WOOHOO! oreillycom finally out of the loop!

vibe666

just picked this up off the register here: http://www.theregister.co.uk/content/22/35213.html

Ireland is to introduce competition to the line rental market by March, following the public outcry against Eircom's latest rate hike.

Dermot Ahern, the minister for communications, marine and natural resources has instructed the communications regulator (ComReg) to introduce a wholesale line rental product for voice and data services. In a strongly-worded address to the Joint Oireachtas Committee on Communications, Minister Ahern said that he will insist that the difference between the wholesale line rental price and the retail line rental price be wide enough to encourage competition in the market.

Introducing line rental competition would mean that carrier pre-select customers, who currently get one bill from their CPS operator for their call costs and another from Eircom for their line rental, would instead get just one bill per month. But the most important development would be the likely fall in line rental prices, since it would then be in Eircom's interest to keep line rental costs low.

"If the product is not in place by the end of March and if it is not delivering verifiable competition and lower prices by the end of June, I will direct ComReg to take line rental out of the present price CAP, and to set a specific rental cap no greater than the consumer price index," Minister Ahern said in a statement.

The move comes only weeks after ComReg approved a line rental increase for Eircom, which caused controversy among other operators and among the public. The latest increase from Eircom for line rental -- a jump of ?1.68 a month, bringing the monthly rate to almost ?24 -- is the third such price rise in a year.

"The public are angry because the price increase is well ahead of the general rate of inflation," said Ahern. "Secondly, it has been levied on that part of the telephone service where customers have no choice -- Eircom is the sole operator. At the same time prices are falling in those parts of the market where the company faces competition."

The minister also said that the fact that Eircom shareholders took a &eurol500 million dividend from the company during the summer of 2003 indicated that the company was looking after the interests of the shareholder, rather than the interests of the consumers.

"I believe that the interests of Irish consumers are not served by leaving them at the mercy of private shareholders, including those representing employees, whose interests are the corporate bottom line, even if this means higher costs for consumers and slower roll-out of advanced services," the Minister said.

On January 28, Standard & Poor's Ratings Services added Valentia Telecommunications, which owns Eircom, on CreditWatch. This has negative implications for the company's credit rating. The rating action follows Valentia's request that the group be permitted to pay dividends in the event of an IPO. Standard & Poor's said that it considered this to be an aggressive financial policy at the company's current BBB debt rating, given the moderate free cash flow expectations for Valentia in future years and the group's high level of debt.

/me does little victory dance.

this means, that prices for line rental can come down (right down) and you won't have to pay eircom a penny any more if you want to use another phone provider. doesn't that make you happy!

this means that broadband will get cheaper too as where line rental goes, all other communications costs will follow.:D:D

Johnmb

No, it's just an instruction to Eircom to offer a wholesale product. That means rental may come down a bit, but not much as whoever offers you the rental will still have to pay Eircom. I can't remember the exact figures (they are somewhere on the IrelandOffline board), but the wholesale rate is something like 15% lower than the retail rate, so at €24 retail (inc VAT) the other providers will have to pay Eircom about €20.40. So they'll have to charge us at least that amount, but most likely they'll have to charge a bit more to cover administration if nothing else. Then if they want to make a profit, they'll have to charge a bit more. In the end, we'll only notice marginal differences (which is better than nothing I suppose).

BendiBus

AFAIK, WLR price increases will be limited to the CPI. As WLR is linked to the Eircom line rental charge, Eircom will no longer be able to increase rental above the rate of inflation.

Which will stop them from further cross-subsidising their call charges by increasing rental. The 'basket of charges' farce will be ended indirectly.

Ripwave

Originally posted by vibe666
this means, that prices for line rental can come down (right down) and you won't have to pay eircom a penny any more if you want to use another phone provider. doesn't that make you happy!

I hate to bust your bubble, but WLR resellers have to rent the lines from oreillycom in the first price. ComReg decreed that oreillycom were to introduce WLR last June and that they were to give an 8% discount to WLR operators. They have to pay their overheads, such as administrative costs and advertising, out of that.

Oreillycom are also proposing to impose a €26 "handling fee" for processing any WLR requests. That means that the first 16 months of that "wholesale discount" of 8% will be needed just to cover the processing fee.

Genghis

I think there are two things here:

1. That Line rental now has the potential to fall. Even if the WLR is only 8% discounted on the retail, it will still be cheaper to move to the competiion.

2. The biggest single barrier to true competition is now removed - other telecom sps already offer lower call rates, add the attraction of a lower line rental, all on one bill, customers can wave eircom goodbye (and as soon as I can, I will - even if line rental is only marginally cheaper with others).

