CCI calls for new regulatory model for Eircom

damien

CCI calls for new regulatory model for Eircom

Notes glacial rate of progress on Broadband roll out

The Chambers of Commerce of Ireland's (CCI) Head of Public Affairs, Seán Murphy, has today (06/12/04) called for a radical change in regulatory policy for Eircom following the publication of the Forfás survey confirming Ireland's abysmal performance on broadband connectivity.

He stated, "being third last in any list of international benchmarks, as we currently are for overall broadband takeup, is not where we need to be as country if we are to be competitive. SMEs account for over 90% of businesses in Ireland yet at present only 30% of SMEs in the country have a broadband connection. This is not acceptable. Given this feeble rate of broadband take up (at just over 2% of the population) radical actions need to be taken if we as a society and an economy are to catch up with and surpass our international competitors for the availability of this vital piece of infrastructure," he noted.

CCI proposes a number of immediate actions to support and foster higher connectivity for business, including

1. Using the model currently applied to ESB Networks to regulate Eircom's broadband investment on a Return-on-Assets basis. Under this model, the network investor gets a guaranteed low regulated return on assets commensurate with risk. At present, Eircom does not receive such a return, thus it has no business case for making this investment. This change would radically alter the model for broadband roll out. Eircom would be guaranteed a return on investment in its copperwire network and Ireland would gain a globally competitive advantage in broadband connectivity rates.

2. In return for making this regulatory change, Eircom would reciprocate by driving down local loop unbundling (LLU) charges. (The Forfás report notes that LLU charges are a significant drag on broadband connectivity at present.)

3. Investigating the benefits of enabling commercial operators to access the existing Metropolitan Area Networks (MANs) free of charge for a time limited period. This action would further incentivise all commercial operators to develop a commercially viable business case for investment in and roll out of broadband in the areas surrounding the MANs. This option could only be made subject to connection between the operator and the supplier being retained in open ownership.

He concluded, "while we applaud the Department of Communications, Marine and Natural Resources for innovative investments in MANs and the advanced undersea cable system linking Ireland to the US, a vital piece in the jigsaw is still missing in linking business users to these gleaming new communications networks-this suggested regulatory change may well resolve this issue.

eircomtribunal

"Monday, December 06 2004
by Deirdre McArdle


In light of Ireland's dismal performance in a broadband report by Forfas, the Chamber of Commerce Ireland has suggested a new regulatory model for Eircom.
The Forfas report places Ireland in 18th position out of 21 in terms of broadband adoption, standing ahead of Hungary, the Czech Republic and Greece. Calling the result "abysmal," Sean Murphy, head of public affairs for the Chamber of Commerce Ireland (CCI), has recommended a series of measures which, he claims, would positively affect Ireland's positioning in the European broadband league table.

"Given this feeble rate of broadband take up, at just over 2 percent of the population, radical actions need to be taken if we as a society and an economy are to catch up with and surpass our international competitors for the availability of this vital piece of infrastructure," said Murphy.

The radical measures Murphy has in mind involve regulating Eircom's investment in broadband on a return-on-assets basis. "To upgrade the broadband network across the country will involve significant costs," Murphy told ElectricNews.Net. "We cannot expect Eircom, as a privately-held company, to invest in the network without a viable business case for this investment."

Murphy referred to the upgrade of the country's power lines by ESB which were part-financed by the public through the addition of public levy charges on householders' ESB bills. Due to the success of this model Murphy claims it would be a suitable solution to Ireland's broadband problem.

"If Eircom were guaranteed a reward for investing in its broadband network we believe that it would be more open to the idea of making this investment in the first place," said Murphy.

The CCI does not state how this reward should be made to Eircom, but says that this decision should ultimately be left up to ComReg.

If this regulatory model were agreed upon Eircom should then be in a position to be generous and should be more open to reducing local loop unbundling (LLU) charges, according to Murphy. The Forfas report has cited these charges as being one of the main obstacles towards widespread broadband roll-out.

