Ireland.com: "Eircom chief calls for lighter approach to regulation"

The Cigarette Smoking Man

Full Text is here (subscription reqd.):

http://www.ireland.com/newspaper/finance/2002/0913/764211674BWINTERVIEW.html

Such is the shadow cast by Alfie Kane over the former State telecoms monopoly that six months into the job, Mr Nolan is still seen as the "new" chief executive.

Superficially he is not dissimilar to his predecessor. He has the same slight build and a head that seems just a little too big for his body...

The Government must allow Eircom earn the sort of return that will enable it attract investment, says Mr Nolan. When the company was privatised in 1999, it made a very fundamental and far-reaching decision. It implicitly accepted that future investment in telecommunications infrastructure would come from the private sector and that, by definition, it would have to earn a commercial return.

It seemed like a one-way bet when the sector was booming and companies were queuing up to get into the the Irish market. The easy availability of capital meant that the various entrants would all be able to fund networks over which to compete with Eircom and one another.

A regulatory structure was put in place to suit this environment, the main tool in its armoury being to put limits on the size of the return a company could earn on its investment in infrastructure. This served as an indirect price cap, which worked in tandem with direct price caps on the price of retail services.

This approach - which was supposed to facilitate new entrants to the market - has been found badly wanting in the current environment. The rates of return allowed by the regulator are simply too low to justify further investment in the current market, Mr Nolan claims. Retail prices have been capped at a level where neither Eircom nor potential competitors can make money.

"There is a dilemma here... the Government has made a decision in previous times that it wants the market provision of these services and it wants competition. If the Government is then building something that competes with what it privatised then it seems to me there is something wrong," he argues.

The answer, says Mr Nolan - not surprisingly - lies in working with Eircom. Rather than pump money into fibre networks the Government should perhaps consider alternatives, such as stimulating demand so that it is economic for Eircom to expand its network.

"stimulate demand" = lowering prices = competition = regulation = ODTR :rolleyes:

"rather than pump money into fibre networks" - why don't we just tell all of the foreign multinationals to pack up and head home. We're not going to get much future investment if we can't provide the infrastructure...

DeVore

Turkeys call for fewer Christmasses!

DeV.

Lemming

Retail prices have been capped at a level where neither Eircom nor potential competitors can make money.

let me get this straight Mr.Nolan ........

You think that retail prices /should/ be higher? Christ all mighty - are you stoned or just stupid ? :rolleyes:

The answer, says Mr Nolan - not surprisingly - lies in working with Eircom. Rather than pump money into fibre networks the Government should perhaps consider alternatives, such as stimulating demand so that it is economic for Eircom to expand its network

Hmmmmm ... conflict of interests perhaps??

The government wants to create independent backbone, and eircom are basically saying, "Why pump money into infrastructure which would see all carriers competing on an equal footing??? The country has infrastructure already. We just happen to own it but can't seem to keep it in any state of repair"

In short .. eircom are saying "Give us public funding". In otherwords, they want the luxury of state-ownership, without the 'ownership' bit.

SkepticOne

I read the article this morning. Incumbents calling for 'light touch' regulation is very common since they own most of the infrastructure connecting a variety of networks to peoples homes. It is natural that they should want to be able to raise prices at the expense of consumers and competing companies.

It is even more natural in Ireland where we don't have much competing last mile infrastructure like two-way cable systems and are unlikely to get any in the future.

Eircom are claiming that by removing price caps on out of date services and the monopoly provision of phone lines, Eircom will some how be 'stimulated' to invest in new services. Just about everyone realises that the opposite is the case.

Allowing a monopoly to set it's own prices on last-mile services only makes sense if there is some chance that infrastructural competition will appear. This is highly unlikely in the current climate and Eircom knows this. What competition there is in the market is dependent on Eircom's wholesale prices being held down by the regulator.

Without last mile infrastructural competition, Eircom will in fact be disincentivised from bringing out new services since the need to do so is lessened and fear of cannibalisation of revenues from older (but nevertheless lucrative) services
is increased.

What Eircom naturally wants is to continue to charge high prices for out of date services and have the tax payer subsidise these. If Ireland wants to continue in the dark ages this is the policy it should adopt.

neverhappen

SkepticOne, If this interview is from the Irish Times newspaper, I think you and others should send your responses to the letters editor at lettersed@irish-times.ie