Fingleton says Eircom is not efficient

Eircom has not done enough to improve its efficiency and the telecommunications market is not yet adequately competitive, according to Dr John Fingleton, chairman of the Competition Authority.

Telecommunications was one area where the benefits of deregulation had still to come through to consumers through real competition, he said in a speech yesterday.

However, Eircom has strongly rejected Dr Fingleton's comments, with a spokesman saying that efficiency had greatly improved, feeding through to lower prices for consumers.

Dr Fingleton's comments about Eircom were part of an address on competition to the Institute of European Affairs (IEA) in Dublin, where he was responding to a speech from the EU Competition Commissioner, Mr Mario Monti.

"Eircom has not made the type of substantial progress on efficiency that is possible and should be required," Dr Fingleton said. Real competition had still to be introduced in the energy sector and the telecoms market, he said, pointing to a recent survey which had shown that Ireland ranked badly in terms of cost and availability of broadband.

However, Eircom has strongly disputed Dr Fingleton's analysis. "The efficiency is being driven in Eircom and it is leading to lower prices," according to Mr David McRedmond, commercial director. Prices had fallen by 40 per cent in real terms since 1997, he said, and Eircom's staff numbers had fallen from 13,500 to 8,500 in the past four years. An OECD study had shown that business prices here were cheaper than in the UK, while household prices were now similar.

Eircom was now making available a low-cost broadband product through its new DSL service, he said, which, the company was confident, would increase uptake in this area.

Dr Fingleton also highlighted other areas that he felt could benefit from increased competition,including airports, the electricity sector, hospital and medical services and bus transport.

The key issue was the extent of competition, rather than whether the company was in State or private ownership, he said, highlighting the improved efficiency at State-owned Aer Lingus.

The authority would also be concentrating on removing barriers to entry in various areas, he said. Restrictions on entry were also a key factor in many professions, he added.

Earlier Mr Monti told the IEA audience that the 12.5 per cent Irish corporation tax rate was not now an issue from a competition viewpoint as it applied equally to all companies. The EU Commission had negotiated the ending of the old 10 per cent rate, which had applied only to manufacturing and IFSC companies and was thus seen as discriminatory.

"In contrast, Ireland's general reduction of corporation tax to 12.5 per cent, seen by some as distorting competition, is a general measure outside the scope of the State-aid rules and the Commission's control," he added.

A number of other member-states are believed to be unhappy with Ireland's 12.5 per cent rate, but Mr Monti's comments indicate that the Commission does not see it as a competition issue, while details published yesterday show that moves to tax harmonisation have been more or less shelved in the Convention on Europe discussions.

Indicating the Commission's determination to implement competition policy, he said that vigorous enforcement "contributes decisively to competitiveness and economic growth in Europe". He also outlined plans to devolve more authority for implementing policy from the Commission to the national competition authorities.