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Telecomms
Tuning into TV leads to broadband wars
Telecommunication company profits are under pressure as competition intensifies, prices fall across the board and demand for service content grows. Ray Spencer looks at how, in a small market, the suppliers of broadband Internet services are counting on diversification to maintain business growth
uncertain. Gibtel’s 2014 income stalled at £41.9m,
the result of price competition in key sectors such as data storage centres, and the bandwidth supplied to eCommerce and eGaming. “Last year we announced price reductions of between 4-25% and this year we have taken further steps with price reductions”, Bristow explains.
With the intervention 18 months ago of Financial Service Minister, Albert Isola – Lawrence’s brother – the gaming companies have seen prices fall. “The price is continuously coming down – it’s probably 70% down on those from 2-3 years ago for the gaming community. Its been the combination of government intervention and competition with Gibtelecom”, the Sapphire chief executive suggests.
Now the retail cost of broadband has become the battleground. Bristow denies the reduction in Gibtel’s publicly advertised rates are primarily the result of competition. “It was something we had been meaning to do anyway, because we had always recognised that our prices were comparatively high, compared to some larger places”, he maintains.
Gibtel has twice cut its original £96pm price for 100mbs internet connection, to today’s £54pm! The telco sells 16mbs services for £28pm, little different to its 8mbs and 4mbs offerings.
Internet speed is as promised
Even so, Bristow is “most disappointed” with the take up of higher Internet speeds, being “nowhere near as great as we wanted; most people have stayed around the lower bandwidths in the 4-8mb offerings we always had when we ran them over ADSL”.
One reason, “is the fact that what we offer is what you get”, suggests Bristow. In another place, a 50mbs [download contract] may rarely run beyond 8mps “whereas when we offer 8mbs, broadly speaking you are getting it.” However, actual speed can be reduced: if copper wire is being used to households, or the number of devices being used at the same time, it can slow down individual units.
Gibtel’s Internet revenue accounting for 13% of the total, saw 7% growth – “more customers joining every month still”, Bristow notes, adding “whether we get hit in this area by competitors has yet to be seen - how much they will eat of our cake”.
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High bandwidth, superfast broadband services have been available for well over a decade to Gibraltar’s
eGaming and financial services sector businesses fuelling the growth of State-owned Gibtelecom (Gibtel) and private concern, Sapphire Networks.
Gibtelecom chief But with uncertainty over expansion of
EU digital agenda on delivery of broadband speeds”, points out Gibtel chief executive Tim Bristow, who with a claimed 90% broadband market share says his fibre cabling reaches directly to homes and offices throughout The Rock, or within 500m of their premises.
Sapphire Networks is spending some £5m over three years on top of the £10m already invested in fibre optic cabling to extend its network beyond the estimated 70% of eGaming companies it presently supplies, to reach small and medium sized businesses (SMB) and also to homes through its new u-mee subsidiary.
A necessary move
u-mee claims it can already reach more than half of residential and business properties with fibre optic cable and will be everywhere by mid-next year, while GibFibreSpeed says its 50% coverage will exceed 60% by year-end and 80% by 2016.
Sapphire has been doing well in gaming in recent years, a sector that is still growing, but diversification into the residential market was seen as “a necessary move”. As Sapphire Networks and u-mee chief executive, Lawrence Isola, explains: “Gaming revenues are not growing; we are selling more capacity for less and that is part of the reason for going into other areas - banks, small businesses and [homes]”.
The choice has been between offering residential services “or do we stick with local business and make hay while the sun shines without diversifying”. Sapphire decided a year and half ago to extend fibre to the home. “It wasn’t an easy decision to go into the residential market, because it is without doubt a risky investment given the size of our economy,” Isola observes.
Given a small market – an estimated 15,000 residential dwellings, plus the data hungry gaming companies and thriving business community – financial returns are
executive, Tim Bristow: gambling sector (as a result of a spate or
the jurisdiction’s all-important Internet take-up of industry mergers and acquisitions), the two
higher internet speed “most largest telecoms suppliers are being joined by
disappointing” two smaller firms in a bid to attract residential custom.
More than £25m has been invested by three firms on installation of fast broadband through new fibre optic cables offering down- load speeds of 100mps or more – GibFibreSpeed, an offshoot of old-established local firm, A J Sheriff Electrical, even boasts 200mps, way more than most computers can handle!
A readily available superfast bandwidth of 100mbs puts Gibraltar “well ahead of the
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Gibraltar International
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