Eircom will today announce cuts in the cost of residential calls which company sources say will reduce average phone bills by at least 15 per cent. The initiative, which will also affect small and medium-size business customers, follows the announcement last week by NTL, the cable operator, that it was entering the residential phone market.
Esat Telecom, the second largest player in the market, also announced ambitious expansion plans last week.
The reductions are part of Eircom chief executive Mr Alfie Kane's strategy to defend the group's dominant position in the market. They may also help the share price, down again yesterday at €2.49, if they are seen as an example of Eircom taking the initiative. An Eircom source said last night that, unlike previous marketing efforts, the reductions will be in the form of lower prices rather than discounts or other indirect measures. Line and equipment rental rates will be unaffected, said the source. Eircom currently charges 4p per minute for local calls and 1p per minute for evening and weekend calls subject to a minimum charge of 12p. National calls are 7.4p during the day, 4.9p in the evenings and 1p at the weekends.
NTL says it plans to offer residential calls along with a package of other services including high-speed Internet services on an enhanced cable network. Customers will pay £20 per month for two telephone lines, cable TV and free Internet access. Calls will cost a minimum of 3.5p and there will be a single national call rate of 6p for daytime calls in Ireland and Britain. Irish Multi-channel, which is 50 per cent owned by Independent News and Media, plans to offer a similar service across its cable network in the Leinster area and also in Cork. Although the residential market has been opened up to competition, Eircom still does not have to share the local infrastructure with its competitors. Residential customers wishing to avail of cheaper rates from competitors such as Esat or Spirit still have to rent their phone line from Eircom.
As a result, Eircom still has 85 per cent of the residential phone market. The company lost €240 million on retail telephony services last year. Esat announced last week that its ambition is to be the number two player in the residential market. It has rebranded its local services under the Esat Fusion name as part of a £600 million, three-year investment programme. It claims to have 82,000 customers representing 7 per cent of the market. Its rates are cheaper in most cases than NTL's planned tariffs, according to the company.
Spirit Telecom has complained to the telecoms regulator and the Competition Authority that Eircom is inundating its Carrier Pre Select (CPS) customers with leaflets and phone calls in an attempt to win them back.
Customers who use CPS technology an select an alternative service provider to carry their calls while Eircom continues to provide the telephone line. Spirit claims Eircom recently broke an industry code of practice by mailing advertisements which included a CPS authorisation form to its customers.
The complaint follows a separate ruling by the regulator which found there was evidence to support allegations made by rival operator Ocean that Eircom's retail staff were able to receive information on its competitors' customers from other sections of the company which handled customers' billing.
An Eircom spokeswoman said Spirit was misrepresenting the situation and Eircom was not in breach of the code of practice.
