Wednesday, May 31, 2017

Update on the Irish Telecoms Market - part 1

Preamble - Ireland in great shape though economic statistics confusing and Brexit impact uncertain 

Ireland remains an ambiguous term, sometimes referring to the whole island but also to the politically separate southern majority part of the island, often referred to by its Celtic name of Eire and more generally as the Republic of Ireland. Ireland/Eire/RoI is a small but strategically situated and relatively rich country but its actual size and growth-rates have been bedevilled by its role as an international tax haven with a corporate tax rate of only 12.5%, which has resulted in many manoeuvres by large international companies such as Apple and Tyco and plane-leasing groups that have nominally moved their HQs or significant groups of assets to Eire for tax purposes. 

For example, the Irish economy was originally predicated by the IMF to grow by 7.8% in 2015 but ended up at a disconcerting, difficult-tounderstand 26.3% after foreign companies that had switched their base to Ireland were included in the value of its corporate sector, pushing up the value of the state’s balance sheet (which then had to be justified by an on-paper increase in the country's GDP). The RoI's official actual or predicated growth-rates in 2014, 2016 and 2017 (all probably also including at least some similar artificial asset-increase components due to this factor) are 4.8%, 4.9% and 3.2%, respectively. As a result Eire's nominal GDP in 2016 is quoted by the IMF as over $317.917 billion, which would rank it the 37th richest nation in the world in absolute dollars and giving its average 4.68 million population in 2016 a GDP per capita of about $68,000, ranking it with the world's wealthiest populations such as Liechtenstein, Luxembourg, Kuwait, Singapore, Oman, UAE, Brunei, Monaco, Norway and Switzerland. 

On the other hand, the World Bank estimates its GDP to have been only around $238.020 billion, which would still make it the 43rd richest nation in absolute terms, but reduces its GDP per capita to around $50,000. However this would still rank its citizens at around the 12th richest in those terms out of 34 OECD countries. 

According to the European Commission's Europa website, the Republic of Ireland has probably been the European country which has benefited the most of the 28 members since its accession to the EU in 1973, at which time it was a rather poor, largely agriculturally-dependent country. Apart from the more general benefits to the Irish economy and people such as free movement of people and preferential access to a huge market, these benefits have included an increase in Foreign Direct Investment into Ireland from just Euro 16 million in 1972 to more than Euro 30 billion, as well as the fact that between 1973 and 2014, it received over Euro 72.5 billion from the EU but contributed only about Euro 30 billion to the EU budget. 

The decision by the UK, Ireland's largest trading partner, as a result of its national referendum on June 23, 2016, to leave the EU looked on the face of it likely to be a huge disaster for the country. However, an article of January 17th in the Financial Times (entitled Ireland could yet benefit from Britain's Euro-divorce) pointed out that once Britain left the EU Ireland would be the only English-speaking EU member still sharing many legal and institutional structures with the UK, as well as the same time zone, and noted that since the Brexit vote the head of Ireland’s Industrial Development Agency had reported more than 100 inquiries from potential 'Brexit refugees', and had also received the first visit for 25 years from the Foreign Minister of Japan, whose companies employ 140,000 workers in the UK, some of whom might be interested in moving next door. 

Irish regulatory and government issues 

ComReg is the statutory body responsible in the Republic of Ireland for the regulation of the electronic communications sector (telecommunications, radio communications and broadcasting transmission) and the postal sector. Although ComReg works closely with Ireland's Department of Communications, Climate Action, and Environment (DCCAE) it operates autonomously in terms of its decisions. 

In June 2016, as required by law, ComReg Commissioner Gerry Fahy published the agency's Radio Spectrum Strategy for 2016 to 2018. In a summary statement Fahy commented that Ireland’s radio spectrum was a highly valuable national resource, the use of which based on 2014 data, was estimated to make a contribution of Euro 4.7 billion to Ireland's GDP and supported almost 29,000 jobs. More specifically, Fahy said that the challenging strategy could see the radio spectrum available for wireless broadband delivery increasing by almost 200% by 2019. Indeed, the upcoming release of the 3.6 GHz band, plus the planned release of further spectrum bands (700 MHz, 1.4 GHz, 2.3 GHz and 2.6 GHz) could go a significant way to meeting the increasing demands for mobile data, including supporting broadband availability for all users and in as many locations as possible. 

In late August 2016, ComReg announced that following an earlier consultation an auction of spectrum in the 3.6 GHz band was expected to take place by the end of Q2 2017. A total of 350 MHz of spectrum will be offered using a TDD band plan in two blocks, separated by a frequency block currently allocated to state services: 325 MHz (3475 – 3800 MHz) above state services, and 25 MHz (3410 – 3435 MHz) below. The frequencies will be allocated on a regional basis, with a total of nine distinct regions (one for each of the five largest urban centres - Dublin, Cork, Limerick, Waterford and Galway), with the rest of the country split into another four regional areas. Each bidder is allowed to bid for up to a maximum of 150 MHz of spectrum in any given region. 

In early October 2016, Irish Communications Minister Denis Naughten announced that the government had allocated a further Euro 5 million for the National Broadband Plan in 2017, bringing the plan's total allocation in 2017 to Euro 15 million. 

In late December 2016, the Irish government announced that following the formation in late July 2016 of a national Mobile and Broadband Task Force, whose mandate was to consider how the development of Ireland's national communications infrastructure required to support specific customer-facing programs such as the National Broadband Plan could be accelerated, the Ministry now had a list of 40 specific measures which would be implemented for that purpose. 

On January 31st, in reply to a couple of parliamentary questions in the Dail on the issue of when 700 MHz frequencies would be available for use in mobile broadband, and particularly for use in rural areas, Minister Denis Naughten noted first that the European Commission had brought forward proposals to co-ordinate the release of the 694 – 790 MHz (700 MHz) spectrum band in all member States to June 30, 2020, and these proposals would allow mobile broadband services to use this part of the spectrum band. However, he confirmed that In Ireland the 700 MHz band was currently used by digital terrestrial television services (DTT) and the migration of these broadcasting services had not yet happened, and that the move to the lower part of the UHF band by the DTT services that currently used the 700 MHz band would require a significant amount of work on the transmission network. He added that In consultation with ComReg and 2RN (formerly known as RTÉ Networks), the aim was to achieve the release of this spectrum in advance of the June 2020 date, in coordination with the UK. 

Ireland's National Broadband plan 

Fibre coverage of Ireland is being primarily implemented by an organisation operating as Open Eir, which plans to cover 80% of the country with an open wholesale fibre network available to any supplier. In June 2015, the company announced that it was committed to enabling 1.9 million premises by the end of 2020, as well as supporting the Department of Communications, Climate Action, and Environment (DCCAE) in its implementation of the National Broadband Plan in underserved rural areas. 

(NB: in early February 2017 it was announced that the Irish government planned to set up a new regulator, the Digital Safety Commission, which would have the power to require any social media organisation such as Twitter or Facebook to remove content which it deemed distasteful or abusive.)