Mr. Conal Henry:

I thank the Chairman and members for the opportunity to put forward our views, as representatives of e|net, in regard to public policy in the area of broadband provision and the roll-out of metropolitan area networks, MANs. Members will have received copies of our PowerPoint presentation, which I will go through now. The first slide sets out a brief history of the MAN project, what has been achieved to date in this regard, and our view on how it has affected public policy. Unfortunately, parts of the slides are obscured from view.

There is not a huge amount of detail available on them, but, as well as being an aid for members, they help to remind me of what I am saying.

The company that runs the State's metropolitan area network, MAN, infrastructure is e|net. There are 94 such networks in towns and cities across Ireland. They were deployed in areas in respect of which it was agreed between the State and the European Union that there was a market failure in the provision of telecommunications infrastructure. They operate on what is termed a wholesale open-access model. The critical point is that e|net does not provide services directly for consumers, which means people cannot contact us by telephone in order to purchase access to broadband services. That is why one will never see e|net logos, brands or advertising throughout the country. This may be the reason people are of the view that there is a low profile to the business. It is a wholesale business and our customers are the telecommunications operators. We focus very much on ensuring the latter provide services on the metropolitan area networks.

The company's headquarters are located in Limerick and it employs 51 people. That number has risen significantly in the past couple of years. I will not go into too much detail on the history of the company. We have, however, been operating the metropolitan area network infrastructure since 2004, when we won the first licence to do so for a period of 15 years. We won another licence in 2006 to service a further 66 towns. In 2008 and 2009 we conducted an analysis of the impact of the metropolitan area networks on the first 27 towns in which they were put in place. We discovered that in the five years before the networks were put in place, the towns involved were winning approximately 22% of new IDA Ireland-foreign direct investment jobs. In the three years after they were up and running the average figure in this regard was above 80%. The impact of metropolitan area networks in attracting foreign direct investment and related jobs to towns such as those to which I refer is significant.

One of the points I would make on e|net and the metropolitan area networks is that I do not believe the latter have solved all of Ireland's broadband problems. In addition, I am not stating Ireland does not have problems with broadband. However, the networks have been a significant policy success in the context of the increasing competition in regional areas, reducing the cost of telecommunications in these areas and bringing jobs to them.

I will now comment on how the networks operate. The company - e|net - sits in the middle of a complex operational arrangement. Where we sell services to licensed telecommunications operators, we provide them on the metropolitan area networks. We also use other networks connected to the metropolitan area networks to Dublin in order to ensure the traffic on the metropolitan area networks actually gets to the capital and onto the Internet. The networks remain at all times in the ownership of the State. Technically, ownership of each metropolitan area network rests with the relevant local authority. Therefore, ownership of the Cork MAN rests with Cork City Council and Cork County Council. The networks are publicly owned. We have spent considerable amounts of money on maintaining and extending them and such extensions also remain in public ownership. We have actually built the equivalent of two new metropolitan area networks with moneys procured from our own shareholder funds, but these remain in State ownership. That is part of the return to the State. There is also the fact that the networks have been enhanced to a considerable degree since we assumed responsibility for them.

We have a very strong policy partnership with the Department of Communications, Energy and Natural Resources. We are obliged to operate the metropolitan area network infrastructure in an open-access, carrier-neutral way to ensure all operators are treated in the same way. Our achievements in the areas of jobs, competitiveness and the cost of telecommunications are demonstrable. It is a very useful model and platform through which policy can be developed. It is our opinion that metropolitan area networks and e|net, in partnership with the Department of Communications, Energy and Natural Resources, have done a good job in dealing with the policy challenges in 2004. We stand ready to help and provide support in dealing with the policy challenges which emerged in 2009.

On how e|net fits into the telecommunications market, if members look at the top part of the diagram on the slide on display, they will see that we are all consumers of communications services. We all use broadband and actually use the communications market for many more purposes than used to be the case. For example, 20 years ago people probably only used it to make telephone calls. Then they began to use fax machines and after that they stated to access the Internet via dial-up connections. Most of us now spend a large part of our time on these networks. We use them not just for telephony but also to access broadband services. The metropolitan area networks are also increasingly being used for entertainment purposes. UPC, one of the major cable TV operators, is distributing its entertainment content via the networks. This is going to become much more common. These are the services that are being deployed over the networks.

