A leading international authority on telecommunications has warned the Government that levying telecoms operators to fund school internet access will frighten off private investors and raise consumer prices.
The levy, mooted by the Department of Communications, Marine and Natural Resources, is "not a good idea economically", Prof Bill Melody told an Oireachtas sub-committee examining ways of improving the Republic's broadband infrastructure.
Prof Melody, a former chief economist at the US Federal Communications Commission, is the author of an influential report recommending that sector regulator, the Commission for Communications Regulation (ComReg), benchmark local-loop access fees to be within the lowest 12 of the 15 EU member-states.
ComReg's attempt to implement his recommendations have led to a legal battle with Eircom.
Overheads must be kept as low as feasible to encourage telecoms players to introduce broadband, said Prof Melody. "A levy would have a dissuasive effect in financial markets and operators market," he explained.
He also advised against the State assuming responsibility for creating broadband infrastructure. The Government should concentrate on encouraging private investment, if necessary by offering generous subsidies to players selected by competitive tender.
Over-reliance on subsidies may, however, dampen competition over the long term, Prof Melody said. "Government subsides cause uncertainty in capital markets and reduce private investment," he said.
Although he stopped short of explicitly criticising Eircom,which is widely accused of dragging its feet over broadband, Prof Melody said international experience suggested incumbent telecoms providers only fully embraced the free market and opened their networks to rivals at competitive wholesale rates after a "significant" change in key staff.
Earlier, a delegation from the Department of Communications said the downturn in the telecoms sector had exposed flaws in the free-market philosophies underpinning the Government's decision to privatise Eircom.
"There are limitations in the liberal market model," said Mr Brendan Tuohy, general secretary of the Department. "But we are only now finding this out."
It is unwise to depend on the private sector to spearhead broadband introduction in the current fraught market environment, he said.
