Expect some fireworks in Net charges row

The significance of the latest spat between Eircom and Ms Etain Doyle, the director of telecommunications regulation, should not be underestimated. On the surface it seems a fairly routine dispute about the price at which the dominant market player should let rivals access its new high-speed internet service. Without wanting to overdramatise it unduly, it also represents a very important battle in the war being waged against Ms Doyle and her office by Eircom.

Mr Alfie Kane, the Eircom chief executive nailed his colours to the mast last year when he said the company was going to take a more robust position towards regulation. His contention was that in her enthusiasm to introduce competition to the Irish market, Ms Doyle was forcing Eircom to give other players access to its networks at unfair and uneconomic prices. The subtext was that the company had little choice other than to grin and bear this while it was owned by the State, but following its flotation in mid 1999 the gloves were off.

Prior to the current row, the most serious run-in between Eircom and the Office of the Director of Telecommunications Regulation had been over the way in which rivals were to be allowed access to Eircom's local phone network. The ODTR ended up imposing a pricing structure last May that Eircom has challenged in the courts, claiming it does not allow the company recoup its investment.

The recent dispute is quite similar, but it concerns the price at which rivals will gain access to a high-speed internet infrastructure that Eircom is building to launch its Eircom i-stream product on October 2nd. Ms Doyle appears to have won the first round. Two weeks ago she told Eircom that it had to provide more information on its proposed charging structure. Despite a considerable amount of huffing and puffing the company complied ahead of the regulator's deadline of last Tuesday. Where the matter goes from here depends on the ODTR. If Ms Doyle and her officials decide on the basis of the new information that Eircom's prices are justified, then that will be the end of the matter.

If - as seems more likely - they take the view that the prices are not justified we can expect some fireworks. Eircom has made it clear that it will not reduce the tariffs which will push Ms Doyle down the road of imposing her own rates as she did with the local loop. Eircom can then be expected to launch a second legal challenge.

One of the more surprising things about the new dispute is that Eircom has chosen to pick a fight with the ODTR while it is in the process of being taken over. Barring some unforeseen circumstance Eircom will be acquired next month by Valentia Telecommunications.

Eircom's transition from publicly quoted company to a privately held entity will remove a number of important checks and balances. The most important will be that Eircom will no longer be subject to the stock exchange rules on the publication of financial information. The non-executive directors appointed to the Eircom board by the Government ahead of its flotation are also expected to resign. The presence of independent directors such as the businessmen Mr Jim Flavin and Mr Niall Mackay on the board gave some assurance that the company would not act in a way that was detrimental to the national interests.

Once it surrenders its stock market listing, the only body outside the company entitled to detailed financial information on Eircom will be the ODTR. Ms Doyle will be the only person in a position to judge whether Eircom's actions are financially justified as well as fair to its competitors and customers. Given that Eircom owns the bulk of the State's telecommunications network and almost every household in the State is a customer, it is vital that Eircom both respect and co-operate with the statutory regulator. The failure of politicians of any hue to voice an opinion on Eircom in the wake of its disastrous flotation serves to highlight the importance of the ODTR's job.

Eircom's track record to date is not very encouraging and there is no reason to believe that it will get any better under its new owners. With more than €2 billion (£1.6 billion) in debt to service Valentia can be expected to oppose any action by the regulator that will restrict its ability to sweat its new asset. One can assume that letting competitors access its network at anything other than a substantial profit is definitely not on Valentia's agenda.

The value of the infrastructure that Valentia is acquiring and the market power that comes with it has been clearly demonstrated by the whole high-speed internet saga. Eircom is the only player in the market that is even near offering high-speed internet on a widespread basis to small business and households.

Eircom has made it clear that despite the concerns voiced by the regulator it will not be reviewing its prices and has threatened to scrap the whole €150 million project if the ODTR imposes its own charges. This does not sound very different to saying that it will not submit to regulation.

jmcmanus@irish-times.ie