Broadband review suggests Eircom split

pete

A review by industrial development body Forfas has called for the establishment of a specialist broadband planning office to ensure the rapid delivery of the Government's new broadband investment initiative.

http://www.onbusiness.ie/2002/0328/broadband.html

Dustaz

Pete, you missed the real meat in that

The review calls for a debate on the merits of splitting Eircom's network business from its retail business, thus allowing it to become a wholesale network accessible to all operators.

Best idea ive ever seen come out of a quoted article imo. This would solve 90% of current problems wouldnt it? Im fairly sure we discussed this before as i have it in my head that its not a viable proposition how possible is this idea? Could the government theoretically force this? Would they want to?
Discuss please:)

oh, and for the 56k advocates ... ( )

Among other proposals are the introduction of flat-rate Internet access and the speedy passing of the Communications Bill.

pete

Missed it? What about my topic headline?

SkepticOne

Originally posted by Dustaz
Best idea ive ever seen come out of a quoted article imo. This would solve 90% of current problems wouldnt it? Im fairly sure we discussed this before as i have it in my head that its not a viable proposition how possible is this idea? Could the government theoretically force this? Would they want to?
Discuss please:)

For this to work, there has to be a split of ownership at the top too. This would not be a problem with a publically traded shares, where after a time, the ownership would diversify.

I'm not sure how it would work with Eircom. Maybe there would be letters of assurance stating that the two companies would be operated at 'arms length'.

Let's imagine for a moment that you don't believe these (hypothetical) assurances. The tendency then would be for the infrastructure side to charge high prices at the expense of the retail arm. At the top level, this would all cancel out but it would have the effect of driving out retail competition.

It could be argued that this situation already exists with the 'split' between Eircom (the phone company) and Eircom.net (the ISP). The phone company is responsible for the extremely high wholesale ADSL bitstream price which the ISP (Eircom.net) is forced to pay.

Of course as far as the shareholders (Valentia consortium) are concerned, you are simply paying them EUR 120 or whatever. They would not be concerned about the way the company is split up in to entities so long as these entities work together to maximise the profits.

jd

Hi
afaik It will actally be eircom ireland selling the adsl products , not eircomnet-eircomnet will provide the ip services and email services to them

dahamsta

Eircom have already announced that they wish to split the company into "Eircom Wholesale" and "Eircom Retail", although it should be pointed out that the company is already split, with Eircom Net in the "Eircom Multimedia" division.

Splitting it in this way will give better visible separation, but as SkepticOne suggests, it will have little or no effect on Eircom's abuse of SMP. There has to be clear financial separation, but more importantly in my view, there has to be heavy regulatory oversight.

The important factor here is that this oversight should already exist, since Eircom Net should be treated by the ODTR as Just Another ISP. This may be the case from the ODTR's POV, but, as is evident, there is still tangible market control taking place.

Will separation really tackle this? Probably, but in my view it won't tackle it hard enough.

adam

Dustaz

Originally posted by dahamsta


Will separation really tackle this? Probably, but in my view it won't tackle it hard enough.

adam

In your view, a wrecking ball outside Eircom HQ wouldnt tackle them hard enough adam


Surely, if there was clear financial seperaration the loss making company would be streamlined/re-evaluated/sold on by the parent company?

SkepticOne

Even with total separation (i.e. without any collusion between the wholesale and retail arms) it would still make very little difference since the wholesale arm will still be a monopoly and will try and maximise profits accross all its wholesale products and services. This means not undercutting itself by introducing a cheap broadband product that might divert revenue away from metered ISDN for example. Bitstream ADSL would still be expensive, but the burden of advertising and marketing would now be placed on the shoulders of the retail arm. This might make it a little fairer. The existing wholesale last mile monopoly is a large part of the current problem.

Nevertheless, this sort of separation is unrealistic.

SkepticOne

Originally posted by Dustaz
Surely, if there was clear financial seperaration the loss making company would be streamlined/re-evaluated/sold on by the parent company?

I don't think the retail arm would be allowed to make a loss as such. Rather, it might be operated at a low profit to discourage competition. Then, with competion out of the way, the profits would rise.

One thing that would worry me if this wholesale/retail split were to be swallowed: Where would be the incentive for the wholesale monopoly to innovate?

dahamsta

In your view, a wrecking ball outside Eircom HQ wouldnt tackle them hard enough adam

I know you say that somewhat tongue-in-cheek Dustaz, but for the benefit of our somewhat less-endowed members (in the humour department), I want to make it clear: I don't begrudge Eircom making a profit; I don't dislike Eircom; I never have. Sure I have a rant every now and then, but that should be expected. I /do/ begrudge them making too much money from unethical practises; and I /do/ dislike the people that defend their fallacious[1] "right" to leverage their SMP.

