The communications regulator has failed to comply with a request made by the European Commission more than two years ago to urgently update the pricing model it uses to decide how much Eir can charge rivals to access its services.
Given that ComReg was already relying on figures that were set in 2016, which were merely indicative and based on older data, it means that the so-called Copper Access Model (CAM), which the regulator relies on for pricing, is now seriously outdated.
Eir’s rivals claim that because they are forced to pay wholesale rates that do not reflect current market prices, Eir is being given an unfair advantage . They also insist that the biggest losers from this are consumers, who are being charged more for broadband than they ought to be.
Eir owns most of the new high-speed fibre and older copper lines that go into people's homes and businesses and that are used to deliver broadband services. It is allowed to charge competitors such as Sky and Vodafone for use of its infrastructure using the pricing model regulated by ComReg.
The European Commission on July 13th, 2018, told ComReg the pricing model it relied on needed to be updated with more recent data and that this should be done “without undue delay”.
However, ComReg has yet to update the model despite agreeing to do so as part of a High Court settlement reached with Sky last October. Sky took a case against the regulator on switching charges after Eir was allowed to charge rivals €170 every time a customer moved from one supplier to the other. Previously this had cost just €2.50.
Growing frustration
Some industry experts believe a strongly-worded letter sent by the European Commission early last month regarding related fixed-line telecommunications charges known as the weighted average cost of capital (WACC) shows its growing frustration at ComReg’s failure to properly regulate the market.
The commission last month told ComReg to reduce WACC rates “as soon as possible” after rivals complained about delays in doing so.
A consultation on CAM pricing could take as long as a year to complete, according to lobby group Alto, which represents all the major players bar Eir. It is estimated that parts of the network covered by the model showed returns of 12 per cent last year.
Alto said that between the failure to update WACC and the delay in the CAM wholesale charges, consumers could collectively be paying tens of millions of euro per year that they shouldn’t be.
"The failure of ComReg to act on this has the potential to keep prices artificially high for the consumer, and there is no real excuse for the delays in either of the reviews that the European Commission has urged it to carry out," said Ronan Lupton, chairman of the organisation. "We want to see immediate action to rectify the situation."
ComReg said a project was under way to update the cost models it uses.
“The updated models will reflect changes in cost assumptions and the new weighted average cost of capital. We expect to consult on a number of prices over the next 12 months,” a spokeswoman said.
“It is too soon to quantify any potential changes to prices at this stage, as the modelling work is not complete. ComReg’s approach to updating regulated prices reflects the importance of regulatory certainty in promoting investment, as well as the desirability of avoiding a material discrepancy between prices and underlying costs,” she added.
