eircom Announces fibre roll out

Wow, I do away for a few days on holidays and I come back to find you all having a very interesting conversation

A few points.

Why UPC haven't really focused on the business market?

When UPC first came to the Irish market having bought NTL/Chorus, they were faced with having 600,000 very nice profitable TV customers, who were unfortunately on an old, rotting network, which would mean they would likely lose many of those valuable customers to Sky in time if they didn't do something about the network and stem the churn quickly.

So their first and most important goal was to quickly upgrade the network, to improve the quality of the TV service to stop the lose of customers to Sky.

They then discovered (well really they knew this from the start), that for just a (relative) little extra cost (docsis gear, network gear + some international backhaul) they could also use this new network to steal hundreds of thousands of phone and broadband customers from Eircom for almost free.

Thus making lots more easy money and the triple play phone + BB + TV would help them re-inforce their grip on their TV customers too and many even win some back from Sky!!

So their focus on residential customers stems from this, it is just so easy to steal them from Eircom, it is like stealing candy from a baby.

Also business customers tend to be slower to move, they often have a long term relationship with a company and are slow to move to a new company, specially one that hasn't been long in the market.

But Eircom shouldn't assume this will continue and it should scare the hell out of them when (not if) UPC turns it's attention to the business market. UPC aren't a new player anymore, they are a company with a generally very well regarded reputation now, many of these business customers have rock solid high speed UPC connections at home and those people will be wondering why they can't use UPC for their business too. When UPC start targeting these businesses and make use of their extensive fibre netwrok, it will be a blood bath for Eircom.

I also wouldn't assume that UPC won't expand outside of their current network. Once they complete the network upgrade of their existing network, I think it would be a bad mistake to think that UPC will sit still. No, instead I'll expect they will start expanding their network, initially into high density areas close to their existing network (I'm thinking places like parts of Cork and Fingals, covered by UPC MMDS), but in time maybe even into towns with no UPC, but connected to e-Net and MANS. So watch out here too Eircom.

Finally UPC are likely to turn their attention to improving TV services over the next year, with VoD, catch up TV, IPTV and their new media box.

Does UPC care about this new Eircom fibre co-op joint venture?

Nope, SpongeBob is correct, UPC already have an extensive fibre network that covers most of their existing core co-ax network, so they certainly don't need Eircom for this.

And they probably have plenty of areas close to their existing network or areas served by cheaper e-net/MANs to keep them busy for years before they need to go talking to Eircom.

They may eventually talk to Eircom if they want to become a 100% provider and expand further, but I don't see that happening for years.

Why aren't Vodafone, o2, BT, etc. interested?

They probably are interested, but are very wary of Eircom and their underlying motives. They don't want to get caught in some trick by Eircom to wring more money out of the government or screw their bondholders over.

Who is the really target of their PR?

Don't kid yourself, this PR was aimed straight at the bondholders. While UPC are a massive and perhaps mortal threat to Eircom, the biggest threat they actually face is their 3.9 Billion debt. If they can't sort this first and invest in the network then Eircom are finished.

If Eircom do eventually invest in NGN, where will they do it?

Well they certainly won't be doing towns where UPC aren't present. After all why would they bother investing in expensive new equipment in areas where they already have a monopoly?

No, instead they have to target areas where UPC are present or likely to be soon. It is the same reason why UPC had to invest in their network to compete with Sky. Eircom simply can't survive if they lose all their highest value customers (people living in densely populated areas) to UPC. These customers subsidise the much less valuable customers in more rural areas.

But even with Fibre products, will Eircom be able to compete with UPC?

No, not really, UPC will still offer faster speeds for less money. But that won't manner, Eircom will hope that if they can get close enough, they can use their marketing expertise, brand name and peoples inertia to change to reduce their churn and stop the flood of customers.

