03 June 2016

Are we witnessing rip-off Ireland in full swing yet again? As we face another broadband price hike, our neighbours in the UK experience the opposite - a price reduction, Dave Mc Donald, CEO of Nova Broadband, suggests that even urban dwellers in Ireland face high prices due to our rural broadband problems, as providers recoup huge costs for rural networks from all users equally.


Speaking about the problem with rural broadband, Dave says “Firstly, the reason entry-level fibre broadband is 33% more expensive in Ireland than the UK, is that it costs far more to provide broadband here due to the high level of rural connections. Yes, the spectre of low population density, combined with rampant ribbon-development and poor planning decisions has come back to haunt us yet again.”


ESB electricity connections are priced higher in rural areas than urban areas, because of the higher cost of provision. Broadband prices, however are “postalised” across the nation. This term is a throw-back to the decision to charge the same to deliver a letter to a city address as a rural address, despite the much higher cost for the rural delivery. This means that the city post is effectively subsidising the rural post.


Therefore users will pay the same price to Eir, Vodafone, Sky, or any other retailer using Open Eir’s infrastructure to provide fixed-line broadband in an urban or rural setting (provided you are within coverage) resulting in urban broadband users, effectively subsidising rural fixed-line broadband users.


Dave continued “Yet another price hike is on the cards as Eir’s wholesale division, Open Eir revealed this week they will be increasing their line cost by €3.50 per month in September – an increase which has been rubber-stamped by ComReg. At current retail prices, broadband providers will be operating on a margin of less than €1 per customer per month and as a result, retail prices for fixed line broadband will have to go up even further. Why are Open Eir increasing their prices? We know that they are embarking on a huge build-out of rural fibre broadband, costing €400m over the next five years and they have the get the money from somewhere. Assuming the National Broadband Plan finally gets off the ground, citizens will also have to pay through general taxation, whether they live in rural areas or not, to fund the delivery of (probably fibre optic) high-speed broadband to 100% of rural locations. The irony is that the rural connections will most likely be significantly faster than the urban connections of those who are subsidising them. In addition to this, by going for 100% coverage with the National Broadband Plan rather than say 95% coverage, the burden to the taxpayer will be probably doubled, just to get to the most difficult last 5%, who will have to pay extra for connection.”


In the UK, BT Openzone, who provide wholesale broadband to BT Retail and other providers, operate differently. Depending on where you live, you will be either located in BT’s Market A (low-cost area) or Market B (high cost area) and they will charge the retailer more than twice the amount if you are in Market B.


According to Dave, this is a good thing as it keeps things fair - for the majority of people in the nation, it keeps their price low. For those who live in remote areas, they will pay a higher price for accessing the service, just like ESB connections in Ireland.


While the importance of the development of rural broadband is beyond debate at this point, in the interest of fairness, the following questions need to be asked:

Should the postalisation of broadband charges be allowed to continue or should customers pay prices that actually reflect the cost of providing the service to their location, just like they do for ESB electricity connections?


Should the National Broadband Plan really cover 100% of premises at the same price, or should the last 5% be asked to pay the extra installation costs, again like they would for an electricity connection, where the distance and number of poles drives the price up.