The Telecommunications Regulator, Ms Etain Doyle, has intervened in an effort to defuse a high profile row between two State companies and allegations of competition abuse. The row, between An Post and Telecom Eireann, has already gone to Brussels for a ruling by DGIV, the Competition Directorate.

It emerged yesterday that An Post had filed the complaint, alleging an abuse of a dominant position against Telecom because it was unhappy with the rates and terms its subsidiaries Ireland Online (an Internet provider) and Postgem were getting from Telecom.

It is understood that An Post has complained that Telecom is giving more favourable terms to its own Internet subsidiary Indigo and Tinet, which between them have in excess of 30,000 customers. The Internet service provider market is dominated by State companies. None make profits and the costs of using the telecommunications infrastructure is considerable.

It is believed that in its complaint An Post alleged that there was no transparency in the running of the Telecom Internet subsidiaries and there could be cross-subsidisation and below-cost selling of its services. This is because Telecom allegedly gives its subsidiaries better rates or more preferential treatment.

An Post would only confirm last night that it had lodged the complaint with DGIV. Sources said a number of attempts had been made to resolve the issue at local level, but these had failed and the matter had been referred to Brussels.

It is understood that both sides are embarrassed that the matter became public. It was referred to Brussels in May, but the row had been simmering for some time. The Office of the Director for Telecommunications Regulation (ODTR), headed by Ms Doyle, will now investigate the matter, following agreement by both sides yesterday afternoon to refer it to that office. However, it was still unclear last night whether DGIV will now drop its investigation. It is believed that Telecom has argued that it charges all internet service providers the same for infrastructure.

A spokesman for Telecom said it was "very unfortunate that An Post felt it necessary to refer the matter to DGIV. "However, having done so, Telecom is fully responding in a professional way to the matters raised."

The spokesman added that Telecom "very much welcomes the sensible way forward now being proposed by the ODTR and we are very confident of a sensible resolution of the matter".