Ministerial intervention needed ‘now’ on local loop

9 Nov 2004

Communications Minister Noel Dempsey TD has been called on to immediately intervene in response to the decision by the Commission for Communications Regulation (ComReg) to fix the cost of local-loop unbundling (LLU) at €14.65 a month until 2008.

Lobby group Ireland Offline told that the excessive costs Eircom charges operators for not only unbundling the loop but actually accessing a local exchange are preventing the onset of broadband competition in Ireland.

Last week, ComReg set the monthly rental price payable by operators to Eircom at €14.65 a month for accessing the local loop, a charge otherwise known as unbundled local metallic path (ULMP).

IrelandOffline spokesman Damien Mulley told this afternoon that there are some 1,000 exchanges in this country. Out of this, however, only 40 have actually been unbundled by alternative operators to Eircom for broadband. “For example, there are some 1.7 million phone lines in Ireland, of these Esat BT has only managed to unbundled 2,500 phone lines. And it is only able to do so when it can obtain a grant under the National Development Plan.”

Mulley drew attention to claims by operators that the cost of unbundling a single exchange is €100k when you factor in technical and legal costs. “On top of the €14.65 per line, there is a 50-step process with a charge at nearly every step in order to unbundle a local exchange and offer a customer broadband. For example, for an engineer to actually view the local exchange it is €600 per visit. To go in and measure the exchange for installing equipment it costs €6,000 before an engineer unwinds his measuring tape.”

Mulley gave the example of Denmark, which had the same broadband problems as Ireland in terms of the non-existence of cable competition. “That country now has the lowest LLU prices in Europe. Ireland has the second highest LLU prices in Europe after Luxembourg and we are the second last in Europe for broadband penetration.”

Describing ComReg’s awarding of a €14.65 price to Eircom as “an abject failure” Mulley said: “A ministerial directive in the morning could change the price and energise the market.”

Earlier this afternoon, Mulley’s organisation IrelandOffline said that LLU is key to creating and sustaining true competition in the telecoms sector. It said that while most European and OECD countries have progressed by lowering prices significantly and reforming the overall process to the benefit of new telco entrants, “Eircom have bitterly contested any change to the byzantine LLU procedures that could simplify or cheapen the process of other telcos releasing true broadband products.”

Mulley said: “A simple and affordable LLU process is long overdue in this country. The Information Society Commission recognised the need for a reality-based LLU charge, the Oireachtas committee on broadband recognised it, the other telcos need it, but ComReg have now effectively condemned LLU to obscurity.”

IrelandOffline committee member, John Timmons, stated: “The fact that ComReg have been quoted as saying that the new price is going to energise the market is fantasy. It is in reality nothing but detrimental to an already weakened market. The regulator needs to genuinely facilitate competition and is performing a major disservice to broadband rollout in Ireland with their spin. The facts are obvious: Ireland is two years behind almost every other country with regards to broadband rollout. Guaranteeing the second highest LLU rental price until 2008 is not how the market becomes more competitive.”

Timmons also noted the upcoming review of ancillary charges by ComReg: “ComReg is currently reviewing the charges for a bewildering array of services related to the LLU process. Currently, there are more than 50 separate charges that a telco must pay before they enable one single exchange. It is IrelandOffline’s expectation that these charges and services will be drastically simplified and reduced in price, to make up for the inadequate ULMP pricing that will be in use.”

The lobby group added that failure to introduce an effective LLU framework represents a major disappointment by ComReg in respect of its core objectives to the detriment of both business users and consumers. It concluded by calling on the Communications Minister to “urgently review this abject failure and to use his prerogative of intervention to drive this essential and overdue change”.

However, a spokesman for ComReg corrected many of IrelandOffline’s assertions, indicating that a site visit by a licensed operator to an Eircom exchange is in fact €60, not €600, and that there are actually half a dozen steps to unbundling rather than the 50 steps suggested by the lobby group.

In terms of ministerial intervention, the spokesman said: “Ireland is a regulated market and responsibility for regulation has been delegated to ComReg. It would conflict with EU law and national law for the minister to issue a directive on this issue.”

Defending ComReg’s price agreement, the spokesman said: “The €14.65 price is less than the €16.81 Eircom previously charged and considerably less than the €21 price Eircom initially wanted to charge.

“Groups like IrelandOffline need to remember that we have to build a model that takes into account everybody and also ensure that the incumbent can make a return. In terms of broadband, there are unique factors about the Irish market such as the fact that it has a low population density. Some 42pc of the population live in rural areas, compared with the UK where less than 10pc of the population lives in rural areas.”

By John Kennedy