Local loop price proposal gets lukewarm welcome

1 Sep 2004

IrelandOffline, the broadband lobby group, has expressed its disappointment at the draft decision by the telecoms regulator to set the local loop unbundling (LLU) price at €14.65 per month, calling it “the highest in Europe”. Meanwhile the industry association for alternative telecoms firms (ALTO) welcomed the fact that the new price is reduced from the previous level but said that other related issues must also be addressed.

ALTO chairman Iarla Flynn recognised the regulator’s efforts to get to this point, as the current LLU price of €16.81 had remained static since 2001. The new lower price, likely to be approved following a consultation period, would come into effect on 1 December.

This should result in lower broadband prices for consumers and it will also allow operators to offer a wider range of services to customers. Unlike bitstream access where Eircom provides the entire service and sells it to other telcos, LLU involves operators installing their own equipment in telephone exchanges. It requires greater investment from telcos but it also gives them a closer relationship to their customers. The growth to date in the broadband market has overwhelmingly come from the bitstream service rather than LLU, said ALTO.

In a statement, IrelandOffline claimed that the proposed price would still “sell-out” the competition in the Irish market and the pressure group urged the Communications Minister to intervene to reduce the price further.

IrelandOffline chairman Adam Beecher said: “The Minister’s previous directives brought Ireland into line with the rest of Europe and the flat rate directive enabled Ireland to finally avail of affordable dial-up internet access. With another groundbreaking directive the Minister could bring about the next phase of competition in the sector. The Minister’s response could be a significant step in defining Ireland’s broadband advancement on a world stage.”

The lobby group compared the Irish situation to elsewhere, noting that other countries had reduced LLU pricing by as much as 70pc, such as BT in the UK. Wholesale prices to other telecoms operators are continually falling, the group added. “ComReg has decided to lock in this rate until 2007, but is allowing Eircom to increase the price by no more than the rate of consumer inflation by reference to the consumer price index (‘CPI’) in each year.”

ALTO has also come out against this element of the proposal. “In a sense, it’s against the trend for telecoms charges. We’re puzzled at that. If anything, these kinds of prices should be coming down,” said Flynn. He pointed out that economies of scale should mean that the addition of more customers should make it viable for operators to offer a cheaper service.

Eircom had cited the ongoing costs of running a national network as a reason to include a built-in price rise, but Flynn argued that improvements in networking systems should also make it possible to maintain telecoms infrastructure cost-effectively.

In addition, ALTO has questioned other elements of the regulator’s discussion paper, such as a planned incremental price rise to 2007 as well as the cumbersome process involved in activating customers on an alternative operator’s service. “We think there’s a need for a streamlined service ordering facility. ComReg needs to address that issue before local loop unbundling can take off,” Flynn told siliconrepublic.com.

By Gordon Smith