EU backs ComReg proposal to cut Eircom broadband charges

2 Oct 2009

UPDATE: The European Commission today endorsed ComReg’s proposal to lower the prices charged by incumbent operator Eircom for allowing competitors for granting access to its network.

During the summer, ComReg moved to reduce the cost of line share for alternative local loop unbundling (LLU) operators from €8.41 to €0.77 – a move that was roundly applauded by LLU players BT and Magnet.

However, for the third time, Eircom in recent weeks lodged an appeal with the High Court against ComReg’s decision to cut the LLU line-share cost. A hearing is due to take place next week.

Today, the EU ruled that from now on Eircom will no longer charge competitors that use its lines for costs on lines they do not use. The proposed measures it says complement previous important steps towards facilitating investment in infrastructure and enhancing competition on the Irish broadband market.

“I am right behind ComReg’s cost-oriented prices. In the short term, they will result in better prices for consumers, and boost competition in the long term so that consumers also benefit from a wider range of services,” said EU Telecoms Commissioner Viviane Reding.

“ComReg is doing good service to competition in Ireland’s high-speed broadband internet by promoting direct investment in infrastructure: investment that is crucial not only for Irish people to enjoy affordable and state-of-the-art access to the latest internet applications and services, but also for the Irish economy to remain competitive.”

ComReg wants Eircom to significantly reduce its current Full Unbundling Rental Price – a fee paid by an alternative operator for access to the last mile of Eircom’s phone or internet lines.

This process – known as local loop unbundling (LLU) allows other operators to use Eircom’s lines to provide broadband internet services to their own customers’ homes or businesses. This price reduction would prevent Eircom charging other operators for costs they would actually not incur in areas where lines are not accessed by other operators due to limited economic viability.

Although ComReg believes those areas should not be taken into account when setting the rental price operators pay to use Eircom’s lines, it nevertheless takes a small part of those lines into consideration when calculating prices in order to rule out under-pricing.

ComReg’s new approach to setting the wholesale costs operators charge for use of their lines (the costing model) would reduce prices in 2009-2012 to €12.24 per line per month for LLU and €10.38 per line per month for sub-loop-unbundling (SLU – a partial local loop connecting to the subscriber). Under the previous model, based on the cost of all lines, irrespective of whether they are unbundled or not, this would have cost €17.89 for LLU and €15.63 for SLU for the same period.

These price cuts build on earlier moves in June 2009 by ComReg, which lowered the prices charged by Eircom for granting competitors access to its broadband network and for migrating customers between different wholesale broadband products.

EU Competition commissioner Neelie Kroes said: “ComReg’s proposal is good news for competitors and consumers. Due to the proposed regulatory measure, alternative operators will pay less for access to Eircom’s network, so they will be able to provide more attractive retail offers. As a result, competition will increase and consumers will have greater choice and better prices.”

The news of the European Commission’s support for ComReg was welcomed by BT. “Broadband growth in Ireland has been slow,” a spokeswoman said.

“Facilitating competition via local loop unbundling (LLU) will not only immediately benefit consumers and businesses from innovative broadband services, lower prices and greater choice, it will also lead to the accelerated deployment of Next Generation Network (NGN) broadband services. This has proven to be the case in countries such as Germany, France and the UK, where competition from LLU has triggered the advancement of their NGN strategies.

“Given the barriers that exist in Ireland for an open and competitive broadband market, it is reassuring that two very respected European Commissioners are adding their support to ComReg in its efforts to open competition in the Irish market,” the BT spokeswoman said.

By John Kennedy

Photo: EU Telecoms Commissioner Viviane Reding.

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