Between us and the services to which I refer are the service providers. Members will have heard of most of these operators, both large and small. We have named a few of them - Eircom, Vodafone, O2, 3, UPC, Imagine, Cable and Wireless, Verizon, BT and Smart - on the slide on display. Members can see beneath that list of names a much smaller group of companies and entities which actually operate networks. There are a lot fewer networks in Ireland than there are operators. Networks are critical; they are the roads and the operators are the trucks. There are plenty of truck operators, but there are not as many road networks. In Ireland there are five networks of varying geographical extent. The primary network is that operated by Eircom. This is an incumbent network which theoretically reaches every home and business in the State. BT's network is extensive in Dublin and also runs along the railway lines. Electric Ireland, in the form of ESB Telecoms, ESBT, has a telecommunications network which runs along its main high voltage infrastructure. UPC has a cable TV network that is extensive but only in the major urban areas. Infrastructure is provided by e|net in 94 regional towns, in most of which the only other network available would be that provided by Eircom. However, this is provided on a different basis. Underneath this again there is a great deal of State-owned infrastructure that is very useful in deploying telecommunications infrastructure. For example, CIE can put fibre in place along its rail network, Electric Ireland has it across its electricity network, Bord Gáis has a telecommunications subsidiary, Aurora, the NRA has ducting which is very useful for telecommunications networks and there is a company called Shared Access which works with the OPW to provide telecommunications infrastructure.

There is a complicated layer of telecommunications in Ireland and e|net is very much focused on the provision of telecommunication networks for other telecommunications service providers. The next slide contains a list of some of its customers. If someone is operating in any of the 94 regional towns to which I refer and accessing any of these services, he or she is probably using a metropolitan area network without realising it. I want to try to nail one of the myths that nobody uses the metropolitan area networks. They support 3G mobile coverage, cable TV and normal mobile coverage. Certain high profile retailers are connected to the networks and if one is making a credit card payment in one of their shops, the traffic in this regard is carried across them. The networks are in the background and if we decided to switch them off in the morning - we have no intention of doing so - people would lose mobile signals, credit card payment details, TV signals, etc. Their disappearance would be very noticeable. As a result of the fact that e|net does not have a really recognisable brand and that the metropolitan area networks are often connected indirectly to consumers and businesses, what we do is not so noticeable. This has been a problem for us as we have developed the business. Many believe the networks are in the ground unused, that they are very expensive to use and so on, but that is not the case. The cost of using them, benchmarked against that of any other fibre infrastructure anywhere in the world, is hugely competitive. It is important to realise that metropolitan middle mile infrastructure, which is what the metropolitan area networks are, was not necessarily intended to bring directly connected fibre to every home and business in a particular town. This infrastructure was put in place in order that all the different types of telecommunications services could be connected to it and that we could inject lower cost and higher performance into the networks through the use of that fibre.

I referred to jobs. The next slide shows some of the regional, high value foreign direct investment companies connected to the metropolitan area networks.

I will mention two, EA Games and Northern Trust, that announced jobs in recent weeks, which are end users of the MANs. They will buy services from one of our customers. We do not sell to EA Games or to any of those companies. Our customers sell to those and we find that they enjoy those services.

A significant proportion of the public sector and public sector premises are using the MANs and have been able to reduce the cost of their communications significantly. If the telecommunications costs of regional public sector entities were reduced by 10% to 15%, which we think the MANs may well be supported in doing, that alone would be enough to pay for the investment that was made in the MANs in terms of the original founding investment. A great number of public sector entities are getting their communications services better and more cheaply than they did in the past. That is as much as I want to say about e|net and the metropolitan area network infrastructure.

I may be telling members something they already know but I want to share my views on why we think broadband is important and why broadband as an area of policy is one that cannot simply be left to the market and forgotten about. The most important aspect of broadband as a component of the economy is that it is a proven driver of economic growth. We have a number of studies on a range of different, important and well-respected economic analyses - if members would like to read them, I have a booklet I can share with them - showing that high quality broadband will increase the economy somewhere between 1% and 2%. I do not need to remind members that an extra 1% to 2% growth may well be the difference between our doing or not doing the IMF plan. This is an engine for economic growth and that has proven to be the case. If one thinks about why that is the case, one will note that many of the world's markets are moving online. Members will know this as they purchase products online. They buy tickets online. The economy is moving online. The better served this country is in that economy, the better it will perform in it. We have some problems in this area. We know that Ireland has an online balance of payments deficit. Irish consumers buy much more online than Irish businesses sell online. A business needs more communications infrastructure to sell online than a consumer needs to buy online. Much of this comes down to the quality of the communications infrastructure, which is a critical component.

I would explain this by asking members to reflect on the building of canals in the 18th century, railways in the 19th century and electricity infrastructure in the 20th century, and communications infrastructure is the critical national infrastructure for the 21st century. It will define the winners and the losers. The most interesting point is that by the end of each of those centuries, every country had its critical national infrastructure but the countries which got it first and built it best derived the most and the longest lasting economic advantage from it. The British built the canals first, the US built the railways first and they had a century of economic advantage from that, long after everybody else had caught up. It is the same with communications infrastructure. The countries that have the best communications infrastructure will attract the best communications jobs and companies, develop the strongest communications in the economy, and by the time all the other countries have an infrastructure to match, it will be too late. We really believe that.

