Ireland orders line rental competition
Public outcry against Eircom rate hike
Ireland is to introduce competition to the line rental market by March, following the public outcry against Eircom's latest rate hike.
Dermot Ahern, the minister for communications, marine and natural resources has instructed the communications regulator (ComReg) to introduce a wholesale line rental product for voice and data services. In a strongly-worded address to the Joint Oireachtas Committee on Communications, Minister Ahern said that he will insist that the difference between the wholesale line rental price and the retail line rental price be wide enough to encourage competition in the market.
Introducing line rental competition would mean that carrier pre-select customers, who currently get one bill from their CPS operator for their call costs and another from Eircom for their line rental, would instead get just one bill per month. But the most important development would be the likely fall in line rental prices, since it would then be in Eircom's interest to keep line rental costs low.
"If the product is not in place by the end of March and if it is not delivering verifiable competition and lower prices by the end of June, I will direct ComReg to take line rental out of the present price CAP, and to set a specific rental cap no greater than the consumer price index," Minister Ahern said in a statement.
The move comes only weeks after ComReg approved a line rental increase for Eircom, which caused controversy among other operators and among the public. The latest increase from Eircom for line rental -- a jump of €1.68 a month, bringing the monthly rate to almost €24 -- is the third such price rise in a year.
"The public are angry because the price increase is well ahead of the general rate of inflation," said Ahern. "Secondly, it has been levied on that part of the telephone service where customers have no choice -- Eircom is the sole operator. At the same time prices are falling in those parts of the market where the company faces competition."
The minister also said that the fact that Eircom shareholders took a &eurol500 million dividend from the company during the summer of 2003 indicated that the company was looking after the interests of the shareholder, rather than the interests of the consumers.
"I believe that the interests of Irish consumers are not served by leaving them at the mercy of private shareholders, including those representing employees, whose interests are the corporate bottom line, even if this means higher costs for consumers and slower roll-out of advanced services," the Minister said.
On January 28, Standard & Poor's Ratings Services added Valentia Telecommunications, which owns Eircom, on CreditWatch. This has negative implications for the company's credit rating. The rating action follows Valentia's request that the group be permitted to pay dividends in the event of an IPO. Standard & Poor's said that it considered this to be an aggressive financial policy at the company's current BBB debt rating, given the moderate free cash flow expectations for Valentia in future years and the group's high level of debt.
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