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Ireland: E-Commerce

Facilities

Telecommunications Providers

In 1999 the Irish Government entered an agreement with Bermuda-based international communications company Global Crossing for the provision of high speed, competitively priced communications links to 26 European cities and to New York. In May 2001, under an extension to that agreement, the government secured links to 40 European centres and to Los Angeles, San Francisco, Dallas, Washington, Chicago and Boston. In addition, it has also secured high-speed links to Tokyo and Hong Kong and agreed in principle on links to Singapore.

Eircom had been the republic's largest telecommunications company. The Government privatised Eircom in 1999, but after a short and turbulent independent life it was acquired in late 2001 by the Valentia consortium led by well-known Irish businessman Tony O'Reilly.

Eircom's comfortable presence was challenged by Esat, BT's Irish subsidiary. In 1999 Esat took over Cablelink, Ireland's state-owned cable operator with plans to introduce a 16 channel television service, two free phone lines and unlimited acess to the internet for a flat fee of IR£20 a month.

In March 2001 the then Minister for Public Enterprise, Mary O'Rourke, announced that the government would provide funding to the tune of EUR75 million with the aim of developing broadband networks around the country to give faster Internet access to all areas of Ireland.

Ireland's progress in this area was however called into question by the EU's 'Seventh Annual Report on the Implementation of the Telecommunications Regulatory Package', which outlined problem areas including the level of fees for access to mobile networks, the practice of Digifone and Eircell Vodafone of maintaining artificially high charges, and the reputation of Eircom's leased lines' performance as one of the worst in the EU.

In addition, the report revealed Ireland to be the only EU country at that time not to have launched any DSL lines or to have unbundled a single local loop. The Commission recommended that the Office of the Director of Telecommunications Regulation (ODTR) lowers currently over-priced telecommunications charges.

Ireland's own Advisory Committee on Information and Communications Technology made similar criticisms in March 2002, saying that Ireland would need to implement a new regulatory regime if it is to develop its reputation as an e-commerce hub.

After finally resolving a long-running argument about broadband pricing in May, 2002, Telecoms Regulator Etian Doyle had to step in to direct Eircom to allow other operators to interconnect to its network at additional network points of presence.

Eircom offers services to other operators under a document known as the Reference Interconnection Offer (RIO), which amounts to a catalogue of the services that Eircom offers to other operators. Eircom's RIO is under constant review by the Regulator, prompted by a stream of complaints from OLOs about Eircom's behaviour.

Chairman of the Association of Licensed Telecom Operators, Iarla Flynn, said that the change would mean increased efficiencies and lower costs for operators. "OLOs have been looking for such a change for quite some time," commented Flynn. "Up until now, OLOs could only interconnect with Eircom's network at a limited number of switches. This ruling will mean that OLOs will now be able to interconnect with Eircom at an expanded number of points of presence, which will enable them to save money and be more efficient. These savings can then be passed on to consumers."

Regulator Etain Doyle also decreed that all future changes to the RIO would have to be approved by him. "Eircom's RIO is a living document and will change with the requirements of the market," said Mr Doyle, in a statement. "I believe these decisions bring the Irish RIO into line with best EU practice and the version control will help improve the transparency of Eircom's RIO for other operators."

Other aspects of the RIO reviewed by the regulator included routing and capacity issues, billing and payments, management aspects of the RIO, new services, and service level agreements for interconnection links.

The long delay in rolling out high speed internet connections to the Irish residential and business market, which have only become available in recent years, and which has caused Ireland to lag behind other EU countries, has resulted as much as anything from the high fees which the telecommunications giant proposed charging other firms for permission to resell the service to consumers.

In March 2006, the European Commission announced that it had authorised a programme to boost broadband availability in Ireland.

The aid approved by the EC pertained to plans by the Irish Government to create open-access Metropolitan Area Networks in over 120 Irish towns at a cost of EUR170m, with support from EU structural funds.

This funding is for Phases II and III of the MANs programme. Phase I has already been completed, with networks built in 26 towns.

The Commission concluded that the aid was not likely to distort competition within the EU significantly, as the Irish authorities have implemented a number of safeguards to ensure that this is the case.

Competition Commissioner Neelie Kroes commented at the time that:

“I am pleased to endorse this expansion of the Irish Metropolitan Area Network programme. The open networks will enable all operators to offer high-speed broadband services to businesses and citizens in the towns concerned. The project will boost competition in the area and is fully in line with the Commission’s policy to promote broadband in areas which would otherwise miss out.”