The interesting point about broadband is that it is not only about the economy. There is barely an area of public policy that is not heavily affected by broadband and broadband quality. To take the example of health care, the only way we will be able to deliver health care in the 21st century is outside the hospital. We know that our hospitals cannot carry the number of sick people we will have in the 21st century. We need to look after our patients at home much more and the only way we will be able to do that is by new medical communications technology and the only way we will be able to deliver that is through appropriate infrastructure. The only way we can offer services like that is if those services are available on a ubiquitous basis.

Communications is a green technology in that we can significantly reduce our emissions through the use of technology such as video-conferencing and teleworking. We can significantly make an impact towards reaching our emissions targets.

In education we are already rolling out at 100 Mbs, and the Minister has talked about industrial strength broadband in schools, and that has a significant impact on education. The difference between reading Martin Luther King's speech on paper and seeing him on screen in a classroom giving that speech at the Washington Monument is transformational.

In terms of traffic on our roads, the gain that can be made is simple but powerful. If we could reach a point at which people were working from home on one working day in 20 - that could consist of one worker in 20 who works permanently from home, or all workers working one day in 20 from home - it would take 5% off peak traffic loads. Peak traffic loads define the size of the road network we need to build. If we can reduce peak traffic loads by 5%, we would probably get a two- to three-year break in road traffic growth. That is a significant economic break. This stuff drives the economy. It is critical for health care and education and has benefits in most public policy areas. It is an area policy-makers cannot ignore and I do not believe they are.

It had been policy for a long time that communications and communications infrastructure was a matter for the private sector. There is an important point in that respect. We have spoken about the benefits to the economy and to the State of next generation broadband or top quality infrastructure but a strange pattern globally in telecommunications is that most of that benefit is not coming to the network service providers.

To return to the example of members, if they reflect on the volume of communications services and communications networks they use and the amount that is spent on those compared with when they used those networks only to make phone calls, economically the average customer spends about the same now when they are practically living on those networks compared with what they spent on them in the past. For whatever reason and whoever is at fault, communications network service providers have not managed to earn any more revenue, despite the explosion in the use of their networks. The members will know this. They will know it from their bills, which are broadly in line with what they have been in the past.

With regard to the communications sector in terms of its revenue, the ComReg statistics track the size of the Irish economy. This explosion in the use of communications services and the quality of communications services has led to no growth in communications revenue. If one is trying to build new networks, that is a disaster because there is no upside, and that is difficult. We have felt for a long time that we are not getting new high quality communications infrastructure because of Eircom and its financial problems, and to an extent that is true, but there is a much more insidious underlying factor here, which is that the business case for communications service providers for new builds is pretty marginal, particularly where it is not competitive to build more than one. We believe this is an area that requires State intervention.

On EU policy, this is beginning to be understood and agreed in policy across Europe and globally. The EU, as part of its digital agenda for Europe, set targets that everyone will have basic broadband of 30 Mbs and up to 50% of consumers will be using 100 Mbs by 2020. If it is left to the private sector to achieve those targets, that will not happen. There is no business case to do that. There is a business case to do some of it but not to do all of it. What drives a business case is cost and revenue. This work will be done in areas where it is cheaper to deploy network and areas that are cheaper to deploy network are high population density areas.

The former Minister, Eamon Ryan, supported subsequently by the Minster, Deputy Rabbitte, commissioned the next generation broadband task force to examine where exactly the operators would have networks and to compare that with the digital agenda for Europe targets. Essentially the next generation broadband task force report, which I hope the members have read, states that the industry is certainly good for the first 50%. Therefore, 50% of homes and businesses in Ireland will have 100 Mbs quality broadband available to them by 2020, and that is great. That is as good as most countries are looking at. Not many countries, particularly the EU 27, are looking at much better than that. With regard to the other 50%, the last 30% are rural areas. It is very clear that there is not going to be any new provision of fixed line network there paid for by the private sector and that some form of State intervention is needed.

On the middle 20% it is less clear. These are the smaller regional towns, including Monaghan, Letterkenny and Drogheda. The first 50% essentially is Dublin, Cork, Galway, Limerick and Waterford. The middle 20% comprises our regional towns and the last 30% comprises rural areas. The larger urban areas will be okay and a policy intervention has been announced for the rural areas. The State will support the development of broadband networks to the tune of €175 million. In the other regional urban centres it is less clear how they will be addressed. We would have some concerns about those areas but there is no need to worry yet. However, policymakers need to keep an eye on it because no operator is announcing any fixed line development plans in those areas. It will take a new or upgraded fixed line network to deliver the kind of broadband homes and businesses in those areas will require.

The Minister's announcement of €175 million for the rural areas is an excellent policy. Having discussed this with other stakeholders in the industry, we believe that economically that should be enough to do it. However, only one thing will be built in these areas, and if that one thing is a monopoly, it would be bad. Whatever gets built with this €175 million, we need to ensure it is open and competitive and that all operators are allowed to provide services over it. Otherwise we believe it is very good policy. However, we remain concerned for the middle 20% of urban areas.

That concludes our discussion of e|net's stance on broadband policy and I would be happy to take questions.