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Oireachtas Line Rental Investigation Transcript - Jan 2004
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16-11-2004 10:21am#1http://www.oireachtas.ie/viewdoc.asp?fn=/documents/Committees29thDail/jcmnr/jcmnr280104.rtf
This is from January 28th 2004. It's old now but it's worth reading to see the comments of ComReg, Eircom and the Consumer Affairs Association.0
Comments
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Dear Mr O'Flynn
I understand that the Oireachtas Joint Committee on Communications, Marine and Natural Resources is planning to launch an investigation into reports of overcharging by Eircom. While this move is warmly welcomed I would also ask that your committee take the opportunity to review the situation with regard to line rental and its inclusion in the price basket under which Eircom operates.
You may remember that in a speech to the Committee last January, that followed the uproar after Eircom increase their line rental charges for the third time in less that 18 months, the then Minister, Dermot Ahern made the following statements
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I am now going to turn to the issue of line rental.
It would be easy for me to announce today that I am simply taking line rental out of the price basket. That I’m going to direct ComReg to introduce a new sub-CAP. Whilst politically attractive, I have rejected this route.
Primarily because alone it is not the most effective route. The approach I will take is more radical.
It is designed to cut line retail prices to Irish consumers by allowing telecoms companies to compete against Eircom for line-rental.
It is designed to cut line rental prices by giving telecom companies the potential to undercut the Eircom price. And it will give Eircom the incentive to keep prices down.
It is designed to build jobs, lower phone prices for Irish consumers, which in turn will lower inflation.
I will direct ComReg to introduce by Wednesday 31st March, 2004 a wholesale line rental product for voice and data services.
I will direct ComReg to insist that the margin between wholesale and retail is wide enough to drive competition.
I will direct ComReg to insist that the product is accessible, affordable, and available for telecoms operators.
If this product is not in place by the 31st March, 2004 and if it is not delivering verifiable competition and lower prices by the 30th June, 2004 I will direct ComReg to take line rental out of the present price CAP, and to set a specific rental cap no greater than CPI.
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It is now over nine months since that speech was made, and six months past the deadline date of the 31st of March and there has been no reduction in the line rental price, nor any prospect of one. Instead it looks increasingly likely, given the recent announcements by Eircom spokespeople, that there will be a further line rental increase early in 2005.
I would there ask that you question Comreg on why there is no effective competition in the area of line rental prices, and why as a result the Line Rental has not been established as a separate basket as per the Ministers statement above? This is an opportunity for the Committee to pro-actively protect the Irish consumer from the monopolistic powers which Eircom enjoys.
I look forward to your response on this matter,
M.0 -
Email the letter to ronan.lenihan@oireachtas.ie who is the Clerk for the Committee and ask him to send it on to everyone on the committee and see what you get back.0
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Also copy the main opposition spokespeople on the committee yourself -
Tommy Broughan
Eamon Ryan and
whoever has replaced Coveney as the lead FG person - David Staunton is it?0 -
I've sent copies of the mail to Tommy Broughan, Bernard Durkin, Eamon Ryan and Martin Ferris. It will be interesting to see if this provokes any kind of response or will it just be ignored again
M.0 -
Starts off quite well and degenerates into a slinging match.
ComReg didn't come across well, and seemed to piss off the committee no end
Lots of useful quotes in there.
John0 -
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Brian Timmons, Smart Telecom (Financial whiz) speaking of the documentation sent to investors and stock brokers
Mr. Timmons: On Eircom profitability, the key point arising is that Eircom generated operating profits of over €550 million in the year to March 2003.
The €550 million, in any event, represents a margin of 33% of turnover. For every euro that consumers, including business customers, pay, 33 cent is the surplus arising as operating turnover. It does raise an issue that was touched on in the previous session. The bottom line is that an operating margin of 33% is made. If it is the case that access costs are generating a loss for Eircom, then obviously something else is generating an enormous margin. The company probably does have a degree of discretion as to how it allocates its costs to make its case.
Later on…..
Deputy Eamon Ryan: It is not a junk bond that Mr. Milken would have used - these were very solid bonds. They used that bond and equity mix to buy the company. To a certain extent they have a very profitable business which is paying off those bonds.
Mr. Timmons: Correct.
Deputy Eamon Ryan: That is paying off the debt, in a sense. While the figure stated in public in the accounts is showing a relatively low profit margin, it does not show the huge growth margins which can pay off the debt that they raised to buy the company. Is that a fair summary?
Mr. Timmons: That is the point. It was purchased as a highly leveraged operation so when Eircom presents it case it deducts the interest being paid to the bankers who enabled it to acquire the company for €900 instead of paying for it all. That is why I focus on the operating figure. It is the important one because there was virtually no debt in the company before Valentia acquired it. There was approximately €100 million which ballooned to over €2 billion. Eircom existed without debt and its profits were available for investment and for dividends. Now the cash flow is being used to pay down debt.