This was highlighted to me when I had a discussion with an Eircom rep yesterday. I told him who I was, and got the standard nervous giggle in response. At one stage in the (polite) discussion he asked what I "have against Eircom". I laughed, because it's a misnomer, that is probably encouraged by the middle and upper management that are responsible for the insitutional beliefs of the company. I have nothing againt 99.9% of the people in Eircom. But I have a hell of a lot against the .1% that should, in my view, be in jail. I have no proof that Eircom broke the law; but if they didn't, I'll eat my red fedora.

Surely, if there was clear financial seperaration the loss making company would be streamlined/re-evaluated/sold on by the parent company?

I'm honestly not sure what you're asking me Dustaz, but if you're saying that Eircom Net would be loss-making if the company was split (it already is), then sure it would; but that would be down to bad management and bad business plans, nothing more. ISP's mightn't make a hell of a lot of money, but they can make money. The suggestion (not your suggestion, the general suggestion) that you can't make money in the ISP business is rubbish.

Or perhaps you're talking about the wholesale division? Again, there's no reason why the wholesale division can't make money. I'm not asking Eircom to sell their wholesale products below or at cost; I'm asking them to sell them at a fair price. They are quite simply not doing so. If they were, the ODTR would never have interceded in Eircom's i-Stream rollout.

But of course it's much more likely that I've missed the point entirely.

adam

[1] Word of the week.

Typedef

Originally posted by dahamsta I'm not asking Eircom to sell their wholesale products below or at cost; I'm asking them to sell them at a fair price. They are quite simply not doing so. If they were, the ODTR would never have interceded in Eircom's i-Stream rollout.

This notion reminds me of the theories and indemnification behind the land wars in Ireland between 1860-190x.

Free Sale.
Fair Rent.
Reasonable Tenure.

Typedef.

Dustaz

Originally posted by dahamsta
In your view, a wrecking ball outside Eircom HQ wouldnt tackle them hard enough adam

I know you say that somewhat tongue-in-cheek Dustaz,

[scouse] Calm daown! [/scouse] It was completely tongue in cheek:)

Surely, if there was clear financial seperaration the loss making company would be streamlined/re-evaluated/sold on by the parent company?

I'm honestly not sure what you're asking me Dustaz, but if you're saying that Eircom Net would be loss-making if the company was split (it already is), then sure it would; but that would be down to bad management and bad business plans, nothing more. ISP's mightn't make a hell of a lot of money, but they can make money. The suggestion (not your suggestion, the general suggestion) that you can't make money in the ISP business is rubbish.
[/quote]
Not asking you, but asking everyone. Yes, eircom.net make a loss. If they were a self sufficient company they would either make a profit or go down the tubes and someone else would step in to make a profit.
Currently they dont have to take any measures because the loss is measured against the profit of the company in general. What i wanted to know is what would happen if a split did occur (Skeptic answered it fairly well actually).
[/B][/QUOTE]

vinnyfitz

I know this has already been discussed but I think its massive political significance is being lost. What Forfas says goes.


If we agree lets row in and endorse it. If we don't let's gain PR when we object to it.

Next Tuesday (being just after a bank holiday but listned to) at 07.00 "Boring Ireland" will be screaming for news.

We could prepare and supply a reaction dealing with the mediocre debate already in train between FF and FG and add in a whole load more piggy-backing on the Forfas statement.

SkepticOne

Originally posted by Dustaz
Currently they dont have to take any measures because the loss is measured against the profit of the company in general. What i wanted to know is what would happen if a split did occur (Skeptic answered it fairly well actually).

I believe that the 'split' being proposed is simply one of business entities under the single ownership of Valentia. I worked a few years ago in the head office of a small multinational in London. There, the company was split into a couple of dozen companies for legal and tax reasons. From an operational point of view, it did not make any difference. The executives never looked at the accounts for individual companies but rather the consolidated accounts of all the companies together broken down into into operational and geographical areas. I hope the powers that be aren't swallowing the 'split' thing.

SkepticOne

Originally posted by vinnyfitz
I know this has already been discussed but I think its massive political significance is being lost. What Forfas says goes.


If we agree lets row in and endorse it. If we don't let's gain PR when we object to it.

There is not enough time to find out what is going on.

There are two ways this split might occur. 1) Eircom simply presents itself to the outside world as split by setting up separate companies under the single ownership of Valentia or 2) Eircom fully divests itself of it's retail arm.

Neither of these solve the problem but the first is better than the second.

The first means that we are still dealing with a wholesale private monopoly. Prices would still be high for the consumer, but OLOs such as ESAT would no longer be able to moan about unfairness. Each OLO would be being treated equally badly and the consumer would still suffer. This first one is also highly unlikely.

The second would have no effect whatsoever apart from being a smokescreen. It would have no operational effect.

The second one most likely what is being proposed.

Chaos-Engine

How about Irelandoffline rallies support to become a stakeholder... I think it could be possible... What is requied to get a good hold?
15%...?

thats about €250,000.... probably more... I think it is possible...

Xian

Originally posted by SkepticOne
The second one most likely what is being proposed.

Agreed. Smells like another case of the vulture capitalists "sweating" the assets.