Rural homes on the wrong side of the digital divide could soon have better broadband than city counterparts, says Eir CEO Richard Moat
The 300,000 homes and businesses in broadband-deprived areas that Eir is targeting to bring its broadband base to 1.9m premises by 2020 will bypass the cabinet and connect directly to the exchange with speeds up to 1Gbps, CEO Richard Moat told Siliconrepublic.com.
Eir this morning (27 January) reported its second quarter financial results, in which it revealed it is now passing 1.4m homes with fibre-based broadband at speeds of up to 100Mbps.
The company aims to provide fibre broadband to 1.9m homes by 2020, revising a previous target of 1.6m, which it will surpass by the end of this year.
Eir is also currently deploying 1Gbps speeds using fibre-to-the-home technology to 66 towns within the 1.4m premises and currently 28,000 premises in 16 towns can now get 1Gbps speeds.
Moat explained: “Our core FTTC [fibre-to-the-cabinet] rollout was always intended to go to 1.6m homes by the end of the calendar year and that is basically covering the cities and suburban areas of larger towns and broadly speaking built-up areas. But we are pushing out generally into rural communities.”
Before Christmas, the Government’s National Broadband Plan to connect 750,000 homes in broadband-deprived areas with a minimum of 30Mbps entered pre-qualification phase.
Eir said that it will be pressing ahead with its own plan to add 300,000 premises, including in broadband-deprived areas.
According to Moat, those additional 300,000 homes will benefit from a technological upheaval within Eir that will see it ditch cabinets and instead opt to provide fibre-to-the-home services direct to the exchange.
“While FTTC has been cost-effective in built-up areas, it is not economically viable to place thousands of cabinets in rural areas because of the low density of housing stock. Ireland is the second least densely populated country in Europe after Finland.”
‘To us, this is like avoiding what happened when Ireland built the M50 and instead create something future-proof for future generations’
– RICHARD MOAT, EIR
The irony here is that rural communities’ previous geographic disadvantage when it came to getting broadband has the potential to work in their favour and result in superior speeds and services to their urban counterparts.
“The best technology is fibre-to-the-home where you connect with the exchange directly. That will be the architecture for the 300,000 premises and, as such, that can provide speeds of up to 1Gbps.
“To us, this is like avoiding what happened when Ireland built the M50 and instead create something future-proof for future generations.
“Cabinets are expensive to run and they don’t make sense in ribbon developments.
“We are actually starting this rollout now and, in the short term, we are creating a reverse digital divide where rural communities will have superior services through fibre-to-the-home.”
Competition and the road to quad play
This morning Eir reported its third consecutive quarter of revenue growth, with Q2 revenues up 4pc to €328m and an EBITDA of €117m. Eir, which recently acquired sports TV provider Setanta, now has 817,000 broadband customers, up 19,000 in the quarter.
Its Eir Vision TV service now has 45,000 customers, a 24pc uptake from its fibre broadband base.
But the competitive pressures are rising. In recent weeks, Virgin Media (formerly UPC) revealed new 360Mbps broadband services and, prior to that, entered the Irish mobile market. Vodafone last week launched its new TV service targeting homes with minimum speeds of 40Mbps.
I asked Moat how he sees Eir handling these competitive pressures. Interestingly, while Eir currently is the only pure-play quad-play provider from a billing sense, neither Virgin or Vodafone have come up with quad-play bundles. But it is only a matter of time.
“You’re right, with the Virgin rebranding and the launch of Vodafone’s TV service there are lots of competitive developments. We are happy that our own rebrand to Eir is going quite well and our research tells us that 83pc of people are aware of the rebranding in Ireland.
‘Setanta is going to be a game-changer and we are putting a lot of energies into this’
– RICHARD MOAT, EIR
“We hope that this, along with compelling price points for quad play, will give us the momentum to compete vigorously across product sets.”
Eir said that 18pc of its overall customer base are subscribing to triple and quad play bundles and that there were, on average, two revenue-generating units per household.
