Though Cablelink's internet access venture has received a lot of press coverage in the last few weeks, Telecom Eireann has been remarkably silent about the whole thing. Some sources see the options (ADSL and xDSL) that could be offered by Telecom Eireann as superior in technological terms. However this is a battle that will be fought and won in the marketplace than on any technological basis.

In technological terms, there has not been a conflict like this in Ireland yet. The best precedent would be the "BSB Vs Sky" scenario.

BSB was staffed largely by ex-BBC types who did not seem to appreciate real business and continued to act like they were civil servants with extremely large expense accounts. Sky was ruthlessly driven and the road where their cheap offices were was nicknamed Razor's Edge. BSB's palatial offices were imposing, in central London and a complete waste of money. Sky's people were tougher and cleverer than the opposition. When the merger occurred the BSB people were eliminated from the new organisation that became BSkyB.

Though BSB had a superior broadcast standard (D-MAC). Their conditional access/encryption overlay was largely a derivative of the compromised VideoCipher II system and was not highly thought of in the industry. Sky on the other hand had a rather quickly slapped together conditional access system (VideoCrypt) and used the existing PAL broadcast standard. Sky also launched first and had almost a year of unchallenged operation before BSB finally made it to air.

The decisive incident was when Andrew Neill (head of Sky at the time) and John Gau (BSB) squared off on Newsnight. Gau produced a Scart lead claiming that the BSB service would provide better quality by giving raw video/audio to the TV via the SCART connector. Neill pointed out that most TVs and VCRs did not have SCART connectors (which was correct at the time). The SCART are now standard on TVs and VCRs - BSB doesn't exist any more.

Sky got to the market first and managed to swamp the audience base by subsidising the market (free installation/cheap decoders etc). BSB were late to launch and they marketed the service in an elitist manner as if they still were the BBC. People were not that interested in buying a box just to get 5 channels.

1. Cablelink Is First Into The Market

Telecom Eireann is used to a monopoly situation. However with the loss of their voice telephony derogation in December, things have changed. Cablelink has seized the initiative by announcing that they are getting into the ISP business. They will deploy in Dublin by Christmas. TE is a shareholder in Cablelink along with RTE.

The timing of Cablelink's deployment is very significant. RTE and TE have to sell their shares in Cablelink around November 1998. The introduction of an ISP aspect to Cablelink would increase the possible sale price and it would put them in a position to compete with TE in a deregulated voice telephony market. Significantly it will be TE who is competing in a deregulated market where as Cablelink's core product is protected by a franchise/license situation.

There has been no real response from TE though rumours of tests of ADSL and xDSL continue to circulate through the business. This mode of operation is typical with TE.

2. Cablelink Has A Captive Audience

Cablelink will use a connection that is arguably installed in most homes. The figures for Cablelink's market share in the markets they operate in is very high compared to most of the other European cable companies. According to Cablelink, they have 83% market penetration whereas the average UK cable company has only 21% market penetration.

Though both Cablelink and TE will have to modify the user installation, the extension lead concept of television use is deeply engrained. People are not as likely to treat phonelines with the same familiarity.

Bandwidth or more precisely the expense of it is one of the underlying aspects of Irish internet access. Internet access is expensive compared to other countries and most of the blame for this can be laid on the heads of TE management with their exorbitant local telephone call charges. The recent peak rate price reduction is a tacit admission of guilt. Significantly one of the internet companies to immediately benefit from this peak rate reduction was TE's Telecom Internet as the service can be accessed nationwide via a single number. All the other ISPs have separate local access numbers and they have claimed that TE's single number access facility is too expensive. The reduction was confirmed as applying to all ISPs much to the relief of some ISP operators.

The most important market difference is the state of Cablelink's and TE's core product after the December. Cablelink's core product is television and radio programming. TE's is voice telephony and data. It is TE that is losing the derogation on voice TE that protected the monopoly. Cablelink still has an effective monopoly in the areas in which it operates. You can disconnect from Cablelink but the alternative is bleak - you could get satellite television but you would still lose the terrestrial UK channels.

Cablelink's markets are captive in a very real sense since there is no commercially viable alternative without investing in UHF amplifiers and antennas and even then a satellite television system and Sky subscription is required to even out what Cablelink offer with other services such as Sky One and the radio channels.

With TE's loss of derogation, other companies will be allowed to offer telephony and data services direct to the consumer and these competing companies will be allowed to install their own lines. TE's core product market will be under a massive attack. They have few if any value added services and offering movies and radio channels is not necessarily going to be part of the set up. Besides, the cable companies who have paid for expensive area franchises would not stand for it.

3. Cablelink Understands Subsidisation

Cablelink offers premium channels on the networks. These channels are scrambled with the Cryptovision scrambling system. The decoders can be rented from Cablelink or alternatively they can be purchased from Cablelink. The percentage take up on these premium channels is low with the sports channels probably being the most popular.

At IR£5.00 per month rental, Cablelink appears to be heavily subsidising the cost of the cable modem. The IR£5 per month figure is psychologically important in the market as it gives the impression of being affordable. The ADSL equipment for the TE user may have to be purchased at anything from IR£100 to IR£300.

