Dáil debates

Wednesday, 19 December 2007

Other Questions

Telecommunications Services.

3:00 pm

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
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Question 64: To ask the Minister for Communications, Energy and Natural Resources his views on repeated calls for a functional separation of Eircom's business rather than a full structural split of its network and its retail arms; his further views on how the consumer will benefit from the proposed split; and if he will make a statement on the matter. [35619/07]

Photo of John O'MahonyJohn O'Mahony (Mayo, Fine Gael)
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Question 72: To ask the Minister for Communications, Energy and Natural Resources the outcome of his examination of the discussion paper from Eircom on its proposals to separate into retail and wholesale arms announced by him on 11 October 2007; if he or his Department has engaged with Eircom on these issues; the outcome of such engagement; if engagement is planned in the near future; and if he will make a statement on the matter. [35482/07]

Photo of Eamon RyanEamon Ryan (Dublin South, Green Party)
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I propose to take Questions Nos. 64 and 72 together.

Since taking up office, I have met the chairman and chief executive of Eircom to discuss Eircom's plans for the future, including those for structural separation. Officials in my Department have also met representatives of Eircom to clarify some of the issues outlined in Eircom's discussion paper and I expect they will engage again with Eircom in due course. Eircom, as a private company, is entitled to implement the corporate structure that best meets its needs, provided that appropriate engagement takes place with ComReg on any regulatory issues that might arise in a separated company.

The roll-out of broadband infrastructure is a key priority of Government. Given the extensive network operated by Eircom in this regard, its investment and organisational plans are of major interest to me. It is, however, important to also emphasise the role of ComReg in terms of determination of the regulatory obligations arising from structural changes that Eircom may make.

Open access for service providers is critically important and ComReg's recent resolution of the outstanding issues around local loop unbundling is a welcome development in this regard. I am keen that we achieve the optimum level of an open access network.

The question as to whether customers will be best served by the functional opening up of the network or by a structural split between the retail and network divisions of the business requires detailed policy analysis. The European Commission has recently proposed the introduction of new powers for national regulators which will facilitate the promotion of functional separation where it is deemed necessary due to market failure.

My objective in this regard is to further Government policy and to protect the public interest so that new higher speed communications services are delivered at the lowest possible price. Any engagement on this issue will be in terms of what will ultimately benefit the economy by reference to underlying competitiveness and how the consumer will be affected.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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I am glad another Member has joined us. I largely agree with what the Minister said on this issue. The most important aspect is for us to be able to ensure for the future that we have a network that is open and neutral in terms of allowing access to the existing infrastructure to enhance telecommunications capacity.

I understand that Eircom favours a full structural split between its network and its retail arm. If that is the case, does the Minister consider there is a potential opportunity for the State to buy back an asset that potentially it should not have sold in the first place? When he was in opposition he was critical of the sale of it in terms of ensuring open and neutral access to the network or is he satisfied that a properly regulated marketplace can sufficiently sweat the asset when there is no retail arm to influence Eircom's policy in terms of allowing open access onto the network? Does he agree that access to the Eircom network has improved significantly in the past 12 months, even though until then it was a significant problem in terms of unbundling local loops and so on?

Photo of Eamon RyanEamon Ryan (Dublin South, Green Party)
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I thank the Deputy for his comments. This is a complicated area given the market is rapidly changing, as are the technologies. The volume of data on the networks of the main operators in the State has increased by the order of 300% or 400% per annum. This is a rapidly changing area. Moving from voice to data services and arranging new data services will result in a very much changed industry in the next few years.

One of the crucial developments is to ensure that significant investment is made in our next generation networks. We cannot rely on existing technology, we must ensure significant investment is made to deliver our next generation of networks. One of the main drivers behind that process will be competition. If we do not make such investment, we will fall behind.

A related issue is that we must have a strongly regulated sector. Where we try to encourage an open access network, we must ensure there is real certainty across the board for different operators as to the developments of the network, the nature of the new technology to be delivered and the level of access. Regulatory certainty for other operators and for the incumbent is crucial to ensure that investment decisions can be made in a market that is complex. Those issues extend beyond the ownership issue of the network, be that State or private ownership. That is the first and foremost issue.

