INTERNET
ComReg alters broadband pricing rules
24-11-2005
by Charlie Taylor
The Commission for Communications Regulation has published new information on how Eircom's wholesale 'bitstream' broadband service should be priced.
Wholesale bitstream is the product that the incumbent offeers to other operators to enable them to provide retail broadband services over Eircom's network under their own brand name.
In February, ComReg ruled that Eircom held Significant Market Power (SMP) in the wholesale broadband access (WBA) market, a decision which meant that ComReg could effectively regulate the sale of bitstream. Following this, the regulator specified interim price controls on all bitstream services pending a consultation to decide permanent pricing.
ComReg has now published its response to a consultation on how Eircom's wholesale broadband product pricing should be structured. In a statement released on Wednesday, the regulator said that wholesale prices will be calculated by a formula based on Eircom's retail prices.
The response is likely to be warmly welcomed by Eircom's rivals who have previously complained that the way the incumbent calculated its wholesale price meant that margins were so tight, competitors were unable to make a profit offering broadband services to customers.
Previously Eircom offered its wholesale broadband product at a fixed price of around EUR20 (ex-VAT). However given that the firm has been reducing the price it charges for its consumer services, it has become increasingly difficult for other licensed operators to compete effectively with Eircom. The incumbent is in a position whereby it could cut the cost of its retail products while maintaining the price of its wholesale product, whereas other licensed operators were forced to reduce their retail service prices to stay competitive, but were cutting into their already thin margins to do so.
ComReg's response has been positively received both by Eircom and its competitors. "Broadly speaking we're happy with the response, but we are in the process of reviewing it," a spokesperson from Eircom told ElectricNews.Net.
Ireland Offline, one of the organisations to offer a submission for the consultation has also welcomed the response. "There were worries that with eircom retail dropping prices down towards the wholesale price and then increasing speeds, the margins for a competing service were dwindling to almost nothing. But when wholesale prices are linked to retail the playing field is more level," Damien Mulley, Ireland Offline's chairperson told ElectricNews.Net.
"Other licensed operators will now have a bigger margin which could mean that they reduce the price of retail bitstream products or offer a better service for the same price, which is good news for consumers," Mulley added.
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