On behalf of ComReg, I thank the Chairman and the committee for the invitation to appear. I have put together a set of slides but I understand the IT system is not functioning and, therefore, if I could point to the slides as I proceed, I would appreciate it. I will provide an overview of ComReg's role and functions. I will give an overview of the market we regulate at the same time to give a context and I will then focus on three of the key areas we cluster our activities around — competition, spectrum and innovation and consumers — before outlining some conclusions and key areas to address.
The first slide gives an overview of the organisation. ComReg was established in 2002 to replace the ODTR. It moved from a single director to a commission and the three of us are present. The objective of the new legislation in 2002 was to establish an organisation with clear statutory goals to promote the following: competition; the effective use of spectrum; investment and innovation; the development of the postal sector; most important, the interest of end users; and protect and inform consumers. The legal basis under which we operate is set out primarily in EU law but also in national legislation. ComReg is fully funded by the industry and receives no subvention from Government. Since liberalisation, the organisation has remitted more than €260 million as a surplus to the Department of Finance.
We are a results orientated organisation, which in 2008 published more than 90 separate documents, including 30 public consultations. We publish an extensive and detailed work programme each year on our website. Our staff comprises engineers, economists, accountants, analysts, more than 85% of whom have third or fourth level qualifications. The objective of the various work streams we undertake is the need for a diverse and competitive communications sector, which is required by business and consumers alike. In addition to the regulation of electronic and postal communications, ComReg has over the past 18 months taken over responsibility for regulating the .ie domain and the emergency call answering service and, in early 2009, we will take over responsibility for the regulation of premium rate services, which was previously handled by Regtel.
I refer to the next slide, which gives a context to the area in which we operate. The industry in Ireland, which comprises postal and electronic communications, has an annual turnover of €5 billion. A total of 50 players are active in the electronic communications sector. Over the past four years average investment by the industry was €700 million. Revenues increased annually over the past ten years but, in 2009, it is possible they will fall, largely to do with the economic environment in which we operate. There has been a significant increase in multiple technology platforms. Traditionally we had the incumbent operator owned by the State whereas today mobile, fixed wireless and cable operators compete in the electronic communications space. One of the holy grails of the industry is so-called convergence, which was debated for a decade but consumers can now benefit from multiple options in the platforms and technologies they use. The next big paradigm switch is the advent of next generation networks, NGNs, in the fixed, mobile and cable areas, which will radically change the industry going forward.
The next slide provides an overall perspective of the electronic communications sector, which turns over approximately €4.4 billion a year. This represents 2.3% of GDP, of which the fixed line element provides 52%, mobile approximately 44%, and broadcasting 4%. The graph illustrates it has increased over time. The following slide outlines communications pricing. It demonstrates the divergence between the cost of all items with the base being 1997 at the point of liberalisation and the significant reduction in the cost of communications services driven by technology and efficiency. Driving competition through regulation has ensured the benefits of lower prices have flowed through to the consumer. We conduct surveys of the marketplace on a continual basis. Our survey of the fixed line basket, for instance, in the Irish market, shows prices falling annually from €102 in 2004 to €93 in 2008. In the mobile sector, the prices over the four-year period have not fallen consistently but they have fallen significantly over the past year from approximately €53 to €45. This illustrates the benefits of regulation, technology and, particularly, competition have flowed through to the consumer.
I refer to the positional aspect. The other slides only examine Ireland and look at it a little in the abstract. This slide gives an international context to Ireland's pricing. The international pricing basket in August 2008 shows, for instance, that Ireland is in second place in Europe for the cost of a three-minute international call. The next slide refers to the national pricing baskets, which includes calls to mobile and line rental for which Ireland is in sixth and tenth positions, respectively. This demonstrates that on an international comparison basis, Ireland remains competitive in telecommunications because clearly the lifeblood for industry and consumers is to ensure we have a diverse telecommunications sector in operation.
The following slide deals with the fixed voice market between 2006 and 2008. Eircom's market share fell by 5%, which highlights again the benefits of competition and the fact that consumers have more choice, through which they can shop around and achieve better prices.
The next slide addresses mobile subscriptions and highlights a dramatic change. When ComReg was established in December 2002, 94% of the market was provided by two players, Vodafone and O2. In the period between 2003 and today those market shares have changed radically. Clearly, there are more competition options out there but the market share of those two players has fallen from 96% through 94% to 74%. The market share of Meteor, for example, has grown to almost 20%. We see the basis of an increasingly competitive market. We also have, for the first time, mobile virtual network operators, MVNOs, operating in the marketplace. It is unusual for a population of our size to have four full-blown network operators. We currently have one mobile virtual network operator in the marketplace. Members may have seen announcements before Christmas that An Post is joining that suite of MVNOs in 2009. For the size of the market, we have an increasingly competitive marketplace. There is, clearly, more to be done.
The next slide signals one of the clear areas of success in this sector. When we started out in broadband development in 2002, there was one player, who was providing broadband at €100 per month. Not surprisingly, it had 3,000 customers. The slide covers approximately 20 current players in the broadband space. Today, one can get prices ranging from €8 to €10 for broadband packages. Increasingly, these companies are providing higher speeds. Part of the current Eircom package is up to 20 megs, with a more general package offering between 3 and 6 megs.
The next slide illustrates the distribution of the broadband Internet market. There is a good distribution of the different platforms. The existence of different platforms providing services is a key ingredient of a competitive marketplace. It is interesting to see that mobile broadband has grown by more than 200% in the last year and now represents almost 300,000 customers. Eircom's share of the retail broadband market is now below 40%. That is a significant development. In 2002, Eircom's share was almost 100% of the market. This has come about largely because we took a number of initiatives, particularly in the spectrum area, to drive competition. This slide shows that the total market, including mobile broadband, is now €1.12 million. We have come up very significantly.
The next graph shows that we are now almost at the 20% level compared with other EU countries. With developments in enhanced competition and choice and the national broadband scheme, we expect that this growth will continue and that Ireland will continue to move up this table. More importantly, the emphasis will shift to the quality and speed of broadband rather than the supply.
The last of the market review slides looks at broadcasting. In the last year, the cable/MMDS area has fallen back by 15% while satellite services have grown by almost 10%. This slide gives a picture in time of what is happening in the broadcasting market.
The final slides deal with ComReg's key initiative areas. I will deal with competition, Mr. Mike Byrne will deal with spectrum and innovation, and Mr. Alex Chisholm will deal with consumer initiatives.
I have touched on a number of competition issues already. To underpin the competitive marketplace we must have continually enhanced competition. Much of the work of ComReg is focused on ensuring that there are appropriate wholesale product offerings in the marketplace, particularly products involving local loop unbundling, which facilitates companies accessing Eircom's exchange and providing a suite of services directly to their customers. We have spent much time in 2008 trying to ensure that the product is fit for purpose and that pricing and the various elements that make up the product facilitate a good business model. We are focused on local loop unbundling because it has been a key driver of broadband in other markets. It has also been seen as a strong precursor to investment in next generation access networks. We see it as part of the ingredient mix which we need in this marketplace.
In the mobile marketplace, we have focused on trying to get more operators into the marketplace, lowering the barriers to entry and supporting the introduction of MVNO access. By the end of this year we will have two MVNO players. We have also sought to reduce mobile termination rates and porting costs in a way which facilitates new entrants to establish a better business model. Cable has become a significant player in the broadband space and currently has approximately 100,000 customers.
I will ask Mr. Mike Byrne to take up the issue of spectrum and innovation.