"While we applaud the Department of Communications, Marine and Natural Resources for innovative investments in MANs and the advanced undersea cable system linking Ireland to the US, a vital piece in the jigsaw is still missing in linking business users to these gleaming new communications networks -- this suggested regulatory change may well resolve this issue," concluded Murphy."

This is how enn report on the matter.
I have seldom heard such utter crap before.

P.

Slutmonkey57b

1: Electricity supply is an essential commodity (ie society does not function without it) so placing a levy on people's bills for the continuation of investment in the network is not going to ruffle too many feathers. Last-mile telephony is not "essential" as it once was, particularly not with the advent of mobiles.
2: Eircom's only incentive to upgrade their network is the fact that there is a viable business case for it - as evidenced by BT's recent turnaround to total IP-based switching and 100% bb availability. There is no future in letting copper rot to support a voice-only network.
3: Eircom's only business interest is serving Valentia's debt.

spongebob

eircomtribunal wrote:

This is how enn report on the matter.
I have seldom heard such utter crap before.

Typical ENN ....thats why I call them /dev/bull

M

eircomtribunal

Muck wrote:

Typical ENN ....thats why I call them /dev/bull

M

This time I did not mean ENN. Deirdre McArdle was only reporting.

Sean Murphy's ill-thought out proposals are born of course from the misleading explanations, bodies like Forfas, the Information Society Commission, ComReg and the DCMNR are constantly banding around about the causes of our broadband development failure.

It's the regulation, stupid.

P.

eircomtribunal

Sean Murphy gets another chance to publicise the Chamber of Commerce's ill-thought out proposals for a Broadband development plan.

P.

"Sunday Times December 12, 2004

Personal View: The vital link to global business

THE recently published Forfas report on broadband connectivity raises serious concerns regarding Ireland’s efforts to stay ahead of our international competitors.

The report, which looked at a wide variety of countries, places Ireland 18th out of 21 countries in terms of broadband adoption, only beating Hungary, the Czech Republic and Greece.

Being so far behind in broadband — as vital as electricity for businesses seeking to build productivity and control costs — is worrying.

As an expensive economy that can only compete through productivity gains, we need to be in the top three for broadband.

The small and medium enterprise (SME) sector accounts for more than 90% of businesses in Ireland yet only 30% of these companies have a broadband connection. This is not acceptable.

To meet the average of the 20 countries against which we are competing, Ireland needs in the region of 700,000 broadband connections by 2007. We now have slightly more than 100,000.

Eircom, which controls the national telecoms copper wire grid, is now a private company. Its priorities are not necessarily those of Irish society or the wider business community.

Upgrading the broadband network across the country will involve significant costs. The combination of rolling out broadband — which will cannibalise other parts of Eircom’s current revenues lines — and the high capital cost of upgrading its copper wire network, gives it no incentive to make this investment.

As a privately held company, Eircom needs a viable business case to justify this investment.

The current regulatory model governing Eircom’s broadband capability is not working. It does not offer enough reward to the company for rolling out broadband.

One regulatory model, which offers a calculated and just reward for investment, is the return- on-assets model.

Under this method the network investor gets a guaranteed low regulated return on assets that, in the case of Eircom, would allow it to earn a guaranteed return on its investment in its copper wire network. Bord Gais already operates this model, regulated by the commission for energy regulation (CER).

So too does ESB Networks in the electricity sector. Under this agreement, ESB Networks acts as a low-cost carrier for other electricity generators in Ireland, and competition is supported.

If Eircom was offered a similar arrangement it would have to bring down the cost of access to its network in return — a process known as local loop unbundling (LLU).

The Forfas report notes that high LLU charges are a significant drag on broadband connectivity.

Although the government should be applauded for the investments it has made in Metropolitan Area Networks (MANs) and the advanced undersea cable system linking Ireland to America, a vital piece in the jigsaw is still missing.

This suggested regulatory change, coupled with incentives for commercial telecoms firms to plug into the MANs, could radically alter the roll-out of broadband.

Eircom would be rewarded for investing in and upgrading its copper wire network and Ireland would catch up with international connectivity rates. Real competition could also be fostered."

Sean Murphy
head of public affairs, Chambers of Commerce of Ireland"