ComReg gets a grilling
Senator Kenneally: I have never heard of the vulnerable users scheme and I am not surprised that only 300 to 400 people have availed of it. If it is in place I would have thought ComReg would require Eircom to apply it automatically if a certain number of calls are made and that people would not have to apply for it or be made aware of it. It should be automatic and then those entitled to it would get it. Should ComReg not direct Eircom to proceed along those lines?
Ms Goggin: On timing, the price cap document came out in February 2003 and it was in that document that we made it a condition that Eircom introduce a vulnerable users scheme. In the previous price cap there had been an equivalent scheme, the lower quartile cap. That was put together differently but the idea was the same, protecting users at the lower end of the spectrum of use. The idea that there is an overall price cap but that within that there would be some form of protection for lower users goes back a number of years. The document mentioned by Deputy Ryan was a response to our consultations in the middle of last year. The idea was there previously and the details of the scheme are Eircom's responsibility, but we would require Eircom to have such a scheme.
Chairman: I hope I am not the only member of the committee who does not understand this. When saying "Eircom has agreed to publicise", I do not like the word "agreed". That does not mean anything. Is it mandatory for Eircom to advise customers of the low users scheme?
Ms Goggin: It is mandatory for them to advertise all their tariffs, and this is on their website, but it is pretty hard to find on the website. We will take that on board.
Chairman: Can you answer the question Ms Goggin, please? You have ordered Eircom to introduce this scheme, even though it was their idea. Is it mandatory for them to ensure it is introduced?
Ms Goggin: It is mandatory.
Chairman: Is it part of their agreements with you? Can you not answer the question?
Mr. Doherty: It is.
Chairman: Thank you, Mr. Doherty
Asked about rescinding the line rent increase
Deputy Broughan: This morning consumer associations asked if there was any way this increase could be reversed. Can ComReg simply say it made a mistake and that it wants to reverse the decision?
Mr. Doherty: If I may go back to the basic principle
Deputy Broughan: Will Mr. Doherty just answer that question? We were asked to
Mr. Doherty: Part of what we do on market analysis in these areas is to look at it but we would need to look at this holistically
Deputy Broughan: Is Mr. Doherty saying he could withdraw that increase?
Mr. Doherty: It is not a question of whether we could or could not. There are conflicting issues and I ask members to bear in mind that we have legal obligations.
Deputy Broughan: Do you have the power to withdraw it legally?
Chairman: Mr. Doherty, with all due respect, would you please answer the Deputy's question? Is it within your power to withdraw that price increase, yes or no?
Mr. Doherty: If we could find in the market analysis there were other issues that made the decision different, yes, we could.
Chairman: Mr. Doherty, it is a simple question. Is the answer yes or no?
Mr. Doherty: I think I have just answered it, Chairman.
Chairman: No, you did not answer it, Mr. Doherty. When we ask you for a simple answer, please give us a simple answer. Is it within your power to reverse that price increase?
Mr. Doherty: If the market analysis data show up something different then the answer is, "Yes, we can".
Chairman: Is it within your power, Mr. Doherty, to refuse an increase of a line rental in 2004? You are saying you do not forsee such an increase. I do not like the word "forsee". Is it within your power to say no to further increases for line rental this year, next year or any other year?
Mr. Doherty: If we believe they are not cost orientated, yes, it is.
Deputy Finucane: Could Mr. Doherty not change that and say that ComReg will not tolerate any further increase in 2004? If consumers, as telephone users, were asked what ComReg does, they would not know. There is a mystique surrounding ComReg and if it showed more teeth, perhaps consumers might know what it is doing and have respect for it.
Enter Eircom dum dum dum!!!!!!!
The master begins his work
Chairman: Mr. McRedmond is taking us up and down roads explaining the difficulties in maintaining access, or the first mile as we call it. Could he or Mr. Nolan tell us whether the cost has anything to do with inefficiency or overstaffing in the company, with the fact that the staff own 30% of the company or with the fact that the vice-chairman of Valentia is also the secretary general of the Communications Workers' Union and effectively wearing three hats? Is it possible that consumers are paying for the inefficiency of the company in terms of line access?
Dr. Nolan: Mr. McRedmond will answer the first part of the question and I will reply to the rest.
Mr. McRedmond: In answer to the first part of the question, we have a very low cost cheap core network and a high cost access network. When the two are blended, which is ultimately what consumers will end up paying, we are showing at both the retail and wholesale level, which is what other operators pay, that we are below the EU average. Therefore if we are inefficient, we are less inefficient than most other telcos in Europe.
Chairman: Are you?
Mr. McRedmond: I think that is the answer.
