Increases in Telephone Charges: Motion.

Mr. Dardis

I move:

That Seanad Éireann condemns the Government decision to approve increases in telephone charges of up to 400 per cent in day-time local calls; regrets that the Government's decision failed totally to address the overall cost levels of Telecom Éireann or to encourage greater competition, as recommended in the Culliton report; calls for a retention of the present position regarding VAT on phone bills; and calls on the Government to withdraw the increase in local call charges.

I welcome the Minister to the House and thank him for his attendance. Due to the importance of this issue for individuals, small businesses and the disabled, the Progressive Democrats has taken the opportunity in the Seanad this evening to follow up on its initiative in the Dáil last week where the party insisted that the House debate a motion condemning the totally unfair and excessive domestic telephone price increases announced by Telecom Éireann.

The Progressive Democrats motion before the Seanad this evening reiterates our opposition to the increases of up to 400 per cent in some local calls which will take effect from next September. It condemns the Government's failure to introduce greater competition in the provision of telephone services within the country as recommended by the Culliton report. It also urges the retention of the present VAT level on telephone bills rather than the proposed further, increase of 10 per cent next September and in April 1994. Finally the motion urges the Government to withdraw the proposed increase in local call charges.

I have no doubt that if the Government fails to act in this matter, Telecom Éireann will be forced to rethink its so-called rebalancing strategy, which amounts to nothing more than having domestic Irish telephone users subsidising international telephone calls at a hefty cost, by the intervention of the EC since it is plain that the transfer pricing proposals are a direct contravention of the Treaty of Rome.

This deliberate policy of cross subsidisation, which involves greatly increased domestic charges where Telecom Éireann enjoys a monopoly in order to reduce international charges where the company is subject to effective competition, will be successfully challenged in the European Court of Justice. That court has given a variety of judgments under Article 90 of the Treaty of Rome to the effect that State bodies which enjoy special exclusive rights under national law cannot use those powers to engage in differential pricing which are not commercially based and which have the effect of abusing a dominant position.

That form of judgment is a classic definition of what Telecom Éireann proposes to do in relation to telephone charges from next September. I am also aware that Telecom Éireann is already the subject of a formal complaint to the European Commission from the Esat company in Ireland which is alleging anticompetitive practices on the part of the semi-State company.

I believe ordinary householders, the elderly and disabled persons will look ahead with trepidation to the likely impact on their telephone bills from next September and they will be equally incensed by the manner in which the Government and the Minister, who is here this evening, have sought to put the price increases across in a totally misleading, selective and unrepresentative way. Most people simply do not accept the validity of Telecom Éireann's claim that over 70 per cent of local calls in this country are less than three minutes' duration. This raises the question of the manner in which the Government and Telecom Éireann are prepared to proceed on a hand-in-glove basis.

The Department and the Minister seem satisfied to accept Telecom Éireann's analysis of the situation and the likely impact on its customers. Surely it would have been fairer to the telephone using public for the Department to have engaged independent consultants to examine the impact of various price changes rather than relying on the obviously self-servicing approach by the company, an approach which understandably from their point of view, seeks to totally minimise and obliterate the negative impact on people's telephone bills and to hype the undoubted benefits which a reduction in our international telephone charges will bring to some business users, although those benefits are to be welcomed.

I stress that this will benefit some business users because our country is one where not only the domestic telephone user will be severely hit but thousands of small businesses, the very sector we are relying on to boost job creation in the years ahead, will also suffer severe increases in operating costs. Auctioneering firms, travel agents in provincial towns, co-operative marts and farmers, almost all businesses outside the greater Dublin area that are not part of large multinational or manufacturing companies will suffer. This is the area which it has been repeatedly said will bring jobs to the country through the promotion of indigenous industries and services. These proposals are contrary to that rhetoric.

Most smaller companies are reliant on the domestic market for their sales and business. Undoubtedly, their telephone charges will increase massively from next September. What about disabled people, or elderly people living alone or people who are confined to a wheelchair? For people confined to wheelchairs the telephone is their lifeline. Are they now being told "do not make that call". As time has passed, the full impact of the increased telephone charges is getting across to the public who have reacted with justifiable anger.

I note the relative silence from the Labour Party on this issue and I have no doubt that this ill-judged and ill thought out price increase strategy approved by the Government for Telecom Éireann will prove to be a major embarrassment and impediment to both Government parties, and to the Labour Party in particular. One can imagine — and the Chair will readily appreciate this — the howls of outrage with which this decision would have been greeted by the Labour Party had it still been in Opposition. Over the past few weeks we have seen that party indulge in a totally misleading and unfair strategy of seeking to suggest that the price increases will be reviewed.

