ComReg imposes new price cap on Eircom

4 Feb 2003

The Commission for Communications Regulation (ComReg) has imposed a new price cap on Eircom that prevents the national carrier from increasing its prices by more than the rate of inflation.

The cap is also being extended to calls from fixed line to mobile, with a view to putting downward pressure on these prices.

According to ComReg, since the current price cap of CPI (consumer price index) minus 8pc was introduced in early 2000, prices for services protected by the cap have fallen by over 20pc in real terms (by more than the rate of inflation), leaving customers with large gains relative to inflation.

The new cap of CPI minus 0, which comes into place today, is aimed to ensure that those real gains are maintained over the next three years. “By the end of that period in 2006, we expect nominal average prices to be at approximately the same level as they were in 2000,” ComReg said in a statement.

The price cap applies to where Eircom services are dominant. These include the provision of telephone exchange lines and ISDN lines, telephone exchange line and ISDN connection and take over, local dialled calls, trunk dialled calls, operator calls, payphone calls, lower quartile bills and fixed to mobile calls.

ComReg added that it believes that the relaxation of the cap from CPI-8 to CPI-0 will stimulate competition for alternative telcos offering price-capped services, “allowing Eircom’s competitors more opportunity to compete on price than they would have under a continuing CPI-8pc cap.”

During the period of the current price cap, Irish voice services fell to the European average. However, the three commissioners, Etain Doyle, John Doherty and Isolde Goggin, said that with the current competitive pressures on the industry it would not be possible to maintain so strong a downward pressure on the industry. They said that “the combination of this price cap coupled with cost-oriented wholesale prices and expected efficiency gains in Eircom, in particular, can ensure the cost base for Irish communications is comparable with those in other European countries.”

By John Kennedy