Meanwhile, early adoption of 3G services in the Republic has been slow, with Vodafone being first off the mark. November 2007 showed a strong per-capita subscriber growth over the year in Ireland, broadband services added more than 5 subscribers per 100 inhabitants during the previous year.

In September, 2008, Magico.ie, a leading Irish ecommerce firm, announced that web sales in Ireland are now exceeding EUR12m a day. Paul McGurran, Director of ecommerce at Magico.ie announced:

"Although traditional high-street retail activity is suffering a downturn, Internet sales in Ireland are likely to smash all previous records this year as more and more drop the high street for the super information highway."

"For example, according to Realex Payments online sales in Ireland reached EUR12.7m on December 4, 2007, last year, declining to EUR7.3m in subsequent days during the Christmas period. In 2008 average daily Web sales in Ireland are now exceeding EUR12m per day," he added.

Mr McGurran pointed to recent research in the UK showing that Internet sales will continue to grow and the web channel will claim more than half of the retail market pie by 2026.

"This increase in online retail activity is being stimulated by numerous factors including greater broadband penetration across Ireland, and time-poor and price conscious consumers. Furthermore, the rising price of fuel is the main reason behind consumers’ inclination towards web shopping, with users spending an average of 1.6 hours each week buying on the Internet," he added.

ISP and Hosting Services

There is a well-developed ISP sector in Ireland. ISPAI (The Internet Service Providers' Association of Ireland) has 23 members as of 2012, with some of the better-known providers being:

Eircom
BT Ireland
O2
Vodafone
Verizon Ireland
Irish Broadband Communications
Hutchinson 3G Ireland

The cost of a basic package per annum varies significantly, although some bottom-end ISP services are available free.

As with ISP services, there is a wide range of hosting possibilities. In the following list of hosting service providers, many of the providers offer more advanced services such as co-location and technical support at various levels.

ANU Internet Services 
Digiweb-BaseStation
DNA Internet
Eircom
e-live
Esat 
Indigo 
Irish Trade Web 
Sixnet Limited
Via-Net-works Expresso Web
Web World

Given the rapid growth and substantial size of the Internet sector in Ireland, there have been a number of initiatives to create 'server hotels' in Dublin. AboveNet, a US Internet co-locator company owned by Nasdaq-listed Internet infrastructure and optical network company Metromedia Fibre Network, invested US$75 million in an Internet services exchange in Dublin.

Servervault, a US-based data hosting and management company, invested around US$150 million (EUR172 million) in a fully managed Internet hosting centre in Dublin.

As would be clear from the presence of many large international high-technology companies, there is an extensive network of service and support firms in Ireland for Internet operations, covering consultancy, software and hardware.

The Irish Internet Association has over 300 member companies, of whom a good proportion could be classified as Internet support.

Applications

As previously mentioned, more than any other European country, Ireland has acted as a magnet for high-tech companies, due to a combination of its highly favourable tax regime, use of the English language and availability of a well-educated young population among other factors. Although the country's very success has led to pressure on resources, the size of the technology community is such that it now acts as a draw in its own right, and it is hard to see how significant competition will arise. American companies in particular find Ireland attractive as a jumping-off point for their EU operations.

The Irish government was celebrating in March, 2003, when major internet search engine Google announced that it had chosen Dublin as the base for its European HQ. Google officially opened its first headquarters outside of the United States in Dublin, in October, 2004. The Irish division serves as the company's headquarters for Europe, the Middle East and Africa.

Google co-founder, Sergey Brin explained that the quality of Ireland's workforce, rather than its low corporate tax rate, was the chief motivation behind the move to Ireland. "We did not go with the lowest taxes but the access to young and talented people is what made our decision," he was reported as saying.

The decision was hailed by the Irish government, and then Deputy Prime Minister Mary Harney described the move as "a huge vote of confidence for our knowledge-based economy."

The move was facilitated with help from the Irish Investment and Development Agency (IDA).

In January, 2005, online retailer Amazon became the next high-profile e-business to establish a presence in Ireland, announcing that the firm would locate its European operations centre in Dublin.

Amazon's European Systems & Network Operations Centre provides infrastructure support for the company's systems and networks worldwide.

The move was welcomed by Minister for Enterprise, Trade and Employment, Michel Martin, who stated that it further endorsed Ireland's reputation as a centre for hi-tech business.

"It confirms this country's status as the leading European location for the largest Internet activities in the world," he observed.

