Eircom's ComReg challenge criticised

Eircom is acting contrary to the national interest by challenging the Commission for Communications Regulation's (ComReg) ruling that it must cut the price it charges rivals to use its local access network.

Professor Bill Melody, a former chief economist at the US Federal Communications Commission and an expert in telecommunications, said enabling rivals to use Eircom's access network was crucial to competitiveness.

In addition a successful challenge may also force ComReg to break European law, according to Professor Melody who arbitrated between Eircom and the Commission for Communications Regulation (ComReg) on the issue.

"This is a battle which decides whether the next step in telecoms liberalisation goes forward or is stalled," he said. "Simply resisting all this change isn't helping Ireland or Eircom," he said.

Eircom went to the High Court this week to get a stay put on the ruling, pending a full legal challenge.

Prof Melody, who chaired an industry group on the controversial issue of "local loop unbundling"- opening an incumbent operator's local network to competition- said the Irish telecoms market was not yet competitive.

"Compared to the leading countries of Europe, such as those in Scandinavia, and the UK, competition has been slower to develop in Ireland because of the late start in liberalisation."

The slow roll out of broadband and higher prices for telecoms was hurting inward investment by certain types of foreign firms, according to Prof Melody.

"If I want to establish an Europe-wide information service and get direct access to customers, I wouldn't invest in Ireland, rather I would go to Sweden or Denmark because customers pay too high a price and get a poor service here."

He said it was completely unrealistic for Eircom to think that by fighting the decision to cut the cost for rivals to use the local access network they could stop the entire liberalisation process.

Prof Melody said Eircom's threat to delay a $1 billion investment on the basis of a single regulatory decision was "pretty incredible". Local loop unbundling is just one step in the liberalisation process, he added.

But Prof Melody said ComReg's pricing decision on "local loop unbundling" would set a precedent for future regulation in the telecoms market.

He said a successful challenge to the decision by Eircom could force ComReg to be in breach of European law on the issue.

The European Union has insisted that all member-states use a current cost method for setting these access prices, whereas a lot of incumbents want to use historical costs, said Mr Melody.

Using historical costs to set prices would pass on inefficient costs to business.

Professor Melody said there was no future in Eircom's opposition to liberalisation and the firm should follow other incumbent operators in attempting to boost its wholesale business.