This also offers the potential for eircom competitors to 'do deals' on rental - they could:
- offer line rental at a below cost rate to attract new business (something they had no control over before),
- begin to offer 'fixed bill' offers - like Esats €25 package - how about something like €40 to include all national, local, and NI calls plus line rental?
- offer other creative and competitive packages that finally allow users to select the best option for them given their particular calling pattern.

So it is big news!

BigCon

Sorry if this is a stupid question - does this mean that I will have the option of getting some other company to install my phone line?

Ripwave

Originally posted by BigCon
Sorry if this is a stupid question - does this mean that I will have the option of getting some other company to install my phone line?

Nope. It means you will have the option of ordering your line from some other company, but it will still be installed by oreillycom techs, and connected to an oreillycom exchange, and the company you order the line from will hand over 92% of what you pay them to oreillycom every month.

(Note that that's 92% this year - Comreg envisage that discount being phased out over a number of years, though they haven't specified how long this "glide path" is to be. My guess would be 3 to 4 years, tops).

Ripwave

Originally posted by Genghis
2. The biggest single barrier to true competition is now removed - other telecom sps already offer lower call rates, add the attraction of a lower line rental, all on one bill, customers can wave eircom goodbye (and as soon as I can, I will - even if line rental is only marginally cheaper with others).

Single billing will definitely help. But the additional hurdles that oreillycom are insisting on putting in the way (like deleting you from the National Directory Database, and insisting that your new provider put you back in 5 minutes later, and preventing you from "mixing and matching" CPS services) will take a little bit of the shine off.

I'm not saying that WLR is bad - I'm saying that it's over a year late, and doesn't deliver nearly as much by way of real competition as the Minister would have you believe. It will make relatively little difference to oreillycom from a financial point of view, except in so far as it makes CPS just a little bit smoother, because of the single bill.

Capt'n Midnight

So all this means is that the Highest Line Rental in the Eu (if not the planet) is now index linked. - yeah that's a great victory - just rubber stamps the current extortion.

8% is not enough - if eircom give a lower (is that possible?) priority to customers from other telco's when there are line problems - then it's not really worth the hassle.

Changing your line would give rise to the notion that there is competition and eircom would get 92% + €26 (one months rental) anyway. Better off complaining and asking for a meaningfull rate.

Next month is FEB - you are paying nearly €1 per day for the Line & Comfort Phone Rental.

On January 28, Standard & Poor's Ratings Services added Valentia Telecommunications, which owns Eircom, on CreditWatch. This has negative implications for the company's credit rating. The rating action follows Valentia's request that the group be permitted to pay dividends in the event of an IPO. Standard & Poor's said that it considered this to be an aggressive financial policy at the company's current BBB debt rating, given the moderate free cash flow expectations for Valentia in future years and the group's high level of debt

Ripwave

Originally posted by Capt'n Midnight
if eircom give a lower (is that possible?) priority to customers from other telco's when there are line problems - then it's not really worth the hassle.

WLR customers won't be allowed to call 1901 - they'll have to call their own provider, who will log your problem in oreillycoms fault tracking system.

If anyone believes that there won't be a different level of service for oreillycom customers and WLR customers, I have a bridge I'd like to sell you.

Genghis

Originally posted by Ripwave
Single billing will definitely help. But the additional hurdles that oreillycom are insisting on putting in the way (like deleting you from the National Directory Database, and insisting that your new provider put you back in 5 minutes later, and preventing you from "mixing and matching" CPS services) will take a little bit of the shine off.

I'm not saying that WLR is bad - I'm saying that it's over a year late, and doesn't deliver nearly as much by way of real competition as the Minister would have you believe. It will make relatively little difference to oreillycom from a financial point of view, except in so far as it makes CPS just a little bit smoother, because of the single bill.

You are not seeing the knock-on effect yet, are you? Yes, 8% is very little, I agree. And going on form and attitude, eircom will drag its heels every step of the way unless they are regulated against doing so - the specific examples you mention re: directory databases and CPS are good ones, but just something else the rgulator needs to review.

The bigger picture is that the 90%+ market share that eircom sits on is predicated by the fact that customers simply do not want to get one bill from Esat BT and one bill from eircom. In addition, other 'telcos' were never in a proper position to take on eircom head on - they could only compete on call costs. Take into account other factors such as mobile use and the fact that the average bill now has a significant fixed call-rate element (namely dial-up charges), and the other telcos were left very little wriggle-room.

In effect, the former monopoly eircom once had has been substituted by a monopoly on line rental. I contend that this is the real reason that competition has not worked. Line rental, eircoms weapon of monopoly is about to be decommissioned.
Factors such as the discount rate, or the fact that the revenue ultimately goes to eircom are irrelevant to the bigger picture.

Ripwave

Originally posted by Genghis
You are not seeing the knock-on effect yet, are you? Yes, 8% is very little, I agree. And going on form and attitude, eircom will drag its heels every step of the way unless they are regulated against doing so - the specific examples you mention re: directory databases and CPS are good ones, but just something else the rgulator needs to review.

