Vodafone, O2 may have to open networks

Mobile firms O2 and Vodafone may be forced to open their networks to competition following a controversial ruling by the Commission for Communications Regulation (ComReg) yesterday.

The regulator said its finding that the two biggest mobile firms have "joint dominance" in the market should pave the way for cheaper mobile prices for Irish consumers within 12 months.

In the ruling, ComReg concludes that the Irish mobile phone market is not yet competitive and that O2 and Vodafone are "tacitly colluding" in the market through their pricing policies.

The ruling, if sanctioned by the European Commission, would force O2 and Vodafone to offer new entrants access to their networks from January 2005 to provide services to consumers.

This would enable the creation of so-called virtual network operators to enter the Irish market and compete against the three current mobile network operators, Vodafone, O2 and Meteor.

These operators would be able to lease mobile minutes from the network operators at cheaper prices than their standard retail prices to resell to consumers.

ComReg chairwoman Ms Isolde Goggin said a similar ruling in Denmark had resulted in price cuts of up to 25 per cent in a year.

She also rejected O2 and Vodafone's analysis that Irish people spend more on mobile services because they talk more. The price of calls for contract customers is still above the EU average, said Ms Goggin.

But she struck a note of caution due to the likelihood of legal challenges by the two companies.

"We expect there will be vociferous opposition from the major operators, but we cannot let that deter us from doing what we believe to be in the interests of competition and of Irish consumers," she added.

Vodafone and O2 both criticised the decision yesterday as looking backwards rather than forwards at an analysis of competition in mobile phone market.

"We refute the decision of joint dominance in the mobile market and we will be challenging it," said an O2 spokeswoman. "If a decision like this goes through then it makes operators question their investment decisions here. The type of innovative services that we provide in Ireland are not possible in highly regulated markets."

Both companies are likely to lobby the European Commission which must sanction the ComReg decision before it takes effect. They are also likely to take the regulator to court if they are forced to open their networks under commercial terms that they don't like.

However, the new ruling will be welcomed by Eircom, which has stated that it wants to become a virtual mobile operator. The firm has not been able to negotiate an acceptable deal with any of the mobile network operators.

Other firms that are likely to be interested in entering the Irish market as virtual operators are Tesco, Carphone Warehouse, Smart Telecom and Esat BT.