Telecoms regulator Ms Etain Doyle has said Eircom should continue to reduce its retail telecoms charges in line with set price controls despite strong lobbying against the imposition of a new price cap by the company.

But she has resisted calls from competitors for a new form of wholesale price cap and a requirement for Eircom to publish full pricing lists to highlight potential discriminatory pricing.

The decision should mean that consumers in the Republic will continue to enjoy cheaper prices for telecoms services over the next few years, despite a rapid fall-off in competition. But it has disappointed Eircom, which lobbied hard against the maintenance of a retail cap on the grounds that it would only hurt its competitors and that the Irish market was already competitive.

The decision has also been criticised by competitors, such as Esat BT, which believe retail price controls are a disincentive for competing firms.

Under the current retail price cap, which runs to January 1st, Eircom has had to reduce its prices on a basket of services by a formula based on the consumer price index minus 8 per cent. This cap, together with greater competition since liberalisation of the telecoms market, has forced down prices and improved the Republic's international standing for telecoms costs.

Ms Doyle, who is due to make a full ruling on a new price-cap regime by November, indicated recently that many of the services Eircom offers consumers should remain capped.

The capped services include local/national calls and the provision of operator-assisted calls. The regulator has indicated that she intends to remove the cap on directory inquiry calls.

But Ms Doyle has rejected the arguments of some competing operators that wanted the establishment of a fixed cap on wholesale services rather than retail services. Wholesale services are the bulk purchase of telecoms calls from Eircom by competing operators. These firms then resell calls to their customers at slightly higher rates.

The prices of some wholesale services, such as interconnect, are controlled by directions from the regulator but price rulings are regularly delayed, in part, due to difficulties in obtaining accounting information from Eircom. Competitors argue this is hurting their business and a more stable price cap regime would give them more certainty and enable them to invest.

Esat argues in its consultation paper to the regulator that the time is ripe to consider interconnect/ wholesale price controls along with or instead of retail price controls.

It says the current retail price cap enables Eircom to reduce the prices of some services more than others to undermine competitors.

Esat's analysis of Eircom's charges since 1993 shows it has reduced the cost of national calls by 7 per cent per annum while increasing the cost of line rental by 20 per cent per annum. Because Esat can only compete on call costs and not line rental it is at a disadvantage to Eircom.

But the introduction of a wholesale price cap and a relaxation of a retail cap must be coupled with the introduction of "price squeeze tests" on Eircom, says Esat. These would analyse Eircom's wholesale and retail prices and prevent the firm from deliberately undercutting competitors through margin squeeze, it says.

In her recent paper, Ms Doyle said the issue of whether to change current price controls on wholesale fixed services to a price cap was a significant strategic question. This would not be reviewed until late 2003 or 2004, she added.

Ms Doyle will hold further consultations over the summer.