10pc single billing margin not enough, warns Esat BT

19 Oct 2004

Ireland’s second largest fixed line telco Esat BT has warned that the present 10pc margin allowed to telcos engaged in single billing is insufficient when you factor in costs of acquiring and billing customers and has pressed for the margin to be boosted to 25pc, siliconrepublic.com has learned.

Esat BT yesterday launched single billing services covering Ireland’s 1.6 million both business and consumer lines, ending an era of dual billing by other licensed telcos (OLOs) and the incumbent, Eircom. Esat BT has battled for over two years to make single billing a reality.

The rationale and advantage for OLOs is that there is less likelihood of customer churn as customers can see for themselves the savings they make on calls as well as preventing Eircom to target customers with marketing literature in their line rental bills, thus making customer acquisition costs more equitable.

Under existing wholesale rules, however, OLOs are only entitled to a 10pc margin off the cost of a €24.18 line rental charge. Under this arrangement they pay €21.76 for the line, leaving a profit margin of €2.42.

Esat BT product director Peter Evans warned that once the costs of sales, marketing, billing and other details such as bad debt are factored in OLOs are left with little or no profit and would have to focus on increased earnings from calls to ensure a profit.

“Ourselves and other providers cannot offer real savings on the present line rental situation. In future, the Commission for Communications Regulation (ComReg) is pushing to increase the margin to 25pc and we would obviously be backing this as it would enable us to offer substantial retail savings. It will be 2005 at the earliest before ComReg successfully manage to move the margin to 25pc,” Evans said.

“Having to pay a separate line rental bill to Eircom stopped many consumers from shopping around for better call rates,’ commented Bill Murphy, CEO of Esat BT. ‘We are delighted to offer consumers a real choice. They can now benefit from our guaranteed lower call rates without the hassle of two bills.”

In a directive earlier this year by the Minister for Communications, Eircom was forced to allow competitors to give consumers call and line rental costs on one convenient bill. Penalised for choosing an alternative provider, consumers continued to receive a separate line rental bill from Eircom. As a result, many had stayed with the former state company despite their high call charges.

“Under Eircom’s stranglehold, the cost of line rental to Irish households has risen over 24pc in the past 18 months to be amongst the highest in Europe,” Murphy added. “Esat BT will continue to push for this to be lowered so that consumers can enjoy the real benefits of a liberalised phone market.”

A spokesperson for Esat BT argued: “If the line rental was cheaper we could offer cheaper services. At present Eircom wins either way. ComReg have a long way to go to widen the margin.”

It is understood that as a result of single billing, Esat BT is preparing a strong set of bundled packages that include mobile, wireless, DSL and voice-over IP (VoIP) services. One bundled package that siliconrepublic.com understands is being readied for a pre-Christmas rollout includes all-you-can-eat phone calls, VoIP, DSL broadband and line rental for less than €70 per month.

By John Kennedy