Eircom and the Commission for Communications Regulation (ComReg) agreed an interim price yesterday at which rivals can access Eircom's network until their court case is resolved.
The agreement means rival firms will pay €16.81 per month to rent a line on the last mile of Eircom's local telecoms network, rather than the €14.67 monthly charge directed by ComReg in a ruling earlier this month.
This price is the same as the previous interim fee set last year by Eircom and ComReg when they could not agree an official charging structure. But the fee is considerably higher than the level proposed in the Melody Report, which ComReg has used to justify its original direction.
The confidential report by the former FCC economist, Prof Bill Melody, which has been seen by The Irish Times, proposes that ComReg should benchmark the access fees to be within the lowest 12 of the 15 EU countries.
The report argues that this may be a better way to set pricing rather than using a method that attempts to judge Eircom's own cost efficiencies.
But the current interim price agreed by both parties yesterday will be among the highest fees charged by any operator in the European Union.
The rate at which rivals access Eircom's network is crucial to promoting competition in the market and enabling Eircom to recover its costs and make profit.
Prof Melody, who chaired an industry group on the controversial issue, also proposes that ComReg should order a new independent corporate efficiency audit of Eircom, which could focus on the specific elements of Eircom's inefficiencies.
It says ComReg must exclude Eircom's inefficiency costs, and shift Eircom's focus from attempting to pass on the costs of its inherited inefficiencies, says the report.
In a stinging rebuke to the former state company's attitude to regulation, the report says that Eircom does not believe the European model of telecoms reform should apply in Ireland because of unique circumstances, namely that management's hands are tied on the issue of staff reductions.
"Eircom's managers and owners must confirm that they did not purchase this problem when they purchased the company," says the Melody report.
"The most successful incumbent operators are those who managed the reduction in their workforces and improvement of their networks most effectively."
Eircom last night rejected Melody's findings as "ill-informed".
Mr David McRedmond, commercial director of Eircom, said the report was a failure under its own terms of reference.
He also noted that Mr Melody was a paid adviser to ComReg. He said that in his opinion, Mr Melody was not independent.
"Pricing rules should ensure that the local loop provider is able to cover its appropriate costs plus a reasonable return in order to ensure long-term development," he said.
