Eircom is threatening to postpone up to €1 billion in much needed investment after being told to cut prices by the regulator. The decision to review its five- year investment plan could seriously undermine the national telecommunications infrastructure.

The firm has also rejected a call by the Commission for Communication Regulation (ComReg) to become more efficient and consider cutting staff.

Mr Phil Nolan, Eircom chief executive, said yesterday the firm had no option but to review its investment programme in light of a regulatory decision that could force it to lose money.

In an interview with The Irish Times, Mr Nolan also confirmed that Eircom would challenge a ComReg decision to force it to cut the rates at which it allows rivals to use its network.

The landmark decision, announced on Wednesday, will force Eircom to provide low-cost access to the last mile of its telecoms network, which enters every Irish home and business.

Eircom's competitors will now have to pay Eur 14.67 to rent a line for a month, rather than a fee of Eur 27, which Eircom had proposed in a submission to the regulator.

Ms Etain Doyle, ComReg chairperson, vigorously defended the decision yesterday and said Eircom's proposed fee was inappropriate and based on historical assumptions and costs. She said the access rates needed to reflect best practice efficiency levels to ensure the Republic's competitiveness was not undermined.

Ms Doyle said Eircom continued to harbour inefficiencies, which were reflected in its headcount and in some of its processes. "We have to be competitive in Ireland and offer the price, choice and quality that consumers want," she added.

Mr Nolan rejected this analysis and said Eircom had already reduced its workforce to 8,500 from 13,000 in three years.

He said it was not possible to accurately compare the efficiencies of different European operators easily and the Republic's high costs must be considered.

"The cost of everything in Ireland is not competitive as most things cost more here. A recent survey found we were the second most expensive in Europe."

He said the new access rates would have serious consequences for Eircom. The firm's head of regulatory affairs, Mr David McRedmond, said it could mean "elimination". The firm would seek a judicial review within the next 21 days or mount a High Court challenge within the seven days, said Mr Nolan.

Eircom may also appeal to the Minister for Communication, Mr Ahern, to refer the decision to an appeals panel due to be set up later this year. "It doesn't make any sense to invest in the access network when we have to sell access to it below cost," he said. "This is an inappropriate and unreasonable decision ."

An Eircom decision to halt investment in its network would probably halt its rollout of broadband technologies and undermine the competitiveness of the State's telecoms infrastructure.