Irish businesses and consumers already pay the highest telephone line rental fees of any European Union member-state and, from February 4th, they will face a further €1.68 price hike.
The new price of €24.18 per month is about €10 higher than the EU average, and will make line rental in the Republic about €9 more expensive than France and Britain.
Unsurprisingly, Eircom's decision this week to seek its third increase in line rental in a year was greeted with anger by consumer groups and politicians. The fact that the company was able to pay a dividend of almost €500 million to its shareholders last year has not gone unnoticed by a public that already feels it was ripped off in the State's failed public flotation.
The sheer scale of this payout also undermines Eircom's claim that it is losing money on its local access telephone network - the lines that run into almost every home and business in the State - and, therefore, needs to hike line rental charges further.
However, it should be acknowledged that, overall, Irish telecommunications prices are not the highest in Europe.
The latest quarterly survey published by the Commission for Communications Regulation (ComReg) shows the Republic ranks between fifth and seventh in terms of affordability for business and consumer charges. This may slip a place or two following the impact of the latest line rental increase. However, it is likely the State will be at the EU average.
This overall performance has been achieved by steep discounting on call costs from Eircom since deregulation of the telecoms industry five years ago. Consistently over the years, the firm has reduced its call charges before Christmas, only to push up rental fees in February.
This pattern of "rebalancing" its charges structure enables Eircom to comply with a price cap formula that is set by ComReg to protect consumers.
The current cap was agreed last year and enables Eircom to raise its prices on a basket of goods in line with inflation. This price cap replaced a stricter cap on charges, which was in operation for the previous three years, and will probably enable Eircom to increase consumers' bills for the first time in years.
Eircom's strategy of hiking line rental while simultaneously reducing call costs is damaging competition in the Irish market - a move that could eventually lead to higher prices for all.
Competing operators such as Esat BT and Smart Telecom are not yet able to offer line rental - a situation that places them at a huge disadvantage to Eircom because it forces their customers to pay two bills.
For example, a current Esat BT customer must pay a bill for calls to Esat BT but also pay a separate rental bill to Eircom. A plan by ComReg to introduce wholesale line rental and a single bill for consumers is a year behind schedule.
Competitors blame Eircom for frustrating this product and warn that line rental will continue to increase until competition is brought to this area of the market.
In the meantime, ComReg estimates that Eircom retains about 90 per cent of the residential market. With such a dominant position, no one should be surprised to see prices go up.
Jamie Smyth
