Mr. Kevin Barrins:

Senator O'Reilly referred to pricing. There is a question around whether the delay in wholesale price reductions are a consequence of a lack of powers or resources and the answer is that it is probably a lack of resources. ComReg has the powers to reduce prices and has outlined what in its preliminary view prices should come down to. While that could ultimately be appealed, ComReg certainly has the power to implement lower prices. Connected to that, Deputy Naughton asked whether it was about staff or expertise. While it is a combination of both, expertise is required in the wholesale area certainly. It is an extremely complex area from market definition to designation of somebody having dominance in accordance with EU legislation to then going to the job of building cost models. These things are extremely costly and difficult to build and there are pages and pages of Excel sheets in that regard. A great deal of expertise and input is required for that. It is a question of having the right kind of staff also. I do not know what the wage structure in ComReg is but it might be something that could be looked at if the necessary expertise is required. The Deputy asked if this would impact on consumers, which is highly unlikely given the figures outlined by Mr. Lupton on the levy. The current levy is at 0.2% of revenue for each operator. No one will be passing that on to the consumer.

There was a further question on the need for functional separation, which Mr. O'Dwyer will deal with more extensively. I will deal with it in relation to pricing. One of the things that emerged from the KPMG and Cartesian reports was that Eir's wholesale and retail pricing division sit together. They literally sit in the same place in the office. That is an extraordinary advantage for one's retail arm to have. It is simply not credible that the retail arm does not know what the wholesale arm is doing. When one is sitting down strategising about pricing and is in that 300,000 home footprint, one will ask what a good policy would be. They might charge €270 for connection at the wholesale level and nothing at the retail level. Anyone will say intuitively that there is something wrong with that, if one is offering it for nothing at the retail level and for €270 at the wholesale level, while taking on some small regional operators. Some small operators have come on with Eir, which will tell one that it has lots of operators connected, but Eir is still doing 80% or 90% of retail sales there. That is a problem and it needs to be looked at in respect of functional separation.

I reiterate the points made by Mr. Lupton and Mr. O'Brien. It was a sensible decision by Eir on a commercial basis to cherry pick the 300,000 premises and the Government was stuck between a rock and a hard place because of EU state aid rules and really had no choice in the matter.