Eircom and Profit?

tHE vAGGABOND

Not a flame, but a question, wondering about people’s opinions on a slow moment here in the office?

Do Eircom have a right (in your opinion?), as a private company to make a profit? Like banks charging a fortunes to account holders and making billions in profits. I can check my AIB account balance on an ATM machine in the US and some here in England, but not on Bank of Ireland or any other non AIB ATM in Ireland.

The fact Eircom were once a public company is a non-issue as I see it. We (’we’ as in the Irish state) sold it. The state sold it and then the shareholders sold it again. So it’s now a private company (although it’s a private company who offers services to the public). Since it has been sold - who paid for what 5,10,15 years ago does not matter.

In that case, why can’t they charge what they want?

Meh

Like all companies, they not only have a right to make a profit, they have a responsibility (to their shareholders) to make a profit.
The reason why Eircom can't set its prices to what it wants is because it is a monopoly. The State established the Department of Posts and Telegraphs (as Eircom was originally called), funded its construction of the local loop from taxes, and gave it exclusive monopoly rights to provide telecom services. Eircom has gained a huge commercial advantage ("significant market power", in ODTR speak) from this. Therefore, to preserve a free market, it is subject to regulation in a way that other telecomms companies are not. The company might have been sold a few times over, but they still have the advantage of the local loop monopoly.

SkepticOne

Originally posted by tHE vAGGABOND
[BIn that case, why can?t they charge what they want? [/B]

I would imagine that everyone has their own answer to this. Here's mine and this is a purely personal view.

If Eircom, through being the best, most efficient, most innovative, telecommunications company had battled against competition to get to its current position as market leader and 'last mile' monopoly then my position would be different but here goes.

What is now Eircom was once simply the Irish telephone utility. It was designed as a monolithic entity and competition with it was illegal. If you wanted a phone, you phoned the P&T and waited. It was built up with the help of the people of Ireland.
For purely practical reasons, the Government realised that it would be madness to privatise this company without controls in place to protect the consumer. For example, you might be in an area that Eircom consider uneconomic, but they are forced under the universal service obligation to provide you with a basic phone line (this needs to be updated to include decent modem communication)

These controls were set up and it was into this environment that what is now Eircom was sold.
Unless they are very thick, the buyers of Eircom should also realise that the nature of these controls have to change as new technologies are developed.

Without these controls and obligations, Eircom would probably have been sold for far more money since all they would have to do to make money would be to tripple their line rental, up their local call rate to 10p a minute etc. They could basically hold the country to ransom.

The government could have got far more money for Eircom if they had sold it as an unregulated monopoly but they forwent that money in the national interest. Just as well. Think of the damage to the economy that might have resulted otherwise.

SkepticOne

My last reply was in answer to the question: "Why can't they charge what they want?".

It is not the same question as "Do Eircom have a right to make a profit?" which was posed by tHE vAGABOND at the start of his post.

In my opinion, no company has a right to make a profit. They have a right to attempt to make a profit. If a baker sold mouldy bread, they would make a loss, and quite rightly so.