Skip
Deputy Broughan: Should Eircom not have been investing more given the condition of telecoms infrastructure in the country? Eircom has a particular responsibility as the incumbent in the fixed line market and therefore should not follow the pattern of other telcos.
Dr. Nolan: If we increase investment the prices will increase because the value of the network increases and the costs increase. We are always trying to strike a balance for consumers. Consumers do not want over-invested networks because that pushes prices up. In the early years of post-privatisation for example in the UK, the major goal of the regulators was to keep down capital expenditure because there was spare capacity and there was not a demand for it.
Chairman: Are you suggesting that no other telco in Europe is investing?
Dr. Nolan: No. I am saying that they are not investing at the rate they were. I was asked whether we are investing. We are investing €200 million. We are investing but we are just investing at a lower level than in the past as are all other telcos.
CONTD......0 -
Deputy M. Brady: What is the handset rental per month?
Mr. McRedmond: The rental is about €2.50 per month.
Deputy M. Brady: Will Eircom place an advertisement in the newspapers to advise people that they can avail of the opportunity to return their handsets?
Mr. McRedmond: I could not commit to necessarily putting an advertisement in the newspapers, but it might be possible to do so through the telephone bill. I know the Chairman mentioned earlier that we should put the low user scheme in the telephone bill, which we will do, and we will notify people about the handset in the bill. We have solutions to address members' concerns.
Regarding vulnerable users scheme
Chairman: Are you obliged to promote that user scheme? Are you mandated to do so by ComReg?
Mr. McRedmond: I could not answer the question as to the precise legality of whether we are mandated to do so. We are committed to doing so. I will come back on the other question tomorrow.
Chairman: Are you saying you cannot give us an answer today?
Mr. McRedmond: Correct. I do not know the precise legality as to whether we are mandated.
Regarding DSL wholesale price cutting
Deputy M. Brady: I do not know what procedure you are using here, but I wish to receive a satisfactory answer before we move on. I asked about selling DSL lines to wholesalers. Eircom then has its own promotion undercutting wholesalers making it virtually impossible for them to compete. Is that true or false?
Mr. McRedmond: I am not the other operator and I do not have their costs. That is not a reasonable claim.
Deputy M. Brady: Some of them have provided me with costs. The figures they have given me suggest their claim is reasonable. Is it true that Eircom has a promotion which will be under way until the end of February?
Mr. McRedmond: That is correct.
Deputy M. Brady: Is Eircom undercutting wholesalers it has supplied?
Mr. McRedmond: That is not true. We are not undercutting wholesalers. There is a gross margin of around 30%; it could be 35% or it could be 27%. Out of that gross margin, the wholesaler has to meet its costs. One of the other operators had a promotion in place before we reduced our wholesale prices and made it available through our promotion. The difference we reduced our promotion by is less than the reduction in the wholesale price. If the other operator was able to run that promotion before, there is no reason he should not continue to be able to do so. If the operator decided for its own commercial reasons to sell below cost, that is an issue for him or her. We are delivering value for broadband. We make no apologies about keeping the margins tight to make broadband available. We can see the success of that approach in the take up of broadband. We have made the break-through in broadband.
Deputy M. Brady: As a supplier selling to wholesalers, why would Eircom launch a promotion which undercut its customers?
Mr. McRedmond: We have not launched a promotion which undercuts them.
Deputy M. Brady: I have figures from a few operators which indicate that is the case. Perhaps they are all telling me lies and Mr. McRedmond is telling me the truth. I do not know.
Mr. McRedmond: I would be happy to examine those figures.
The DSL exchanges versus lines debate
Deputy Eamon Ryan: What about Internet access?
Mr. McRedmond: I cannot answer for specific cases. If Ballinteer and Dundrum do not currently have broadband access they will have it soon. We have said that every town with a population of more than 1,500 will have such access by the end of 2004. We have exceeded the Government's ambition for this. We have set a target of 100,000 users and we are going to reach it
As for Deputy Ryan's particular case, while I cannot answer it, there is an issue called "carriers", namely, single lines. We are dealing with this issue. It is less of an issue that we expected in that 80% of lines in an exchange area qualify for broadband; we thought it might have been less than this. While more people are qualifying, this is not much of a consolation for the Deputy.
Chairman: Will you communicate directly with Deputy Ryan on this matter?
Mr. McRedmond: I will.
Deputy Broughan: What does "they will qualify" mean?
Mr. McRedmond: When we roll out broadband, we fix an exchange so that broadband can be provided from it. Broadband uses the access network. This is why it is so important that we do not sell this network below cost. The quality of the copper lines in the access network - an issue throughout Europe - dictates whether the line can take broadband. An average of approximately 80% of lines in our network can take broadband. This may be as high as 90% of lines in one area and 75% of lines in another. We believe this is a high percentage compared to many European countries.
