The founder of Esat Telecom, Mr Denis O'Brien, urged the Government and private firms yesterday to invest in a completely new telecoms infrastructure to supersede Eircom's local loop.

The entrepreneur, who sold his stake in Esat to British Telecom in 2000 for €290 million, said this was the only way that a true knowledge economy could be created in the Republic.

He said the incumbent operator Eircom did not have enough cash to invest to upgrade its own network to offer business and consumers a real broadband product. Digital subscriber line (DSL) technology, which is currently on offer from Eircom, is not fast enough to be called a real broadband product, he added. Mr O'Brien led a consortium that bid unsuccessfully for Eircom, losing out to the Valentia consortium headed by Sir Anthony O'Reilly.

Mr O'Brien, who was speaking at IBEC's annual Telecoms and Internet Federation conference in Dublin, said the new fibre network would cost more than €2 billion and would offer people five megabytes of internet capacity.

But Mr O'Brien - who currently operates a Caribbean mobile phone business - did not offer to invest in the alternative telecoms network himself. Rather, he said the Minister for Communications, Mr Ahern, should expand the Government's plan to build new networks in 120 towns.

Mr Ahern, who also addressed the conference, warned private telecoms firms that if they did not invest in infrastructure to serve Irish towns, the Government would intervene.

"Currently there are 80 large towns that the market is not addressing, and that simply is not sustainable. I want that deficit addressed in a pro-competition, pro-choice and low-cost fashion.

"If it isn't addressed quickly by the market, I will intervene on the regulatory, infrastructural and legislative fronts to advance change," said Mr Ahern.

Eircom's chief strategy officer, Mr David McRedmond, rejected the criticism about the firm's infrastructural spending on telecoms networks. He said Eircom was delivering on its commitment to making broadband Ireland a reality by rolling out DSL.

"In addition to the €1 billion invested in the network over the past five years, we have spent over €125 million rolling out broadband to 850,000 lines in Ireland."

Mr McRedmond said Eircom was on target to achieve 100,000 broadband customers by the end of 100,000 and was adding 1,000 new customers every week.