The Government may intervene further in the telecoms market by building new State telecoms assets that would enable competing firms to bypass parts of Eircom's local access network.

The proposal, which was announced yesterday by the Minister for Communications, Mr Ahern, is being considered as a way to spur demand for new high-speed internet services.

It is also being promoted as a way to break Eircom's monopoly on the local access telecoms network that enters every home and business in the Republic. It follows increasing Government frustration with Eircom's record on rolling out internet technologies and opposing State regulation.

The take-up of broadband internet services is extremely low in the Republic, with just 7,350 digital subscriber lines installed by customers by the end of June 2003 - significantly less than most other European states.

In a speech at the Global Leaders Forum in Rome, Mr Ahern said yesterday he would investigate building cheaper telecoms access points beside Eircom's existing local exchanges, in a move that would "end control of phone lines remaining in the hands of one player".

The proposed new State-owned independent co-location facilities or community broadband exchanges would play a major role in driving internet competition in the Irish marketplaces, said Mr Ahern, who is already managing the construction of State-owned telecoms networks in 19 regional towns.

The proposed neutral co-location facilities would enable competitors to offer broadband services to customers without having to negotiate entry to Eircom's own exchanges. Some competitors have alleged this has significantly delayed their ability to "unbundle lines" or access to the last mile of Eircom's network.

Despite being mandated by the European Commission in 2001, just 1,000 telephone lines have been unbundled in the Republic.

Eircom also recently lodged a High Court challenge over the prices that the telecoms regulator set for enabling competitors to use its network. It is believed the Government is frustrated with Eircom's decision to consistently challenge State regulation.

"In a telecoms market without real cross-platform competition and where local loop unbundling has not sufficiently delivered, I am prepared to step in to assist the market," said Mr Ahern.

"The bottom line is this: incumbents focus on shareholders; Governments and ministers must focus on citizens and the broader economic picture. To that end intervention is justified."

Mr Ahern's determination to further increase the State's direct investment in telecoms infrastructure reflects his belief that the Government should not sell off State companies that provide critical services to consumers.

He has also sought to promote greater competition in the telecoms market by spending €60 million to build metropolitan fibre networks in 19 towns in regional areas, where there is a clear infrastructural deficit.

But these new networks are also available for use by Eircom and have been structured so they do not compete directly with the firm.

In contrast, Mr Ahern's proposal to finance neutral co-location facilities beside existing Eircom's exchanges would only benefit competitors to Eircom.

Mr Darragh Stokes, managing director of Hardiman Telecommunications, said the proposal should be welcomed by consumers for promoting more choice and lower prices. But he said it also raised major legal and competition issues regarding State subsidies to private firms.

Eircom would not comment on the proposal yesterday while its main rival Esat BT welcomed the speech and policy proposal.