Various Labour Party spokespersons have said they want the prices reviewed. However, in the Dáil last week, all the Labour Party Deputies trooped through the division lobbies and approved price increases of up to 400 per cent for many domestic users. That is the bottom line. The Irish public, both domestic consumers and business users of telephones, can and must judge the Labour Party by its actions and not by its fine flown sentiments. I have no doubt, notwithstanding any crocodile tears which may be shed by the other side for the hapless consumer and for small businesses, that both Government parties will once again vote to approve these unacceptable price increases.

Ms Honan

I second the motion. I welcome the Minister to the House and I am pleased to have an opportunity to discuss this motion. I am delighted Mr. Culliton, the chairman of the Culliton commission, which was appointed by Deputy O'Malley to update Ireland's industrial policy, has unequivocally rejected this Government's claim that its outrageous telephone charge increase was in line with the strategy recommended by the commission in its landmark report on industrial policy 18 months ago.

As Mr. Culliton points out, the thrust of his recommendation was to urge a general downturn in telephone charges, and also to provide competition in the domestic telephone services market. What the Minister, Deputy Cowen, and the Government are proposing is the very antithesis of the Culliton prescription and they can no longer use the report to justify their unfair decision. This fig leaf of justification is no longer available to the Government.

The weekend newspaper report that the British telecommunications company, Cable and Wireless, may be interested in taking a stake in Telecom Éireann is a possibility that should be examined carefully and not summarily thrown out in a purely ideological kneejerk response by the Labour Party. The silliness of that party's response is summed up in the cartoon in today's Irish Times, which highlights the fact that the Labour Party in Government has stood idly by while the State's shares in Greencore and in Irish Life were being sold off. In an apparent rediscovery of the socialist style rhetoric which the Labour Party espoused in Opposition, its leader Deputy Spring has declared that: “The sale of any stake whatsoever in Telecom must be ruled out”. Such rhetoric is nonsensical, both for the taxpaying public and for workers in Telecom Éireann.

Everyone with a knowledge of telecommunications knows that that sector is evolving rapidly. Advances in technology render yesterday's miracle processes redundant today and it is essential that Telecom Éireann stay at the forefront of technological advances. The prospect of Cable and Wireless being willing to pay up to £1 billion for the purchase of a 25 per cent stake in Telecom Éireann would not only be a major boon to taxpayers and save approximately £100 million in interest repayments on our national debt, but would also make the future development of Telecom Éireann and the security of jobs there even more assured.

The reality is that Telecom Éireann cannot hold back the tide of competition and with the implementation of EC competition laws, it will be faced with competition in the provision of telephone services here at home. Therefore, it is in the company's own interest to be in a position to take on such competition. In stating this, I am not necessarily advocating the privatisation of all of Telecom Éireann's activities. The attitude of the Progressive Democrats to privatisation is a pragmatic one — it is appropriate in some cases but not in others. Our primary concern is not the nature of company ownership but rather the quality of service provided to the customer and the facilitation of competition in the delivery of such services as telecommunications.

A private monopoly could be just as anti-consumer as Telecom Éireann proposes to be when its prices rise unacceptably next September and, therefore, there is no question of the Progressive Democrats favouring the privatisation of all of Telecom Éireann's activities. Our primary concern is to see reasonable charges available to all telephone users. I believe this can be best achieved by facilitating competition in the provision and delivery of telephone and other telecommunications services to the Irish market.

It is in that context and spirit that we believe the possible interest by Cable and Wireless in a 25 per cent stake in Telecom Éireann should be actively investigated. We do not want another ADM style debacle with the Labour Party scaring off potentially important and vital strategic investors in the Irish economy, whether in the sugar industry or the telecommunications sector.

Mr. Kelleher

I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"notes and approves of the action of the Minister for Transport, Energy and Communications in authorising the implementation of a package of telephone tariffs which will improve competition and assist in job creation in the economy; allow Telecom Éireann to further develop and update our national telecommunications infrastructure and provide incentives for maximising public usage of the telephone system; further approves of the Government's decision to recommend that State and local government agencies maximise the use of freefone facilities; and welcomes the decision to establish a telephone users' advisory group to monitor the impact of the rebalancing of telephone tariffs."

Minister for Transport, Energy and Communications (Mr. Cowen)

The motion before the House is selectively critical, highlighting only the price increases in a small proportion of day time calls, while the price reductions in the vast majority of calls are ignored. This selectiveness and lack of balance by the Opposition has dominated the debate on the issue.

As I have explained on two occasions in the Dáil and in several public statements, day time local charges will not increase by anything like 400 per cent. Such increases will only apply to one out of every 25 local calls. The price of 20 peak and 24 off-peak local calls out of every 25 calls is being reduced. This uncomfortable fact is consistently ignored by those who wish to criticise a carefully balanced package which will bring commercial principles and fairness to bear on a tariff which is outmoded and unsuitable for the telecommunications market of today and tomorrow.

