Business Irish

Wednesday 22 November 2017

Eir warned it's on 'collision' course with telecom regulator

Eir chief executive Richard Moat faces the prospect of Comreg enforcing structural change. Photo: Damien Eagers
Eir chief executive Richard Moat faces the prospect of Comreg enforcing structural change. Photo: Damien Eagers
Adrian Weckler

Adrian Weckler

Comreg is set for a "collision" with Eir unless the company changes how it's run, the chairman of Comreg has said.

Gerry Fahy said that the Commision for Communication Regulation (Comreg) retains a "significant degree of unhappiness" with Eir's governance model and wants a new independent watchdog body to be created within Eir to remedy the problem.

If this doesn't happen, Eir could face enforced structural change with "all options on the table", according to the Comreg chairman.

His comments come as Eir remains in discussions with a potential new investor, thought to be French telecoms billionaire Xavier Niel.

"What we've seen is that where Eir is managing its own governance, it hasn't worked out as it should do," said Mr Fahy. "A degree of independent oversight is something that would be essential, in our view."

However, he said that while splitting Eir's wholesale and retail divisions apart further remains possible, "full separation" between the two entities would be "problematic".

"I think all options are on the table at the moment," he said. "But the more you go towards full separation, the more problematic that becomes. Even if you look at the UK, which is the most advanced example of this sort of separation process in Europe, it hasn't quite gone to full separation [of incumbent telecoms operator BT].

"Ofcom accepted proposals from BT in relation to the improvements that they were going to make to the independence of the organisation there."

A recent Comreg report recommended the creation of a new independent oversight body for Eir, with the majority of its members from outside the company. Mr Fahy said that such a body should have extensive powers beyond the control of Eir's management.

"The remit of the body would be important," he said. "Would it have the ability to bring in its own consultants to do work for itself independently? Or would it have to depend entirely on Eir's approval for that? Those would be important characteristics."

Mr Fahy also said that credit should be given to Eir for being "open to the process".

"They have indicated that they'll be bringing forward new proposals. Whether those proposals are fit for purpose, are comprehensive enough or are legally binding, remains to be seen."

Mr Fahy also said that Eir may have to compromise on the €270 fee it currently charges other telecoms firms who want to access its wholesale broadband network in rural areas. Rival telcos have threatened to boycott Eir's network over the charges, saying that it's too high a cost to facilitate competition in the market. The Eir charge is levied on rival companies that need to connect homes which are more than 50m away from Eir's network.

"I think we'll have a view that perhaps it should be less onerous on the service provider," said Mr Fahy.

"If an access operator on Eir's network sees its new customer changing back to Eir or to another operator after a short time, why would that first operator have to bear the full cost of that connection, given that they may only have a two-year window on a business connection that might last 10 or 15 years? It's a reasonable question."

Mr Fahy said that the issue is included in a Comreg consultation underway on the wholesale fixed broadband market in Ireland. Eir insists building broadband infrastructure in rural areas is expensive and that it is entitled to recoup as much of its cost as it can.

Access charges to Eir infrastructure are being debated in government circles as a potential further roadblock to progress on rolling out the National Broadband Plan.

Earlier this month, internal government memos revealed fears within the Department of Communications that some network access fees could mean a 60pc hike in the cost of the scheme.

"The level of subsidy bidders might seek for the reduced intervention area could increase by between 10pc and 15pc if an incremental cost is applied to infrastructure access, and by more than 60pc if the existing regulated price for pole and duct access is applied," said the government memo from senior civil servants.

"All three bidders have indicated that access to the new infrastructure built as part of the Eir 300,000 rural deployment, will be central to their bids. The cost to bidders of accessing this infrastructure in order to reach the Intervention Area is a critical factor that could significantly impact on the level of subsidy sought by bidders in the procurement process."

The government wants Eir to charge a reduced price to this infrastructure while Eir insists that it is entitled to charge the current regulated rate.

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