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Wednesday 17 September 2014

Should Eircom be saddled with universal service bill?

Published 10/08/2014 | 02:30

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Eircom is embroiled in a High Court action against the telecoms regulator (Comreg)

Should Ireland continue to have a telecoms universal service obligation? For those who need reminding, the USO is the regulatory rule that says that someone must provide telephone services (though not broadband services) to homes and businesses wherever they're located in the country.

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The issue has arisen again after Eircom officially appealed its latest redesignation as Ireland's universal service provider. The company has not explicitly said why it is resisting the classification, nor has it spelled out in detail why it is embroiled in a High Court action against the telecoms regulator (Comreg) on the same issue. But its growing opposition to the notion of a universal service obligation is probably a good opportunity to re-examine the concept's relevance in Ireland of 2014.

Ask homes and businesses in remote locations, and they will tell you that the USO has been a lifeline for many years. Without it, it could be argued that a privatised telecoms market might have skipped the bits of the country that proved to be uneconomic to provide services to, just like its approach to providing broadband.

The chairman of the telecoms regulator, Kevin O'Brien, is also a supporter in principle, referring to it as a "safety net" that is "required".

There is also something logical, as well as comforting, about the notion of no premises being left without some sort of communication infrastructure in a modern European country.

The question, though, is whether that communication medium is a landline telephone service.

"I would agree that if you took a long-term view, it's inevitable that as technology changes and broadband becomes ubiquitous that people will move away from the need to have this sort of guarantee," Comreg's chairman told me the last time I talked to him about this subject.

The regulator's recently published 'Strategy Statement for Electronics Communications 2014-2016' echoes these sentiments in an official document.

"In respect of access at a fixed location, ComReg is mindful that the provision over time of high speed broadband to homes and businesses, including as a result of the National Broadband Plan, may mean that the requirement for the universal service of access at a fixed location could, in time, lessen and indeed become unnecessary," it says.

In other words, if the government delivers on its proposed National Broadband Plan and genuinely hooks up 1,100 small rural towns and villages to top-end fibre broadband, it's hard to argue as forcefully for the state-mandated provision of copper phone lines.

(The question of whether the universal service obligation should apply to broadband services, which are arguably a more fundamental utility now than limited voice lines, is a separate issue that no-one is keen to look at for various reasons.)

Even if the universal service obligation remains, as Comreg says it wants for at least another "three to five years", it is starting to look possible that its cost structure might be altered.

Eircom is intensifying its argument that the current cost burden is simply unfair. If you build a bungalow half way up a mountain, it argues, Eircom (being the universal service provider) is obliged to cover a large whack (up to €7,000) of the cost of the telephone poles and other equipment required to connect you. Having paid for that, it then faces the prospect of you choosing Vodafone or Magnet or some other rival for your phone services, using Eircom's brand new pricey infrastructure put in just for you. (Eircom still gets some income from this, but it probably seems like a very nice bonus to whoever gets the main business.)

Comreg doesn't fully buy the perceived injustice of this, having attributed the cost of Eircom's USO activities for the last publicly noted period (2010) at €5.1m.

Nevertheless, Eircom is pushing on with a notion of a new shared 'USO fund' that would see rivals contribute to its USO costs, presumably proportionately to the business they deliver on USO-focused parts of the network.

Here, the telecoms regulator appears open to discussion.

"ComReg will continue its work on Universal Service Funding including the assessment of applications for funding it receives from the USP [Eircom] and the establishment of the principles for a universal service fund sharing mechanism as required."

Is this the start of a change in how we understand the universal service obligation? And if it stays, will it ever apply to broadband? At present, the USO includes a requirement that the line must be capable of carrying an internet signal of 0.03Mbs. This is the equivalent of no internet service at all - there is almost nothing you can do (not even basic email) on a service delivering 0.03Mbs. So it seems very odd that a USO incorporates a notional internet connection mandate that is incapable of internet use. This, though, is a topic no one is keen on discussing as it would have massive policy, regulatory and commercial implications for almost every organisation associated with telecoms policy in Ireland. We'll have a clearer idea of the USO's future when Eircom's court case against Comreg concludes.

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