The announcement of British Telecom's entry into the Irish market this week sets the scene for a battle royal for the telecommunications business of corporate Ireland. BT is linking up with the ESB in a £130 million joint venture company which will target the corporate market.

It was just one more development in a market which will continue to undergo radical change and upheaval. BT/ESB plan to become the second major telecoms provider in Ireland.

The market is already developing quickly. Telecom Eireann's only remaining derogation from open competition is on switched voice telephony including the residential market which runs out in 2000. Virtually all other areas of the market are already up for grabs.

At present, Telecom's competitors must use Telecom's network to deliver part of their calls. However, that will all disappear in 2000.

Consumers, particularly in the business sector, are already benefiting from the increased competition in the market and lower prices. And next year, industry analysts forecast that prices for telecoms consumers will fall further and an increasing number of services will be offered. These will be aimed primarily at business users.

Deregulation, driven by new rules from Europe, is one of the factors driving change in the sector. Further opening of the European telecoms market will take place next January. Then what are known as accounting rates the rates charged by telecoms operators in one country to deliver a call originating from another country are expected to fall sharply. This will in turn result in further savings for customers.

Adding to the momentum, last week the telecommunications regulator announced details of Ireland's third mobile phone licence. Once awarded, the entry of a new player should spark a further round of price cuts for consumers, as operators vie for business.

The Irish telecommunications market is a growing and lucrative one and is increasingly open to global market influences. The EU is driving much of the liberalisation of the market and big players are forming global alliances as they seek synergies which will aid them to provide services to more customers and increase revenue.

The global market is changing quickly. Industry players talk about providing a seamless service, connecting customers around the world to their various offices, using just one phone company. Alliances are a key factor, because they help operators not only to provide the services, but also to bring down the cost of doing so as they put business each other's way.

In tandem with these international developments, a landmark change for Irish consumers was the further liberalisation of the market in July, again at the behest of the EU. It allows Telecom Eireann's competitors to build their own infrastructure, which they can then offer to corporate clients. Although initially an expensive investment, it pays dividends in the longer term as it obviates the need, in many cases, for the company to use Telecom's services.

The deregulation of the sector has led to predictable disputes about the activities of the State operator. Telecom's charges for leased lines and for handling other telecoms operators' calls is a source of contention in the industry. Operators say the company takes 12 weeks on average to deliver the circuits needed, whereas in Britain the average waiting time is four weeks. They also say the charges are outrageous that they have gone up to £80,000 from £35,000 a few years ago.

"It is significant that under Telecom's tariff rebalancing, the cost of leased lines has gone up while the cost of switched services (longdistance, international) calls has gone down," says Mr Eddie Brennan of Cable & Wireless.

Several companies are already building their own telecommunications networks. One of these is Esat Telecom which is building fibre optic rings in the major cities. Esat is also laying down its own network around the country using CIE's rail network.

WorldCom, which recently bought out TCL Telecom in Dublin, is also building its fibre optic ring to carry business traffic in the capital.

Mr Sean Melly, chief executive of WorldCom's Irish operation, says there will be plenty of activity on alternative infrastructure, both citywide, nationwide and internationally. He predicts it will cause a restructuring of prices downwards. "Building your own `highway' gives you control over your costs and quality and allows you to offer new services," he says.

The rush to build alternative networks is also driven by the fact that there is a massive surge in the use of telecommunications to transmit data. It is reckoned that data telecoms traffic is growing at a rate of 12 per cent per year. Within a few years it is predicted that 80 per cent of telecoms traffic will comprise data, while 20 per cent will comprise voice telephony a virtual reversal of the current situation.

Mr Sean Melly says telecoms companies are just scratching the surface. "When you have bandwidth (capacity to carry traffic) available at reasonable prices you will see an explosion of telecoms services," he says.

Services which WorldCom will offer include frame relay (high-speed data) as well as Internet services, which demand large chunks of bandwidth.

Mr Melly says the market is moving into an era of consumers accepting that alternative operators can do the job for them, do it cheaper and provide as good a quality or better service as Telecom, but now they also want to know what other services are provided. "People understand that there is more to telecoms than just being cheaper," he says. "Nevertheless, you have to be competitive and consumers expect that a company will not just provide services for international voice calls, but whether you can offer a whole range of other services.

"The stakes are going up, you need to be able to cater for a company's needs in a number of countries, not just Ireland."

Industry sources say WorldCom is a strong operator and its estimated customer base is anything from 1,500 to 2,000. The company targets the corporate market specifically. It is estimated that Esat Telecom has around 3,300 customers. Founded by its chairman Mr Denis O'Brien, it currently occupies the number two slot as a telecoms carrier in Ireland. The company says it has 19 per cent of all business customers in Ireland who spend over £200 per month on phone bills.

Like others, Esat is very conscious of the need to become as independent as possible of Telecom Eireann. It is building a £7.5 million fibre-optic link to Britain, from Wexford. Around 60 per cent of international call traffic is from Ireland to Britain, an area of the business which Esat is targeting. British Telecom and new partner, the ESB, will also compete aggressively for this market segment.

Sources say plugging into Britain forms a key part of any alternative carrier's strategy because it is one of the most open markets in the world. From there, it is relatively easy to strike deals with other carriers for onward connections to the US and the rest of Europe.

As competition in the marketplace has grown Telecom has responded by cutting its rates, both internationally and for long-distance inland calls. Its competitors in Ireland openly claim the credit for Telecom's reductions. In reality it is competition both locally and globally which has forced the State operator to begin the long process of restructuring the company.

It is set to further drive down costs. Its chief executive Mr Alfie Kane has pledged a further £200 million in price cuts over the next two years.

Telecom's competitors quickly realised the importance of account management, something which the semi-state is now doing too. Telecoms companies say some of these account managers are the equivalent of telecommunications consultants to firms.

"Companies are not just concerned about prices, they also want assurance on customer service and quality," says one source.

Even though the market for residential business seems at first glance to be off-limits, companies can provide value-added services. Companies such as Swiftcall offer reduced rates on international calls via a switch in Belfast.

This week Esat Telecom announced it too was entering the residential market.

Customers call a freephone number and open an account. This allows them to make calls on other phones charging them to their account. The company says an evening or weekend call to the US will be 30-50 per cent cheaper than Telecom's rates. Esat is using it to establish the brand among residential users, in preparation for the opening of the market. It is understood that the company is aiming to take around 5 per cent of the market, which some estimate to be currently worth about £100 million a year. However, its entry into the residential market will represent a mere skirmish in comparison to the fight for household business when that market is opened to competition in two years time.

See also Technology, page 10