Local loop liberation will cut Net costs

The Government's decision to end Eircom's control of the "last mile" of telephone lines - that portion of wires feeding directly into homes and businesses from the nearest exchange - has been welcomed by industry observers.

The move to open competition by the end of the year is seen as being as significant as the transatlantic cable projects and deregulation of the rest of the telecoms sector.

For the consumer and, most critically, for the small to medium-sized enterprise (SME), this socalled "unbundling of the local loop" should have swift effects, lowering Internet access costs dramatically and opening the door to new kinds of access options.

Why? "Competition," says Mr Seamus Mulconry, e-commerce specialist for Andersen Consulting in Dublin.

"It allows choice, it allows full competition and it should accelerate investment in that final mile," says a spokesman for the Department of Public Enterprise, which will introduce the legislation in October.

"Unbundling the local loop" may sound like some bizarre ritual. But it has become one of the most sought-after goals in the global telecommunications industry for the companies trying to compete with incumbent operators. As the world's telecommunications markets have become increasingly deregulated, incumbents have clung to this last piece of proprietary network.

Because they've controlled this section, incumbents have had little incentive to introduce fast access technologies that can run over traditional copper lines, like asymmetric digital subscriber line (ADSL), or to pull down prices. And, they've only been willing to let competitors buy capacity on the lines while still managing them, which competitors say doesn't allow them to significantly lower their own prices. The evidence seems to back their case.

Eircom, for example, has been rumoured to be trialing ADSL for two years. But ADSL has yet to appear as a consumer offering. Eircom also indicated nearly two years ago that it intended to introduce a low flat-rate Internet access charge that would have made the State the European pioneer in US-style cheap Net access. But that was shelved as well.

Eircom has been arguing for a more limited form of unbundling, called "bitstream access" - they'd retain control of the wires but let competitors buy access to them. The Government considered this option but this week dropped it in favour of full unbundling.

Mr Mulconry believes that ADSL will be one of the first offerings following deregulation and that costs will then drop immediately for all types of Net access. This, he says, should encourage SMEs to do what they hardly done to date: get online.

"This will be crucial to the growth of e-commerce in Ireland," he says. Final mile deregulation "is the fundamental building block of e-commerce".

Without a digital mentality, the State's smaller companies risk being sidelined in their export markets and even at home. As companies they trade with and supply to switch, as they will, to online ordering, invoicing and paperwork management, they'll be dropped as partners. And the larger international companies that may have depended on them in the past may well move to other states where this more efficient form of trade is the norm.

Despite the objections of the incumbents - Eircom said Wednesday that full unbundling "was not necessarily the way to go", and noted that the technical issues could be oppressive - international governments increasingly have taken the view that incumbents must be obliged to open up the local loop.

The European Commission, for example, set a goal of full deregulation for member countries by December of this year. Thus, the Government in bringing forward legislation intended for next year is actually simply meeting the timetable Europe prefers.

Operators like Esat are, of course, pleased. "We've put a lot of effort in driving towards this," says Ms Janet Lee, acting head of regulatory affairs for Esat. "We're delighted."

But now comes the hard slog. The telecommunications regulator's office says three working parties have already been preparing for full deregulation, but a spokesperson adds that the notoriously argumentative operators themselves must agree on key parts of it. This stipulation has delayed other elements of deregulation for months. Thus, though we may get legislative permission for unbundling by December, it's anyone's guess when we'll begin to reap the benefits.

klillington@irish-times.ie