Mr. Doherty has outlined the framework and I will move on to supply. This slide is busy but it shows a range of broadband access technologies that are potentially available together with both the advantages and disadvantages. DSL is being rolled out and the disadvantages are availability and the length and condition of the line. Technology is improving all the time and the UK began, like us, at 4 km and moved to 6 km from the exchange. The original technology used for DSL was large and pretty expensive and now there is what is known as "pizza box" technology, which is much smaller. It can deal with a small number of lines but is appropriate for smaller exchanges. As we discuss these, six months or a year can result in changes in the technologies.
On cable, Ireland has operators with extensive experience and customers are used to cable but the problem is that cable networks are expensive to upgrade. Countries that upgraded during the best period up to 2000 did well on this front. Satellite is available nationwide. It is good for broadcast and involves low installation and set-up time but it can be expensive. However, it has been a solution for a number of people in more remote areas and in areas that have not been covered by other services.
There are national licences available for fixed wireless access but the take-up has been more limited. The cost to the customer, premises and equipment can be expensive in the higher frequency bands. It is cheaper in the lower bands and we are working on that. Ms Goggin will tell the sub-committee more about that.
Mobile technology is used by most consumers. There are 1.6 million PSPN lines in Ireland but there are 3.1 million mobile telephones. Mobile technology has come out of nowhere in the past few years but people feel comfortable with their mobile telephones and, with the additional functionality provided by 2.5G and 3G, in particular, this will be another source of broadband availability that could be overlooked but should not be.
I refer to optical access, fibre-optic cable and wireless optical. Fibre-optic has been available for a considerable time. Digging issues and costs are considerable. Wireless optical is newer but it is also a technology that needs to be examined. A range of technologies is available.
The next slide refers to people who were asked, if they had to have one of these technologies, which it would be and we are trying to ask in relation to what. It takes a minute to download a 60 page document and it may well take longer if the lines are congested and so on. It only takes 28 seconds on an ISDN line, 7 seconds on a cable modem, 1.8 seconds on a leased line DSL and, as one gets into higher capacities, one hardly notices the time taken to download the document.
The slide highlights the time involved if one were using a digital camera and sending photographs over the Internet to a family member or as a sales pitch. It does not make sense to send photographs on a dial-up modem. From a business point of view, it can be seen how quickly one needs to move up the scale and, from a domestic point of view, one needs to be pretty sophisticated before one moves up the scale or has access at home for teleworking.
We have seen where we are. How is it that other countries are where they are? Competition between alternative networks was a key factor in spurring network roll-outs. Broadband penetration is highest in the cabled central European countries - Sweden, Belgium, the Netherlands, Austria, Denmark and Switzerland. Many of these will be seen on the OECD slide which shows us way down the line. It is interesting to note that Germany is a main exception. Deutsche Telekom owned the cable assets in Germany until earlier this year. Therefore, this type of pressure was less there. This is also the case in Portugal.
In some of the larger countries where the incumbent was slow to react to the threat from cable operators, broadband is beginning to take off. In the United Kingdom, BT was relatively slow to react until early last year when it suddenly noticed there were several hundred thousand subscribers to NTL and Telewest cable modems. It also came under pressure in different ways. Spain and France would be in the same position.
The smaller peripheral markets show little evidence of much inter-network competition. Portugal, Finland and Ireland would be in this category. The question for us and these other countries is to what degree has missing out on the short window of opportunity for investment, between the liberalisation of markets in 1998 and the slowdown in capital markets, made in terms of making it more difficult to get up that that curve than might otherwise be the case.
Looking in more detail at the Irish market, there is the incumbent with a large residential base, which owns the bulk of the fixed line infrastructure and can be strongly focused on maximising value from existing investments. The other licensed operators are largely Irish subsidiaries of global telecommunications players, although there are also some interesting Irish-based companies. These mainly work in the high-tech multi-national companies end of the business. Esat BT has a broader range of business.
Most of these companies have some fibre-optic infrastructure in Dublin, mainly serving the large business parks. They are working in a constrained funding environment with a high degree of focus on maximising free cash flow. We list a few. The fact that a company might not be on the list should not be taken as a view on our part. It is important to include the mobile operators with 2.5G, and in particular with 3G, in the broadband market. We list the numbers of subscribers.
The cable operators in their current configuration are in a constrained funding environment and are concentrating on digital roll-out, but there is a certain amount of innovation and new technology coming down the line which may mean that, in time, they may contribute more to this area. A number of other players are involved in fixed wires access, satellite, wireless LANs and so on.
They are the operators. Looking at the other side, we have a highly dispersed population and it presents a challenge. The Government has given considerable assistance in many ways to the regions to counterbalance this. Some 30% of the population lives in the Dublin region, 20% in the major towns and 50% in rural and other areas. Telecommunications is a volume and network business and counteracting that is quite a challenge. The more recent census figures show that the level of concentration in the Dublin area in particular is growing.
