Ecapped and Stymied at Every Turn

Dear Noel,
you can't keep looking into the other direction all the time. I know your standard answer to journalists questioning the Broadband and Telecom development, is to say: “This is a matter for the independent regulator.”
But while you keep looking forcibly sideways we keep having nasty incidents.


Communications Minister Noel Dempsey: "It's a matter
for the independent regulator."

The incumbent still rules town, we're "ecapped" by your hastily assembled appeals panel (ECAP.ie), which delays all our regulation if the bullies of the industry want to, but is not even set up in a way that can give judicial certainty.

Karlin Lillington presents us – and your Department – as the laughing stock to the Irish public in her recent Irish Times article:

"Instead, a regulator was appointed to the regulator, to expedite the appeals system needed because the regulator has so little power to demand companies keep to its decisions in the first place.
To add to this horror, parties to any judgment by Ecap have the right to - yes! - a High Court appeal if they aren't satisfied with what Ecap says about what ComReg has already said."
[See resource 1 for the full article]

And we have painful incidents through our own stupidity on top of that. The lamp posts at the Four Courts are no laughing matter if you hit them frontally.

Hear it straight from the horses mouth: Read how Citigroup Stockbrokers tell their clientele straight in the face how utterly useless we are. Thank God that this material is not available to the general public! We have seldom been humiliated so barefacedly. The Citigroup report on eircom has no time at all for the rosetinting misinformation we normally feed to the media. But it carries some useful suggestions how the Minister could change the game!


Yours
John and Isolde

P.S.: Some quotes from the Citigroup eircom report (more in resources 2):

"Stuttering attempts to kick-start competition
eircom is delivering a master class in how to play the regulatory game – effectively stymieing ComReg at every turn. In our view there are inconsistencies in the relative pricing of services within the wholesale DSL portfolio that skew the market and limit competition. Add the fact that the public sector investment in infrastructure (the government funded metro and long distance build) appears to have major short-comings and eircom’s position looks robust."[page 7]

"ComReg stymied at every turn
Trench warfare characterises the ComReg/eircom relationship as the regulator attempts to engineer a boost to nascent competition. However, ComReg’s inability to enforce structural change – as a result of the appeals process and right to Judicial Review – has enabled eircom to reinforce its market position. The list of ongoing regulatory reviews, consultation and appeals is long and far ranging. However, as the recent Judicial Review aptly demonstrated, eircom is well equipped to repel its boarders." [page 30]

ComReg lacks power to enforce change
ComReg appears frustrated at its lack of power to enforce decisions and at eircom’s continual use of the appeals process and Judicial Review procedures as a delaying tactic. Rather then streamlining the process the creation of an Appeals Panel (as part of the EU’s New Regulatory Framework) appears to have further reduced the power of the regulator by allowing all decisions to be appealed and therefore delayed (note a right to Judicial Review is also available under Irish general administrative law).
The danger must be that the Ministry of Communications, Marine and Natural Resources runs out of patience with the way the game is being played and increasingly intervenes in the market either by formally giving the regulator more power (which would take time due to the legal implications) or by simply bringing pressure to bare on eircom – either through the issuance of ‘policy directions’ to ComReg or possibly more subtly through the Government’s status as asignificant customer of eircom. [page 31]

More quotes from the Citigroup report on eircom in the resources.

Resources:
1. Karlin Lillington wrote in the Irish Times:

Net Results: How many layers of intervention are useful for making an industry get its behind in gear?

About a year ago the Government created the Electronic Communications Appeals Panel (Ecap) to try to fast-track appeals by the telecommunications industry against decisions by the Commission for Communications Regulation (ComReg).

The panel will finally be issuing a decision on its first case next month: an appeal by new operator 3 (Hutchison 3G Ireland) against ComReg's determination that 3 was a "significant market power" and therefore could be regulated in special ways. For example, ComReg could cap the fees it is allowed to charge other operators to access its network.

I can't help but wonder whether such a panel is necessary, or if we aren't heading towards a ridiculous situation akin to looking into back-to-back mirrors, where all you see is a succession of the same thing over and over, receding into the distance?

I mean, I thought the regulator was there to regulate - to establish guidelines for industry activity and issue licences, yes, but also to consider industrial grievances and pass decisions upon them.

In other words, to regulate, just like it says in the name of this national body. But no. It turns out that we not only need to regulate the industry, we also need to regulate the decisions made by the regulator - in other words, we need to regulate the regulator who regulates the industry.

You can see it coming, can't you - a regulator to the regulator to the regulator of the industry, on into eternity. This is beginning to sound like an industrial version of The Old Lady who Swallowed a Fly.

Maybe I'm missing something here. Shouldn't we have a regulatory system where regulators are given the power in the first instance to pass judgments and enforce them? And furthermore, shouldn't we have a system that does not easily enable companies that are so regulated to endlessly take out court cases to delay the implementation of regulator decisions that they disagree with?

I think we can all at least agree that this is a nation that is so sue-happy that we make the US, once the model to the world for the frivolous court case and the outlandish settlement, look like a Judge Judy land full of amateurs.

We have seen the knock-on effect of this in other areas such as insurance, but why this trend has to accompany industrial regulation is beyond me.

