A lengthy court battle to defend its interests may be Eircom's right, but the ensuing delay could cost customers a range of services, writes Jamie Smyth, Technology Reporter

A four-and-a-half-year battle to open Eircom's network for use by rivals was back in the High Court this week as barristers argued over the merits and pitfalls of local loop unbundling.

The legal spat between Eircom and the Commission for Communications Regulation (ComReg) is primarily concerned with the right to appeal decisions made by the regulator. But the huge significance of "unbundling" to Eircom and the economy lies at the heart of a struggle, which has been in and out of the courts since 2001.

Unbundling, a process that effectively opens the last mile of an incumbent firm's phone network to competition, was mandated by the European Commission by a target date of January 2001.

Yet four-and-half-years later, just 3,500 of Eircom's 1.6 million telephone lines have been opened to competitors so far, leading both the telecoms regulator and rival firms to cry foul.

Smart Telecom and BT Ireland have invested upwards of €30 million in equipment to place in Eircom's phone exchanges to offer their own broadband, telephone and indeed video services.

Even the Government has coughed up millions of euro in European and State funding to stimulate unbundling with little effect to date.

"Trying to get agreement with Eircom on unbundling is like walking through cement," says Iarla Flynn, regulatory director at Smart Telecom. "We have thousands of customers signed up for our services but can't get them transferred over by Eircom."

Smart Telecom has so far transferred about 1,000 customers to its €35 per month broadband and telephone line rental product but has about 19,000 orders waiting to be processed.

It accuses Eircom of refusing to agree processes that would enable people to retain their phone numbers when they sign up to the product. The firm is also refusing to transfer existing customers that use its other products to the unbundled service in a deliberate attempt to stymie competition, says Flynn.

Earlier this year, ComReg came to similar conclusions about Eircom's resistance to unbundling and issued orders forcing it to negotiate new procedures with rivals. Eircom immediately appealed the order to the new electronic appeals panel - a body recently set up by the Minister for Communications to adjudicate on regulatory decisions.

But the regulator superseded this appeal by issuing an enforcement order forcing Eircom to comply by a tight deadline. Meanwhile, the Minister for Communications has still not agreed to establish an appeals panel to hear the appeal against the orders.

The right to appeal a decision by the regulator forms the crux of Eircom's judicial review in the High Court, which has been heard over the past two months by Mr Justice McKechnie.

In closing arguments this week Eircom's counsel vigorously defended its right to appeal decisions made by ComReg. Eircom must be accorded the same constitutional rights to appeal as any other citizen or firm, he added.

ComReg's counsel argued that Eircom was asking the court to amend the legislation that established the appeals panel and argued the regulator's enforcement orders cannot be "stayed" until a future appeal is heard.

An affidavit submitted by ComReg's senior market operations manager, Paul Conway, says that Eircom's failure to negotiate with other firms is hindering rivals from using its network and imperilling their financial interests.

Consumers interests are also being detrimentally affected by the delay to unbundling as they have less choice of services in the market, according to ComReg.

In the absence of a viable unbundling regime, rival operators have only been able to repackage Eircom's broadband service called i-stream rather than offer their own service.

But without taking full control of the last mile of Eircom's network that runs into homes and businesses, rivals are unable to offer faster broadband, video on demand or SDSL services - which enable users to send large files very quickly over the internet - because Eircom hasn't yet invested in these types of service.

"Broadband uptake is being stifled at the moment because we don't have unbundling," says Rory Ardagh, technical director at Magnet Networks.

"Eircom don't understand the whole concept of digital living. It is not about just selling a broadband pipe, it is about the services and content you offer to consumers."

Eircom's rivals also point to the recent dip in the rate of increase in broadband uptake as evidence of the need to accelerate unbundling to spur demand.

Just 12,000 subscribers have signed up for broadband on Eircom's network since March 31st, indicating that the rapid growth in subscribers seen during 2004 may be at an end.

This will provoke concern at Government level, particularly given that a new EU survey published this week ranks Ireland 19th out of the 25 EU states in terms of broadband uptake. Hungary, Lithuania and Estonia all rank higher than the Republic, which ironically markets itself as the "e-commerce hub of Europe".

However, David McRedmond, Eircom's commercial director, agrees that more must be done to stimulate demand for broadband by offering innovative services. He also points to the need to increase PC penetration in the Republic. But he utterly rejects that Eircom is holding up the process of "unbundling".

"I would react furiously to the suggestion that we are delaying unbundling. We have the right to protect our right to appeal decisions made by the regulator," he says. "In no way are we attempting to delay unbundling by using the courts."

McRedmond says Eircom has written to the Minister on three separate occasions to have an appeals panel set up to hear its current appeal. But to no avail.

Mr Justice McKechnie should issue his ruling on Eircom's right to appeal ComReg's latest regulatory order within weeks. A ruling in favour of ComReg would put further pressure on Eircom to make it easier for rivals to unbundle its network.

A ruling in favour of Eircom would send its complaint to the appeals panel, which could take months to issue a ruling on the legalities of the new unbundling procedures proposed by the telecoms regulator.

Industry and consumers await the decision.