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...something that suits Eircom.
Dermot,
after the nasty Eircom/ComReg line rental price hike debacle, just in order to prepare you beforehand about a new "Ireland in first place" issue, so that you can already work out some answers to possible nasty questions from the media:
ComReg will shortly grant Eircom the highest price for LLU (Local Loop Unbundling) in Europe, further stifling any possible competition on that front.
This is particularly awkward, as Ireland would urgently need low LLU prices, as we do not have, like most of the other EU countries, a competing infrastructure like cable. Frankly our LLU has been a total flop so far, with only 1400 lines unbundled – and no improvement can be expected with the new high price I will agree to this April.
In my Interview with John Kennedy of the Independent I have already prepared the way for the April announcement. So far non of the Irish media has taken up the subject, so I am confident, this issue will be over the heads of Joe Duffy and Joe public. Here's how I put our rubber-stamping of the new price hike delicately into words:
"The last time we went to court it was €14.67 we were looking for. We will be working up from the price we want and something that suits Eircom. We want to introduce a reasonable valuation. We originally went to court for €14.67, I don’t think we will be very far away from that figure in April when we go back again."
resources
1. Graph of comparative LLU pricing in Europe - and what Eircom demanded (From our own ComReg0355.pdf document from May 2003):
2. Graph of comparative LLU pricing in Europe - and what they currently get (From our own ComReg0355.pdf document from May 2003):
3. Article about LLU pricing, already predicting its flop in 2001 (from investormedia):
New Yankee Group Report Cautions that Benefits of Local Loop Unbundling are Limited
LONDON, July 18, 2001 — The process of local loop unbundling (LLU) is stifling the development of competition in Europe’s broadband markets, rather than bringing about cheaper and faster Internet access for end users, as originally intended. According to a new Yankee Group Report, "Europe’s Unbundled Local Loop: Chasing a Rainbow," alternative operators’ entry into the market for high-speed Internet services via DSL is being hampered by the long-winded regulatory procedures associated with local loop unbundling. They are also being deterred from their plans to gain access to the last mile by the prohibitive costs of loop rental and collocation facilities required to install their DSL equipment at the incumbents’ central offices. Meanwhile, many incumbents are stealing a lead by aggressively rolling out their commercial ADSL offerings as their would-be competitors struggle through negotiations over prices and the tangle of red tape surrounding the allocation of collocation facilities.
"LLU does not adequately support alternative operators entering the market for broadband services, because of cumbersome regulatory processes and the entrenched dominance of the incumbents," says Jonathan Doran, senior analyst with the Yankee Group’s Convergent Communications Europe Planning Service and author of the Report. Doran also makes the following key observations:
• Alternative operators seeking unbundled access face significant cost hurdles and delays to market entry.
• Incumbents will benefit from LLU as its initial processes implementation slows down the entry of effective competition.
• In the short to medium term, consumers will also benefit from LLU as it drives down broadband access prices. However, these benefits will not last if LLU has the overall effect of deterring newcomers from offering competitive broadband access.
Doran advises new entrants to think twice before pursuing full unbundled access, suggesting they consider less costly possibilities such as resale of the incumbents’ wholesale service as well as the emerging options of line sharing and sub-loop unbundling. However, wholesale remains expensive in most markets where it is available. Doran warns that, although the wholesale/resale model provides an interim strategy for gaining market share while LLU finds its feet, its current form ultimately benefits the telcos more than the alternates.
4. My full Interview (from silicon repulic):
11.02.2004 - “What we do is always too far ahead and too quick for Eircom and always not far enough and not quick enough for the other licensed operators (OLOs),” the newly appointed chairman of the Commission on Communications Regulation (ComReg) John Doherty (pictured) says resignedly.
He later adds: “ComReg has come in for criticism throughout its whole life. The key thing for us is that we have a job to do and we’ll keep doing it. The best advantage for Irish businesses consumers is a competitive sector where people can get products at prices they want.”
