Business Technology

Wednesday 17 September 2014

Eircom challenges law requiring it to provide rural phone service

Published 12/02/2014 | 02:30

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Eircom wants the cost for providing rural phone services shared among providers.
Eircom wants the cost for providing rural phone services shared among providers.

Thousands of rural telephone users face an uncertain future after Eircom revealed it is to challenge a law requiring it to pay for rural telephone lines.

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Ireland's biggest operator will tell the High Court that it is "unfair" for it to be saddled with the cost of funding a service in remote areas.

The move is set to be resisted by the Irish telecoms regulator, which said it would "fully defend" the High Court action.

If successful, Eircom could ask rival operators to help pay for rural phone lines. However, the company denied that the High Court action was part of a new effort to abandon uneconomic rural telephone lines.

The operator is currently seeking a declaration from the High Court that its so-called Universal Service Obligation (USO) represents "an unfair burden".

Under current law, Eircom is required to erect telephone equipment to homes and businesses in rural areas, even where that provision is uneconomic. The rule is intended to ensure rural communities remain connected to telephone services and do not fall victim to market dynamics which often exclude rural areas from high-speed broadband availability.

However, Eircom is now challenging the rule, arguing that such a universal service obligation is out of date. It is also set to argue that a continuation of such a rule should be supported by a new fund that other operators could contribute to.

"We don't believe that the current situation is fair," said a spokesman for Eircom. "The full cost to provide what amounts to a social service should be shared among operators because we operate in a competitive market."

The spokesman said Eircom hopes to gain the court's approval for the establishment of a "USO fund" that would share the capital and operating costs.

At present, rival operators can offer low-cost services on Eircom landlines, even if the incumbent operator has had to invest heavily to reach a remote, rural household. However, the spokesman said that the High Court case was not a "trojan horse" for the operator seeking to take more radical action, such as cutting rural communities' phone services off.

DEFENDED

The chairman of Comreg, Kevin O'Brien, said that he could not comment on the case as it was before the courts. However, he defended the concept of a universal service obligation.

"If you take a long-term view, as technology changes and broadband becomes ubiquitous, people may move away from the need to have that guarantee. But the story to date has been that it is required," he said.

Mr O'Brien said that Comreg is seeking industry consultation ahead of a June decision on universal obligation rules.

Separately, a spokesman for the regulatory body said that it intended to "fully defend" the High Court action.

"ComReg determined that for the year 2009 to 2010 there was a net cost of €5.1m in respect of Eircom's provision of the Universal Service Obligation," said the spokesman. "This cost does not represent an unfair burden on Eircom."

News of the court case comes as the international financial ratings agency Moody's upgraded Eircom's rating, citing better economic conditions and Eircom's investments in 4G and fibre networks.

Irish Independent

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