eircom ComReg bundles settlement

Tom Young

Seems there eircom ComReg bundles settlement might be more in line with ComReg's expectations from the case.

I'd personally have liked to have seen eircom getting a slap down or fine over the whole thing.

The settlement agreement states ComReg will use: Net Revenue Test using
average total cost - This creates a 'straight jacket' effect on eircom in my view.

Other terms:

The parties have agreed the following in relation to bundles that include retail line rental:

1. Bundles will be assessed by reference to the Net Revenue Test using
average total cost;

2. Eircom is not to launch bundles which include retail line rental without
ComReg’s prior approval;

3. Eircom will modify the October 2008 bundles in a manner approved by
ComReg. In default of such modification, Eircom will withdraw such bundles;

4. If there are any bundles in the market that include retail line rental that have been cleared by ComReg, which ComReg subsequently determines do not pass the Net Revenue Test, Eircom will modify or withdraw such bundles;

5. ComReg has agreed to conduct a consultation in relation to a further
specification of the existing obligation not to unreasonably bundle.

Now, what remains to be seen is whether or not ComReg has the attention span to enforce it. Recent history would be negative.

This is use of ex post competition law levers by eircom, on this case, they may have settled but lost. Meanwhile the market has to wait. ex ante measures and enforcement is far better but requires skill, analysis and robust outputs (Note to ComReg - You're not good at that).

ComReg had some of the country's top lawyers on this case, as well as a young renound Irish barrister from Brick Court Chambers in London called Robert O'Donoghue.

Next up - Line Share.

ninjasurfer1

Tom Young wrote: »

Seems there eircom ComReg bundles settlement might be more in line with ComReg's expectations from the case.

I'd personally have liked to have seen eircom getting a slap down or fine over the whole thing.

The settlement agreement states ComReg will use: Net Revenue Test using
average total cost - This creates a 'straight jacket' effect on eircom in my view.
.

So, in essence, eircom have had to remove the bundles or increase the bundle price to customers because of this decision?
Nice result!!! :rolleyes::rolleyes:

I'd personally have liked to have seen eircom comreg getting a slap down or fine over the whole thing.

BurnsCarpenter

ninjasurfer1 wrote: »

So, in essence, eircom have had to remove the bundles or increase the bundle price to customers because of this decision?
Nice result!!! :rolleyes::rolleyes:

Comreg is there to promote competition in the market and below cost selling is anti-competitive.
I'm sure if eircom started selling bundles at a euro a month it would go down well with the general public but comreg could hardly allow it.

bealtine

BurnsCarpenter wrote: »

Comreg is there to promote competition in the market and below cost selling is anti-competitive.
I'm sure if eircom started selling bundles at a euro a month it would go down well with the general public but comreg could hardly allow it.

Which is why we have the highest line rental and the highest calls basket on the planet.

They'd have been better off making eircom charge all the operators the same prices as they charge themselves, that would have been smarter and better for all consumers of eircom products (like broadband and calls)

Tom Young

I've posted here on the calls basket before. There's a component in it which is a hangover from the eircell days. F2M recovery I believe. Wasn't spotted and is extant since God knows when.

ninjasurfer1

BurnsCarpenter wrote: »

Comreg is there to promote competition in the market and below cost selling is anti-competitive.
I'm sure if eircom started selling bundles at a euro a month it would go down well with the general public but comreg could hardly allow it.

Is that why eircom is getting rid of approx 1200 staff?
It seems to be the only way they have of reducing costs quickly...

cgarvey

ninjasurfer1 wrote: »

Is that why eircom is getting rid of approx 1200 staff?

No, but I suspect you already know that.

ninjasurfer1

cgarvey wrote: »

No, but I suspect you already know that.

an ex school friend of mine works there, and he said that that is the reason for the staff reduction...if they reduce costs, they can reduce their charges?
Sounds a bit simplistic to me.

cgarvey

Every owner of ericom, since it went private, has expressed an interest in reducing, dramatically, the workforce. ericom has way too many staff; even still. It's riddled with legacy union-driven civil service inefficiencies which means it can't compete effectively with newer telcos. It has happened with incumbents the world over, but most have adjusted adequately. In eircom's case, every trick in the book is used to hold on to a decreasing market share.

So with respect to your ex-school friend, I don't think his opinion is objective or entirely correct.

Steviemak

cgarvey wrote: »

It's riddled with legacy union-driven civil service inefficiencies which means it can't compete effectively with newer telcos. It has happened with incumbents the world over, but most have adjusted adequately.

I don't think that is very fair - when the govt sold it in 1998 eircom had 14,500 employees. It now has less than 6000 - soon to be reduced to 4,800. I'd like to see the current civil service stripped by that amount without one day of protest. Also, eircom staff are one of the few large private companies to implement huge pay cuts and pay freezes until 2011 over the last year.

eircom is a highly more efficient operation than any public service. Show me a company that has been run by ruthless venture capitalists for years that is not efficient.

watty

It's maybe easier to asset strip and not invest in rollouts of new technology than fight unions/ex-semistate workforce.

What Venture Capitalists? None of the owners have invested. None were real venture capitalists. They all carpet bagged and ran. Mobile Phone division sold off, masts sold off recently. Almost every (or all?) takes overs leveraged rather than real investment so now Debt must be nearly x4 higher, yet little investment to so for it versus Revenue etc.

