Poor telecommunications infrastructure is holding back widespread use of internet technologies by small and medium-sized firms, according to a survey by the Chambers of Commerce of Ireland.

But despite the failings of the telecoms market and the meltdown in the technology sector, businesses are still embracing new technology, says the survey.

The Chamber SME E-Business Survey 2002 found two in three firms said they would use the internet more if there was an "always on" flat-rate internet service available from service providers.

More than 70 per cent of businesses believe uncertainty about the legal and regulatory environment is a problem when it comes to adopting e-business.

Nearly half of firms surveyed say there was inadequate competition in the Irish telecoms market.

"The telecommunications market is not meeting the growing demands of business," said Mr Annrai O'Toole, chairman of the Chambers of Commerce of Ireland. "Businesses in Ireland have to settle for ISDN as the best available service and therefore are not realising the potential of the internet, unlike their European and American counterparts."

Eircom recently launched an "always on" high-speed internet product called i-stream, but it is not yet available to customers outside Dublin.

Mr O'Toole, one of the founders of Iona Technologies, said the telecoms regulator needed to adopt a tougher stance, and the new Minister for Communications must ensure that the regulator has the power to enforce.

"There is a concern that the Government has taken its eye off the ball on this issue and that nobody is driving this agenda forward.

"This is not a technology issue but a fundamental competitiveness issue for businesses and Ireland," said Mr O'Toole.

Meanwhile, the survey found more than a quarter of businesses are using the Revenue On-Line service, up from 14 per cent last year.

The number of businesses banking online has increased by 61 per cent since 2001, and is now 55 per cent of all business, it added. However, the survey also found that a third of Irish businesses still did not see the benefits of e-business.

The survey was conducted from interviews with 600 businesses from the membership of the Chambers of Commerce of Ireland in six locations in July 2002.

The sample was made up of small and medium-sized enterprises with under 250 employees.