Deputy Broughan: Therefore the complaints we get are from people whose network unfortunately falls into the 20%.
Mr. McRedmond: I suggest that this might be the case.
Deputy Eamon Ryan: Can I tell my constituents that DSL will be enabled by the end of 2004?
Mr. McRedmond: To be precise, we have targeted March 2005, the end of our fiscal year. However, this might be earlier as we are going at quite a pace.
Deputy Eamon Ryan: Will this be available for every house?
Mr. McRedmond: It will be in every exchange.
Deputy Eamon Ryan: This means my house, and 20% of houses on similar split lines, will never be able to get it.
Deputy Broughan: What investment will be required to enable the 20% of lines to carry broadband?
Mr. McRedmond: The investment would be in the access network. We constantly renew the access network. I cannot answer about the specifics of the "carriers". As we upgrade and renew the access network, we are ensuring that the lines can carry broadband.
Deputy Eamon Ryan: If qualifying exchanges will be enabled by March 2005, when will my home line be enabled?
Mr. McRedmond: I cannot answer that. I can tell the committee what our plans are around this.
We told the committee that we would launch a trigger programme. Under this, we would set up a website for communities with a population of below 1,500 where interested parties could register for broadband. If significant demand exists in an area we would enable the local exchange. This is an efficient way to roll out broadband.
Minister Aherne arrives
Minister for Communications, Marine and Natural Resources (Deputy D. Ahern)
Preamble snipped…
Before discussing my role in this area, I should outline to the committee the legal framework under which ComReg and I operate. It was brought to my attention that efforts were made earlier to muddy the waters when people know the legal position. Lest anyone be under any misapprehension, I have no statutory role in regard to the approval of individual price increases in the telecom sector.
Deputy Broughan: The Minister knew they were coming.
Deputy D. Ahern: This is the job for the regulator, which is independent in the exercise of its functions under section 11 of the Communication Regulations Act 2002.
Deputy Broughan: He was just an innocent bystander.
Deputy D. Ahern: I will answer Deputy Broughan in due course but I did not know about it, nor should I have known. The Deputy is aware of that fact because he was a Member of the Oireachtas that passed the legislation introducing the independence of ComReg. He cannot have it both ways.
Chairman: Members must let the Minister finish his presentation. There will be plenty of time to ask questions.
Deputy D. Ahern: Deputy Broughan is trying to ride two horses at one time and it is a difficult thing to do.
Deputy Broughan: The Minister sings the same song every time.
And so begins a tirade of point scoring and petty squabbling0 -
The transcripts of the most recent Committee hearing is online now.
P.
http://debates.oireachtas.ie/DDebate.aspx?F=MAJ20041103.xml&Node=H4&Page=1
Example: "Chairman:Is 512 Kbps available to all the lines that Eircom has enabled?
Mr. McRedmond:Correct. It is available to one million lines."0 -
I did NOT have sex with that woman...eircomtribunal wrote:The transcripts of the most recent Committee hearing is online now.
P.
http://debates.oireachtas.ie/DDebate.aspx?F=MAJ20041103.xml&Node=H4&Page=1
Example: "Chairman:Is 512 Kbps available to all the lines that Eircom has enabled?
Mr. McRedmond:Correct. It is available to one million lines."0 -
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eircomtribunal wrote:The transcripts of the most recent Committee hearing is online now.
Yes indeed. David McRedmond has officially endorsed our website:Deputy Broughan:
I will finish my point. The Minister informed us of a figure of approximately 9% the other week, which does not seem to be correct. The reaction we receive from interested, publicly orientated interest groups, such as Ireland Offline, is that the current position is a disaster and Ireland is being left far behind. This is our concern.
Mr. McRedmond:
We have our own targets. Deputy Broughan also asked about the test indicator. Ireland Offline is a small, vocal group which is entitled to comment as it wishes. I suggest members look at their website to get a flavour of what they do. We are behaving extremely responsibly in terms of how we roll out broadband and are very grateful for the 100,000 customers we have. While exasperation will exist where there is a successful product, the momentum is continuing to build. We are not stuck in a log-jam but are moving at an incredible pace to make up the ground we need to. Eircom is a commercial company and will do what is right for our customers and shareholders. We make no apology for that. Government targets are an issue for itself for which we cannot be responsible.0 -
More choice bits:Deputy Broughan: Should ComReg not publish what it knows about the state of the Eircom network? The network seems to be similar to the third secret of Fatima. When I put a question to the Minister last week, he stated only 9% of lines were available. Another person might state the figure is 30%. Someone else might say 50% of lines are in the old system to try to get the phones into every household. We should have that information. A colleague referred to the famous Pittsburgh project of the venture capitalists. Mr. McRedmond did not deny the figures gleaned from the information that came to market about Eircom but would it not be better to be transparent now and give the full information in that regard so we would at least know the state of play?