I don't know, maybe eircom is very efficient now. But for sure they can't compete with Mobile or UPC, nor do the Fibre rollouts that ex-incumbents and others are doing in France, Portugal, Spain Greece, Australia, UK and Finland. Or even Kenya. 1/3rd of their line revenue is supported by Social Welfare and lines are at 66% penetration. That's a national disaster for Fixed Infrastructure. We have most expensive rental in world and eircom can't afford to reduce it.

cgarvey

Steviemak wrote: »

I don't think that is very fair

I do, and stand by it. For the sake of clarity, I am not an employee/contractor, and haven't been.

Steviemak wrote: »

when the govt sold it in 1998 eircom had 14,500 employees. It now has less than 6000 - soon to be reduced to 4,800.

Yes, but it's still way too many (especially given the current investment level in to the network; i.e. none/not even meeting depreciation). Also, those job cuts came at enormous cost.

Steviemak wrote: »

I'd like to see the current civil service stripped by that amount without one day of protest.

So would I, but that's nothing to do with the topic at hand.

Steviemak wrote: »

Also, eircom staff are one of the few large private companies to implement huge pay cuts and pay freezes until 2011 over the last year.

OK. Doesn't alter the fact that they still have too many staff (overall headcount, I mean). Plenty of companies have done similar, by the way; but maybe not large companies, as you allude to.

Steviemak wrote: »

eircom is a highly more efficient operation than any public service.

Based on what? Source?

Steviemak wrote: »

Show me a company that has been run by ruthless venture capitalists for years that is not efficient.

eircom. In fact, all those venture capitalists you refer to have commented in some shape or form about the staffing levels, I think. Every other domestic telco in Ireland is VC backed, but manage to run themselves much more efficiently. By efficient, I mean they deliver a reasonable service with much lower staffing and more profitably than eircom (although profitably usually means less of a loss; but that's a debate for another day).

I'm interested in how you measure efficiency (especially compared to the civil service). I'm also interested to know have you a vested interest in the debate (i.e. an eircom employee/contractor or related to one, etc.), because you do have a rather optimistic outlook on eircom. I don't mean that in an accusatory manner (feel free to continue to debate, etc.), just wondering if that explained your positive outlook (something I've not come across to often!)

lucernarian

The investment/deprecation argument is wrong, in my opinion, limited as it is.

Eircom use excessive depreciation rates to reduce their tax bill. I remember seeing the depreciation values they used while on the stock exchange. Totally unrealistic. Underground ducting lasts more than 14 years. Poles last more than 20 years.

The job cuts in eircom were accompanied with very healthy reduncancy options for the boys. Who were then sometimes re-hired later on as contractors with much higher rates of pay albeit not as permanent staff. Happened in all areas of the company I'm told.

cgarvey

To_be_confirmed wrote: »

Eircom use excessive depreciation rates to reduce their tax bill.

Yup, I believe they do. I have it in my head that other EU incumbents do to (as do many telcos). Is that wrong? I can't remember the source for that, so I'm open to correction.

However, even with aggressive depreciation, it looks to me that, even with aggressive depreciation, any investment that is not on real depreciation is in DSL rollout without addressing the ageing network itself. Certainly we're still seeing new split lines, we're still seeing brand new developments waiting over 1year for any trunk access, the days of road-side pole/wire replacement in rural areas are done, line path lenghts haven't come down, street cabs are still in dire repair, line faults are still one of the highest in the EU (even with a pretty sharp decrease in line numbers). There's not many metrics available to prove either way, but one thing is for sure; if eircom believe they were massively improving the network, we'd know about it.

To_be_confirmed wrote: »

The job cuts in eircom were accompanied with very healthy reduncancy options for the boys.

Yup, some very sweet deals to be had back in the early 2000s anyway, including written agreements for re-hire as contractors. That was my point earlier.

lucernarian

Between 2006 and 2008 I saw a fair amount of actual network renewal take place. A lot of the "horror stories" of the last mile (that I was aware of) were fixed then. There used to be a lot of pairgains where I live, now there's less than half the number for the same area.

Drogheda had one very large main exchange with none in outlying areas a few years ago. Then RCUs made their appearance for some new estates, but there were (and are) issues with the length of existing lines. A year or so they set up a proper exchange in the AEH on the other side of town away from the main exchange, and transferred at least 9 or 10 cabinets worth of lines to it.

Also, since about 06 I've never heard of anyone's lines becoming pairgained. Unless RSU systems count. To be fair, the improvement I've seen in line quality has not been reflected everywhere. And eircom have a problem in that they are spending money on what is a legacy way of providing comms. Reliability has improved, but higher renewal investment won't change the long term picture. A 5 mile line of Cat5e rated cable still will have feck-all bandwidth.

watty

I thought most phone wiring was Cat3, not even Cat5. But maybe that was 1980.

lucernarian

No the spec is Cat3. My point was if they improved it to Cat5e standard, it would still be completely inadequate at the distances seen on the Irish network.

Sponge Bob

Irish line lengths are not abnormal and you are correct about the access network investment in 2007/2008 . Shame this has largely stopped .

Line lengths compared below ( 3 year old data) , we may have disimproved _relatively_ because other countries such as the UK have carried on investing since.

http://www.comreg.ie/_fileupload/publications/PDanon.pdf

lucernarian

I understood it was not abnormal but still higher than average. And the large majority of lines would want to be a lot shorter to get to a reliable 10 mbps speed. And that applies to every country (without a fibre rollout...)

watty

Hardly anyones lines in any country doe 10Mbps. < 20% You need cable or fibre, or FTTC + VDSL to ensure 10Mbps. In which case it's not harder to get 20Mbps. <5% of DSL can do 20Mbps anywhere... Approx figures.

The majority of DSL can do > 3Mbps. To have 10Mbps or higher univerally DSL can't do it.