We must have a consistent and clear sense of direction, particularly for the main core access network to ensure other operators know the type of open operation that exists and what role they have to play in that regard. Such an open access network would benefit the incumbent. The volumes of transactions that can increase would lead to a stream of revenue that could result in it being a profitable business, which would be able to afford further investment. Strong regulatory pressure in the United Kingdom, which led to the opening up of the access network, has resulted in a significant increase in competition, one that has benefited the network provider as well as other operators.

Different questions surround the issue of opting for structural or functional separations. Structural separation has not been tried yet. We do not have an example of where this has been done elsewhere and therefore cannot cite an example of how such separation works. There are questions around the benefits that might derive from functions separation in having a retail arm and keeping pressure on a network company to make sure standards are maintained. In the regulatory system we put in place, whether there is functional or structural separation, we must ensure we do not introduce a rigidity into the system such that new technological developments would not then take place. In other words, we must ensure we do not have a system that is regulated in such a conservative manner to deliver a certain return that it does not allow for competition to function. This is a difficult regulatory issue, on the detail of which ComReg must work.

While we must be cautious and take due care to make sure that the regulatory system is right, we must also be willing to make bold decisions within a suitable timeframe. We cannot wait for many years to make decisions on how to proceed regarding the next generation networks. The industry is developing at such a speed that it requires us to make strong regulatory and policy decisions sooner rather than later. That must be done on the back of detailed analysis, examining international examples and consulting all the players here to ensure we do not discourage investment by other operators who have an interest in the whole market.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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That is a "No" so I take it the Government will not consider trying to buy back the Eircom network should it structurally split from the existing company. I accept the Minister's arguments on the advantages of functional separation versus structural separation. In fact, in the UK functional separation has unbundled local loops to quite a successful degree. However, is there not the same rationale with regard to the ESB's relationship with EirGrid and the ownership of the electricity grid in terms of the argument for functional separation versus full structural split when dealing with the ownership of assets? This is not directly connected to the question being discussed but there is similar thinking from a policy point of view.

Photo of Eamon RyanEamon Ryan (Dublin South, Green Party)
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I do not believe I said "No" to anything. I am keeping all options open. I would not predetermine what the final structures or ownership structures might be for any company in the area. The one difference between this area and any other utility, be it water or electricity, is that there is a multitude of ways to deliver the service. Electricity will only ever be delivered down a wire and water will only ever be delivered by pipe. Telecommunications, however, can be delivered by means of wireless, satellite, fixed cable, DSL or fixed line telecommunication services. It is intrinsically different and is a far more fast moving and changing utility sector, which means there will be different solutions. There is no comparison between electricity and telecommunications or in the example the Deputy mentioned of the separation of EirGrid from the ESB.

That complexity and the fact that there are myriad ways of delivering services adds to the regulatory issues I mentioned earlier. We are facing a more varied system. A telecommunications signal will go through a variety of different sources in the connection between laptops. It may go from a fixed line to wireless or vice versa, on into a backhaul network, that might actually be owned by the ESB, and then connect to another operator's network into an international system and into a server. Not only are there various different ways of delivering it, one may well get a voice message that goes through a variety of systems and, indeed, different operators' systems.

In general, I believe there should be as open an access network as possible, where mobile networks are open and other operators use their networks to deliver certain services, where the fixed line network is opened and where a variety of different users use services in a flexible way. That will be particularly appropriate in this country because we have two different distinct markets, an urban one and a rural one. We will require a flexible response which suits the different characteristics of the two.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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Before we conclude, I wish the Minister a happy Christmas. He has had a busy six months and I hope he gets a good rest and time with his family over Christmas. I am sure he needs it.

Photo of Johnny BradyJohnny Brady (Meath West, Fianna Fail)
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We all wish to be associated with the Deputy's wishes.

Photo of Eamon RyanEamon Ryan (Dublin South, Green Party)
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On behalf of the Government, I wish a happy Christmas to the Deputy, the Chairman and all the staff in the Oireachtas. It has been a long term and we all look forward to a break before returning in the new year.