I wish to thank you, a Cheann Comhairle, for permitting me to raise this matter on the Adjournment. What we got yesterday from the Minister for Communications were not just changes in telephone charges but a mini-budget or, at least, phase two of the 1993 budget. If this Government was true to its claim to openness these increases in telephone charges would have been announced here on budget day along with the 1 per cent income levy, the increase in VAT on clothing and the increase in hospital charges. The Minister's attempts since then to represent as pro-consumer these changes in telephone charges which quadruple the cost of local calls——
Adjournment Debate. - Changes in Telephone Charges.
Not true.
It is true. These changes will take £60 million out of the pockets of domestic consumers and disguise increases in VAT. They are a deliberate attempt to pull the wool over the public's eyes, but it is not working and it is downright dishonest.
The day when the telephone was considered a luxury is long gone. In the modern world, it is a necessity. Telephone ownership and use has grown steadily because Telecom Éireann has conducted an extensive advertising campaign urging people to get telephones and promoting their greater use. However, those people who are now "making that call" are finding that in a couple of months' time they will be charged four times as much.
In 1991 the total number of Telecom Éireann's customers increased by 7 per cent to almost £1 million and more than two-thirds of all households now have a telephone. People do not always have discretion as to when they use the telephone. Many domestic calls must be made during normal business hours and these will now cost more. As I pointed out yesterday, the pensioner wanting to contact the Department of Social Welfare, a parent wanting to telephone the school, a family wanting to talk to their doctor cannot leave these calls until after 6 o'clock in the evening or until the weekend, nor can the length of the call always be determined by the caller. How many of us have made calls to firms or, indeed, to Government Departments, to be left holding on for interminable periods and then passed from section to section before the query can be dealt with? Very few queries indeed will be dealt with within the period of three minutes.
Much play has been made by the Minister of the reduction in charges for some calls. The fact that a call to Indonesia, Korea, Malaysia or Taiwan is now going to be 51 per cent cheaper will be of little comfort to a widow living on her own who will now find the cost of a 15 minute chat with her friend or relative on the other side of the city jumping by an incredible 400 per cent.
Or a friend or relative down in Kinnitty.
The imposition of an additional 10 per cent VAT rate is particularly severe and will wipe out any potential savings that may arise from some of the charges. The VAT will apply not just to charges but also to line and equipment. I do not know what the average domestic telephone bill is, but I imagine that £60 or £70 for a two month period would be fairly typical. The VAT increase will mean that a person with an average bill of £70 will have to find an additional £42 per year. A person paying the full rate of tax would have to earn another £80 gross per year to cover the extra VAT alone.
I accept that international charges are higher than the norm and that this has created problems for firms who trade on the international market and who have their headquarters abroad. However, domestic consumers should not have to pick up the tab for providing lower charges for business. For many decades the PAYE sector has had to subsidise tax breaks for the business and commercial sectors by paying crippling rates of income tax on wages and salaries. Now it seems that domestic telephone users are being asked to provide a similar subsidy for communication charges for the business sector.
It should also be realised that the main beneficiaries of the new charge structure will be the largest businesses. The big increase in peaktime charges will create severe problems for many small businesses who rely heavily on the telephone, who would be making largely local calls and who must make them during the working day. The reduced charges for international calls may make the larger firms more competitive; but will that be of any value if it puts smaller firms out of business?
Finally, unlike Fine Gael, I do not believe that Telecom workers should be made the scapegoats for these new charges. The workforce have made great sacrifices to turn Telecom around. An annual loss of around £80 million has been transformed into annual profits of £80 million. The waiting time for connections has been cut. All of this has been achieved against a background of significant reductions in the workforce.
I am sure the Minister has got the message loud and clear in the course of the day. He should now respond to the widespread demand from the public to reverse the appalling decision he made yesterday to place such an intolerable burden on the shoulders of domestic telephone users.
I welcome this opportunity to explain the revised telephone tariffs approved and announced by me yesterday. I would like to say at the outset that the new tariff is not and will not result in sky high telephone bills for ordinary residential users. The average bill after VAT will go up by only 4 per cent. It is not a massive rake-off of the residential customers to subsidise industry—the average business bill will come down by 8 per cent — and it is not to bolster inefficiency in Telecom; Telecom will lose £15 million in revenue.
This is about creating and protecting jobs; it is about becoming competitive and efficient; it is about reinforcing fairness and equality as between different user groups; above all, it is intended to give users more choice, more opportunity and more control to customers over their bills and costs. Finally, it is to encourage the best use by all our citizens of a very costly investment in the national telephone system, an investment of £1,500 million.
If we do not change our tariffs to meet today's conditions events will overtake us and cause severe damage. This is apparent from what is happening in other countries. The savings that ensued to the national network operators as a result of economies in the transmission of international calls were not passed on to those making international calls but were in part used to subsidise local calls. Deregulation, particularly in the US and Britain, has meant that operators were compelled to cut their charges to compete in a liberalised market. The United Kingdom now has the lowest international charges in Europe, but this has lead to charges for local calls in the UK being levied at a rate of 17 pence for three minutes and being charged for at the rate of 57 seconds per unit by British Telecom and at six seconds by Mercury Communications.
Liberalisation and modern technology are now making their effects known in Ireland and the effects are that Telecom Éireann's share of international traffic fell from the 50-50 share, which one would expect, to 40 per cent, and in the case of traffic between Ireland and Australia the Telecom Éireann share is only 30 per cent. The loss of revenue to Telecom Éireann is currently running at £15 million cumulative per year. Put simply, this means that in year one Telecom Éireann lost £15 million in revenue, in year two it lost £30 million and so on.
