ComReg may refund Eircom for USO burden

20 Mar 2003

The Commission for Communications Regulation (ComReg) yesterday told an Oireachtas committee that it is investigating the option of refunding Eircom for some of its perceived €40m cost burden under its universal service obligation (USO) designation if the burden is considered unfair.

ComReg is also looking at sharing the obligations of a USO operator out amongst other telecom players.

As Ireland’s designated universal service provider, Eircom is obliged to provide the entire country with voice telephony services, regardless of location. It inherited this obligation from its previous existence as a State monopoly. A designated USO is expected to provide a telephone connection, phone book, directory query service and public payphones to every part of the country.

However, in a recent call for public consultation by ComReg on draft legislation on communications governing USO in light of an EU directive on communications, Eircom responded by saying it should no longer be the only company obliged to provide a universal service at a cost of €40m a year. ComReg initiated a consultation process in December inviting proposals on how best to implement the new EU directive, especially in relation to USO and Eircom was amongst a number of organisations that responded with proposals.

Eircom pointed out that it now only holds 38pc of the market for voice telephony, with mobile phone companies and other fixed-line providers holding the rest of the balance. Eircom said that this cost should be shared with the other providers or passed on to the individual customers. Critics have responded that people living in rural areas would be hit the hardest if the current situation were to change.

Addressing the Oireachtas Committee on Arts, Sport, Tourism, Community, Rural and Gaeltacht Affairs, ComReg commissioner John Doherty attempted to clarify the situation. He acknowledged that in particular remote rural areas, the cost of installing a new phone line, also capable of connecting to the internet, may not be “reasonable” when taking into account the standard installation charge of €129.99.

Doherty said that ComReg is currently investigating the responsibilities of a USO for providing basic services under a new USO framework, including a new quota system for providing payphones in light of falling demand for payphones due to increased use of mobile phones.

“ComReg has proposed that Eircom continues in its capacity as the universal service provider having regard to Eircom’s market share, the ubiquity of its network and its considerable experience in providing the directory and payphone services,” Doherty said. “The consultation did, however, include an invitation for other operators to put themselves forward to become Ireland’s designated universal service provider for all or part of the basic set of services.”
In its consultation submission, Eircom requested funding for covering the cost of its existing position as USO. Doherty said: “ComReg is currently reviewing whether the costs associated with the existing universal service obligation justify the activation of a funding mechanism. ComReg is awaiting further information from the incumbent USO operator prior to making a final determination.”

He continued: “ComReg also intends to shortly carry out a separate consultation on the matter of costing and financing of USOs in light of the provisions contained in the new framework. A universal service provider may receive compensation for the net cost of meeting the universal service obligations where on the basis of a net cost calculation, ComReg determines that the provider is subject to an unfair burden. If appropriate, compensation will be funded by a sharing mechanism administered by ComReg or an independent body.

Among the other proposals regarding the future role of a USO operator mentioned by Doherty was the issue of ensuring that telephone connections are capable of supporting internet access. In addition, it is proposed that the universal service provider would publish a statement setting out the factors that can reasonably affect the performance of its network and thus the data rate available to the end user.

“I must stress that once designated, the new universal service provider will be required to meet its obligations in light of the requirements specified by ComReg in relation to the provision of telephone access. There is no question of the abandonment of obligations. Regardless of which operator or operators are designated as the universal service provider(s) the obligation to provide universal service is a legislative requirement.

Doherty said that ComReg has received numerous responses from industry, interest groups and consumers on the USO framework and that she expects a decision to be made by ComReg in May 2003.

A spokesperson for Eircom said: “The subject is really only at an embryonic stage of discussion at this point.”

By John Kennedy