C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 001090

SIPDIS

E.O. 12958: DECL: 01/31/2015
TAGS: PREL TINT SENV TRGY EINV ENRG
SUBJECT: CODEL BOUCHER WRAP-UP: IRELAND'S DEBATE ON
TELECOMS COMPETITION AND ENERGY GOALS

REF: DUBLIN 1030

Classified By: Political-Economic Counselor Mary E. Daly; Reasons 1.4 (
B) and (D).


1. (C) Summary: The August 22-23 visit of Congressman Rick
Boucher (D-VA), which focused on information technology (IT)
and energy, exposed conflicting views on the level of
competition in Ireland's telecoms sector, as well as concerns
about Ireland's ability to meet Kyoto commitments. Irish
Government officials described Eircom, the national phone
company, as "luddite," resisting competition and advances in
telecommunications for its own benefit. Representatives of
Eircom and mobile operator Meteor, however, dismissed the
need for Government regulatory actions to make the telecoms
market, particularly the internet, more competitive. Despite
the debate on competition, U.S. IT firms said that Ireland
was an ideal location for their European hubs, due mainly to
the quality of the Irish work force. Regarding energy,
Government officials told Congressman Boucher that Ireland
would be hard-pressed to meet Kyoto targets, even as the
country sought greater reliance on renewable energy sources,
especially wind. A representative of GE separately briefed
Boucher on Ireland's first offshore wind farm, which could
meet energy needs for several thousand Irish homes. GOI
comments on difficulties with Kyoto commitments point up the
irony in Irish public criticism of the U.S. decision to
remain outside the Kyoto regime. End summary.

Visit Overview
--------------


2. (U) On August 22-23, Congressman Rick Boucher (D-VA) met
with U.S. subsidiary firms and Irish Government officials to
discuss information technology (IT) and energy.
(Representative Boucher is a member of the House Energy and
Commerce Committee, serving on the
Telecommunications/Internet and Energy/Air Quality
Subcommittees; he is also the co-founder of the House
Internet Caucus.) The wide-ranging discussions focused on

competition in telecoms and Ireland's attractiveness to IT
firms, on one hand, and Ireland's Kyoto targets and wind
energy initiatives, on the other.

--------------
IT and Telecoms
--------------

The GOI: Eircom is Resistant to Change
--------------


3. (C) Eircom's leadership is "luddite," resisting rather
than embracing advances in the telecoms industry,
particularly the internet, according to Eamon Malloy,
Assistant Secretary for Telecommunications in the Department
of Communications, Marine and Natural Resources, and John
Doherty, Chairman of the Commission for Communications
Regulation (ComReg). They told Congressman Boucher that
Eircom, facing little competition in the late 1990s, had
charged prices that were five times the EU average and had
slowed broadband's roll-out rather than cannibalize its own
56k dial-up service. The Government's efforts to introduce
competition had lowered prices and improved services, and
ComReg intended to compel Eircom to finalize local loop
unbundling (LLU) by year's end through action in the Irish
courts (reftel). Malloy said that such measures reflected a
Government strategy to make Ireland a knowledge-based,
technologically savvy economy, in which cutting-edge telecoms
services played an integral part. In contrast to Eircom's
emphasis on fixed-line broadband, Malloy cited the
Government's focus on wireless technologies both for
hard-to-reach rural communities and for urban Irish,
especially as the latter "were socially disinclined to sit at
home with a computer."

Eircom: Complaints about Lack of Competition Unfounded
-------------- --------------


4. (C) Eircom CEO Philip Nolan took exception to criticism
that Eircom had stifled competition in the telecoms sector,
resisted LLU, and impeded the development of broadband in
Ireland. He explained to Congressman Boucher that Eircom had
overseen the fastest digital subscriber line (DSL) broadband
roll-out in Europe since 2003, with 90 percent of the country
likely to have broadband access by March 2006. He added that
the remaining 10 percent were rural areas to which Eircom
could not extend broadband service in an economically
feasible way. Nolan rebuffed complaints about the pace of
LLU, pointing out that the United States was moving away from
unbundling requirements in order to give fiber-optic network
builders, like Verizon, more incentives to expand service.
He also attributed Ireland's low ranking in Europe for
broadband penetration to lack of consumer demand, noting that
nearly half of Eircom's new household broadband customers had
canceled their subscriptions in favor of cheaper charges
through 56k dial-up. Nolan predicted that the on-line gaming
industry would drive demand for fixed-line broadband service
in Ireland, especially as wireless technologies could not
provide comparable gaming experiences.