Reference was made to wireless solutions. They are exciting solutions but are they not fairly expensive? Someone living in a rural location, with no hope of getting broadband, is at a disadvantage compared to urban dwellers or people who live close to an enabled exchange.
Mr. Doherty: I will deal with the fixed wireless question and Ms Goggin will answer the other question. We have provided 78 fixed wireless local access areas. We have a map, which I would be delighted to distribute, which demonstrates their location. The combination of those, with the community broadband initiative undertaken by Government, significantly increases the reach in those areas. The parallel ESB and Esat initiatives in respect of the back hall provide another alternative but it must be recognised that if we need fibre to the cabinet and other models, the combination of the community broadband and the fixed wireless makes a competitive offering but there will be some people in this country who can get broadband only over satellite. That is a realisation of which we must be aware and we must examine the pricing structure that accommodates that.
Eircom said on the record today that it was 8% or 9% up on pair gains in the country. Those are the sort of levels. We have an agreement with Eircom, as DSL deployment comes into place, that it has to remove the pair gains.
Deputy Broughan: Has Mr. Doherty’s organisation independently audited that, given the volume of complains we, and journalists, have got as a result of the recent controversy about the situation?
Mr. Doherty: To be candid with the Deputy, the pair gains is an issue. In regard to the DSL enabled exchange, Eircom is mentioning a figure of 3% or 4% in those that are enabled. One aspect on which we will be concentrating is that the current acceptance rate of 77.69% can be moved up to 90%, and we are working with Eircom to get that additional 10% or 12%. We are trying to cluster our prioritisation around the bits that will make the most material difference most quickly. If we could get the figure up to 85% or 90% of those who look for broadband, that would be a significant outcome. As we move forward we will deal with the pair gains and the line distance in so far as there are options, both wireless and fibre to cabinet, as a way of addressing those. We have to accept that we will have to cut and dice every one of these solutions to get to the end game. There is no silver bullet here. We have a good trajectory and we need to bring into play all these aspects if we are to get broadband to most parts of Ireland. That will require a myriad of different solutions, and it certainly will not be all DSL.0 -
A "small, vocal group" which is obviously getting under his skindamien.m wrote:Mr. McRedmond:
Ireland Offline is a small, vocal group which is entitled to comment as it wishes.
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Wait til tomorrow !0
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Choice quotes lads, choice quotes...
I nearly split myself laughing when I read that, and the following comments. Between the holistic approach and the disinterest in answering a question directly, it's obvious to me now that John Doherty is in fact Svlad_Cjelli!Mr. Doherty: Part of what we do on market analysis in these areas is to look at it but we would need to look at this holistically
How conventient. But WLR aside, did this actually happen between then and now, ten months later?Mr. McRedmond: I could not commit to necessarily putting an advertisement in the newspapers, but it might be possible to do so through the telephone bill.
Indeed. It was an efficient way of rolling out broadband two years before this meeting.Mr. McRedmond: [...] We told the committee that we would launch a trigger programme. [...] This is an efficient way to roll out broadband.
I usually dislike the childish behaviour deputies gravitate towards in the chamber and these meetings, but occasionally they still make me giggle guiltily. BTW, the comment that these were in respect of was typical political doublespeak:Deputy Broughan: The Minister knew they were coming.
[...]
Deputy Broughan: He was just an innocent bystander.
Which is of course true. But he can order them to take certain actions, and in fact has unless I'm very much mistaken.Deputy D. Ahern: [...] I have no statutory role in regard to the approval of individual price increases in the telecom sector.
Has Eircom make this agreement available to IrelandOffline for review Damien?Mr. Doherty: [...] We have an agreement with Eircom, as DSL deployment comes into place, that it has to remove the pair gains.
Thanks again for filtering this for us lads, much appreciated.
adam0 -
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Who's this Perry lad ?
Deputy Perry: I was thoroughly impressed by the presentation and the excellent job Eircom is doing. It is very important it has autonomy in the work it does and that it brings regulation into the trade.
With regard to the profit margin, the economy of scale in the market and the fact that Eircom has another obtainable market in the 500,000 to 600,000 lines that have yet to be connected, does it see that levelling out from the point of view of a return on the investment of speculators coming in and leasing the lines from principal operators? What margin of profit does it see in this business that is so attractive it is bringing many people into the trade? It must be good.
Mr. Doherty: As one of those who attended the old school of economics, the theory was that new entrants came into the market only where there was an interesting market to enter.
Deputy Perry: Yes.
