In the telecommunications sector, every company vies loudly and indignantly for the title of the industry's squeakiest wheel. Thus, it is easy to overlook the significance of the noise the industry here is making over a process known as unbundling the local loop, or opening up to competition the so-called last mile of copper wire phone line that connect homes and businesses to their local phone exchange. In plain English, unbundling simply means Eircom will be required to share the control of those lines with competing carriers. To date, they've given other companies access to the lines, but Eircom has managed the connections.
Freeing up the local loop is widely regarding by telecommunications analysts as an essential action in a truly liberalised and competitive telecommunications market, because it spurs the introduction of new service offerings and price cuts and helps bring new technologies for accessing the Internet to market faster. The dominant carriers, known as SMPs (significant market players), have little incentive without competition to bring about such change on their own.
Eircom, like every SMP in Europe and the US, has tried to postpone the inevitability of last mile access for as long as possible. Now that the European Commission has prepared a regulation requiring member-states to unbundle, the company is loudly looking for ways to minimise the erosion of its control. Eircom is opposing unbundling, claiming that the use of other technologies, rather than direct access to its copper wire, would be adequate for competitors. It also claims the EU is offering little compensation to it for providing its infrastructure to other carriers. The company also feels that it is unfair not to in turn allow Eircom access to the cable network of companies such as NTL, so that Eircom can offer packages that include television services.
The reality - as Eircom knows fully well - is that unbundling is coming regardless of the opposition of SMPs. The urgency of the need to open up this market and transform it is underlined by the fact that the Commission has taken the very unusual step of issuing not a directive but a regulation in this regard. The Commission's view - backed by every analyst - is that Europe is far behind in introducing competition on its fixed-line telecommunications infrastructure and this is causing it to continue to lag the US in competitiveness. Fewer people and businesses are online, telecommunications costs remain high compared to the US, and there's little encouragement for people to make any significant use of the Internet.
Internet use may seem like a luxury rather than a central need for any society, but the economy is changing and social structures are shifting. Cheap Internet access devices and mobile phones will make Net access affordable to a huge proportion of Europeans at least from the hardware perspective. And all predictions are that the Net will become a ubiquitous feature of most people's lives, for accessing government, bank accounts, medical records and information across every spectrum. But telecommunications costs and limitations continue to hamper the evolution towards this kind of always-on-Net world. Businesses too are constricted by high telecommunications costs, which damage their ability to perform and compete with North American rivals.
But Eircom is right to look for incentives to open up its network. Forcing compliance to European regulations rather than making it attractive for the company to unbundle is ill-conceived. But incentives should not be limited to financial compensation to the SMPs for unbundling, which only brings immediate benefit to the dominant carrier. Instead, incentives should be structured so that the SMP is encouraged to offer consumers and businesses services that will benefit them. In the US, regulators are doing this by offering the big local operators access to the lucrative long-distance market if they unbundle fairly. Local telcos have also been encouraged to roll out a high speed Internet access technology called DSL, digital subscriber line, by a promise that DSL will not be part of the unbundling package. This has pushed companies to compete to be DSL installers and greatly increased the availability of DSL for homes and small businesses.
Eircom should not be given access, though, to the existing cable network, even though cable companies can now start offering phone services over cable. By any measurement, Eircom is still the dominant player in the communications market. It will take considerable time and investment by cable companies to offer the kind of TV, Internet and phone package promoted by NTL in just one corner of Dublin - a network upgraded with Government support funding by the way. But an obvious development down the line is that Eircom will eventually be given access to the cable networks, and that is surely fair - once competition and incentives have evened out the existing market and created a more vibrant level of service for consumers and businesses.