I would have thought the Government had learned more from the Orange fiasco, in which operator Orange sued over the regulator's decision to award the third mobile licence to Meteor, delaying its implementation for aeons.

During this time the market was nicely sliced up between Eircell and Esat Digifone, creating a virtually competitionless market just raring to become - as it has - one of the most expensive mobile markets for consumers in the world, while also handsomely filling the coffers of the operators.

Well, the Government did decide it needed to do something - more tit-for-tat challenges to the regulator's decisions by operators Eircom and Esat (now BT) kept the overall telecoms market moribund for consumers and businesses. This was clearly not good for the economy, for competition, or our standard in international telecommunications and IT league tables.

Unfortunately the decision was not to brace up the regulator and provide the kind of power many observers believed has been badly needed for years, to give it any teeth for doing its job of regulation.

Nor was it decided that perhaps the whole legal system needs a serious seeing to, to figure out why everyone and her uncle feels court challenges need to be taken at the slightest bit of offence taken, and why juries like to dish out ridiculously large awards in spurious cases, and why each and every case seems to stretch out into the next millennium.

All you have to do is think of roads projects and the 10-year average to get a project finished due to challenges and appeals, and you'll see this is a legal system gone utterly mad. Instead, a regulator was appointed to the regulator, to expedite the appeals system needed because the regulator has so little power to demand companies keep to its decisions in the first place.

To add to this horror, parties to any judgment by Ecap have the right to - yes! - a High Court appeal if they aren't satisfied with what Ecap says about what ComReg has already said.

As Dorothy Parker once said, "What fresh hell is this?" Can we not just buckle down and fix what is broke instead of adding on more layers of bandages?

weblog: http://weblog.techno-culture.com
© The Irish Times


2. More quotes from the Citigroup report on eircom:

[page31]
Defining a workable ULL process
The problem with ULL is that there are so many moving parts in the overall process and today in Ireland non of these parts appear to function concurrently. For example:
• eircom is ‘unable’ to process a ULL request while simultaneously porting a
telephone number effectively undermining the business case for operators like
Smart Telecom.
• The terms of the ULL contract state that it only applies to eircom retail services
– hence there is no obligation to migrate from WLR to ULL
– eircom rejects orders that involve a migration from WLR. The fact that WLR is outside the scope of the contract is a loophole that eircom exploits.
• There is no process for migrating from bit-stream to ULL in an exchange where critical mass of customers has been achieved to justify a third party investing in its own DSL capability.
• There appears to us to be inconsistencies in the current price points for different product within the wholesale broadband portfolio.

[page 33]
Judicial review finds in eircom’s favour
The current Judicial Review concluded on 29th July with a resounding victory for eircom. The history behind the review was that the altnet industry (BT Ireland and Smart) issued ULL requests for services to eircom. Their requests had been validated by ComReg, which in turn directed eircom to deliver the required services (services requested relate to migration of bitstream/WLR customers, mass automation of processes and integration of ULL and GNP - geographic number portability – e.g. jumpering, porting of number). eircom refused, citing the fact that it was unable to comply within the timescales directed. (As a consequence, Smart Telecom is being forced to ask its customers to take a new telephone number when switching to its DSL service – Smart claim 80% of them are happy to do so – possibly indicative of the degree of dissatisfaction with eircom amongst the early adopters. It is unlikely in our view that the mainstream percentage will be this high.)
We understand that eircom has genuine issues with geographic number portability related to inventory control – the line plant and telephone number are effectively linked within the inventory register. eircom’s existing systems are ill-equipped to deal with the complexities of the ULL process make it very difficult to keep track of assets going forward. Compliance with ComReg’s demands may require eircom to complete a significant systems upgrade.

eircom wins a resounding victory. Also a test case with far-reaching implications
The review was essentially a test case. The substantive issue at the heart of the disagreement, and key to the future relationship between eircom and ComReg, was, can ComReg force eircom to implement a directive in parallel with pursuing an appeal? If ComReg had won a precedent would have been set effectively allowing the regulator to enforce decisions while an appeal was being considered. This would have seen a significant shift in power from eircom to ComReg.

[page 34]
Pricing inconsistencies
In Ireland it appears that there is a contradiction: the price of wholesale DSL products (bitstream) is set based on a retail minus formulae3 (minus 40% on average at March 31st) while ULL prices are based on cost plus. We believe that this effectively acts as a deterrent to investment in the ULL model. Use of retail minus and cost plus creates inconsistency and skews the market.

[page 34]
All part of the negotiation? eircom appears to be using all the loop-holes at its disposal to frustrate the definition of a workable ULL process.
It would be easy to conclude that this is simply an attempt to delay for as long as possible before the floodgates eventually burst. However, in our view eircom is actually playing a clever game to enhance its negotiating/bargaining position. Ultimately, the company must know that the processes behind ULL will be defined – there appears to be too much commercial pressure all around for this not to be the case. We believe that eircom’s objective is to ensure that the economic model and the time frame for full adoption are as favourable as possible from its perspective.
The danger is that eircom pushes too aggressively and that the political masters lose patience. The endgame for all stakeholders in the Irish market must be a portfolio of linked wholesale products.


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