TELECOM Eireann should be fully privatised and the proposed telecommunications regulator should be given real teeth as well as the power to license new companies, the employers' organisation IBEC said last night.

Launching its policy recommendations for the telecommunications industry, IBEC said that, without a proper regulator to prevent anti-competitive cross subsidisation, Telecom should be forced to divest its stake in Cablelink and should not be allowed run an Internet access service

"There is a united consensus across industry, including both the major users of telecommunications services and the service providers, that a vibrant competitive environment for telecommunications is necessary to underpin economic development up to the year 2000 and beyond," said Dr George Young, chairman of IBEC's committee on the sector.

He said IBEC welcomed the strategic alliance with KPN/Telia which will see the Dutch-Swedish consortium take a stake of up to 35 per cent in Telecom Eireann and the offer of up to 14 per cent for Telecom's employees. However, the Government should sell off the rest of the company within a two-year period, he added.

Such a strategy, the document asserts, would highlight the commercial orientation of Telecom Eireann, allow it to generate customer and shareholder loyalty, and realise significant funds for the State.

IBEC also warned that the provision for an independent regulator for the industry in the current Telecommunications Bill was "a nonsense".

If the Bill passed in its current form, the new regulator would have no substantial power, said Mr Tommy McCabe, the committee's secretary.

He said the proposal in the Bill which would allow the Minister for Communications to override the price cap mechanism was totally unacceptable to industry.

The independent regulator should also have the power to liberalise telecommunications in Ireland, Mr McCabe added, and should be able to set interconnection terms or investigate allegations of predatory pricing or discriminatory behaviour.

Even under the eye of such a regulator, he added, Telecom Eireann should produce a plan to integrate and develop its fibre optic network with Cablelink by the end of 1997, or be compelled to divest itself of the firm.

Rating Telecom Eireann's progress in recent years offered a mixed scorecard, IBEC said: While the company had done well in its digitalisation and in making Ireland the "call centre" capital of Europe, its tariffs were too high and its penetration was not up to EU levels. The document also expressed concern that Telecom had made only limited preparation for broadband infrastructure.

The report suggests that the Government is lagging far behind most of the developed world in maintaining a State monopoly over the telephone company. Instead of seeking a derogation from introducing competition in the Republic until the year 2000, the Government should champion the development of a competitive environment, IBEC argued. The State should provide measures to support the development of value-added networks, the body added.