I thank the members of the sub-committee for giving us the opportunity to outline the position in relation to broadband. I will take as a starting point the interdepartmental working group on telecommunications, whose report in 2002 outlined the Government's vision for the availability of affordable open access, always on broadband infrastructure. The idea was to have this within three years and to increase Ireland's position in relation to the comparison with other OECD countries. The programme for Government contained a commitment to roll out broadband in accordance with the phasing which my predecessor agreed.
In the first phase, 19 towns were recommended for construction of the metropolitan area networks, as the Chairman knows having attended the national roll out which coincided with the local roll out in Cork. I have also been to Galway and Ballina and I will be in other areas signing the contracts or authorising the commencement of the roll out. Funding of €64 million has been approved for 2003 and 2004. There was speculation that this area would suffer cutbacks but that is not the case because the Government has prioritised this initiative. It is absolutely vital to roll out the first phase. Galway, Cork and Ballina are up and running and others will follow in the near future. As members are probably aware, the metropolitan area networks are designed in such a way that they will take up most of the industrial and business use areas. Some of the cover is quite extensive, for instance in Galway there is wide coverage of the city area.
We examined how other countries rolled out broadband and based our plan on the Swedish model. We decided to use the local authority structure. There were suggestions that while some local authorities would welcome this with open arms, others would have neither the desire nor the capability to respond. As one who came up through local politics I am very proud of the relationship between my Department and the local authorities in the respective areas. In some areas the project involved a couple of local authorities and they have all responded with open arms. The funding structure is that 90% comes from the Exchequer and 10% from the local authority.
Following the Swedish example, we have decided that when the metropolitan area networks are up and running, a neutral private sector managed service entity will operate them and provide open access to the networks, on a cost basis, to all interested parties. We are developing a code of practice on the usage and operation of these networks, and we have consulted the Department of the Taoiseach, Forfás and IBEC in this respect. The broadband programme fund allocation is €200 million for the period 2000-06. Up to €90 million comes from the European Regional Development Fund, which is a co-financed project, and the two strands of the NDP communications structure funding to private sector companies, as well as funding to local authorities through the MANS project. The entire programme of €200 million as originally designated comprised grant assistance to the existing broadband services in the regions. There were two calls for proposals, and companies like Esat BT had three contracts for DSL. Eircom got one contract for DSL, Crossan Cable one contract for cable, ESB Telecom one contract for fibre and Nevada tele one contact for co-location in switches.
In Limerick recently I launched the southern ring of the ESB Telecom national fibre backbone. This is a fairly important contract where, if my memory serves me correctly, approximately €49.2 million will be spent on the ESB network. The network will form a figure of 8, will be 1,500 km long, and uses the ESB's main transmission lines as a carrier for fibre optic cables. The ESB has quite an ingenious method for doing this using a heavy machine which sits on the wires and mechanically wraps the fibre optic cable around the existing wires, moving from that section past the pylon and on to the next section. The southern loop of that is now complete and the northern loop will be completed in early summer.
Eircom and Esat BT have rolled out about 600, 000 DSL capability and over 105 telephone exchanges will have been DSL enabled this year. The Nevada tele project will make the lease line available in the north west. These projects have received significant funding.
There are a number of gaps in the first phase which we are trying to address but Meath, Kildare, Wicklow, Clare, Sligo, Longford, and Kerry did not apply. After the first phase has been implemented and reviewed, we will consider moving on to the subsequent phases, bringing in another 67 towns and ultimately rolling out to 132 nationwide, I think. That is for another day, the initial phase is to see how this beds in as it is an expensive programme.
I was in the Czech Republic last week where I discussed the issue with my Czech counterpart. He was quite astounded to learn that the Government here is funding separate broadband roll out to the main company. The Czech position is quite similar to ours in that the state is half owner of a company but the market is quite open. They were interested to learn that despite our move to an open market the Government has to intervene to create competition and to create connectivity in areas such as Gweedore.
The first 19 areas are Cork, Limerick, Galway, Carlow, Kilkenny, Wexford, Waterford, Dungarvan, Clonmel, Athlone, Mullingar, Portlaoise, Tullamore, Roscommon, Ballina, Letterkenny, Carrick-on-Shannon, Manorhamilton and Bunbeg. It is quite possible that, with the downturn in the telecoms markets, many of the existing companies would not move into such areas.
From that perspective, I will relate to you the experience of the Czech Republic, where they believe that the open market would solve everything. They admitted that in their country, which has a very high proportion of mobile phones - use being slightly higher than our own - in certain peripheral areas, access to both mobile phones and fixed lines is less than desired. However, they have invested hugely in their infrastructure in recent years. Some time ago we set aside €300,000 and requested a call for wireless local area networks. Some 29 proposals were made to conduct trials of the technology using the exempted spectrum. Companies in Trinity College, Cork and Dundalk, as well as O2 and Esat BT, were successful after independent evaluation. Out of the 29, those five came forward. They will be conducting trials of the digital hub wireless LAN at Trinity College, in the Mahon area of Cork, in Westport, in the conference centre at the RDS, in the ferry terminal in Dún Laoghaire and in hotel hotspots around Dublin, Limerick and Galway. Depending on how well that operates, we will examine the possibility of assisting in rolling it out further.