Mr Martin added: "It is an excellent example of the success being achieved by the Government's policy and IDA Ireland's strategy for the development of Ireland's digital media sector."

Then in February, 2005, US-based internet company, Yahoo also said it would establish its European operations headquarters in Dublin.

The new operation is responsible for Yahoo's European business in three main areas including: a shared services centre, responsible for accounting and revenue activities and statutory reporting; a web hosting centre, supporting databases for Yahoo's family of websites, applications and systems; and a customer support centre, comprising a centralised multi-lingual support service and website editorial team.

Welcoming the investment, Michel Martin commented: "The extent of the activities to be undertaken and the level of investment by Yahoo, the number one internet brand globally and the most trafficked internet destination worldwide, makes the winning of this Operations Headquarters a truly outstanding achievement for Ireland."

Mr Martin added: "IDA Ireland faced strong competition from other worldwide locations for this investment and the company's decision to locate here proves that Ireland is a serious contender for the world's largest Internet companies."

Meanwhile, John Marcom, International Senior Vice President of Yahoo Inc, revealed that Ireland represented an ideal location for the firm's new regional HQ, explaining that: "Our decision to locate the European Operations Headquarters in Ireland was influenced by several factors - the success of our existing operation in Dublin, Overture Services, which has surpassed all forecasted operating targets; the calibre and volume of graduates available in Ireland; the up-to-date and cost competitive telecommunications and data centre infrastructures and the assistance of IDA Ireland."

Despite a major recession in the hi tech sector of recent years, Ireland can still claim to be a major player in the field of IT development.

Electronic financial services have also seen particularly strong growth in Ireland. Ireland's largest stockbroking firm, Goodbody Stockbrokers launched its online share dealing service in March 2001. The service offers share trading, portfolio valuations and transaction history online as well as a market monitor with a Reuters news information service and Goodbody's own knowledge centre.

Nearly all of Ireland's major banks have Internet banking channels although standalone offerings have fared less well. Growth has been most significant in online services provided as an integral part of Irish banks' main services. This could well be because customers tend to steer towards established brands rather than into uncharted territory.

In the spring of 2001, Ireland's TSB Bank, the fourth largest retail bank in the Republic, launched a new 24-hour Internet banking service in Ireland called TSB online 24, which is available to all customers with telephone banking facilities.

TSB online 24 follows in the footsteps of other Internet banking services offered by the major Irish banks, including Bank of Ireland with its Banking365 venture and AIB's 24hour-online, both of which were launched in 1997.

Moving in the opposite direction, however, was the Bank of Ireland, which in October 2001 merged its subsidiary Isle of Man Internet bank F Sharp into BoI's offshore operation. F Sharp, which was targeted at Irish and British expatriates, had gained a mere 2,000 customers in two years, far below expectations.

Another sector which has seen much interest is Internet support services. For instance, in October 2000 a special dot.com `nursery' was launched in Dublin to help internet start-up companies get off the ground.

In his December 2001 budget, then Finance Minister Charlie McCreevy reduced the rate of betting excise duty from 5% to 2%, in an attempt to persuade the country's leading bookies not to flee to the United Kingdom, or indeed further afield to Malta or Gibraltar.

In 2002 Power Leisure, parent company of Irish bookie Paddy Power, announced interim profits more than doubled to EUR9.26 million from EUR4.32 million, with revenue jumping from EUR206 million to EUR319 million. The group has 129 betting shops in Ireland and the UK.

However, in January, 2004, Paddy Power announced that it intended to relocate its London-based telephone betting service to the Isle of Man, in order to take advantage of the more attractive tax regime. The bookmaker also decided to base its online casino away from the UK mainland, although it decided to locate it in the Channel Island jurisdiction of Alderney, which does not levy betting taxes.

Paddy Power plc was the first Irish bookmaker to venture into the online gambling market and is listed on both the London and Irish Stock Exchanges.

In May, 2004, The Gibraltar-based bookmaker Victor Chandler, launched a new tax-free online betting service in Ireland in order to take advantage of the Irish market's "huge potential." According to OnlineCasinoNews.com, the firm's new internet presence in Ireland will be augmented by a "significant" bricks and mortar investment which will see up to twenty new shops opening in the coming years.

Finally, on a more mundane level, in September 2002, UK retailer Tesco reported continuing success for its on-line shopping services in Ireland, the UK and South Korea. The company's Internet division, Tesco.com, achieved sales of GBP186 million in the six-month period to 10 August, 27% up on last year, and it made a profit of UK£1.9m.

