Telephone Obligation

The worst fears of those who opposed to the flotation of Telecom Eireann as Eircom three and half years ago appear to have been…

The worst fears of those who opposed to the flotation of Telecom Eireann as Eircom three and half years ago appear to have been realised. Eircom's moves to wriggle out of its obligation to provide a telephone for every home in the country is, for many, the unacceptable but entirely predictable consequence of the privatisation of the state phone company.

Eircom, of course, makes a cogent argument in its recent submission to the Commission for Communications Regulation as to why it should no longer shoulder this burden. It points out that it now has only has 38 per cent of the market for voice telephony - the mobile phone companies and its other rivals account for the balance.

Yet, Eircom argues, it is the only company obliged to provide a universal service at a cost of something in the region of €40 million a year. Not surprisingly Eircom believe this cost should - at a minimum - be shared with other phone companies, or else passed on to the customer. The latter measure would hit those living in isolated rural areas the hardest

Plausible though Eircom's arguments may be, they have to be seen against the background of the company's history and place in Irish life. The legal obligation to provide a universal service is something that Eircom inherited from its previous incarnation as a State monopoly.

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The much more significant part of the the Telecom Eireann legacy is the domination that the company still enjoys in the Irish market. It is this dominant position which made the company so attractive to Valentia Telecommunications - its current owners - that they were prepared to pay €3 billion for it a year ago.

In doing so they brought to an end Eircom's short and rather unhappy life as a stockmarket company, which left something in the region of 400,000 small shareholders out of pocket.

Valentia are entitled to protect their investment and challenge any aspect of the regulatory regime which they feel unfairly discriminates against them. But they should bear in mind that by trying now to get out of their obligation to provide a telephone to every home, they leave themselves open to allegations of bad faith.

It is for Eircom to decide whether pursuing this issue and the bad feeling it will almost certainly generate is worth the €40 million a year they believe it will save them.