EU TELECOMS Commissioner Viviane Reding has praised the Republic's recent leap forward in the take-up of broadband but has insisted that retail prices need to come down.
She also welcomed Babcock & Brown's plan to divide Eircom into separately owned networks and services arms, although she recently backed away from giving regulators the power to force incumbents to sell their networks.
"Structural separation can be done if there is agreement between the regulator and the incumbent," said Ms Reding, who will launch the commission's annual review of the European telecommunications market today. "We are not going to force structural separation, but if there is agreement on it, then we certainly aren't going to oppose it."
The commission had initially considered mandating regulators to break up telecoms firms as a way to promote more competition in the market. But strong opposition from some EU states has forced Ms Reding to water down her plan and instead try to empower regulators to force "functional separation", whereby network arms remain the property of incumbents, but are operated by completely different management.
In an interview with The Irish Times, Ms Reding also said there would be no objection from Brussels if the Government decided to buy Eircom's network arm or invest in it if it was hived off from the rest of the company.
"We naturally prefer the private sector to play its part in a private market, but in many member states the Government has a big stake in main operators," she said. "The key problem is getting access to a dominant network. It doesn't matter if they are State- or privately-owned."
The Government has already invested hundreds of millions of euro in metropolitan area networks (MANS) and may be tempted to invest in a national network firm in an effort to help turn around the Republic's poor performance on broadband.
Ms Reding praised the recent thawing of relations between the regulator and Eircom with regard to the roll out of broadband and noted a leap forward in take-up of high-speed internet access.
New figures due to be published today in the commission's annual telecoms review show 17 per cent of Irish households now have broadband, which while 3 percentage points behind the EU average, is a big improvement.
Denmark, Finland, the Netherlands and Sweden are all held up as world leaders in broadband use,with penetration rates of more than 30 per cent of households.
"High broadband penetration brings strong economic growth - both are linked," said Ms Reding, who insisted the next big issue in the Republic was bringing prices down. The review notes that retail broadband prices in the Republic are among the highest in Europe while wholesale prices for broadband are the highest in the EU
"The high prices in Ireland are linked to the very high wholesale price so regulation should come in to bring wholesale prices down," said Ms Reding, who has advocated creating an European telecoms regulator to work alongside the 27 national regulators. "Regulation is very uneven across Europe. For example, mobile termination rates vary from 2 cent to 19 cent across the EU, although the real cost is about 1 cent These differences lead to a distorted internal market," she says.
A key issue highlighted in the report is the "digital divide" in the Republic, with 64 per of rural households able to access broadband compared to 86 per cent of national households. Ms Reding said public money may be necessary to resolve this issue.