Given TE's cluelessness in pricing equipment in their "Telecentres", they may screw up the pricing on this equipment as well. Though the standard rule in business is that the customer always pays, TE's price may just be too much. This one is all down to market perception. TE has to come close to what Cablelink is offering. Perhaps the best illustration of the cluelessly warped mentality of Telecom Eireann management regarding their "Telecentres" are the closing times. These "Telecentres" close at 1700 Hrs on each weekday except Friday. On Friday these places close at 1645 Hrs. Most businesses stay open until 1730 Hrs.

4. Getting There First

Although ADSL may be superior in some technological areas, cable modems will manage to hit the main section of the populations quickly. They will as the Confederate soldier put it "get there firstest with the mostest". Unless TE can deploy some form of ADSL or xDSL quickly, Cablelink will have taken the majority of the market in Dublin, Waterford and Galway. It would therefore be difficult for TE to substantially reduce this share.

Based on past performance, TE's response would probably be to announce some initiative in their Information Age town. Unfortunately for TE, most of the nation does not give a damn what TE gets up to in Ennis. More importantly, TE made such a big fuss about how they were installing ISDN for homes and businesses there, that any attempt at installing ADSL or xDSL would be an admission that all their wonderful advertising about the benefits of ISDN is rubbish and that they really should have been talking about ADSL. The main threat of Cablelink's cable modem access is not in Ennis - it is in the biggest market in the for advanced telephony and data services - Dublin.

The equivalent to the Neill-Gau exchange outlined earlier will probably be some TE management type waffling on about the superiority of the ADSL and the interviewer then asking about the cost, comparing it to Cablelink's IR£5 per month modem rental and IR£25 per month flat rate. It would be interesting to see if someone from TINET or Cablelink is speaking at the Internet show this year.

5. Convergence Or Parallel Delivery

In the satellite and cable industry of the late eighties and early nineties, one of the catch phrases touted by those who wanted to appear important was "Convergence". TV, radio, telephony and data services would converge to produce some form of Frankenstinian product that was at once all and none of them, and it would happen soon - perhaps next year. However garbled the idea, it had some merit though not quite in the way these people expected. The services appear to be converging on the delivery phase though remaining separate or parallel.

Most people involved with the technology, myself included, tended to ignore "Convergence" never really believing in it as an integration of services preferring instead to treat it as a parallel availability of services over the same connection.

If Cablelink can offer all the main services through one cable, TE may find people more likely to go Cablelink. While Cablelink did not disclose any plan to offer voice telephony immediately, the prospect of a Cablelink telephone service exists.

While proper voice telephony services on Cablelink's nets are things of the future, IP telephony is very much a thing of the present. At the Cablelink press conference, the Net2Phone service was demonstrated. They tried to call the talking clock in some US city but the line was busy. Instead they called the Net2Phone helpline and hung up. The audio quality was excellent. It has one major limiting factor - usability. It is easier to use an ordinary telephone for phone services.

The IP telephony aspect is not that important at the moment and breakout could be a problem - watching Swiftcall and perhaps Esat on this aspect will be important as their moves could provide an easy avenue for Cablelink.

6. The Kill Shot

What will really decide matters for the next few years is "user perception". There is a deeply engrained dislike of paying TE. Cablelink appears to be offering a service for almost nothing in comparison and it uses cable. TE would have to charge for ADSL and would probably screw up the charging model for the first year or so.

The Cablelink service is an embryonic VAN - it offers internet access, IP telephony, radio and video on a single line. TE could not really beat that broad range of services unless they started offering pay movies etc and that would be a waste of bandwidth. Cablelink is licensed/franchised for that and TE is not.

7. The Right Motivation

TE's move into the ISP market appeared to be led by the sense that it should be doing something. Telecom Internet (TInet) was the outcome. Another state operator was what the industry did not need and most ISPs were very wary. However TInet was not as great a threat to the established ISPs as had been thought. TInet introduced a three free month offer to entice subscribers from other ISPs but most of the people signing up with TInet just took the three free months and went back to their original ISPs. After legal action against them claiming unfair competition TInet reduced the free period to one month in line with other ISPs.

The expected subscribers were just not flocking to TINET was not doing well so they bought Indigo apparently for the numbers. At the time they purchased Indigo, it was estimated that Indigo had a subscriber base of 9000. Esat on the other hand had approached the matter from a more cautious viewpoint. They purchased Eunet a business orientated ISP and in so doing cherrypicked the business end of the market.

TE's actions after the takeover of Indigo raised some eyebrows. It hired some people to provide "content" and a non-tech without a deep understanding of the technology or trends to be a guru on the internet and the trends consumer information technology.

Evidence of TE's mindless threshing about can be seen in the recent buy-in of expertise and strategy with Nua and local.ie. TE's own efforts in this area were intellectually impoverished. Though TINET is well marketed, it falls down on strategy - it does not seem to have any clear cut direction. Is it an ISP or a content provider?

Cablelink is an unknown quantity in this respect. However if it selects the right people (it doesn't seem to have them at the moment), this ISP venture can succeed. Of course it has to have the correct strategy. The initial press release stated that the ISP venture would create 50 new jobs in the Dublin area.

Running an ISP is a difficult and demanding task that takes a diverse range of mindsets. Customer care is as important as the technical operation of the ISP. A lot of people, particularly those without any experience of actually running any form of online service other than a website, may think that it is easy. The reality of the situation can quickly overload the unwary. This poses a very significant threat for Cablelink.

A key part of the strategy will be localisation of their service as opposed to a bland Dublin based ISP approach for all Cablelink nets. But then is Cablelink going to really get into the ISP business or does it really want to become an access provider?