The European Commission has recommended as a matter of necessity that the Irish communications regulator should reduce rates for fixed-line telecommunications, which could in turn lead to a reduction of cost of broadband as well as other services for consumers.
ComReg, the Commission for Communications Regulation, was sent a letter by the European Commission recommending that the regulator “update relevant pricing decisions as soon as possible”. This was due to several complaints about a delay in changing the setting of wholesale rates that Eir, the biggest telecommunications company in Ireland, has been setting for wholesale rates.
The language used in the letter has been described as “unprecedented”, and other telecommunications companies in Ireland have been pleased with the swiftness and tone used by the Commission, as it has taken a clear stance on what it expects from both Eir and ComReg.
Whilst it is still just a letter of recommendation, despite the urgent language, and therefore is in no way legally binding, the pressure placed onto ComReg will likely force them into action as this is both a public and private matter.
The conflict between Eir and other Irish Telecommunication companies is in theory rather simple. Eir have been investing into infrastructure in order to bring broadband, fibre and other forms of telecommunication to Ireland, allowing the other companies to use them but also being able to set their own rate.
Rival companies argue that Eir has been able to enjoy excessive returns for this investment which does not truly represent the value of their investment, something that Eir has always disagreed with.
ComReg has said that they will change the weighted average cost of capital rate from 8.18 per cent to 5.61 per cent. In essence, this compensates Eir for their investment into infrastructure that they have done so far, and in turn, this means that Eir will be able to reduce the rates that they charge the rival companies to profit from these infrastructures.
ComReg has been delaying this change so far, and it is for this reason that the European Commission has written this letter. Alto, a body that basically represents the other major telecommunication companies than Eir, is understandably the driving force behind the pressure being put on both Eir and ComReg.
Some rivals are also concerned by the fact that fibre broadband charges have not been included price change recommendations and thus Eir will continue to charge the other operators a higher rate of fibre for a few more years. On top of this, if the next weighted average cost of capital rate review does encourage Eir to reduce their rates that Eir will appeal this decision for fibre and continue the higher charge for other operators.
In reference to the letter, Sky Broadband stated that it was pleased with the “clear and unambiguous comments in the letter” and that it was “a matter of urgency to protect consumers”. While it is much more likely that Sky Broadband regards this as a matter of urgency to protect its own financial healthiness, it is undoubtedly true that they are trying to provide a cheaper service than Eir, and so any move towards this will benefit Irish consumers. Vodafone also welcomed the letter and support the sentiment wholeheartedly.
ComReg has declared that it is finalising its decision and will be considering the European Commission’s advice and comments, and that a project to update cost models is underway. It is expected that in the next twelve months they will be preparing a few changes on the fast growing and changing industry of Irish telecommunications.
A spokesman said : “We will decide whether it is necessary to consult on updated broadband access prices based on an evaluation of whether underlying costs have changed, so that they have become materially different from prevailing regulatory prices”.
He continued by stating : “ComReg’s approach to updating regulated prices reflects the importance of regulatory certainty in promoting investment, as well as the desirability of avoiding a material discrepancy between prices and underlying costs”.