the first place, citing “growing uncertainty on a range of regulatory and pricing issues that reside outside of the National Broadband Process”.

In effect, Eir said that ComReg is destabilising its incentive to invest in long-term infrastructure by, among other things, conducting a market review as to how much Eir can charge rivals to access that infrastructure.

Eir knows that rivals such as Vodafone and Sky (as well as smaller partners such as Magnet) have been baying for a reduction in the Eir’s industry charges, with those firms going so far as to say they won’t compete on Eir’s infrastructure because of the comparatively high cost.

But with a new owner coming in, there seems little chance that Eir will give up some of its most controversial charges (such as a €270 access fee to other operators to trade on its home fibre lines) without a major fight.

The government knows this but has previously expressed sympathy for rival operators on this one, with Communications Department officials indicating they expected the €270 fee to be reduced either by the telecoms regulator or a separate government mechanism. This is a space to be watched closely in the coming months.

Does the Government have any other option now other than Enet?

Last week, Communications Minister Denis Naughten referred to a Plan B that his department has in the event that final negotiations with Enet aren’t immediately successful.

There was nothing else forthcoming on any detail around this, although officials later said that it did not include the option of quitting the process altogether.