Mr. Doherty: The difference now is that in areas like broadband a good deal of front-end investment has to be made. The yield will come later. For instance, at this time a huge amount of money has to be invested, not just in the “de-slams” in exchanges but in advertising the products and services as well. That answer will vary from product to product——
Deputy Perry: Is there not a difficulty in that the organisation does not have the full legislative powers to be more forceful in getting into the loop? Are the difficulties being encountered diminishing the possibility of new entrants coming into the market?
Mr. Doherty: I do not think so at this time. The area we have been trying to stimulate is to get more infrastructural competition. We have quite a good level of re-sell in terms of competition in the market but what we need is more infrastructure competition. One tier of such competition is the unbundling of the local loop. Companies like Smart and Esat are increasingly becoming interested in that area. From my perspective, we have been pushing hard to get the industry to identify exactly the issues involved. We deal with those issues as and when we know clearly what they are.0 -
damien.m wrote:Who's this Perry lad ?
FG TD from Sligo. Currently Fine Gael Spokesperson on the Marine. Joined the Oireachtas Joint Committee on Communications and Natural Resources in October, 2004 and was immediately appointed Vice-Chairman. Previously Chairman of the Public Accounts Committee for two years, moved/(was moved) aside to let Noonan into that prestigious role.0 -
I liked:Mr. McRedmond: Government targets are an issue for itself for which we cannot be responsible.
in the context of Minister Dempsey's latest target announcement
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Yep, saw the leaflet in my bill yesterday. Was surprised that they did it, they also had an offer that the customer gets a new siemens cordless if they continue with equipment rental plus they "get to keep their existing equipment also!"dahamsta wrote:"Mr. McRedmond: I could not commit to necessarily putting an advertisement in the newspapers, but it might be possible to do so through the telephone bill."
How conventient. But WLR aside, did this actually happen between then and now, ten months later?0 -
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Thanks viking. Anyone know what happens with customers on WLR? Does equipment rental show up on the OLO bill? Was there a leaflet in these bills?
adam0 -
Some more choice bitsDeputy Broughan: Smart Telecom, a competitor of Eircom, provided us with documentation which clearly appeared to show Eircom’s investment had crashed through the floor in the past three or four years, in particular since the take-over and refinancing etc. of the company by the venture capitalists. Does the company not have a universal service obligation to provide lines to new estates? One of the many example of feedback I received was that young couples in a new estate in Athy, County Kildare, were waiting for months. This reminded me of something that would have happened in 1979. Dr. Conor Cruise O’Brien was Minister for Posts and Telegraphs and we were a laughing stock. Have we gone backwards with Eircom rather than forward?
Mr. McRedmond: The committee can either choose to believe me or not. The best thing it can do is get telecoms designated as an essential service and then members will see we can get into places which we cannot currently access. It would be insanity for a telecoms company not to want to provide service to a housing estate.
Later on
Deputy Perry: Eircom stated that eight out of ten lines would qualify for broadband. While the company stated that 100,000 broadband lines are connected, what does this represent in percentage terms?
Mr. McRedmond: Percentage wise, 100,000 is 6.25% of lines.
Deputy Perry: Would Mr. McRedmond not agree this is a desperately low figure?
Mr. McRedmond: It is a figure, which we want to increase substantially. However, this is where other telecoms in Europe were a year ago. This is why I say we are catching up. They have now moved ahead. As a percent it is a huge step forward. It is building and getting to base camp.
Deputy Perry: Of the eight out of ten lines that would qualify, less than two are connected.
Mr. McRedmond: Correct.
Deputy Perry: Less than two lines out of ten.
Mr. McRedmond: Correct.
Deputy Perry: Given the number of smaller towns with populations of less than 1,500, a considerable proportion of the country will not have the possibility of getting a broadband connection for years to come.
Mr. McRedmond: There is broadband because satellite broadband is available. Wireless broadband technologies are being developed. In rural areas this is not a feature of Eircom - I emphasise this point. This would be the same in any network anywhere. In some places new versions of DSL have been rolled out. We will upgrade to ensure the latest technology to constantly bridge the divide. We will look at wireless technologies and other ways to access those areas that cannot be accessed using DSL copper. We also hope to work with the rural broadband group schemes and that Eircom will put its money in to see if we can resolve this issue and get as near 100% coverage as possible, if this can be done economically.
Deputy Perry: Is Eircom disappointed with the comments made by the newly appointed Minister who said that in hindsight the sale of the State asset was regrettable?
Mr. McRedmond: That is a matter for the Minister, not me.
ESAT
On MAN’s
Deputy Eamon Ryan: Is it not possible to link the MANS with that network?
Mr. Evans: Yes. We are using the MANS today. We are one of the only operators——
Deputy Eamon Ryan: Going from the MANS to the householder, Esat BT cannot go direct. It has to go through the Eircom——
Mr. Evans: Nobody can cost-effectively go through the MANS to the householder. The route to customers is through the MANS into the exchange, through the local loop and into the household. No one will go directly from the MANS into a customer’s home. It is either through the local loop via the exchange or through wireless and into the customer’s house. Nobody could obtain a return on building a complete parallel network.
