Broadband prices must fall to below €30 a month

20 Oct 2003

The price of broadband internet access in Ireland will have to fall from the current monthly fee of €47.50 to less than €30 per month, according to a leaked Government memo that is highly critical of Eircom.

According to reports at the weekend, a memo written by an adviser to the Minister for Communications, Marine and Natural Resources Dermot Ahern TD claimed that Eircom is holding up the rollout of Ireland’s broadband network and that the price of broadband internet access at currently €47.50 a month, must fall to below €30 a month.

According to a report in the Sunday Times, Minister Ahern is understood to be preparing to issue a directive to the Commission for Communications Regulation (ComReg) ordering the regulator to review Eircom’s charging regime. Ahern is also understood to be planning to bring forward a Government review of Eircom’s pricing due next year to an earlier date.

The leaked document is understood to question Eircom’s commitment to broadband rollout, blaming its tendency to stick to high pricing as “the primary impediment to broadband rollout in Ireland”.

The memo recommends more hardline tactics by the Government in forcing the incumbent telecoms company to move on the issue, in particular enabling competitive players to gain better access to residential landlines owned and operated by Eircom.

The appearance of the leaked memo strikes a similar tone to that of an increasingly combative Minister Ahern, who in recent weeks has been on the warpath against mobile telecommunications firms overcharging border-based communities and business people for roaming rates. It seems clear that the long brewing spat over Eircom’s pricing rates will be next on the Minister’s agenda.

Eircom has defended its pricing regime, claiming that it has kept price increases to phone users to 2pc below the price of inflation, even though a limit equal to rate of increase of inflation currently exists.

The reports of the leaked memo follow a year or more of wrangling between ComReg and Eircom over its access charges to competing telcos.

Last Thursday, Eircom came under fire from the Alternative Licensed Telcos Organisation (ALTO) over the introduction of its new partial private circuits (PPC) service, a wholesale leased-line broadband service for alternative licensed telcos. ALTO claims that the service has resulted in actual increases in the cost of providing broadband, with price increases of up to 50pc in some cases. PPC is a wholesale service from Eircom that are similar to leased lines and which should allow other operators to provide nationwide broadband services to businesses at a significantly improved price.

Eircom currently supplies 21,000 leased lines directly round the country with a further 9,000 leased lines supplied by other operators on Eircom’s network. This business is worth about €125m to Eircom each year.

The introduction of PPCs was first proposed by ComReg in July 2001 as a key enabler of broadband competition and a launch deadline was set for last December. However, nine months later Eircom has introduced a service that ALTO claims actually increases wholesale prices to operators.

PPCs have been introduced throughout the EU and have led to significant savings in the cost of broadband services. For example in the UK operators have seen reductions of 40pc. Consumers there, ALTO says, have benefited directly from these reductions.

Iarla Flynn, chairman of ALTO, says: “Similar reductions could be expected in the Irish market with the introduction of a realistic service. However, what has been offered to operators completely fails to meet market requirements. The prices for the service, which were only released by Eircom to operators in recent weeks, show significant increases in many cases and only marginal savings in others. How can any company be expected to make use of this service when it will actually increase their costs of doing business?”

By John Kennedy