Mr. Kevin O'Brien:

I thank the Chairman and members of the joint committee for an opportunity to discuss with them some of the specifics of the broadband market in Ireland. I am joined by Mr. Donal Leavy, who is director of ComReg's wholesale division.

The wholesale division is responsible for implementing specific regulatory measures that enable or help develop more competition within various parts of the electronic communications sector. We are happy to answer any questions members may have about the matters raised and look forward to the discussion.

ComReg is the national regulatory authority for the electronic communications and postal sectors. We were established in 2002, taking over the functions of the Office of the Director of Telecommunications Regulation, which was set up in 1997. ComReg also manages Ireland's radio frequency spectrum and the national numbering resource. We also regulate the emergency call-answering service, among other activities. We have a committed and hard-working team of highly experienced individuals.

Our overall responsibilities are to promote competition, inform consumers and encourage innovation. Members may recall that ComReg recently held a successful auction of radio spectrum for next-generation mobile telephone licences. This will raise €854 million for the Exchequer between now and 2030. The auction also will allow mobile companies to roll out high-speed, fourth generation mobile communication services later this year. Arising from this auction, €450 million of auction fees were forwarded to the Exchequer last December.

Under the 2002 Communication Regulation Act, ComReg is responsible for promoting competition within the electronic communication sector. We focus on ensuring that users derive maximum benefit in terms of choice, price and quality, that there is no distortion or restriction of competition, that efficient investment in infrastructure occurs, that innovation is promoted, and that we have efficient and effective use of the radio frequencies. The way we regulate is very much defined in European and Irish law, with a significant role played by the European Commission under the relevant directives.

The provision of competitively priced broadband to businesses and consumers, capable of supporting a range of new applications, is essential to Ireland's economic recovery. It will help ensure that Ireland remains an attractive location for new investment from both foreign and domestic sources.

There have been a number of positive signs of progress in recent years, with strong competitive forces and consumer emphasis on value putting downward pressure on prices while quality and coverage levels have improved. ComReg's regulatory interventions in regard to wholesale broadband have helped to stimulate such competitive pressures and ensure new investment.

As a result of the regulatory and business environment, the telecoms sector in Ireland today is making investments of approximately €1 billion in next generation broadband and fibre networks. These networks will deliver speeds of 30 to 150 Mbps to Irish consumers. Broadband adoption has continued to grow in recent years, as have broadband speeds. That has been driven in part by user demand for video consumption and other content services such as gaming and social media networks. There are currently 1.6 million broadband customers in Ireland, and an estimated 65% of Irish households have chosen to purchase broadband.

Outside the regulatory framework, there have been a number of State-sponsored programmes in the past decade. More recently, the national broadband scheme was completed in October 2010 at which point additional broadband services were made available in more than 1,000 electoral divisions across every county in the country to ensure national availability of broadband.

Following the national broadband scheme, the Government recently rolled out the rural broadband scheme to provide broadband to any remaining individual rural premises not capable of getting the service from existing providers.

Last August, the Government published its national broadband plan, which charts progress made to date in achieving the EU digital agenda targets and sets out steps to ensure the country exceeds the targets set for both 2015 and 2020.

With regard to broadband speeds, it is worth noting that higher speeds are being achieved. Approximately 74% of all broadband subscriptions are in the 2 to 10 Mbps category, while 21% are greater than 10 Mbps. ComReg will shortly roll out a new initiative in regard to advertised speeds whereby we will launch an online facility allowing for the measuring and publishing of broadband speeds experienced by consumers using different platforms.

Our analysis of the market reveals that, increasingly, customers are purchasing several services as part of a single bundle. Products offered as parts of bundles include fixed phone, broadband, TV and mobile phone services. The most common bundle purchased is fixed phone and broadband.

Competition in the sale of those bundles is strong, and consumers gain from that through better offerings and lower prices. The strength of the bundles market can be seen from the recent entry of Sky, with an offering that includes satellite TV, broadband and voice. That is in direct competition to UPC, which offers the same bundle but over their cable platform.

