Eircom will face greater pressure to open its network to competition and reduce its cost base because of a European Commission decision to sanction tough new powers for the regulator.
The ruling will enable the Commission for Communications Regulation (ComReg) to change the way it analyses the costs that Eircom incurs when it opens its local access network to rivals.
This should enable ComReg to reduce the regulated price at which Eircom offers rivals access to its local loop - the copper wire that runs into every home and business in the State - to supply their own broadband service.
Last July an EU regulatory framework was introduced that removed many of the powers which ComReg had previously held to regulate the market. ComReg requested the new powers following a lengthy market review by the regulator.
ComReg will also be able to impose a range of strict regulations such as: price control, access obligations, non discrimination, transparency, accounting separation, price control and cost accounting obligations, a European Commission decision note seen by The Irish Times shows.
It is understood that Eircom unsuccessfully lobbied against some of the ComReg proposals, which were submitted following a market review. But the European Commission has now agreed with ComReg that Eircom is a dominant player in the State.
ComReg hopes that, by using its new powers to reduce the price of accessing Eircom's network, rival firms will build their own broadband infrastructure rather than relying purely on Eircom's wholesale internet service.
Until now, only Esat BT has successfully gained access to Eircom's local access network, although it has unbundled just 2,000 lines, a fraction of the 1.6 million lines in the State.
ComReg wants to increase dramatically the number of Eircom lines "unbundled" by rivals to create more variety in the Irish market for broadband services.
Crucially, the European Commission ruling will also provide greater authority to ComReg's upcoming decision on the price that rivals pay to access Eircom's network. The decision, due sometime next month, is likely to prove controversial as consultants hired by Eircom have already criticised the method ComReg is using to calculate the wholesale price.
Last year Eircom challenged this pricing decision in the High Court, prompting ComReg to undertake its current review.
But the EU ruling, signed by European Commissioner Mr Erkki Liikanen, shows the Commission believes Eircom has frustrated competition in the market through "inappropriate and possibly excessive pricing".
This could help ComReg in the event of a court challenge by Eircom.
Leap Broadband, a competitor to Eircom, said last night that the decision gave enormous power to ComReg to force Eircom to make broadband network components available at much cheaper rates than are currently offered.
"We call on ComReg to immediately set the current prices as interim prices and to complete the process of reviewing Eircom's pricing and push them way down," said Mr Rory Ardagh, founder of Leap Broadband.
Eircom and ComReg agreed an interim rate of €16.81 per month for rivals to access Eircom's local access network. But telecoms experts predict this fee, and a range of other one-off charges, will be significantly reduced following ComReg's latest review.
Eircom has consistently said it is not against the process of opening its access to competition, known as "local loop unbundling". But it is against selling its local access network below cost.
