The communications regulator plans to reinstate price controls on Eircom's line rental fees following significant price hikes by the company in recent years.

Draft directions published by the Commission for Communications Regulation (ComReg) yesterday also propose maintaining the current price cap on Eircom.

The proposals will disappoint the telecoms group, which has argued for a gradual relaxation of the price cap regime to give it more flexibility to set prices for its services.

Eircom labelled the new ComReg proposals last night as "ridiculous and astonishing".

The reintroduction of a separate "sub-cap" on line rental means that Eircom will not be able to raise its prices for a year. After that period, it will only be able to raise its charges in line with ComReg's current price cap.

This cap limits Eircom's ability to hike prices on a basket of services to a formula set at the rate of the consumer price index.

ComReg had been planning to review this price cap formula at the end of 2005, but it now plans to review it only when it next reviews the telecoms market.

ComReg's decision to lift an earlier sub-cap on Eircom's line-rental charges resulted in price increases of 23 per cent since the latest price-cap regime came into force. Eircom's decision to hike its line rental fees three times in 12 months to €24.18 provoked a public outcry last year.

In the consultation document, ComReg says these increases have succeeded in aligning line rental prices with the cost to Eircom of upgrading its network.

ComReg said its proposals follow an extensive review of the market and are not overly burdensome in light of the competition problems in the Irish market.

But David McRedmond, Eircom's commercial director, said it seemed astonishing that in a liberalised market ComReg saw the need to regulate in this way.

"It is time to stop this ridiculous overregulation of the retail telecoms market," he said.

ComReg proposes to maintain a range of other regulatory requirements for Eircom to comply with, given its dominance in the fixed telecoms market.

These include providing wholesale line rental services to competitors and access to its network for rivals.