Part one: Farewell, Dermot, the Minister for Communications who had a lot of good intentions.

Dermot,

you know and I know that our upcoming decision to fix the price for Local Loop Unbundling at € 14.65, the second highest in Europe, will dash all hopes for Ireland to catch up with the European broadband development and cement Eircom's detrimental monopoly status for years to come.
Just want to warn you about a letter, which I got hold of. I understand it will be sent to you, the Irish Media and all the TDs and political parties.
While you'll be comfortably sitting in a new department by then, I'll have to stick it out.


Best wishes and more luck with your new portfolio.

John

Here's that letter:

(Also available in pdf format, 1.2 Mb file)

In March 2004 you gave clear instructions to John Doherty’s Office of Communications Regulation (ComReg) to bring Ireland at least to the EU-15 Broadband average by mid 2005.
John Doherty acts in contempt of your policy directive.
Soon he is about to take a devastating decision, condemning Ireland to the bottom of the EU-15 for the foreseeable future. I'll explain later.

As an English speaking, young and educated northerly country we should be at the top of the Broadband league of EU countries, yet we are at the bottom. We are three years behind. It is a catastrophe.

Dermot Ahern on RTE, 17. Sept 2004
"One of the biggest problems that we have in this country as opposed to any other country, particularly America and a lot of the successful countries in this regard is that the cable companies were not in a position to invest in their infrastructure".

Again and again you try to explain our failure with Broadband to be caused by the absence of cable competition to Eircom.
This is not true. It is the sad excuse of a failed Regulator.

Two of the leading Broadband countries, Japan and Denmark, are at the top, despite, or even because they had no cable competition.
They had ministers and regulators with brain and guts, which were not mere ass-wipes of their mighty incumbent Telecoms.
There is no secret to the Danish (or Japanese) success: With no cable competition, the incumbent would not invest in dsl Broadband. The Regulator created competition; he enabled other operators to access the copper from the telephone exchange to the end-user (the so-called local loop or last mile) at a price that made it worthwhile.
When the lazy incumbent had lost over 40% of his business he had to fight back with low prices. The Danish incumbent Telco has since regained over 75% of market share – and Denmark has become the EU leader with Broadband development. Denmark now boasts 13 Broadband subscribers per 100 inhabitants. Ireland has 2. The EU-15 average was 6 in 2003 and will be 8 by the end of this year.
In Denmark 100% of households can get Broadband, in Ireland it is less than 50%, in some Counties less then 30%. The EU-15 average availability is reaching 90%. Northern Ireland will have 100% availability by end of next year.

The National Competitive Council on "Broadband Infrastructure Deployment: Increasing private sector competition among telecoms companies is, ultimately, the most important tool available to Government to accelerate the roll-out of broadband."
Your Regulator failed spectacularly to free the "last mile" for competition with his Local Loop Unbundling attempts. You may say that some other countries did not achieve that either, but remember: it did not matter much for those countries that had cable competition. But it mattered and still matters for us to the highest degree. Your beloved MAN fibre rings are castrates without LLU.

Dermot, if we are to have any chance of catching up, you have to prevent Comreg setting the second highest European LLU prices for Ireland and cement them for the next years, as Comreg proposes to do.
Additionally you have to make Comreg remove the entry blocks to unbundling that exist in the form of obscene ancillary pricing for access to Eircom exchanges.

While the UK’s OFCOM is just introducing a 70% price cut, Comreg has arrived at a "new" LLU price of €14.65 per month.
The awe inspiring mathematical calculation is a decoy and the exactness to the last cent is a delusional myth. The real basis for the new price, explicitly expressed by Comreg, is laughable nonsense: Comreg thinks low prices would "fail to provide sufficient incentive for continued investment in the network." Comreg wants "to encourage continued investment in the network" by fixing high prices for Eircom. (Quotes from Comreg doc 4/90)
The opposite is the case as the Danish example proves:
Low LLU prices encourage competition, force the incumbent to invest and bring success to the country.
High LLU prices make for a lazy incumbent whose owners prefer to extract the profit, rather then invest.

Eircom and Comreg are tightening the noose around the Irish telephone customer's neck – main Westport to Murrisk line. The nation's line rental money is squandered.

The pointy haired "experts" of Comreg, who still proclaim "lack of consumer interest has held back Ireland’s broadband market" should get sent off to the flat-earth society. On Feb 11 this year John Doherty said about LLU pricing: "We will be working up from the price we want and something that suits Eircom." In the end Doherty did not up the price, but € 14.65 for LLU, already welcomed by Eircom, is a disaster for Ireland. While the Comreg specialists show some impressive algebraic wanking while staring at the price of the footrests of every telephone pole in the country, they completely fail to figure into their mathematical equations the colossal unfair competitive advantage our incumbent has gained by blocking LLU to happen since years. To simply "forget" the colossal competitive advantage the incumbent gained from the timing component in the calculation of the new ULMP pricing is unforgivable.



Read part two of the letter about Broadband availability.

Annex: The other idiotic decision of our Communications Regulator



The other detrimental decision of John Doherty – to allow Eircom to charge the highest line rental in Europe – wants also to be rectified. It is based on the same delusional assumption that bestowing the incumbent with plenty of money is a good thing.
Having such a high line rental negatively affects competition in the market:
In February 2004 Irish Telephony prices for national calls, based on the OECD measuring method, which takes line rental costs into consideration, were still below the EU-15 average; within a few months we have fallen back and are now dearer than the EU.


The long blue fixed line component in the Irish column says it all: Eircom cross-finances from the fixed line income, where it faces no competition. This anti-competitive behaviour negatively affects the market. Since February Ireland has fallen from place 4 to place 8, and is now above the EU-15 average in this price basket.

As the OECD only compares the incumbents’ pricing, the reality is much starker: in most EU countries the consumer can avail of much cheaper rates from other operators. In Ireland this is only partially the case, as the line rental part of the price is so high.
The new single billing provision does not make any difference in that respect.
If there is no easy regulatory path to bring Ireland’s line rental price down to the EU-average, then Comreg has to make at least sure the money gets invested into the network: Follow the Danish example and order ISDN quality service on all lines. The Danes did it 8 (!) years ago.
"Functional Internet Access" on all lines is a binding EU requirement that Comreg should not any longer be allowed to disregard.

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