Mr. Jeremy Godfrey:

I will begin with the question of connection charges. Some members might remember that this was a bone of contention when I was last before the committee in October. We made a decision on this issue in December. Prior to that, Eir was charging €270 for connections to the fibre to the home, FTTH, network. The decision we made gives Eir a great deal of flexibility in how it prices its wholesale product. Regarding the issue of fibre to the cabinet, that is now a more mature network. The demand is more certain and we know what the deployment costs are. We moved in December to what is called a cost orientation obligation where we determined what price Eir should be allowed to charge for that network. The fibre to the home network is new and therefore it is much harder to accurately predict the take-up of demand. We share that difficulty with our colleagues across Europe. There are also more uncertainties about the cost of deployment. It is, therefore, much more risky and difficult to set a fixed price.

We are taking a margin squeeze approach to Eir. The company has the freedom to choose its wholesale prices. It has to ensure, however, that there is enough space between the wholesale price and the retail price to allow companies such as Sky Ireland, Vodafone and other resellers to be able to compete effectively. We took the view that Eir should not have complete freedom to set the connection charge. We felt that the company's previous approach of having a very high upfront connection charge had the potential to have anti-competitive effects. We made a decision, therefore, to give Eir the freedom to choose the connection charge, subject to two constraints. One was that it should charge the same for a new connection as for a migration. That was intended to ensure that there was no distortion of the incentives for resellers. We did not want them waiting until somebody else had the disadvantage of paying for the connection and then coming along and trying to churn the customers. We wanted to ensure there was no distortion between new customers and existing customers. The second approach we took was to stipulate that the amount of money that Eir could recover through those upfront charges should, over the lifetime of the asset, be no greater than the cost of building the last connection to the premises of the end user. Based on Eir's costs and its average customer lifetime, the company proposed a price of €170. We scrutinised its proposal but we do not approve the company's prices.

It is the company's responsibility to comply with regulation and we certainly did not see any need to intervene. As the Deputy stated, the Government has taken a slightly different approach in deciding how the wholesale connection charges for the national broadband plan should be arranged. The €170 will not, as a matter of practice, be passed in full to end users. The retail connection charge is also €100 in the area with the 300,000 premises being connected. As a result of the way the regulation works, the reseller can amortise that €170 over the average 42-month customer lifetime. It amounts to approximately €4 per month so the resellers can charge €100 upfront and recover the remaining €70 over the 42 months.