Irish telecom market not `friendly' - IDA warned

Microsoft told IDA Ireland earlier this year that the major global telephone operators have not included the Republic in their investment plans because of their negative view of the Irish market.

"They do not perceive the Irish market as being a modern regulatory and friendly environment for investment," senior technical executives based in Seattle told IDA executives during a meeting where Microsoft revealed it would not be basing its European Internet "mirror site" in Dublin.

IDA and Telecom Eireann made a "concerted effort" during 1997 to have the Microsoft site located in Dublin as it would add greatly to the Republic's image as a location for advanced telecommunications and IT projects. However, Microsoft decided to locate the site in London. The European site "mirrors" the Microsoft home site in Seattle, which receives 190 million "hits" per day from 1.4 million users worldwide.

According to an IDA Ireland briefing note on Microsoft, prepared for the Tanaiste, Ms Harney, before a meeting in May with Mr Robert Herbold, Microsoft's chief operating officer, the decision not to locate the site here was taken for five reasons:

"For large-scale global digital communications, Ireland is a marginal and uncompetitive location.";

"The major global operators such as BT, Global One, World Com and others, have told Microsoft that their investment plans do not include Ireland. This is because they do not perceive the Irish market as being a modern regulatory and friendly environment for investment.";

"The Irish market is perceived as not being deregulated. Ireland has only one major local operator, Telecom Eireann. Therefore, the Irish market lacks the real competition essential in this rapidly growing business.";

"The facility at Telehouse in London has all the necessary `peering' arrangements for business operators. `Peering' is the complex software and contractural arrangements whereby companies at the centre inter-relate to each other.";

"The absence in Ireland of large-scale Internet Service Providers (ISPs) with good international links".

The note explains that the next stage of Microsoft's European Internet development will be electronic commerce, where products are downloaded and sold over the Internet.

"Electronic commerce will require a vast amount of bandwidth. Ireland urgently needs to provide this infrastructure if it is to compete in this new way of doing business. A co-ordinated effort to achieve this is currently being undertaken by Forfas, IDA Ireland, the Department of Public Enterprise and the Department of Enterprise, Trade and Employment."

"The Irish 10 per cent tax rate will be of more significance to Microsoft for this activity as it will be revenue-generating, unlike the "mirror site" project".

In May last, Telecom Eireann denied that the flagship site had been lost because it was not able to provide the technical capacity necessary. Also in May, a week after Ms Harney's meeting with Mr Herbold, the Minister for Public Enterprise, Ms O'Rourke, announced that Telecom Eireann's monopoly position would end in 1999 and not 2000, as had earlier been agreed with the European Commission.

The telecommunications regulator, Ms Etain Doyle, subsequently said that the liberalisation of the market would be completed by the end of the year.