I have said to my officials that, as discussed in recent weeks with the Houses of the Oireachtas, the Office of Public Works and my own Department, I wanted to examine the possible application of wireless technology here in the Houses of the Oireachtas. Two applications were identified for further consideration: the provision of wireless technology in committee rooms to allow Deputies use laptop computers for viewing documents electronically, thus avoiding the need to install rows of permanent monitors on all desks; and more importantly, the provision of wireless technology in public areas around the Oireachtas. The relevant bodies are actively considering that at the moment. It would have to go before a committee of the House, but I would like to think that it would be approved and that we could then proceed to pilot it to publicise the fact that such technology exists. I accept that wireless LAN technology has security issues that are currently unresolved. However, I believe that, with the proper encryption, it could solve many of our problems regarding peripheral areas, for we must recognise that we will not be able to install fibre optic cable in every nook and cranny of the country.
There are obviously broader issues. I assume that the committee is aware that the Government entered into a contract with Global Crossing in 1999 for the provision of two new telecommunication cables affording seamless onward connectivity to 36 European cities and across the Atlantic to America. The Irish ring of the Global Crossing network is now complete and operational, coinciding with the downturn in the telecoms market - there is no doubt about that. However, we see it as an investment in the future that gives us 15 times the existing capability. Despite the fact that telecoms are in a recession, they will rebound, and there is already some evidence that the investment that we have made in the Global Crossing connectivity project is of very great interest to a number of operators when it comes to inward investment. That is the infrastructure, Chairman. I know that you are to see my colleague, Deputy Hanafin, later regarding the e-government initiative, which is her responsibility.
The other part of my responsibility is regulatory issues, and I have not really briefed the committee on that. As you know, the legislation passed by the previous Government established a Commission for Communications Regulation, ComReg, from 1 December 2002. That is now up and running. I gave policy directions to it on 21 December regarding key policy priorities, particularly the introduction of flat-rate Internet access. The policy directions were issued first in draft form, after which there was public consultation. That has now been completed and the final version of the directions was issued on 21 February.
I have said publicly that, since coming to office, I have listened to almost every group in existence and received diametrically opposed views from literally everyone. Depending on which group one talks to, one hears a different version. However, two matters have impressed themselves on my mind. The first is the need for greater access to Internet connectivity. Whether that is at the slow speed of 56 Kbps or at the much faster speed required by general business or heavy users in the home is one aspect. Part of it concerns the roll-out of LAN, the ESB and all the others. The other issue concerns prices, which are far too high, particularly for such things as digital subscriber lines and the faster rate, even at residential level.
Yesterday I discussed with Mr. Henry Tang, the Hong Kong Secretary for Commerce, Industry and Technology, how far they were ahead in the area. They are ahead of us in certain fields, but it is interesting that we are ahead in others. When it comes to such things as metropolitan area network, MANs, it is easier for a place such as Hong Kong to roll out broadband, since most of its people live in high-rise apartments. Ireland, on the other hand, particularly in peripheral areas, is sparsely populated. There are such structural difficulties, but generally speaking, we are on a par with Hong Kong. Our penetration of SMEs in much higher, and many of their SMEs are fairly old family companies who might not take on new technology as quickly as a more modern country such as Ireland.
I am returning to my policy direction regarding flat-rate Internet access call origination, FRIACO. The reason for our low percentage use of the Internet and computers in homes in comparison with other countries is high prices. If prices were reduced, people would use them, and I made those points very strongly to the service providers. Thankfully, Eircom, for example, has agreed to halve its DSL price as of this month, thus bringing it down to the same level as in the UK, which is comparable to many other, though not all, European countries. Eircom will roll it out to 105 exchanges, and around 750,000 users will have DSL if they want it. Ultimately, as I have said time and again, particularly to people such as Eircom management, the price is the prohibitive barrier to getting more people to use the Internet. By reducing prices, one can increase volume. This was the experience in Hong Kong, too, where they have many more service providers but the cost to the public is lower. The companies involved are all making profits, albeit smaller than if only two operators were involved.
Flat-rate Internet access at the slow speed of 56kb will increase the level of usage in residences. We all worry that if our children are on the Internet, it works like a taxi-meter and the longer they are logged on, the more it will cost. However, a flat-rate system, whereby one pays the same amount per month, irrespective of usage, will increase demand and usage.
The Department is also discussing the possibility of liaising with some of the major telco companies as well as major suppliers of computers, of which there are many, on increasing the demand side. There is no point in installing expensive cable around the country at a high cost to the taxpayer, if there is not going to be an increase in usage. There are many pieces to the jigsaw, including access, price and applications.
We are looking closely at the experience in South Korea where 95% of home Internet usage is for games, whereas the corresponding figure here is quite low. Obviously, people using the Internet at home for games will demand higher and higher speeds. There is a huge niche market upon which we can build and from which companies can make profits.
At the end of the roll-out period for the 19 towns, we will have a better feel for where we are going. Things are happening very quickly in this area and by that time the wireless local area network trials will be over. We are approaching this matter slowly but we are coming from a low base. In 1997, the Government's expenditure in this sector was, in effect, 0%. With the roll-out of broadband this year and next, we will be spending in the region of 7,500% more than in 1997. In anyone's book, that is quite significant.
I appreciate the work the committee undertook when visiting Seattle and my officials are aware of the report that was produced, particularly in relation to wireless local area networks. That report will inform us as to how we should move forward on this matter.