ESAT asked about working with Eircom
Chairman: Does Esat BT have any difficulties with the incumbent in terms of the first mile being made available in the event of its taking over lines? Are there any problems with exchanges? Is Esat BT obtaining full co-operation from Eircom?
Mr. Evans: I wish to make one point. We have an extremely good and healthy relationship with Eircom at a wholesale level. We are extremely aggressive and compete strongly with it and vice versa. It is healthy competition.
Chairman: Therefore, there are no difficulties or delays.
Mr. Evans: We run into business issues every day of the week.
Chairman: There is no deliberate——
Mr. Evans: Eircom is not doing anything that runs contrary to the principles, rules and regulations laid down.
Deputy Broughan: I apologise for missing the presentation. I was obliged to attend another meeting. However, I have read it and wish to raise a point. It is stated fewer than 2,500 lines have been unbundled and that this represents 0.15% of available lines, the lowest figure in Europe. That is extraordinary and appears to contradict what Mr. McRedmond said.
Mr. Evans: There are two key differences. Unbundling is the process whereby another operator can take the bare copper cable from the exchange into the customer and deliver its own services directly from it. Eircom is providing its own DSL service and reselling it to other operators. That is the predominant way in which DSL is delivered today. We believe unbundling is the way to move to the next level and deliver better services, at lower cost, to the customer. The price was so high to deliver services from the 40 exchanges from which DSL had been rolled out that it could not have been done without funding under the national development plan because we would not have had a business case for doing so. If we had not obtained the funding, 0% of lines would have been unbundled to date. The figure for unbundling has remained static for the past 12 to 18 months. It is extraordinary and we would like to do more. If we get the process right, we will do more.
Deputy Broughan: It remains the case that it is incredibly difficult to gain access to exchanges.
Mr. Evans: Yes.
ComReg doesn’t answer the question!
Deputy Broughan: Should ComReg not publish what it knows about the state of the Eircom network? The network seems to be similar to the third secret of Fatima. When I put a question to the Minister last week, he stated only 9% of lines were available. Another person might state the figure is 30%. Someone else might say 50% of lines are in the old system to try to get the phones into every household. We should have that information. A colleague referred to the famous Pittsburgh project of the venture capitalists. Mr. McRedmond did not deny the figures gleaned from the information that came to market about Eircom but would it not be better to be transparent now and give the full information in that regard so we would at least know the state of play?
Reference was made to wireless solutions. They are exciting solutions but are they not fairly expensive? Someone living in a rural location, with no hope of getting broadband, is at a disadvantage compared to urban dwellers or people who live close to an enabled exchange.
Mr. Doherty: I will deal with the fixed wireless question and Ms Goggin will answer the other question. We have provided 78 fixed wireless local access areas. We have a map, which I would be delighted to distribute, which demonstrates their location. The combination of those, with the community broadband initiative undertaken by Government, significantly increases the reach in those areas. The parallel ESB and Esat initiatives in respect of the back hall provide another alternative but it must be recognised that if we need fibre to the cabinet and other models, the combination of the community broadband and the fixed wireless makes a competitive offering but there will be some people in this country who can get broadband only over satellite. That is a realisation of which we must be aware and we must examine the pricing structure that accommodates that.
Eircom said on the record today that it was 8% or 9% up on pair gains in the country. Those are the sort of levels. We have an agreement with Eircom, as DSL deployment comes into place, that it has to remove the pair gains.
Deputy Broughan: Has Mr. Doherty’s organisation independently audited that, given the volume of complains we, and journalists, have got as a result of the recent controversy about the situation?
Mr. Doherty: To be candid with the Deputy, the pair gains is an issue. In regard to the DSL enabled exchange, Eircom is mentioning a figure of 3% or 4% in those that are enabled. One aspect on which we will be concentrating is that the current acceptance rate of 77.69% can be moved up to 90%, and we are working with Eircom to get that additional 10% or 12%. We are trying to cluster our prioritisation around the bits that will make the most material difference most quickly. If we could get the figure up to 85% or 90% of those who look for broadband, that would be a significant outcome. As we move forward we will deal with the pair gains and the line distance in so far as there are options, both wireless and fibre to cabinet, as a way of addressing those. We have to accept that we will have to cut and dice every one of these solutions to get to the end game. There is no silver bullet here. We have a good trajectory and we need to bring into play all these aspects if we are to get broadband to most parts of Ireland. That will require a myriad of different solutions, and it certainly will not be all DSL.
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Some funny maths.