Meteor: Competition Level Is Just Fine for Mobile Operators
-------------- --------------


5. (C) Whereas Eircom dominates the internet market, mobile
phone operators work in a competitive environment,
Representative Boucher was told by Robert Mourik, Regulatory
and Public Affairs Manager for Meteor, a Western Wireless
subsidiary that has operated since 2001. Mourik explained
that Vodafone, O2, and Meteor controlled 50, 40, and 10
percent, respectively, of Ireland's market (boasting nearly 4
million cell phones), with Hutchison's "3" having launched 3G
services in July. Eircom departed the mobile market in 2001
after selling its mobile operations to Vodafone, but had made
a euro 420 million offer in August to buy Meteor, a bid that
requires approval from the Competition Authority. Hourik
pointed out that Meteor opposed measures proposed this year
by ComReg and endorsed by the European Commission to
introduce more competition by requiring Vodafone and O2 to
open their networks to Mobile Virtual Network Operators
(MVNOs) (which would hurt Meteor, given its already small
market share). Hourik said that Meteor was pleased with the
level of competition among mobile operators, and he argued
that ComReg's action was an attempt to secure a regulatory
foothold in a largely unregulated market.

Ireland's Key for IT: Human Capital
--------------


6. (SBU) Despite debate on IT competition, representatives
for Google, Yahoo, PayPal, and Dell told Representative
Boucher that Ireland was an ideal location for their
respective European headquarters, due mainly to the quality
of the country's human capital. The Irish work force was
young (with a national average age of 35), well-educated
(with virtually free college education), IT-literate, mobile,
and culturally hip. Google and Yahoo also highlighted the
ease of recruiting multilingual staff for their
Europe-focused services from the large pool of European
immigrants (100,000 since mid-2004) and from Irish who had
worked abroad during Ireland's economic troubles in the
1980s. Dell cautioned, however, that the Irish education
system was not producing enough graduates with technological,
science, and engineering skills to enable Irish IT firms to
move up the value chain in the face of rising labor costs.
To reverse this trend, Dell recommended that the Irish
Government create incentives to make those fields more
attractive to top students, who typically compete to enter
sectors with "guaranteed" high-salary potential, such as
medicine and law.

--------------
Energy
--------------

Kyoto: Challenges with Targets
--------------


7. (C) Ireland will be challenged to meet its Kyoto
commitment to cap greenhouse gas emissions at 13 percent
above 1990 levels by 2012, Martin Brennan, Director General
for Energy in the Department of Communications, the Marine
and Natural Resources, told Congressman Boucher. Brennan
noted that Ireland's emissions were falling, but still 25
percent above 1990 levels, and he commented that Irish
participants in the Kyoto negotiations had not sufficiently
considered the impact of Ireland's "Celtic Tiger" economic
growth on emissions trends. To achieve the 2012 target,
Ireland aimed to reduce current emissions by an average of
9.2 million tons per year through more efficient energy use
and less dependence on carbon-intensive fuels. One specific
goal was to increase the contribution of renewable energy to
gross electricity consumption from 6 percent currently to 12
percent by 2012. To that end, the Irish Government was
hoping to exploit the potential of wind energy, as Ireland
was Europe's windiest country.

Wind: An Offshore Success
--------------


8. (SBU) The Arklow Offshore Wind Park, jointly launched in
May by GE and Airtricity, an Irish firm, demonstrates the
value of wind as a renewable energy source for Ireland,
Congressman Boucher was told by Dan Pearson, GE Commercial
Operations Leader for Offshore Europe. The Arklow Park,
Ireland's first offshore wind facility, is located five miles
off Ireland's east coast and consists of seven 3.6 megawatt
turbines, featuring the world's largest off-shore rotors
(roughly twice a jumbo jet's wingspan). Pearson noted that
the Wind Park's predicted output of 85 gigawatt hours/annum
was sufficient to power 16,000 Irish homes. GE also has
planning permission to construct more turbines at the site;
the only hurdle, according to Pearson, is Ireland's power
grid, which requires upgrades to accommodate additional power
generation. Pearson said that the Irish Government could not
consider privatizing the state-owned grid without such
upgrades and that the failure to pursue upgrades might lead
GE to consider linking the Wind Park to the UK grid, only 40
miles across the Irish Sea.

Comment: Ironic Environmental Views
--------------


9. (C) The views expressed by Irish energy/environmental
officials point up the irony in Irish public/media criticism
of the U.S. decision to remain outside the Kyoto Protocol.
Irish public opinion, as in other European countries,
characterizes that decision as an example of American
unilateralism that accounts for failures in global greenhouse
gas reduction efforts -- even as GOI officials concede
difficulties in Ireland's attempt to meet its own Kyoto
targets, and as the United States makes strides in overall
emissions reductions. Just as ironically, the Arklow Wind
Park is precisely the sort of new environmental technology
that the USG has advocated as an essential complement to the
European emphasis on emissions trading schemes and regulatory
emissions limits.


10. (U) Congressman Boucher did not have an opportunity to
clear this cable.


KENNY