ALTO seeks Eircom break-up
Old idea, new impetus
The association representing alternative operators in the Irish communications market has called for the separation of Eircom's retail and wholesale divisions.
In spite of various actions taken by the communications regulator ComReg, Tom Hickey, the newly-elected chairman of ALTO, the association representing alternative operators in the communications market, has said that regulation has failed to create a competitive market. Hickey made these comments in a document that ALTO has submitted to ComReg outlining Eircom's continuing dominance in what it believes to be several critical markets.
New and radical action is needed to turn the market around, according to Hickey, who said: "These solutions must include the division of Eircom's retail and wholesale divisions into units that are operationally, functionally and legally separate."
Splitting Eircom into separate retail and wholesale divisions is not a new idea; ComReg itself mooted the idea in a forward-looking statement in April saying it believed that such a move could remove "any incentive for [Eircom] to discriminate in favour of its own downstream arm", which in turn could lead to an increase in equality of access, encourage competition in more advanced broadband access and prevent any leverage of market power from one area to another.
Hickey believes that increasing competition is the only way that Ireland will be able to catch up with other developed countries in the telecoms sector. "ComReg has been using the tools available to it", said Hickey. "However, Eircom has retained its dominance and has been able to frustrate the efforts of competitors."
ALTO believes that Eircom has a stranglehold over 87 per cent of the domestic calls market, 99 per cent of the lower level access market, 80 per cent of the wholesale market for call termination and 100 per cent of the market for copper local loops.
"This level of market dominance is not just bad for the telecommunications market it is bad for the economy," said Hickey. "Competitive modern telecoms is a key factor for inward investors."
The broadband market has been cited by Hickey as an example of how a lack of competition can negatively affect a market segment. The latest OECD survey showed that Ireland ranked 24th out of 27 OECD countries for broadband penetration with just 34 connections per 1,000 users.
"All of the major regulator-mandated products provided by Eircom to date have experienced difficulties. The latest example of this is local loop unbundling (LLU), where Eircom and ComReg are currently engaged in a High Court review as a result of a request by new operators to have certain products and facilities provided in a coordinated manner," said Hickey. "This has led to several months delay already."
In assessing the situation Hickey concludes that separating Eircom into two entities is the only suitable solution to increase competition in the Irish telecoms market. "This is the only way that Eircom can be incentivised to treat all users of its products and infrastructure equally," said Hickey. "This would mean that it would be in the wholesale business's interests to offer access to as many retail operators as possible and to invest in its network infrastructure to enhance the products available to them."
While the co-operation of Eircom would be preferable on this issue, Hickey believes that the State should examine the option of forcing Eircom to separate. In its forward-looking statement ComReg commented that while it did not have the power to force separation this could be achieved under section 14 (7) of the Competition Act 2002.