Further legal actions contemplated in bitter Esat, Eircom confrontation

ESAT Telecom and Eircom are still considering whether to take further legal action following the EU Commission's rejection of a long-running complaint by Esat against the former State telephone operator.

Eircom is considering whether it should sue Esat for the costs incurred in the case, which ran for nearly four years. For its part, Esat is considering a further appeal against the EU decision, as it is extremely angry over the findings.

Last week, the Commission "definitely rejected" Esat's complaint that Eircom (then Telecom Eireann) had abused its dominant position. The ruling also contains some stinging criticism of Esat and its handling of the complaint.

Esat still has almost two months to file an appeal in Luxembourg, if it so chooses. Some sources believe this is likely.

The ruling marked the end of a five-year battle - for now - between the two parties and brought to a close uncertainty over how the Commission would rule on the matter. For Esat the case was important, because its chairman Mr Denis O'Brien had long since maintained the company would move to profitability quickly once it had a proper interconnect rate. This has since proven to be the case.

In a detailed 24-page report, the Commission threw out complaints that Eircom was wrong in not giving Esat an equitable interconnect rate. The interconnect is the rate charged by one company to another for delivering the part of their calls which travel on the other company's network.

The Commission findings says that the interconnect issue was only briefly referred to in Esat's complaint - which also dealt with a row over discounts that Eircom gave its large users. These discounts were withdrawn at one stage, but were restored to Esat retrospectively when the Commission warned Eircom that it was abusing a dominant position.

The discounts were the main part of Esat's complaint to the Commission, which said it nevertheless conducted a careful investigation into the interconnect tariffs.

It also dealt at length with a Commission statement (known as a Statement of Objections) in 1997, which accused Telecom Eireann of abusing its dominant position by charging too much for handling their calls (i.e. interconnect). This led to mounting speculation that Telecom Eireann (Eircom) would be fined - some said up to £15 million (€19 million) - and heavily censured.

It said some of the analysis contained in the Statement of Objections was not correct "on further consideration". The Commission also said it did not have sufficiently detailed evidence regarding the services which Esat supplied.

Much of Telecom's defence centred on the issue of routers which Esat had used to take calls from its own customers' premises to an Esat node, where it would then be delivered on via a leased line. The routers would pull the call off the Telecom Eireann network and on to Esat's and saved Esat considerable monies. However, in 1996, the then Department of Communications ruled that they were illegal, a point contested by Esat. However, the new telecoms regulator quickly moved to regularise the routers' situation when she took office, introducing a replacement called Switchlink.

The Commission also said it did not have sufficient evidence that Telecom Eireann's conduct constituted a refusal to supply access to its public switch network.

"A refusal to supply a particular product (in this case network-to-network interconnection) requires a record of the existence of a request for that product which is not available here," it said.

The Commission had concluded that the letters and affidavit supplied by Esat were not sufficiently specific or detailed to constitute a record of a precise request for a specific type of interconnection.

It concluded that the Community's interest would not be served by any further investigations and that, even if undertaken, they would not uncover much else.

This point has been strongly contested by Esat, which says it has passed copious documentation and correspondence on to the Commission.

Whether Esat does pursue the matter further may ultimately depend on its new owner, British Telecom (BT), which offered $2.5 billion (€2.56 billion) for the company two weeks ago. It may decide it now has more pressing matters on its mind.