Mr. Evans: If we are selling a broadband service to our customers and reselling the Eircom product, between seven and eight out of ten lines in DSL enabled exchanges can be provided with a service. Mr. McRedmond quoted similar figures. Between 70% and 80% of lines are in DSL enabled exchanges. This means that broadband is available in approximately 60% of the country.
Deputy Perry: Given the difficulties, what hope is there of making a service available to the remaining 30%?
This "60% of the country" by Evans is an average that veils the dire reality of an enormous digital divide: for example in County Tipperary only 35% of lines will originate from Broadband enabled exchanges by March 2005, according to Eircom's own statement.
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Mr. Doherty: We had received over 300 complaints. At that point it was not apparent that the industry was doing what needed to be done. We were receiving an increasing number of complaints and, when it exceeded 300, issued the direction.
Finally we have the hard figures how Comreg functions. 300 is the trigger level to get them off their behinds.
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jwt wrote:Senator Kenneally: I have never heard of the vulnerable users scheme and I am not surprised that only 300 to 400 people have availed of it. If it is in place I would have thought ComReg would require Eircom to apply it automatically if a certain number of calls are made and that people would not have to apply for it or be made aware of it. It should be automatic and then those entitled to it would get it. Should ComReg not direct Eircom to proceed along those lines?
Ms Goggin: On timing, the price cap document came out in February 2003 and it was in that document that we made it a condition that Eircom introduce a vulnerable users scheme. In the previous price cap there had been an equivalent scheme, the lower quartile cap. That was put together differently but the idea was the same, protecting users at the lower end of the spectrum of use. The idea that there is an overall price cap but that within that there would be some form of protection for lower users goes back a number of years. The document mentioned by Deputy Ryan was a response to our consultations in the middle of last year. The idea was there previously and the details of the scheme are Eircom's responsibility, but we would require Eircom to have such a scheme.
Chairman: I hope I am not the only member of the committee who does not understand this. When saying "Eircom has agreed to publicise", I do not like the word "agreed". That does not mean anything. Is it mandatory for Eircom to advise customers of the low users scheme?
Ms Goggin: It is mandatory for them to advertise all their tariffs, and this is on their website, but it is pretty hard to find on the website. We will take that on board.
Chairman: Can you answer the question Ms Goggin, please? You have ordered Eircom to introduce this scheme, even though it was their idea. Is it mandatory for them to ensure it is introduced?
Ms Goggin: It is mandatory.
Chairman: Is it part of their agreements with you? Can you not answer the question?
Mr. Doherty: It is.
Actually the Vulnerable user scheme was on the eircom pricelist (which is actually easy to access once you know where it is). The pricelist is usually referred to in newspaper adverts which eircom has to place when changing prices.
However the dirty deed that eircom did was not to make the service widely known. This was a deliberate attempt to ensure that users, all of whom are in receipt of the maximum level of social welfare rates possible, were effectively charged normal rates after line rental was covered, for services. Basically this was the nastiest form of overcharging that eircom has ever engaged in. Targetted at probably the poorest group of telecom users.
A secondary point to make is that eircom has since dropped the free installation for existing customers when moving house, so that a low income customer is now probably discouraged from having an account at all by the fact that the installation charge is now almost the same as the basic adult rate for social welfare. The message here is clear: "we do not want you as a customer unless you are an income earner".
There has also been some disquiet by eircom over universal obligations - no doubt eircom no longer wishes to be obliged to offer services to unprofitable customers.0 -
shoegirl wrote:However the dirty deed that eircom did was not to make the service widely known. This was a deliberate attempt to ensure that users, all of whom are in receipt of the maximum level of social welfare rates possible, were effectively charged normal rates after line rental was covered, for services. Basically this was the nastiest form of overcharging that eircom has ever engaged in. Targetted at probably the poorest group of telecom users.
ComReg deliberately removed the subcap on the lower quartile of bills, in order to allow Eircom to increase the line rental, because Eircom had told them that they were making a loss with the lines. Subservient IDA man Doherty had immediately to fulfil Eircom's wish.
ComReg replaced the sub cap – which if it had stayed in place would have reduced Eircom's ability to hike the line rental to 12% (as Eircom state in their SEC filing) – with the Vulnerable User Scheme, which they let Eircom design! Eircom were able to hike the line rental by 23%, without any counterbalancing effect of the vulnerable user scheme, which is a total farce in many aspects (not advertised, not automatically implemented in the bills which fall under its modalities, not transparent for the consumer in its pricing structure, anticompetitive as only Eircom work it).
While the Committee had highlighted this farce and Doherty/Goggins left with egg on their face (only 300 to 400 VUS subscribers), the Nov hearing of the Committee completely ignored/forgot to follow up: How high was the bill rise on the lower quartile of bill payers? How many had subscribed to the VUS? How will ComReg halt a further line rental rise?
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