“The key development has been the acquisition of Setanta and that is currently with the Competition Authority and the Minister for approval and we hope to achieve this in the second quarter of the calendar year.
“This will give us exclusive content to help us acquire more broadband customers and reduce churn. Setanta is going to be a game-changer and we are putting a lot of our energies into this.”
One of the areas that doesn’t get enough attention is Eir’s activity in the mobile space. The company said that it has passed the milestone of 500,000 post-pay mobile subscribers, which is 46pc of its base of 1.1m mobile customers. More than 348,000 of these are 4G and the average data usage for prepay customers exceeded 1Gbps for the first time.
“When I came to this business more than three years ago, we definitely had a target to improve the profitability of the mobile business. We have achieved getting 46pc of our base to post-pay, when I arrived this was just 23pc.
“Previously, people said that Meteor was a youth-oriented brand, but now it appeals to wider segments of the population and this is reflected in post-pay numbers and 4G.
“We have, however, evolved our strategy over time and, instead of a standalone mobile service, our goal now is to sell mobile as far as we can in triple and quad-play bundles. Some 18pc of households in Ireland are on bundles.”
Eir’s chief financial officer Huib Costermans said that, from the business market perspective, Eir has 99,000 business customers and the intention is to stir up competition: “It is a relatively competitive area where our competitors are heavily promoting handsets and offering discounts, so we are considering our performance in this area.”
Moat points out that the acquisition of Setanta and a deal with BT Sport up to 2019 will enable Eir to offer competitive content packages to mobile subscribers.
“Not only have we launched content on the go but we will also be able to offer exclusive content for TV users. We are also giving mobile customers the opportunity to purchase apps to watch TV products on, even if they are not a TV subscriber. We intend to leverage the content we have across the mobile base and keep pace with the developments in the Irish market.”
Storm, recovery and new blood
Companies like Eir are a bellwether for a country’s economic fortunes and, when Ireland descended into recession following the banking crisis of 2008, Eir suffered too. As the country returns to growth, Costermans said that consumers are spending more on getting connected.
“That’s why you are seeing the evolution of quad-play digital TV offerings in the market because people are using their broadband for more things.
“In the SME space, the recovery of the economy is seeing particular developments in the mobile area.”
Last year, Eir announced 375 new jobs as part of an €18m investment, with Eir’s Apprentice Programme generating 300 of the new jobs with a commitment to recruit 60 apprentices a year over five years.
Costermans said that, as Eir evolves into new technologies such as fibre to the home, the demographics within the company need to change. “A large group of our employees are at an age where we need to prepare them for retirement and that was a large part of our plan to recruit undergraduates and apprentices and overall this is true for the industry itself.
“Because we have had to simplify the organisation we are seeing good processes and increases in efficiency as we rejuvenate our demographic.”
Moat added: “The apprentices we took on last year are already having a real impact in the field and contributed strongly to dealing with the fault levels caused by the winter storms so they are already playing their part.”
It is understood that the winter storms cost Eir €500,000 in the last three months of 2015.
War of words over wholesale
Returning to broadband, I put it to Moat that rivals have been kicking up a tantrum claiming Eir has been abusing its power to retain its market position with respect to wholesale. ALTO, the organisation representing alternative operators, this week met with the Department of Communications to call for speedier resolution to issues.
Moat said wholesale is vital to Eir’s future and its wholesale division Open Eir saw an 11pc increase in revenues year-over-year. Wholesale broadband connections grew by 22,000 during the quarter, bringing Eir’s total wholesale broadband lines to 366,00 at the end of December.
“If you look at our results you will see that wholesale is a central feature of operations and, therefore, it is in our best interests to give the best possible to wholesale customers, it is critical to our survival. So why we would do something to damage that is difficult to understand.
“There has been a lot of noise created by a report we produced to illustrate that we are meeting standards and processes expected and where we found discrepancies we fixed them. It’s strange how something we did on a proactive basis is being presented by other operators as negative.
“Our ambition is to comply with regulations and give the best possible service to wholesale customers, they are part of our lifeblood.”
