The Government should intervene in telecoms regulation to stimulate the economy and promote the build-out of broadband infrastructure, a senior adviser to the Government has said.

Mr Michio Narutu, chairman of computer group ICL and a member of an Irish Government advisory committee on telecoms, said there should be more intervention to promote technologies such as digital subscriber line (DSL). These enable higher amounts of data to be transferred at high speed across ordinary telephone lines.

He said the concept of providing subsidies to build out these technologies was contrary to the World Trade Organisation's principles. Rather, free competition should be combined with strong government intervention.

He cited Korea, where the State bought telephone exchanges from the monopoly telecoms firm through a compulsory purchase order to enable competing firms to access the local loop.

"Many companies got into the market and used dark fibre and there has been a rapid spread of DSL," he said. "Korean people like playing computer games through these networks and this has greatly contributed to people's computing skills.

"The problem about a monopoly is that it has enough power to control the market," says Mr Narutu. "Even if a third party starts another business a monopoly can always set up and get itself in a better position."

"Private companies have the right to chose choose when or where they invest and have to pursue profit for shareholders," said Mr Narutu. "We have to allow private companies to behave like that."

Mr Narutu's comments come just days after BT rejected an $8 billion bid by a private consortium for the local telecoms network in the UK.

Industry figures believe if an offer were accepted by BT it would stimulate investment in broadband technologies, as a new owner would promote use and hence competition through the network.

According to Mr Narutu, the Irish Government is now at an economic crossroads and faces similar decisions to those faced by the Japanese government and people in 1975.

"At that time all the Japanese people were equally rich and they decided to pursue quality of life," says Mr Narutu. "But that was the start of the decline and end of the prosperity and the bubble came and we lost huge money.

"Ireland has succeeded for 10 years in the software area and information technology," he says. "They are now at a turning point . . . "People here should be cautious and invest in a new model of economic growth. Now wages are increasing and the difference between rich and poor has narrowed. That is a very dangerous thing for a country."

Mr Narutu believes the Government should focus on boosting business, which does not require a huge boost in population figures.

"There are just 3.7 million people in Ireland but you have a big advantage, you do not need to stick to your territory," he says. "The future is in culture and language. You have 40 million Irish in the US, five million in Canada and Australia."

Investing abroad in a similar fashion to Singapore's Chinese investments should not be discouraged, according to Mr Narutu.

And the Republic's creaking infrastructure will not be the only problem that could upset the Government's plans to become a hub for e-commerce. The complexities of international regulation will also pose challenges, he believes.

"To promote e-commerce we have a big problem because ecommerce is a network society, entirely global, but all the legacy regulations and legal structures are not," says Mr Narutu.

"We cannot provide the data contents such as music and computer games through the network, and of course if we trade on e-commerce and it's good, then they levy the tariff."

As each country has its own tax systems, e-commerce would be undermined if indirect taxes such as VAT or consumption taxes were imposed. A proposed EU directive is not practical, says Mr Narutu.

"The EU recommends that vendors of data contents should find where customers are and register the tax office of the place or country of the consumer. It's impossible."

Other hurdles slowing the adoption of e-commerce are providing a safe harbour or indemnification to ISPs for material they publish on the Internet and security issues arising from the use of credit card numbers over electronic systems, he says.