The god awful screech of dial-up modems connecting to the internet in homes around Ireland is finally receding as more and more consumers opt for broadband. About 85,000 businesses and homes have signed up for high-speed internet in the past year. And while significant gaps exist in Eircom's current roll-out of digital subscriber line (DSL) technology, the firm has finally stopped dithering over the merits of supplying broadband to consumers, and is only arguing over the detail of its roll-out plan, writes Jamie Smyth, Technology Reporter

But with Ireland still lagging behind most developed states in broadband uptake there is no room for complacency. And in one crucial area, known in the telecoms industry as local loop unbundling, the Republic barely registers on the European map.

"Unbundling is important because it offers consumers a real alternative to Eircom," says Mr Brian Timmons, financial director of Smart Telecom, which is currently planning to spend tens of millions on the process. "But there is almost no real unbundling in Ireland yet."

Unbundling is a process whereby part of Eircom's telephone network can by rented by a competitor who can then install its own equipment in Eircom's telephone exchanges to supply a range of products from high-speed broadband to video on demand and digital television.

In European countries, particularly France, Finland and Germany, firms are beginning to unbundle to provide consumers with a wide selection of broadband and video services. But in Ireland less than 2,500 telephone lines have been opened to competitors since "unbundling" was mandated by the European Commission back in January 2001.

Mr Timmons blames this on the high cost of the unbundling and the resistance of incumbents.

"Ireland is a small market and the global telecoms industry has been undergoing great change and disruption in recent years. None of the larger operators have been interested in getting into Ireland and the competitors in the market have generally followed a low investment model."

The big players, Esat BT, UTV Internet and Smart Telecom, have decided to concentrate on repackaging Eircom's existing i-stream DSL service rather than try to unbundle Eircom's local access network and offer innovative broadband services. This means that consumers here do not have access to the same innovative product mix that is available in other states. For instance, Eircom so far has only installed one type of DSL based on a technology known as ADSL, asymmetric digital subscriber line.

ADSL offers fast download speeds to users enabling them to draw down music or video files easily from the web. But the technology is unsuitable for sending large files from a computer because of slower upload speeds, making it an unsuitable technology for many people running businesses from their homes.

Eircom has not deployed any of the newer alternative broadband technologies, SDSL, ASDL 2 and ADSL 2+, and it could be another six months before it begins to offer these. It says its immediate priority is to drive penetration with the current standard, ADSL.

In fact, Esat BT is the only operator in Ireland currently offering the newer SDSL (symmetric digital subscriber line) technology over about 2,500 lines that it has managed to unbundle in Ireland.

This technology provides far higher upload speeds to users enabling them to email large documents and videos from their homes and businesses. But an "unbundling bottleneck" has prevented the company from extending its programme.

"We do it for the business market but the economics are just not right for the consumer market," says Mr Bill Murphy, Esat BT chief executive. "It's just too expensive... if you look at the costs it is probably more expensive to rent space in an exchange than it is in the Trump Tower."

Simply to request entry to an Eircom exchange, rival firms have to pay thousands of euro to the incumbent to pay it to undertake a range of site surveys. There is also a shopping list of other fees that rivals must pay before they can offer services to consumers (see above), bringing the total cost on unbundling a single telephone exchange up to €60,000.

Most emphasis on local loop unbundling has so far focused on the monthly rental charges that Eircom charges to rivals to use each line that runs into a home or business. In Ireland the €16.81 current rental fee is the highest charged in all 15 original member states of the European Union.

The Commission for Communications Regulation (ComReg) will shortly mandate a new price of €14.65, which will still be among the highest fees charged in Europe. Rivals argue this is too high and makes unbundling uneconomic while Eircom argues it is too low and does not give it a return on its own investment.

"At a time when there is such a demand for network investment from Eircom, a decision to put pressure on base pricing components seems slightly perverse," says Mr David McRedmond, Eircom's commercial director, who describes unbundling as a "red herring" for the whole industry.

But privately there is no doubting that Eircom are reasonably happy with the new monthly fee, which is index-linked to inflation. It is understood Eircom will not challenge the decision in the courts, a path it took with the previous unbundling charges.

Esat BT's Mr Murphy describes the fees structure as a "blatant red light and stop sign for unbundling" in Ireland.

"The only way we can unbundle is if we win significant business from Government such as its virtual private network or the schools broadband project."

ComReg, which sets the unbundling fees for Eircom, defends its latest decision on pricing and says the charges reflect the cost of building and running an access network in an efficient manner. Ireland's large rural population means costs are higher here than in other European states, it says.

But rival firms privately complain that ComReg has been bullied by Eircom, which forced a delay to unbundling last year when it issued a High Court challenge to the monthly rental price.

Similar claims have been made against regulators and incumbent firms in other European countries where unbundling the local loop has taken much longer than expected to take off. The European Commission, which mandated unbundling as part of the Lisbon agenda to propel Europe into the information age, has had to initiate legal action against several EU States in an attempt to force the pace of unbundling.

"Incumbents are always truculent in situations where rival firms want to come into their markets and use their networks," says Mr Enda Hardiman, head of the consultancy Hardiman Telecommunications. "It has also been difficult over the past few years for rivals to raise funds."

Even in the larger British market, unbundling has developed at a snail's pace. Just 11,000 lines were unbundled in Britain by 2004, prompting the UK regulator Ofcom to undertake a reviewand appoint an adjudicator to oversee unbundling.

Bearing in mind Ireland's similar poor performance, it is likely similar action is needed here.