Upside-down regulation

IrelandOffline received Comreg’s latest proposals(1) which are still neatly hidden under the innocuous title of “Price regulation of bundled offers” which sneakily refers to something completely different altogether. We have read the document in utter dismay. What in actual fact it really means is Comreg want to create micro-markets where eircom can compete with UPC but only in selected urban areas.

The vast bulk of the country will not benefit from these proposals and it goes,  in our opinion, completely contrary to the basic fundamental theories of regulation. Surely the purpose of regulation is to create the environment for competition to flourish not to micro-manage already existing competition in selected urban areas to the benefit of one specific company. Why should rural consumers pay extra as a subsidy to a company to compete in urban areas? These proposals make no sense on so many levels. Competition should be about getting competition into areas where there is currently no competition not some upside-down regulatory regime.

Fantasy Competition
Eamonn Wallace Chairman of IrelandOffline commented : “eircom will now be able to “compete” by dropping their line rental prices in selected urban areas where Comreg will ‘define’ that competition exists in order that eircom in a futile bid to stop losing customers to UPC’s far superior broadband offering.”

Wallace continued: “eircom’s national line penetration rate is down to about 60% now and probably even less in urban areas due to effective competition from UPC, instead of making rural consumers pay to subsidise urban dwellers a more useful approach would be to bring the utterly inflated line rental charges into line with European norms.This way everybody could afford a phone line. The only organizations who benefit from massive overpriced line rental are eircom and Comreg. This is the law of diminishing returns in action, such an exorbitantly expensive line rental simply means less homes with phone lines”

Wallace added: “So if eircom raise X from their line rental fees and have to drop in selected urban  areas to “win back” consumers inevitably rural consumers will end up subsidising urban “competition” to make up the X figure. Somebody has to pay to finance these proposals.
The effective outcome of these proposals is to allow Comreg to define markets by exchange area, dividing  the country up into 60 or so micro-markets.
In a word we have to question the sanity of these proposals, nobody is happy neither consumers nor industry and we fully expect this whole episode to end up in the courts. This will probably mean the launch of the VDSL pilot program being setback yet again.”

What should be done
We are calling on Minister Rabbitte with his legal right to issue Ministerial Directives to Comreg under the provisions of the Communications Act 2002. It is time for Minister Rabbitte to do so on the topic of Line Rental. IrelandOffline feel that Minister Rabbitte should immediately direct that line rental be charged at the same rate for all consumers in Ireland. We are not asking him to set a specific rate, merely that the principle of equity should be stated in a directive and that rural consumers should not be subsidising fantasy competition for urban consumers

(1) http://www.comreg.ie/publications/price_regulation_of_bundled_offers.583.104300.p.html
(2) http://irelandoffline.org/2012/11/comreg-proposes-to-directly-penalise-rural-ireland/