In a nutshell, Doherty is saying that neither he nor his predecessor in the five-year-old job, Etain Doyle, nor any future regulators can expect plaudits for the job they do. The fact that ComReg’s former chair Doyle is highly respected in the nascent European regulatory community in guiding the Irish communications sector from a point a decade ago, where incumbent operator Eircom had a 100pc grasp on the Irish market to a point where today it has 47pc, is lost on the Irish marketplace where slick public relation machines kick into action whenever simpering telcos get a bee in their bonnets. “It goes with the territory,” former IDA man Doherty says simply.
In recent weeks ComReg has come under heavy criticism for vetoing Eircom’s recent line rental price hike, despite efforts by Doherty to explain that Eircom’s price rise followed three consultations in the marketplace and was part of the incumbent’s effort to rebalance its books as the Irish telecoms market continues on its path to deregulation.
Following a savaging at a recent Oireachtas committee on the subject, where ComReg was likened to a poodle defending the Irish consumer against an Eircom that was described as a business rottweiler, the Minister for Communications, Marine and Natural Resources, Dermot Ahern TD, ordered ComReg to introduce a wholesale line rental product by 31 March. “If this product is not in place by 31 March 2004 and if it is not delivering verifiable competition and lower prices by 30 June 2004 I will direct ComReg to take line rental out of the present price cap and set a specific rental cap no greater than consumer price index,” Ahern said.
But Doherty says he is already on target. The only concerns he has on the subject is the fact that he believes OLOs need to start testing their systems and services and have technical support in place. “We have been working on a wholesale line rental product for the past 12 months, probably the most difficult product we have ever worked on. There is no real precedent on which we can draw. Denmark is the only country in the world that has a line rental product. We have added considerable features to the Danish product; we have both analogue and digital as part of our product.
“The original context of this is we originally were looking at the whole issue of carrier pre-select and competition. A year ago there was fracas over customer win-back strategies. Pre-dating that we were looking at what do customers actually want, what were the key drivers and issues in the marketplace. Two things became very clear, billing and line rental. If the OLOs wanted to retain customers and have enhanced customer relationships, billing and line rental were key. When we did some market analysis, 40pc of people said that they wouldn’t move to a new provider because of two bills.
“To make it work, Eircom have to provide a certain amount of data, the OLO has to be able to interpret the data and produce the bills to go with that. The OLO has to then purchase the line rental element from Eircom as a wholesale product and sell on as a retail product. It is very IT-driven, legal and complex. There are issues of names on the national database that have serious issues around data protection. When you phone up for voicemail at the moment, you get an Eircom voice message. There is also the issue of fault repair. Now it is no longer an Eircom line but an Esat BT or MCI line. Customers will want to know if someone will fix the line if there is something wrong with it,” Doherty explains.
But will the other telcos be ready? Doherty is not sure. “The challenge now is that the OLOs do the granularity of testing, not just testing one or two customers, but 300 or 400 of them at a time and we need to test all the varieties and the systems and make sure all the IT support and so on are robust,” he says.
Next on the horizon for ComReg will be the contentious issue of wholesale line rental and local loop unbundling. So far only some 1,400 local loop circuits have been unbundled. Doherty’s predecessor Doyle ended up in a long drawn-out High Court battle with the incumbent over her recommendation of €14.67 over Eircom’s €24. The battle resulted in a court settlement that will result in ComReg recommending a new price this April. Whether or not Eircom will go with a new price recommendation from ComReg in April is anybody’s guess.
Doherty concludes: “In Ireland the competition is predominantly service-based rather than infrastructure-based, unlike other countries where there are competing infrastructures such as cable. The last time we went to court it was €14.67 we were looking for. We will be working up from the price we want and something that suits Eircom. We want to introduce a reasonable valuation. We originally went to court for €14.67, I don’t think we will be very far away from that figure in April when we go back again.”
By John Kennedy
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