Tesco said it had been aggressively promoting its on-line shopping offering, and claims that that its UK service covers 95% of the UK population; its Irish Net shopping counterpart, Tesco.ie, is available to more than 75 percent of the Irish population. Tesco has 76 stores in Ireland and employs over 10,000 people.

Tesco Ireland launched a Web site for the visually impaired, in an attempt to further broaden the appeal of on-line shopping. The Web site was developed following feedback from blind and partially sighted shoppers, who used the system in its trial phase. The web site is a simplified version of its standard web site. It presents shopping information in a list format and avoids the use of tables, which make it easier for adaptive technologies to interpret the site for the visually impaired.

Intel has been a major investor in Ireland, with a large plant at Leixlip. But in July, 2005, Irish heritage trust An Taisce and local environmentalists lodged objections to Intel's planning application for a EUR1.4 bn Fab 24-2 expansion to its existing chip-making plant at Leixlip in Ireland.

Earlier in the year Ireland was forced to withdraw investment incentives which had been offered to Intel for another expansion of the plant, after the EU said they would constitute unlawful state aid, and as a result the plant went to Arizona along with its 1,000 jobs.

Intel's investment will add an additional 60,000-square-feet of manufacturing cleanroom space, plus the required manufacturing equipment to enable 65-nm technology within both Fab 24-2 and existing Fab 24 facilities. Production for the new Fab 24-2 module had been expected to begin in the first half of 2006.

In November 2006, the Irish Software Association (ISA) called upon the government to extend its investment incentive schemes, arguing that they are crucial to secure future growth of the Irish software development industry.

In November 2006, Minister for Enterprise, Trade and Employment Micheal Martin described the decision by networking firm Cisco to locate its global Research and Development centre in Ireland as a "superb win" for the country.

The new R&D centre will be located in Galway in the west of Ireland and is expected to employ 200 new technical and engineering jobs at graduate level and above over the next three years.

The investment will be undertaken by Cisco subsidiary Cisco Internetworking (Ireland) Limited and is supported by IDA Ireland, the government's investment promotion arm.

"It is a further significant increase in the benchmark by which other global companies can judge Ireland’s abilities to successfully support cutting-edge highly sophisticated technological R&D and of our ability to provide the required numbers of the most knowledgeable and skilled graduates for to-day’s global businesses," he added.

In November 2006, online search engine Google also announced plans for a major expansion of its European, Middle Eastern and African (EMEA) headquarters located in Dublin, in a further endorsement of Ireland as a favoured nation in the global e-commerce industry.

Google's latest decision to invest in its EAMA HQ in Dublin will boost the work force by an additional 500 and comes less than a year after the company announced a similar expansion plan. Currently, in excess of 800 employees representing over 40 nationalities are based at Google in Ireland.

Cisco is one of a clutch of IT firms which have announced major investments in Ireland recently, Digital River and Google being the latest examples.

The ISA said in its 2007 budget submission that it was seeking an extension of the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS), both of which were due to expire at the end of the year, until 2013. It also wanted the government to increase the investment limits that the company can raise to EUR1.5 million (US$1.9 million), up from existing limit of EUR1 million, and an increase in the personal limit to invest EUR250,000 per annum (from current rate of EUR31,750).

According to the ISA over 50% of software start-ups have relied on a combination of both BES and SCS funding over the past few years.

A new scheme, the Employment and Investment Incentive (EII), was announced by the Finance Minister in his budget speech in 2011 and later approved by the European Commission. The scheme allows for a total of EUR2.5m to be raised by a company, instead of the EUR1.5m under the BES. Individuals may invest up to EUR150,000 in the scheme and are entitled to a deduction from total income for the year of thirty forty-firsts of the amount invested. A further allowance of 11 forty-firsts may be given if the company invested in has increased R&D expenditure or its number of employees.

The ISA also recommended improvements to the existing R&D tax credit scheme to help small and start-up funds grow.

In March 2010, IDA Ireland welcomed the announcement by LinkedIn, the world’s largest professional network with more than 60 million members globally, that it is opening its new international headquarters in Dublin, Ireland.

“Ireland has always been attractive to innovative global leaders and I’m delighted that a leading business social networking site, such as LinkedIn, has chosen Ireland as its international headquarters. This is an endorsement that Ireland can satisfy the needs of highly innovative and technologically advanced companies as they make critical investments. It demonstrates the advantages Ireland continues to offer global multinational companies and fits neatly with the type of service innovation investment."

 

 

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