What do we do about this? This is a chicken and egg situation. Some can prefer to wait until there is greater certainty in the business case. Do people really want this? How do we handle this? If everyone waits until someone else does something, it is likely that we will get nowhere. There are operators and customers. The operators want profits but customers have proven that they will not pay more than a certain amount for these services. A concentrated effort across all of them is needed to make it work.
In that context, as we all know, Ireland's DSL charges have been reduced. The purpose of this slide is to show our prices relative to those operating in other countries. We show the monthly rental a person is charged for a DSL product. Esat BT is a little cheaper than Eircom. Likewise there is a connection fee charged upfront and we have taken that over a period of years to give an amortised value. We are just behind Denmark. However, the Danish figure is cheaper than ours because it also bundles in the ordinary line rental. When dealing with the Irish figures, it would have to be taken into account that people would be charged their ordinary line rental as well. The good news about this slide is that, had this been done before April, we would have had to have had a special graph for Irish prices to show them at the top level they were at. We are now within the graph but the prices are not in the cheapest place or anywhere like that.
Moving to the demand side and looking at the different parts of the market, Ireland has at the most about 1,000 large corporations depending on what size cut-off is used, about 90,000 small and medium-sized businesses and 1.3 million households. Obviously the large corporations want much more sophisticated and high capacity than the SMEs or the residential market. The concerns for the large corporations are high bandwidth requirements, reliability, security and choice of providers. Even in our most recent survey, there are still some issues turning up among the high bandwidth users, although it is much better looked after than when one comes to the next areas. SMEs have come a certain distance and I will deal with those further. Price, usefulness and unfamiliarity are still issues in the residential market
Looking at the SMEs in more detail, 60% of them use 56K ordinary dial-up. However, 40% use ISDN and a very small number use leased lines and wireless local loop. Those using leased lines would tend to be companies involved in specialised business needing this. Most SMEs use their connections for simple activities such as communications, e-mail, transfer of files and basic e-commerce transactions. Some 46% of SMEs have a website. There are issues, however, in moving from that basic level to the next level. There has been a huge growth in ISDN channels. In the absence of DSL, that is what small businesses have gone for. There are issues for SMEs in moving from ISDN up to the next level as their Internet usage becomes more sophisticated. Many have fewer than ten employees, which means they will not have a specialised IT manager and so on which much larger companies would have. Nevertheless, as one becomes more sophisticated, broadband makes sense and we have a comparison which shows that the ISDN per minute charge means that the costs for SMEs who use the Internet a great deal rise very quickly and they might be better off on a DSL connection. We give an example of a company. We have taken this from one operator's website but there would be others as well.
In the residential market, most homes that have computers also have the Internet. It depends on the survey used but a study we had done by MRBI last year suggested that something like 60% of Irish households have computers and, of those, about 40% have the Internet. If one is looking at broadband, one needs also to examine the computer penetration.
On the residential side, our most recent survey, which was done in May this year, asked people how interested they were in getting a broadband ADSL service. Some interest was expressed by 42% but there is a significant issue of awareness of the product. Some 44% said they did not know anything about it and had never heard about it, 43% knew a little and 13% knew a great deal. One could do half full and half empty on this. The 43% and 13% can be added together so that it can be said that 56% know something, or the 44% and 43% can be added together and it can be said that almost 90% have very little understanding of what this is about. Either way, in terms of moving Ireland on, we need to deal with those figures.
Given the lack of awareness, is it surprising that there is little demand at current price levels? We have noted that there are about 3,000 subscribers at the end of March. We also noted earlier in the presentation that there has been an increase in the orders, mainly coming through from business, over the past month or two since prices have been reduced. As can be seen from these graphs, there is much lack of knowledge of what this is. People do not have a price expectation. When asked if they would buy at the Eircom pricings the number of people who were fairly interested was pretty low. When asked what they would pay for an ADSL service one could say that 65% did not know what they would pay, which comes back again to awareness among consumers.
Are consumers clear about what is different about the broadband experience and that one can have voice and data calls at the same time? A child can be on the Internet and his mother can be on the telephone at the same time. People talk about increased speed, which may lead some to think this will be rushed, but if one has increased speed one's connection is more relaxed and under less pressure. One is not saying to oneself, "this document will not download in time for me to be out of the house." Paradoxically, increased speed means more time, as always-on means one does not have to turn on and disconnect. One can have the time on the Internet without feeling watched and connected.
Looking at this in Ireland, we have many of advantages with which to move forward. Many qualities make us well-placed. We are IT-savvy, English-speaking and we have a high spend on entertainment services and recreation consumption. Our Gameboy targets are unmatchable anywhere apart from Japan. We also go to the cinema and use video retail. These are all things on which to build.
I will ask Ms Goggin to talk about our work programme and how that fits into broadband.
