ESAT accuses Telecom of robbing Peter to pay Paul

TELECOM Eireann has been accused of using local calls to subsidise significant cuts in the price of national and international calls. The state operator recently announced price reductions of £80 million.

The accusation was made yesterday by Mr Denis O'Brien, chairman of Esat Telecom, which competes with Telecom for some long-distance and international business.

Mr O'Brien strongly criticised Telecom's pricing policy. "What we are witnessing is price predation, being financed by cross-subsidisation, or "rebalancing" as it is euphemistically referred to," he said.

Mr O'Brien, who was addressing the Leinster Society of Chartered Accountants in Dublin, said three years ago you could spend all day on the phone, if it was a local call. However this changed in September 1993. "So the price we used to pay for a local call, which allowed us to speak for as long as we wanted, now only allows us to speak for three minutes."

Mr O'Brien said Telecom tried to justify rebalancing by saying that local rates would have to be increased so that they could drop long-distance inland prices and international call prices.

"Strategically they found themselves in the market of competition where international competition was pushing the cost of calls lower, but they still had no competition for local calls.

Mr O'Brien said this form of "price squeezing" has been tackled by the European Commission in its case against Deutsche Telecom. He added that the ruling has equal significance for Ireland.

Mr O'Brien also said Telecom's pricing policy has led to a huge increase in accessing the Internet. "Similar to a telephone call in 1993, you could spend all day on the Web using a local call, but today it costs 11.5p per three minutes.

He also said that for larger users, like universities the fact that lease line rates (which must be leased from Telecom) have increased by 300 to 400 per cent, means their access to the Web has dramatically decreased.