The Government and industry should consider the benefits of separating Eircom's network business from its retail arm, according to a new report from Forfás. Such a move would promote greater competition and potentially leave Eircom retail free of regulatory scrutiny.
By separating Eircom's network division - which owns the copper wires that enter every home in the State - from its retail arm, access to the local telecoms network would be governed by a genuine commercial relationship unaffected by the success of Eircom's retail arm. This would reduce concerns about the effectiveness of open access to Eircom's network, argues the report.
This separation of the two divisions would need to be initiated by Eircom, because it is now a private company.
But there would be benefits to Eircom because its retail business would face less intense regulatory scrutiny, which would allow it freedom to achieve higher rates of return in the competitive markets, says the report.
This recommendation comes less than three years after the Government privatised Telecom Éireann, thereby undermining its ability to influence the firm.
A similar proposal in Britain was recently rejected by British Telecom, which turned down a bid for its network from venture capitalists, arguing that its network was essential to the firm's strategy.
The report also highlights an emerging concern that Eircom, under new ownership financed by high debt levels, will cut back on its capital investment. It recommends including a provision within the Communications Bill that would enable a new communications commission to intervene to force Eircom to invest in its core network.
At the very least, the price-cap powers of the regulator should be examined to ensure that the regulator has the power to reduce prices charged to customers, if a reasonable proportion of revenues is not reinvested to benefit customers, says the report.
The report also recommended that the Communications Bill be amended to increase regulatory powers to force Eircom to provide a flat-rate interconnection product.
An Eircom spokeswoman said last night the firm already operated on the basis of separate business units and it was not true to suggest that the firm was not complying with EU regulations.
Other provisions in the report include encouraging local authorities to be active in providing telecoms infrastructure and developing an internet exchange that would attract new internet service providers to the Republic.
Meanwhile, Forfás also called for the establishment of a new broadband planning office to co-ordinate the roll-out of the Government's €300 million broadband strategy.
Mr John Travers, chief executive of Forfás, said this specialist office would ensure consistency in approach and planning, and achieve economies of scale in the contracting of civil engineering works.
