Flat-rate Net rates to become crucial issue

Flat-rate Internet access rates, already a serious bone of contention between Telecom Eireann, Government departments, Internet service providers, Internet-based companies and Web users, are set to become a critical issue over the next few weeks. Telecom is preparing a "significant" announcement on Internet charges and the Government is due to release the report of its Telecoms Advisory Committee.

Flat-rate charges are seen by the Government and industry figures as central to spurring Internet business. Mr Ira Magaziner, President Clinton's chief policy adviser, who has visited the Republic several times to consult with Government on the development of e-commerce, has emphasised the need to move towards a flat-rate model.

Flat-rate charge for Internet access could either follow the US model of offering unlimited local calls at a set fee (in this case, the local call would be to the Internet service provider), or could separate data (Internet) calls from voice (regular telephone) calls and charge them at a flat fee, perhaps on a monthly or weekly basis.

Currently, most Irish Internet service providers charge their Internet users a flat monthly or annual rate for supplying a Net connection, and phone charges are determined by their phone service provider. In recent months, Telecom Eireann has lowered its charges for calls to Internet service provider numbers, so that charges are determined now in five rather than three-minute increments, at a lower rate.

As full deregulation approaches for Telecom on December 1st, it is understood that it will offer a new package rate for Internet charges which would probably offer a very large block of time online at even lower rates. However, sources within the Government say they want charges to be lower than those Telecom is likely to offer this time around.

The Government seems certain to find support for its position in the Telecoms Advisory Committee report, due out shortly. The committee, which was formed in June and comprises top telecommunications figures from the US as well as a range of Irish advisers, is likely to make the move to flat or extremely low-rate Internet charges one of its prime recommendations for the establishment of an e-commerce culture in the State.

According to Telecom Eireann, "unresolved regulatory issues" have made it impossible for them to implement flat-rate access. In particular, Telecom is concerned about the way "interconnect" charges would be made - charges paid from one telephone service provider to another when it uses another's lines.

As well, the company is uncertain that it can legally separate charges for voice and data calls, and if it can vary the pricing of the flat rate during peak periods of use, to control demand.

Telecom Eireann sent a letter to the European Commission seeking advice. "We've been looking for clarification on a number of issues," said Telecom spokesman, Mr Gerry O'Sullivan. "I think that the EU recognises that Telecom Eireann has raised some fundamental regulatory issues."

This assertion is challenged by a spokesman for the Department of Public Enterprise, which has led Government demands for flat-rate charges. According to a letter written to the Commission and seen by The Irish Times, the Department requested that the two relevant Directorates General address Telecom's reservations. In its response, which the Commission notes is informal, the Commission states that Telecom's concerns are largely unfounded.

However, Mr O'Sullivan said that Telecom feels that the Commission's reply is too general. It is understood that Telecom will be discussing the matter further with DG IV, the directorate which oversees competition. "I think flat-rate access is something that needs to be quite defined," said Mr O'Sullivan. He noted that US telecommunications companies were considering moving away from flat-rate phone charges to control demand on overstressed networks.

But in general, according to Mr O'Sullivan, Telecom has backed the Government's e-commerce focus and noted: "We have done very much not only to embrace it, but have been pushing, very proactively, this agenda ourselves."

He noted that Telecom was looking "at a number of issues on the Internet access side" and said initiatives would be forthcoming to increase overall Internet usage by new users, to make access cheaper in peak weekday periods, and to support high usage customers.

In particular, he said Telecom would introduce in the first half of 1999 a new, high-bandwidth ADSL (asynchronous digital subscriber loop) service at a cost similar to ISDN lines (integrated services digital network). ADSL is a technology which offers vastly accelerated connection speeds over the copper phone wire already used for voice calls.

Internet service providers have expressed some concern about a switch to flat rate charges because it will greatly increase the demands on their existing infrastructure of modems, lines and switches. Users are expected to spend more time online, in extended chunks of time, which means ISPs would be forced to install more hardware to handle demand.

But most ISPs seem to accept a flat-rate model is coming and see it as central to the growth of e-commerce. Because they offer services to business customers, most ISPs would see an e-commerce positive climate as a plus for their own business.

"We'd welcome anything that brings down the cost of [Internet] usage," said Mr Richard Cooke, managing director of ISP Esat Net. Lower costs will attract companies and simultaneously drive the installation of the high-bandwidth phone lines needed for e-commerce, he believes.

Because of the coming challenge to dial-up Internet access by cable modems, digital television, satellite connections and other potential offerings, the telecommunications companies will be forced to offer flat rate access in the Republic, said Mr Frank Quinn, who heads the Irish Internet Association, an association of Internet-based and Internet-using companies.

However, he pointed out a related concern. "Flat-rate access certainly needs to happen, but it has to go hand in hand with increased speed and bandwidth," he said. "I wonder if people are as concerned about their phone bill running up as opposed to the time it takes for a Web page to download."

Karlin Lillington is at klillington@irish-times.ie