The problem is that currently the gap between UPC and Eircoms products and prices are so great, even the best marketing in the world couldn't save them. But if they could offer some half decent speeds and some sort of triple play package with TV, that they could muddy water enough with marketing that people mightn't notice the difference.

Do Eircom have to open up their new fibre network to other operators?

Yes, definitely. A few other operators thought of the idea of investing in a fibre network as a way of getting away from their operator with significant market power commitments, but the EU saw that one coming from a mile away and laid down in no uncertain terms conditions that meant any new network investment had to be open fairly to all.

Also people are assuming that a monopoly would be better for Eircom financially. But BT in the UK have dis-proven that, they are making far more money today with their highly separated wholsesale arm then they ever did as a monopoly.

Also it is interesting to note, that a lot of this new PR has popped up in the last few weeks from Eircom since the EU introduced new legislation giving governments the power to break up telcos like Eircom into separate wholesale and retail divisions where the companies are failing to compete. This has certainly scared the hell out of Eircoms owners.

Interesting times lay ahead for Eircom.

To_be_confirmed wrote: »

Bk, I agree with practically every word you said, it was a great post. Do clarify something for me though: Did you mean to say "Well they certainly won't be doing towns where UPC are not present."?

Yup, typo there, posting too late

To_be_confirmed wrote: »

That would make more sense, with the caveat that were eircom to treat a potential TV service seriously then they may spread their wings more freely so as to take on Sky also. Purely speculative I know. It's worth pointing out that Wexford town has no UPC broadband whatsoever though a cable network in place is more of a threat to eircom than somewhere with no cable network whatsoever like Dundalk or Monaghan town. There will likely be a few exceptions like these places based on what I mentioned earlier, but it will be UPC areas for the most part methinks.

I think this is what makes Wexford any interesting experiment for Eircom.

Obviously UPC will eventually Broadband enable Wexford, they will BB enable all their existing cable areas naturally. So if Eircom can get in there first, it will be interesting to see if they can use these new products to stem the flow of customers to UPC when they finally move in.

I expect Eircom will first target high density areas which currently don't have UPC, but will likely soon have UPC. Followed by UPC areas.

To_be_confirmed wrote: »

Eircom do have an awful lot to prove but their product/investment options are narrowing down to "have widespread FTTx over the next 3 years" or "stop offfering any products"! The latest announcement probably stems more from the preparation of a new business plan for the bondholders than a regulatory threat by itself. I suspect the announcements over wholesale fibre might please Comreg and Brussels while the FTTH/FTTC announcement is more to get the attention of bondholders.

Yes, that is it exactly.

Sponge Bob wrote: »

Remember that eircom are now losing c.5k a month lines to UPC. On service alone they have three more years of shrinkage ahead of them at 60-70k skullz a year.

eircom ....if they execute on target......will only match UPC coverage in mid 2015. By then they will have 200,000 fewer lines and UPC will have 200,000 more customers, minimum.

Yup and I wouldn't be surprised if that is the lower end of the estimate. Here you are assuming no increase in the churn rate from Eircom to UPC, but I'd be surprised if the churn rate doesn't increase for the following reasons:

1) People become more aware of UPC as a large, quality ISP
2) Word of mouth, people get to see their family and friends UPC internet and want if for themselves.
3) The increased availability (and acceptance and take up) of new high bandwidth video streaming services like iTunes, RTE/c4/BBC iPlayer, Youtube HD, Netflick, Amazon VOD, etc. which will drive people to wanting higher speeds.
4) Increased availability and acceptance of cloud services like iCloud, dropbox, Steam, etc. which also require higher upload speeds.

It could easily hit Eircom losing more then 300,000 customers in that time. And those lost customers, are totally lost to Eircom. People that sign up to Vodafone, UTV, etc. DSL, are still on Eircoms network and still giving them lots of money. But someone who moves to UPC, end up not giving Eircom one cent.

And finally don't forget Eircom will be losing customers to the mobile operators 3G services and LTE services in future.