Eircom will lobby aggressively to have the price cap on its core telephony services removed this year. It will also consider spinning off its IT services arm and re-entering the mobile market in the future, according to Mr Philip Nolan, Eircom chief executive.

In his first interview since taking on the top job at Eircom in January, Mr Nolan, also outlined a more co-operative stance towards the regulatory authorities here, and a new vision of an internet ready, broadband Ireland.

He spoke to The Irish Times after Eircom's announcement this week that it would invest €125 million in developing digital subscriber line technology in the Republic following resolution of a long-running dispute with the telecoms regulator, Ms Etain Doyle.

This agreement - on lowering the price at which Eircom will offer its new internet service to its competitors - should make high speed internet available to about one million consumers here by the end of 2003. It could also transform the Irish telecoms market, which has recently fallen behind its main European neighbours in the provision of innovative broadband services such as digital subscriber line technology.

But Mr Nolan believes recent criticism of Eircom, and the lack of competitiveness of the Republic's telecoms network, was harsh.

"I've been concerned about the negative way things have been portrayed in the Irish media, especially the reports that showed Ireland 36th in the league for DSL services."

"We have quite a good broadband infrastructure, and the only hold up has been a regulatory problem. Very shortly we will have 500,000 homes enabled for DSL services."

Eircom's decision this week to reduce the price of its wholesale digital subscriber line service will enable competitors, such as Esat or Nevada tele.com, to get into the potentially lucrative DSL market. But observers believe it may also slow the pace of a parallel process known as "unbundling the local loop" - where competitors place their own equipment into an exchange to offer telecoms and data services to customers.

This is not disputed by Eircom.

"We think it will be more attractive for other licensed telecoms operators to supply a service using our network rather than investing in their own infrastructure," says Mr Nolan. "But it is really a decision for other operators. To offer their own DSL product will require capital, they just need the facilities from us."

By keeping competitors on its own network Eircom will be able to grab a large slice of the revenue made on these services. In this respect, Eircom's recent agreement mirrors a similar move in the UK by British Telecom.

The compromise on DSL agreed between Eircom and the telecoms regulator, was just one of three agreements, made this week.Eircom also agreed to drop two court cases considered crucial to opening the telecoms market in the Republic to competition. So does this represent a major shift in strategy on regulatory matters?

"I can't speak for how Eircom's previous management handled its dealings," says Mr Nolan. "But the management team now has a new operating philosophy. We've split our retail and network arms into separate divisions and we see regulation as a facilitator to going forward, with co-operation and professionalism and recognising the needs of both sides."

Mr Nolan's agreement with the telecoms regulator this week stands in contrast to the often combative relationship between Eircom's former chief executive, Mr Alfie Kane, and Ms Etain Doyle. Mr Nolan will keep up dialogue with the regulator and strive for compromise on other issues.

"I recognise the need for regulation on the network side of Eircom's business but there is less need for regulation on the retail side... we believe there is no need for a price cap now."

This price cap forces Eircom to reduce the prices of a basket of its most popular services. It is currently the subject of a consultation with the telecoms regulator.

"Other licensed operators we view as customers of our network operations while on the retail operations they are competitors," says Mr Nolan. "Price caps could be relaxed, after all there is the Competition Act where abuse of a dominant position can be dealt with rather than by regulation."

Eircom, which employs about 10,000 staff, is also evaluatingways to cut future costs although no final decisions have been made yet, says Mr Nolan.

"There is severe pressure to become more efficient, to deliver low prices, and generate real innovation."

Eircom will consider spinning off its IT services arm - which employs about 500 staff and includes Eircom's internet data service operations. "It is one possibility," says Mr Nolan. "We have a network to deliver services, but we will apply a test to see if we can deliver them better outside."

It will also continue to sell sites from its extensive property portfolio and continue to seek voluntary redundancies to reduce staff numbers, he says.

Eircom may also move back into the mobile telecoms market in the future despite a non-compete clause signed with Vodafone. "We would look at introducing fixed and mobile infrastructure. We will have towers, base stations which we could make available to mobile operators," says Mr Nolan.

This would enable Eircom to form contractual agreements with other mobile firms to supply its customers with mobile services.

Eircom is concerned about the Government's plan to invest €300 million in broadband infrastructure in 127 towns across the State.

"It could be seen as a reversal of a previous trend in telecoms away from deregulation," he says. "If it is simply to add new network in areas where there is no existing infrastructure then that is good, but there is a danger it will be competing with existing network and discourage further investment from the private sector.

"The total investment we are making on DSL is significant and demonstrates that the new owners of Eircom are committed to developing the Irish market," he says.