This is obviously a situation which could not be allowed to continue. If it were, we might rapidly come to a stage where there would be insufficient revenue from international calls to subsidise local calls, which would then have to increase. This would not be in the interests of the consumer, Telecom Éireann or the nation. Quite simply we have to act before this occurs.
With the co-operation of Telecom Éireann, my Department has provided a package that protects the revenues of the company, provides international call charges that are competitive universally and close to those charged by British Telecom, which are the cheapest in Europe. This has been done in a manner which will have the minimum adverse impact on subscriber's bills. The average domestic subscriber will have an increase of 4 to 5 per cent on the bill — £3 per bill, £20 per year or 37 pence per week — without any alteration in the calling patterns to reduce costs.
At this stage I would refer to some ill informed criticisms which have been made of the package. Let me put the record straight. Based on the accurate data at my disposal, almost 80 per cent of all local calls will be unaffected by the timing restrictions; more than 72 per cent of local calls made at peak periods will be unaffected; more than 97 per cent of local calls made at off peak periods will be unaffected; and the cost of all these calls is reduced to 9.5 pence basic tariff.
From where will the £60 million come?
Telecom Éireann has the technology in its itemised billing programme to allow it examine the bills of different categories of customer. At my request various types of bills for the month of December 1992 were examined in detail and the average effect on each type of bill produced if the subscriber did not later his or her calling pattern in any way. This examination confirmed that different categories of customer's bills did not show dramatic changes for residential users, small businesses or old age pensioners.
Some of the media comments today give the impression that there will be outrageously high increases in bills, figures as high as 400 per cent have been headlined. If this were likely to be the case does this House think that I and the Government would stand for it? This is, of course, not the truth by any stretch of the imagination. I have had a detailed and thorough examination carried out of the actual bills of various categories of customers to see what effect the new tariff would have on actual bills. I am satisfied that the outcome will be within reason — some up, some down, but by moderate amounts.
I can, of course, understand that people could have genuine misgivings about the impact of these changes on their telephone bills. My concern, and indeed input into the changes proposed by Telecom, was to address such worries. The underlying facts about the pattern of telephone calls are a surprise to most people. The facts, based on accurate recording of all telephone traffic, show quite clearly that consumers need not be unduly worried; in fact, with a small change in usage, most can reduce their own bills.
I would like to assure all telephone users that the exaggerated stories put about based on highly selective situations do not present a true or accurate picture. For example, it is true that the cost of a 15 minute peak call will increase from 11.17 pence to nearly 50 pence. That is for one call in 25. The proponents of such stories do not tell the public that the cost of 20 out of the 25 calls will be reduced from 11.17 pence to 9.5 pence. The savings on this will almost wipe out the extra cost of the one call which is being highlighted. That is the reason there will not be a grossly exaggerated increase for even those customers who make only local calls and do not benefit from substantial reductions in trunk and international calls.
The poor grannies.
For those customers who make even a moderate number of trunk or international calls there are likely to be overall cost reductions. Most customers do so at one time or another. It may be a surprise to most people that, for example, of old age pensioners, who are perceived to be low users of the phone, 80 per cent make trunk and international calls. They will benefit from the reductions in those categories leading to only minor changes in their overall bill.
The wrong and misleading impression has been given by Deputy Gilmore again tonight that residential customers will be asked to pay £60 million to subsidise industry. That is so far from the truth as to be ludicrous. Residents will benefit from reduction of £21 million in international calls and £14 million in trunk calls including the new weekend specials, a total benefit of £35 million.
They will pay, based on unchanged calling patterns, an extra £18 million on long duration local calls and not £33 million as put about, and £30 million in VAT now to be passed on by Telecom. The overall net increase in bills is therefore £13 million for that category of customer, not £60 million, a net increase of under 4 per cent. This is before any exercise of the choice and incentives now open to them to cut costs. It is a discretion of customers to eliminate that 4 per cent increase by using the new incentives in the tariff system to shift a reasonable proportion of less essential calls from peak to off peak time. I believe the vast majority of customers will seize that new opportunity not only to eliminate the small increase but, in fact, to reduce their bills.
During my discussions with Telecom Éireann I was very anxious to ensure that helplines such as the Samaritans will be able to continue to provide their services without clients having to worry about telephone charges. I can advise Deputies that emergency calls to the Samaritans will continue to be made through contacting the Telecom Éireann operator. I have also asked Telecom Éireann to enter into discussions with operators of other helpline type services with a view to ensuring that essential work is not disrupted and I want to see that free-phone numbers for such helplines are placed in the ordinary telephone directory rather than confining them to the Golden Pages in common with other free-phone services. As the package approved by me yesterday will not come into effect until 1 September I will ensure that there will be no disruption of essential helplines under the new arrangement.
The Minister will need a helpline to Deputy Jim Kemmy by the time this is over.
While on the subject of helplines I would like to say that I welcome a news report on last evening's RTE news which stated that a spokesperson for the Childline helpline had welcomed the new tariffs as they would reduce the helpline's telephone bill without interfering in any way with the service provided.
Much has been made of the fact that the time allowed for local calls has been reduced to three minutes. I have shown that our local call charges are extremely favourable compared with those applying in the UK and Ireland will, after the implementation of this package, still have the seventh cheapest local call charges in Europe, based on a three minute call, while at the same time having competitive international call charges.
The principle that those who use a facility must pay according to their usage must be applied to telecommunications charges as in other areas of business. That is why I refused to allow an increase in connection or rental charges as it is not related to use.
We should thank the Minister for bringing down the cost of telephones.
We should thank the Minister for being an outstanding forward thinking man.