O2 and Vodafone's stranglehold on the Irish mobile market could bechallenged, writes Jamie Smyth, Technology Reporter

Two stories are likely to dominate the telecommunications market during 2004: the continued roll-out of high-speed internet technologies and increased competition in the mobile phone market.

Vodafone and O2 continued to dominate the mobile phone market last year with recent surveys showing the firms have a combined market share of 95 per cent.

Bearing in mind this iron grip on the market, it is not surprising that Irish users continue to spend more on mobile services than consumers in any other European Union state.

But there are signs that 2004 could be the year in which the two firms' stranglehold over the industry is loosened.

The introduction of full mobile number portability in 2003 laid the foundations for a more competitive industry. It has been a major success, with more than 40,000 people switching mobile provider while keeping their own numbers.

This system removes a key barrier to competition and has prepared the market for a more competitive landscape during 2004.

Under the terms of the third-generation (3G) mobile phone licence won by Hutchison in 2002, the firm will have to begin offering new multimedia mobile services, which are already on offer in Britain and Italy.

If the firm follows the same business model that it has pursued in these markets, consumers should benefit from cheaper calls as Hutchison slashes prices to attract users.

But Hutchison may not be the only new entrant in 2004 as Eircom has said that it wants to get back into this fast-growing sector of the telecoms market.

The firm, which sold Eircell to Vodafone in 2001, can begin offering mobile services from May 2004 when a non-compete clause with Vodafone expires.

Getting back into the mobile market could prove a lucrative strategy for the dominant fixed-line provider, which retains a billing relationship with most Irish households and can leverage its brand name to boost its market profile.

But Eircom faces a conundrum in working out how it can best, and most efficiently, enter the market. It has already asked the three existing mobile companies to provide it with terms under which it could piggyback on their networks to provide a service.

But in the past the three licensed network providers have refused to sign deals with so-called "virtual operators". It is likely that they will think long and hard about giving Eircom an easy route into a market that they have dominated for so long.

Eircom, which is carrying more than €2 billion in debt, will probably not try to acquire an existing player such as Meteor because of the huge price tag attached.

It will probably try to invoke a clause in Hutchison's 3G licence that forces the company to offer virtual operators some kind of deal. Relying on regulation may not sit kindly with Eircom, which has spent the past five years at loggerheads with the regulator.

But the company has consistently sought tougher regulation of the mobile sector since it sold Eircell. It may now try to use more regulatory intervention to its advantage.

The Commission for Communications Regulation (ComReg) could play a vital role in shaking up the market next year when it publishes a comprehensive sector review under the new European framework.

If ComReg intervenes and pushes down prices in the mobile market, all the existing players will have to review their strategies.

This may create opportunities for nimble new entrants and generate market momentum. Alternatively, it could result in a legal quagmire for all the operators.

But on balance, 2004 should be a better one for consumers, who should benefit from falling prices and the availability of new 3G mobile services.

Third-generation services will offer businesses and consumers faster access to the internet from mobile devices and laptops. It will also provide a range of video phone services similar to the one available from Hutchison in Britain and Italy.

A full consumer launch of 3G mobile services will probably not take place in the Republic until mid-to-late 2004. But businesses are trailing the technology and it should boost high-speed internet access (broadband) across the State.

Broadband is likely to be the other big story in telecoms during 2004, with Eircom and the Government both extending networks to regional towns in a move that should increase take-up of the new technology.

Under pressure from the Government's €140 million strategy to build broadband rings around 80 towns in the Republic, Eircom has at last decided to take the initiative and roll out broadband.

In mid-December Eircom said it would make digital subscriber line (DSL) available in every Irish town by March 2005.

This will be a massive boost for small and medium sized firms in these areas, that will be able to dramatically cut the cost of internet use.

With the broadband supply issue largely put to bed in 2004 and 2005, attention should now turn to demand issues and particularly the cost of DSL.

Recent surveys show broadband prices here remain among the highest in the EU at about €50 per month.

There is a danger that if the retail cost of broadband does not fall, consumer take-up will slow and Ireland will languish among the lower end of European league tables for broadband.

Eircom will also face regulatory pressure to reduce its wholesale prices for DSL in a move to create a competitive broadband market.