Smart debacle impacts on telecom competition

6 Feb 2007

The controversial decision by Eircom to pull the plug on Smart Telecoms’ 45,000 fixed-line customers last October has left Irish consumers and businesses cautious about switching and more likely to remain with the incumbent, two independent surveys commissioned by ComReg have revealed.

A survey of six residential user groups by research firm Amarach found that the Smart experience left non-switchers and some switchers with a jaundiced experience of switching landline suppliers. “What’s the point in switching if something like this can happen,” said one respondent.

A second survey of eight business focus groups around the country by Millward Brown found that businesses and consumers who were considering leaving Eircom are less likely to consider a switch any time soon.

The Millward Brown report went on to say that the Smart debacle exposed Eircom as having what might be perceived as an unfair level of control over the fixed line market and it is likely to bring about increased pressure for local loop unbundling (LLU).

The Amarach study revealed that there is a growing emphasis on mobile only households in Ireland with nearly nine mobile users for every seven fixed line users in the country.

Key reasons for this were a perceived lack of a need for a fixed line and a desire to avoid more bills.

Most people who keep landlines do so because of internet access. Most mobile only consumers also use the internet but at work. And while there is some interest amongst mobile users in eventually getting the internet at home, they are inclined to wait and see what newer 3G handsets and services will offer before going down the fixed route.

One major complaint consumers have about the telecoms industry, according to Amarach is cold calling from existing or competing fixed line service providers soliciting users to switch to new services. Many found this intrusive and even inclined some to switch just to avoid the calls.

The Amarach study found that some users switched back to Eircom in the last 12 months because they were offered better deals than they were getting from Eircom before they left.

Amarach also found considerable interest amongst consumers in bundled phone, internet and TV packages, the chief motivation being the one bill. However, there is no one in the market providing such services as of yet.

The Millward Brown study found that many businesses felt that ICT costs had fallen in Ireland over the last few years, especially amongst those who had upgraded to broadband from ISDN or dial-up. It was also acknowledged that many fixed line call costs have come down. But despite this, the general feeling of being taken advantage of prevails.

Few businesses are interested in operating without a landline phone because a landline is seen as adding credibility, rather than being seen as a “fly by night.”

Some businesses claimed to be more reliant on their mobile phone but nevertheless felt that they would need to retain a landline as a main contact point.

While some did spontaneously mention voice over IP (VoIP) as a viable alternative, most businesses have a limited understanding of VoIP or its potential in a business environment.

Switching experiences amongst businesses, the Millward Brown study says, have been mixed. While some are happy with their new provider and are recording savings, other have run into quality problems and poor customer service. Others were hassled by getting multiple bills.

The study said there was evidence of switching back, whereby companies that had moved from Eircom were lured back only a few months later by a direct offer from Eircom that closely matched the competitor’s offering.

The Millward Brown survey found that many companies have the few that their fixed line costs are so high that they are reluctant to switch for a saving of 10-15pc with a company they are unfamiliar with.

The survey found that some businesses are cautious about switching to less well-known established providers. This feeling became more pronounced following Smart’s withdrawal from the fixed voice market.

By John Kennedy