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Undercutting the Regulation... until when?

  • 10-02-2010 4:01pm
    #1
    Registered Users Posts: 37,534 ✭✭✭✭ the_syco


    Hi all,
    Putting this here, as this concerns Eircom(phones), ESB(electricity) and Bord Gais(gas), so this forum would probably be best for it.

    In my experience Eircom cannot offer less than what it sells to the resellers. They must also give their resellers (their competition) any new stuff before it gives it to their own customers. The same applies with ESB and Bord Gais, where they can only reduce their prices so far, but their competition can undercut them, even though they are providing their competition with the goods.

    I've often seen people say "make the switch" as it's cheaper, and it is. But my question is this: if everyone switched from a regulated body to a non-regulated body, say ESB to one of it's reselllers how would Eircom/ESB survive long term? Before someone says "lower the price", they can't. And if they do, they must give it's competition cheaper rates. Since I've never seen any reseller put hundreds of miles of cable down, as Eircom & ESB do for their relevent infrastructure, if they got less money in, isn't it biting the hand that feeds it.

    Will reread & edit this at a later stage. In ful rant mode atm.


Comments

  • Registered Users Posts: 1,419 ✭✭✭ Cool Mo D


    What you're missing is that the prices set by state monopolies are regulated, and do not reflect what it costs them to provide.

    Take ESB for example. Electricity costs were purposely set higher then what ESB was happy to charge by the regulator - this was to create an incentive for competition to enter the Irish market.

    The idea is that when competition comes in with lower prices, and gains significant market share, ESB will be allowed lower their prices. There is a sheltering period for new entrants to the market from the power of the ex-state monopolies, to encourage competition. When you say the ESB can't lower the price, generally they can do just that if they were allowed.

    The issue with who will develop the infrastructure is a valid one - but Eircom aren't doing it now they're private, so there's no reason to shed a tear if they get torn up by the competition.

    In the end it's likely that the government, in no small part thanks to making a mess of privatisation, will be paying for infrastructure.


  • Registered Users Posts: 37,534 ✭✭✭✭ the_syco


    Cool Mo D wrote: »
    The issue with who will develop the infrastructure is a valid one - but Eircom aren't doing it now they're private, so there's no reason to shed a tear if they get torn up by the competition.
    As far as I know, the Aussie owners raped Eircom, and didn't put a cent into infrastructure since it took over. Hope the new owners (think that went through last year, yeah?) will do better.


  • Closed Accounts Posts: 4,858 paulm17781


    Cool Mo D wrote: »
    The issue with who will develop the infrastructure is a valid one - but Eircom aren't doing it now they're private, so there's no reason to shed a tear if they get torn up by the competition.

    Sadly they still own 'the last mile' - the copper to your house - which is harder to compete with. Wireless and cable are the only real competition to that and in fairness, UPC have been investing heavily in infrastructure.


  • Registered Users Posts: 8,781 ✭✭✭ Carawaystick


    Only a part of the esb is in competition, the transmission networks and distribution networks part is still a monopoly and get their cut even from alternative electricity suppliers.

    THe airy fairy pie in the sky theory is that increasing prices of electricity will allow private co's to compete with the esb and reduce the prices of electricity overall. Is the price of electricity lower than before the eejits in cer started?
    Do the eejits in cer accept any blame for this?
    where does the salaries of the eejits in cer come from? it's pocketed out of your bills. cer have no incentive to make themselves more efficient - whatt're ya gonnado? cut off your electricity?


  • Registered Users Posts: 1,419 ✭✭✭ Cool Mo D


    Only a part of the esb is in competition, the transmission networks and distribution networks part is still a monopoly and get their cut even from alternative electricity suppliers.

    THe airy fairy pie in the sky theory is that increasing prices of electricity will allow private co's to compete with the esb and reduce the prices of electricity overall. Is the price of electricity lower than before the eejits in cer started?
    Do the eejits in cer accept any blame for this?
    where does the salaries of the eejits in cer come from? it's pocketed out of your bills. cer have no incentive to make themselves more efficient - whatt're ya gonnado? cut off your electricity?

    Despite its flaws, the electricity model is a not too terrible (but not brilliant either) way of doing it. It would have been a lot better if Eircom's infrastructure was kept as a state monopoly offering access to anyone at a fixed price. And the price of electricity is starting to slowly come down - over the long term I think that being able to buy your power from different providers will be better than keeping the ESB as the only game in town.


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