Eircom blames a 'system error' but its rivals seem to believe that Eircom intentionally offered "off-book pricing" to retain or win business from them, writes Jamie Smyth.
Eircom's admission that it offered customers illegal price discounts during a period of almost two years could cost it dearly if competing operators carry through with a threat to take a legal suit for damages against it.
Esat BT has estimated that it may have lost €60 million per year in customer contracts during the period when Eircom was offering off-book pricing to its customers. WorldCom and several other telecoms operators represented by ALTO have also said they believe it has severely undermined competition in the market.
A rapid fall-off in competition in the telecoms sector suggests they may have a case. However, the severe downturn in global telecoms industry has played a major part in pegging competitors' share of the market at 20 per cent.
The ruling means Eircom was offering firms and some high-end residential customers services at prices that were below those set by the telecoms regulator, Ms Etain Doyle. Because Eircom is a dominant operator and holds about four-fifths of the fixed-line market it has to conform to the published prices.
Eircom says a "systems error" caused it to offer some customers "off-book pricing". This occurred when a computerised system was changed to manual. It says it has now recognised the issue and will ensure compliance.
Dr Phil Nolan, Eircom chief executive, told The Irish Times earlier this week that "it was the end of the matter".
But competitors are gearing up to fight for compensation. ALTO believes its members may have lost up to €170 million because of the scheme, and Esat BT looks set to sue for damages.
The reaction of competitors to the decision suggests they believe Eircom had set out intentionally to offer off-book pricing to retain or win business against competition.
ALTO believes the discount pricing has cost competitors up to 10 per cent of market share, while Esat has blamed it for its financial difficulties, which has forced it to cut jobs this year.
It has welcomed the regulator's ruling but is pressing for penalties against Eircom. It has written to the Competition Authority, urging it to undertake co-operative action with the telecoms regulator to prosecute Eircom for the practice.
The bad publicity surrounding the "off-book pricing" issue could also undermine Eircom's recent €100 million deal with the Government. The deal, which was signed in May 2002 by Eircom, Vodafone and the Minister for Finance, was negotiated while Eircom was engaged in discount pricing.
Vodafone won the mobile arm of this contract, which is the largest single telecoms service contract in the history of the State.
Esat has made a formal complaint to Ms Doyle about the deal, and ALTO will raise the issue with Mr McCreevy this week.
Eircom says an investigation has already been carried out by the regulator on the contract and nothing untoward was found. But the regulator would not comment on the matter yesterday when contacted by The Irish Times.
