Telecoms firms may face fines of up to €5 million under a tough new penalty regime being drawn up by the Governmen, writes Jamie Smyth, Technology Reporter.

The new powers, which see the fines levied directly by the regulator, are being considered as a response to recent overcharging scandals but could also be used to penalise firms that breach regulations.

Currently, the Commission for Communications Regulation (ComReg) can only levy fines of €3,000 against errant operators on indictment in court. Given the low level of the maximum fine and the costs involved in pursuing prosecutions, the regulator has not taken court action against any company.

In an interview yesterday with The Irish Times, the Minister for Communications, Mr Ahern, said he had asked his officials to try to model the penalty regime for ComReg on similar powers that have been granted recently to the Irish Financial Services Regulatory Authority (IFSRA).

He said there was a question about whether or not independent regulators had the power to impose fines directly but that the Central Bank and Financial Services Act 2004 had addressed this.

"We are looking at that legislation and the possibility of using that as a template," said Mr Ahern, who dismissed criticism about a delay in introducing proper penalties for ComReg.

Under new legislation rushed through the Dáil in the wake of the AIB overcharging scandal, IFSRA can fine banks up to a maximum of €5 million without pursuing a case through the courts.

Mr Ahern said he had signed off all parts of a new Telecoms Miscellaneous Bill, except the section relating to direct fines.

The new legislation should go before the Dáil next month when the section dealing with ComReg's ability to levy fines directly has been completed by Mr Ahern's officials.

The new Bill will reinstate ComReg's ability to seek court approval to levy fines worth 10 per cent of a telecoms firm's turnover if they breach regulations. This power, which has never been used by ComReg due to the lengthy process of proving a case in court, lapsed in July 2003 when a new European regulatory framework was introduced.

It is understood that the Government is keen to introduce the new penalty regime as quickly as possible following three separate overcharging incidents this year.

O2, Vodafone and Eircom all admitted to overcharging customers due to billing system errors this summer. When the new penalties are passed, telecoms firms could face fines for future instances of overcharging.