Eircom strategy: no price differential for broadband between urban and rural areas

13 Feb 2013

In the wake of a controversial regulatory decision to create a Larger Exchange Area (LEA) mechanism that will enable incumbent Eircom to offer lower-priced bundles in competitive areas, the telco has told Siliconrepublic.com that its long-term pricing strategy is to ensure no differentiation for high-speed broadband between urban and rural areas in Ireland.

Alternative licensed telcos fear in the move to next-generation access (NGA) where broadband access will be characterised by fibre-to-the-cabinet VDSL technologies, not only will they be faced with potential mass migration back to the incumbent but that the LEA could mean different prices across the 126 LEA-designated exchanges.

Some warn that if this happens rural broadband subscribers might end up paying higher prices than their urban counterparts.

In the past year, the telecoms market in Ireland has changed considerably and Eircom faces heightened competition in urban areas from cable broadband provider UPC, as well as Vodafone, Magnet and new arrival Sky.

The battle for the bundles is about to begin

Eircom now competes in competitive urban areas with operators offering triple play bundles consisting of phone, broadband and TV.

With the onset of 4G LTE services this spring and the arrival of the first wave of its new fibre-based VDSL next-generation broadband, Eircom intends to fight back with its own ‘quad play’ services that include TV and mobile services.

Much of the concern in the telecoms industry in recent weeks has centred on the complexity of the 126 LEA zones, where different margin tests will be applied.

Ireland’s telecoms regulator ComReg has assured Siliconrepublic.com that the margin tests will apply to wholesale products and services between Eircom and the various telcos and that line-rental prices won’t be affected as feared by farmers’ group IFA, which also operates its own telecoms company.

Last night, in response to queries from Siliconrepublic.com, Eircom said it will be consistent in its status as a universal services provider (USP) to maintain a uniform line-rental charge resulting in geographic averaged prices for the entire country.

Price benchmark

A spokesman explained the purpose of the USP is to ensure basic telephone services are available at an affordable price, irrespective of geographical location.

“Even in the absence of this, the choice of how to charge for retail telecoms services is a matter for all individual companies. All have the same wholesale input costs.

“Eircom’s long-term pricing strategy is to ensure no differentiation for high-speed broadband between urban and rural areas; by competitively pricing high-speed broadband in the initial rollout areas, ie, urban areas.

“It is setting a price benchmark that will apply when that service is extended to all areas under the Government’s National Broadband Scheme – EU guidelines require symmetry in prices between urban and rural areas,” the spokesman said.

Fiber vortex, via Groman123 on Flickr

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years