Eircom, ComReg dispute set for High Court

The current judicial review is only likely to slow the process of unbundling the local loop rather than stopping it altogether, writes Jamie Smyth, Technology Reporter

The latest in a series of disputes between Eircom and the Commission for Communications Regulation (ComReg) over "local loop unbundling" will now be decided by the High Court.

Over the past week, both sides in the dispute have traded insults over proposed changes to the process through which rival operators take control of the last mile of Eircom's telephone network.

This network, which is known as the local loop, is the jewel in Eircom's crown because it runs into almost every home and business in the Republic, giving it access to 1.7 million consumers.

Eircom and ComReg previously fought in the High Court over the monthly rental fee charged by Eircom to rivals for local loop unbundling. This time around, they are at loggerheads over the way customers move from Eircom to unbundled lines.

These technical issues behind "local loop unbundling" are notoriously complex. However, in short, ComReg wants to make it easier for Eircom's rivals to rent the line running into homes, enabling these firms to provide their own range of services to people.

Despite an EU directive mandating "local loop unbundling" in 2001, progress has been slow everywhere in Europe. But gradually, other European incumbents are opening their networks to rivals and the Republic is now wedded to the bottom of the EU "local loop unbundling" league table.

"To date, with less than 2,000 unbundled local loops out of 1.6 million, considerable scope for improvement exists," says Mr John Doherty, a director of ComReg. "ComReg believes that the current low level of take-up is in part due to the serious operational issues experienced by those telecoms companies seeking local loop unbundling."

Rival operators such as Esat BT, Smart Telecom and Leap broadband - which have all applied to unbundle the local loop - blame Eircom for deliberately frustrating the process of unbundling.

"Eircom don't want local loop unbundling at all because, for the first time, it removes the power from the incumbent," says Mr Oisín Fanning, chief executive of Smart Telecom, which plans to begin unbundling Eircom's network within the next two weeks.

Smart Telecom is already aggressively marketing an ambitious broadband product, which will offer consumers two megabyte download speeds and free telephone line rental for just €35 a month.

"We are only able to offer these types of products if we unbundle. Everyone else is just repackaging Eircom's own broadband services," says Mr Fanning, who accuses Eircom of making it difficult for its customers to switch to fully unbundled lines.

ComReg is proposing three changes to the current "unbundling" process to make it easier for customers to move. These are: automating the process (setting up computer systems to process customer orders rather than doing it by hand); enabling customers to bring their phone numbers with them when they switch to an unbundled line, and enabling customers using a range services - for example, wholesale line rental - to migrate these easily to an unbundled line.

The proposed changes all relate to making the process of switching to unbundled lines for consumers seamless. In other words, to remove the possibility that they won't be able to use their phone line for a few days when they switch operators.

Eircom says it is not against unbundling or even the proposed changes to the process. But it is opposing the way the regulator is seeking to impose its directions.

Unhappy at the length of time Eircom was taking to respond to its proposals, ComReg issued a series of directions last month, attempting to force it to comply with its proposals. But Eircom rejected these and made an appeal to the Electronics Communications Appeals Panel - a body set up by the Government to oversee regulatory decisions.

Believing that a delay while an appeal was heard would undermine other operators, ComReg sought to force Eircom to comply with its directions immediately.

Yesterday, this attempt failed when Eircom was granted a "stay" on ComReg's directives by the High Court. The court has also agreed to perform a judicial review of the enforcement order.

ComReg is expected to contest this ruling in court later today.

"ComReg is very disappointed at the current situation in relation to unbundling. ComReg has been forced to intervene to support competition and increase consumer choice. Unbundling has a key role to play in driving broadband supply and take-up in Ireland," according to Mr Doherty, who said a clear demand already existed for the service in Ireland.

Eircom's commercial director, Mr David McRedmond, disagrees strongly with ComReg.

"We've had an unbundling process in place for three years and we have not had a single request from an operator," he says. "There has been no backlog of orders from operators and no delay to processing customers."

He says that operators have instead preferred to repackage Eircom's own broadband service for customers because they do not have to invest in equipment to unbundle local exchanges.

In fairness, up until recently, few telecoms operators had the appetite for investing in the Republic and the cost of connecting users to unbundled lines was prohibitive. But the halving of connection fees from €121 per user to €58 in December last year and the aggressive entry of Smart Telecom has changed the equation.

Smart Telecom says it plans to unbundle 64 local Eircom telephone exchanges by July and has an agreement with Eircom to transfer 5,000 customers per month to unbundled lines. And this agreement does not rely on a resolution to the current dispute between ComReg and Eircom over automating the unbundling process, says Mr Fanning.

So it is no wonder that Eircom is opposing "local loop unbundling", considering the potential negative impact on its revenue.

Ms Bríd White, equity analyst with Merrion Capital, estimates that Eircom would receive at least 25 per cent less revenue per unbundled line, compared to the current wholesale charges it gets.

"If you look at what happened in France, where unbundling has really taken off, France Telecom's broadband revenues fell immensely," she says.

"This has forced France Telecom to introduce a whole swathe of new broadband services and cut its prices... So unbundling has been very good for the consumer."

In France, currently the European leader for "unbundling", broadband firms are already offering television services and voice-over-internet protocol (VOIP) services.

Bearing in mind the increased take-up of unbundling across the EU and reduced prices for unbundling in the Republic, Eircom probably cannot hold back the tide for much longer. When seen in this light, the current judicial review will only slow the process rather than stop it altogether.

Rivals line up to get in the loop

What is the local loop?

The local loop is the last mile of Eircom's telephone network, which runs from local exchanges into almost every home and business in the State. The wire itself is made of copper in most cases.

What services can be carried over the copper wire?

For much of the past century voice calls have been transmitted over the wires. In the past decade dial-up internet services, and more recently broadband, have become popular. TV, video-on-demand and internet phone calls are offered in other EU states.

What is unbundling?

Eircom owns the local loop and controls the lines that run into people's homes. Because of its dominant position, the regulator has established rules to enable rivals to access the lines. The rules should enable other companies to rent the last mile of Eircom's network for a fee- set at €14.65 to offer their own suite of services to consumers.

Is there unbundling in the Republic?

Just 2,000 out of 1.7 million lines have been unbundled by Esat BT in the Republic. Eircom accuses rivals of not wanting to invest in the process. They blame Eircom for delaying the process.