It is useful at this point in our introduction to describe the platforms used by Irish customers in obtaining broadband. Members received a submission from us in advance of today's meeting, and I would direct them to charts 3 and 4 on page 3 of that submission. These are two charts from our quarterly reports. The most recent quarterly report was published yesterday therefore, these are up-to-date figures. They report on the final quarter of 2012. On the top chart, chart 3, members will see a number of different platforms identified whereby Irish consumers obtain their broadband service. If I start at the bottom, members will see the dark blue area, which is DSL. DSL is the Eircom copper network with which we are all familiar. DSL is the way we get broadband through that. It is the biggest source of broadband for Irish consumers. The cable network is shown in green. Members can see that, quarter on quarter, the number of subscribers using cable to get broadband is increasing. The grey area is fixed wireless access. This is a spectrum based service, which ComReg introduced targeting rural areas in particular six or seven years ago. While numbers using that platform have declined, it is still a very important platform, particularly in the more rural areas. Detailed in red are smaller but important services across satellite and fibre direct into houses. Outlined in light blue is mobile broadband, which has been a significant means of getting broadband to more rural areas in Ireland. Members will see that over 500,000 people avail of mobile broadband.

The second chart breaks down the DSL group, and it is important for today's discussion to mention that. In chart 4, the dark blue area is where Eircom provides broadband to its own customers on its own network. The green area is where other operators such as Vodafone, Sky, UTV or IFA resell Eircom products to consumers but using the Eircom network. In that case it buys a wholesale product and then resells it under its name, but it is on the DSL Eircom-owned copper network.

The final category is what we call local loop unbundling where other operators have effectively taken control of that last part of the Eircom network. They have invested in the exchanges and can innovate to a greater extent, and offer more variety. Rather than being just a resell, it is a reuse. It is important to explain the way in which people currently receive broadband.

I will refer briefly to two recent regulatory decisions ComReg has made. These relate to next generation access and the bundles I have described. competition.

The next-generation access decision provides a regulatory framework for next-generation broadband in Ireland that will facilitate investment and the promotion of competition. The bundling decision ensures that other operators can effectively compete with an Eircom bundle so they can sell the products they buy from Eircom without being squeezed out of the market by the latter. Both decisions were notified to the European Commission. ComReg took the utmost account of all comments received in consultation.

Subsequent to these recent decisions, Eircom announced that it would provide a €3 discount on wholesale line rental that all operators could avail of from the date of Eircom's NGA launch, where wholesale line rental is purchased with another wholesale service from Eircom which enables the operator to provide broadband to consumers. Put simply, wholesale line rental is a wholesale service provided by Eircom that allows another operator to provide services over the phone line. ComReg welcomes the Eircom wholesale line rental discount announcement. The discount applies for a period of 18 months. ComReg considers that Eircom's proposal gives certainty to operators regarding their wholesale input costs from Eircom and ultimately allows for the prospect of faster broadband services to consumers without the need to increase retail prices.

The wholesale line rental discount is also available to operators who purchase next-generation-access-enabled broadband wholesale services. Eircom has announced it is investing €400 million in its fibre infrastructure, which will result in the making available to 1.2 million premises of next-generation broadband, delivered over five phases. In practical terms, it should mean that a significant number of households and small businesses get access to fast broadband services, in most cases with a choice of provider. In conjunction with the wholesale discount, ComReg hopes that the next-generation access deployment will further stimulate competition in the market and ultimately lead to better services for consumers at higher speeds and lower prices.

It is important to note that there is a significant distinction between retail line rental and wholesale line rental. Retail line rental is provided for under the universal service obligation regime put in place by ComReg and ensures that fixed-line telephone services are available to end users at the same standard price everywhere in the country. Retail line rental is the flat monthly fee paid for by consumers to access the telecommunications network so that they can receive and make calls on their fixed telephone lines. I emphasise that this nationally averaged universal charge applies to all consumers, urban and rural, regardless of location, and there are no plans for this price to change.

Broadband availability has grown significantly in recent years and the further rolling out of more next-generation broadband is crucial to our economic recovery. ComReg takes measures aimed at stimulating competition within the marketplace to enhance the roll-out of next-generation broadband and to encourage competition.

With regard to claims about line rental, I am happy to emphasise to members that there is no retail line rental price differentiation between urban and rural areas, nor is there any proposal to amend the relevant legislation. We will be very happy to take questions and discuss these issues.