Doyle to make decision on removal of Eircom price cap

Telecoms regulator Ms Etain Doyle is expected to issue a crucial decision within 10 days on whether to remove a price cap on Eircom's retail telecoms services.

The decision, which was initially scheduled to be made in September, follows a lengthy public consultation, and will determine whether consumers face a major price hike for a range of telecoms services from next January.

Ms Doyle's proposed decision notice on the price cap will also either boost or depress Eircom's revenues, a third of which are covered by the current price cap.

Eircom has lobbied the regulator strongly over the past few months on the cap, which it claims is preventing it from investing further in its network infrastructure.

The firm wants Ms Doyle to drop a cap set at the consumer price index minus eight for a basket of its services while maintaining a cap on its wholesale services.

This would enable Eircom to raise prices for most of its retail products for the first time in years, while continuing to regulate prices set for Eircom's rivals.

Eircom's rivals remain divided over the issue of removing the retail price cap, although all favour the retention of a wholesale price cap.

The State's second operator, Esat has lobbied the regulator to remove the retail cap on Eircom because it believes the cap is forcing competitors out of the market.

But initial work completed by the regulator's office suggested it does not believe the retail cap should be abolished because there is still not the correct level of competition in the market.

Recently, at a conference in Dublin, Ms Doyle stressed that Eircom's cost base needed to be as efficient as possible to ensure costs weren't passed on to other competitors.

However, a recent decision by the Spanish Minister for Science and Technology suggests European regulators are willing to reduce price caps at present.

At the beginning of September, the Spanish government decided to relax its price cap on telecoms servcies from a rate previously set at the retail price index minus four to a rate of the retail price index.

In addition, the monthly rental fee charged by Telefonica to consumers will be excluded from the price cap, a new report issued by the communications research group, Cullen International, shows.

The report suggests this will rise to €12.62 in January 2003, up from the current price of €11.67.

Meanwhile, in August the UK regulator OFTEL pegged BT's prices for its lowest spending 80 per cent of residential consumers at their current rates.