Eh Genghis, do you have any idea of the history of WLR? What I'm describing isn't mere speculation. oreillycom were originally told to introduce WLR by December 2002. They were given an extension until April 30th 2003, and then another extension until June 2003. The regulator has been "reviewing" this stuff for over 2 years, and we still don't have WLR.

In fact, do you remember that second increase in Line Rental last June? oreillycom announced that it was brought in to coincide with the introduction of Wholesale Line Rental (WLR). Maybe we should ask for our money back? :-)

The bigger picture is that the 90%+ market share that eircom sits on is predicated by the fact that customers simply do not want to get one bill from Esat BT and one bill from eircom.

90%+ of the people who sign up for CPS are totally unaware of the fact that they're going to get two separate bills until they get two serarate bills. The lack of single billing certainly increases the "churn", as people end up going back to oreillycom for one reason or another (rather than switching to a different CPS operator), but it doesn't explain the low take up of CPS in the first place.

In addition, other 'telcos' were never in a proper position to take on eircom head on - they could only compete on call costs.

They can still only compete on call costs. WLR won't change this. There was nothing to stop them giving their customers a "Line Rental discount" on their CPS bills up to now, except that they couldn't afford it. They won't be able to afford it when WLR is introduced either. (The €1.60/month "discount" they are getting this year will have to pay for creating and maintaining an alternative 1901 service, a subscription to the National Directory Database and a variety of other tasks that oreillycom already fund from the Line rental - in other words WLR customers will end up paying for this twice).

Take into account other factors such as mobile use and the fact that the average bill now has a significant fixed call-rate element (namely dial-up charges), and the other telcos were left very little wriggle-room.
In effect, the former monopoly eircom once had has been substituted by a monopoly on line rental. I contend that this is the real reason that competition has not worked. Line rental, eircoms weapon of monopoly is about to be decommissioned.

No it's not. Not by any stretch of the imagination. WLR is not much more than a cosmetic change that will hide from the customer the fact that they're still paying oreillycom for their line, and that Ireland will continute to have the highest line rental charges in the EU, because that's the way oreillycom wants it.

If you're a WLR customer, and you pick up your phone to listen to your voicemail messages, you'll still hear the greeting "Welcome to eircom voicemail". Every time you turn on the radio or watch the weather on RTE Television, you'll be reminded of them. This is oreillycoms real monopoly - they have managed to brand themselves as "our telco" to the vast majority of people. Even with the huge sense of outrage expressed last week, by the time WLR is finally available, the vast majority of the people expressing outrage last week will have forgotten all about it, and will continue to deal directly with oreillycom because "it's not worth the effort" to change.

Genghis

Thanks for the detailed reply Ripwave. I do not claim to have as much knowledge of the area as you, and I accept all of your points. However, I do think that on balance the introduction of WLR and single bills has huge potential for shaking-up the market; if I can't accept that then I have to accept the alternative hypotheses: that Irish consumers simply do not want competition and are happy to pay a private monopoly any price for a service. Essentially I think that up to now competition has not been properly created, and the proposed measures take a big step towards that.

You say that CPS has not worked, and I agree that it hasn't been the success it could have been. However, the following points are also worth noting:

1. Eircoms most serious assault was right after the deregulation of the market - I believe at one time their market share dipped below 80%. This was because of aggressive activity by new entrants and the adoption of these by customers. It was only down to the inconvenience of two bills, and the predatory (and if not illegal, then certainly immoral) actions of eircom to use their access to CPS data to 'win back' customers that their market share began to re-approach 100% market share.

2. A useful illustration of true telecoms competition is the mobile market. Once another operator was empowered to compete as an indepedent company, Eircell saw its monopoly dwindle to 60% very rapidly. I appreciate that the market was exploding, and that there is something very dubious about the activity of the big 2 mobile players in recent years, but I still think it is a useful example of how properly licensed and properly empowered new players can compete.

Finally, I agree that Comreg / government could do more to improve the situtation further: such as regulating the national database, re-nationalising / seperating the local telecom network management / operation / ownership from eircom, making internet call up charges open to CPS / other operators and allowing for multiple CPS selection if that is what a particular customer wants.

vibe666

oh, well. seemed like something good at the time.

at least it's a start anyway!

i say we should do it like the russian used to and march them out to the spike and execute them. maybe that would help. it'd get the ball rolling anyway.

ednwireland

your still paying eircom line rental they'll just hide the cost (increases) in the bill of your cps telco provider who may or may not reduce the amount to get your business if i was them i would point out in large letters on the bill what your eircom line rental charge is cos that will never go away (don't see a huge queue of telcos looking to build an alternative set of phone lines across the country)