Much has been said about other supposed inadequacies of the telephone tariff rebalancing package. It has been described as inadequate because it fails to address the inefficiencies of Telecom Éireann and the issue of competition, as recommended in the Culliton and Moriarty reports. I will deal with these points later but I would refer Senators to the Culliton report and ask them to note that it has separate timetables for areas such as rebalancing tariffs, efficiency in Telecom Éireann and the introduction of competition. The implementation of this rebalancing package is but one step towards completing the Government's obligations and has been achieved within the time frame set by the Culliton report. The Government look forward to fulfilling all its obligations under those reports.

With regard to the tariff rebalancing, the Moriarty Task Force specifically recommended the urgent introduction of rebalancing: "which must not be made await the introduction of greater efficiency, rather it must happen first", which is what is happening. The status quo could not have been maintained for much longer because of the serious loss of international business suffered by Telecom Éireann. The primary reason for rebalancing bears repetition — further competition is inevitable and will come sooner rather than later. The EC Commission envisages competition in voice telephony by 1998 and prior to this the opening up of the radio communications and satellite markets. Ireland will be bound by the deadlines for liberalisation of these services which will be imposed in relevant EC legislative measures.

Telecom Éireann must not only be prepared to face this competition but it must also be allowed to face it successfully. This is a point which the Progressive Democrats in particular, both here and in the Dáil, fail to address. Telecom Éireann's tariffs must be cost based for all services if it is to continue supplying services to all parts of the State.

On Wednesday last I advised the Dáil on certain misapprehensions which have led to this debate. Over the years there was a universal policy of using some of the cost savings, which were achieved with the advancement of technology in relation to international telephone calls, for the subsidisation of local calls where the impact of technology has had less effect. When liberalisation of the telephone market commenced in the United States over ten years ago this position was no longer tenable in any country, not least in Ireland.

The opening up of the telecommunications industry created, among public network operators, artificially high prices for international traffic. Market share was lost to competing international carriers who had no local service obligations. In such circumstances it is essential for public network operators to reduce, and eventually cease, the subsidy on local telephone calls and to readjust tariffs to cost related levels. This had occurred, to a certain extent, in other countries to the stage where Telecom's charges from Ireland were far higher than those of incoming calls from most other countries. Not to adjust tariffs now would result in a further and continuing loss of international traffic for public network operators who operate uncompetitive tariffs to such an extent that there would not be sufficient profits from international traffic to subsidise local traffic. This is the situation emerging here.

If Telecom Éireann loses its international revenues it cannot subsidise local traffic and we will have high local charges as well as high international charges. That is what would happen if I chose to avoid the problem and did nothing. There would be a loss of revenue and profits to Telecom Éireann and a loss of dividend to the State. There would also be a general deterioration in the quality of service available in Ireland and compared to our competitor countries if we persisted with the status quo. The ability of Telecom Éireann to continue to provide a service, both nationally and internationally, of which we can be justly proud would be jeopardised and the company's ability to provide advanced telecommunications services and networks, as well as secure well paid employment for the greatest possible number of our people would also be put at serious risk. I am not prepared to allow that to happen and that is why the Government took the necessary decision.

The rebalancing measure approved by me is competitive and it is necessary if Telecom Éireann is to face further competition. It is not abuse of monopoly power but the opposite. On the subject of the alleged abuse of its monopoly position by Telecom Éireann, I draw the attention of Senators to the fact that telephone charges have decreased, in real terms, by over 34 per cent since 1986. In addition, the overall effect of the rebalancing package is a net loss of £15 million a year in Telecom's revenue. If this is abuse of a monopoly then let us have more of it.

Rebalancing is in line with the requirements of the EC Commission that telephone tariffs throughout the Community be based on cost. Rebalancing is a necessary measure to prepare Telecom Éireann for full competition on voice telephony in the not too distant future when the company will have to compete against service providers who are selective in the sectors of the market they are prepared to cover. If Telecom Éireann is to compete successfully and continue to provide telephone service in even the remotest parts of our island it must be allowed to compete on a level playing field. Telecom must, therefore, have cost based competitive tariffs. That is not suggested by the Progressive Democrats in the motion. They want to encourage competition. However, when the Progressive Democrat leader was in Government he refused to give Telecom a commercially based tariff despite the fact that the prelude to competition is to give Telecom — in which the Irish taxpayer has invested £1,500 million — such a tariff to compete on an equal basis in the market place.

Inefficiencies exist in Telecom Éireann and they are being tackled. The first annual report of Telecom Éireann in 1985 identified that the company would require to shed 5,000 jobs — some 25 per cent of its workforce — in five years. The company has done so and in a manner which has not only maintained services without interruption, but greatly increased the number of connections to the national telephone service; all but abolished the waiting list for telephone service and provided new and advanced services for both the business and residential customer. The company has a further voluntary severance and early retirement plan on offer which I approved recently.

The penetration of telephones in Ireland at 29 per 100 people is well below the EC average of 45. Increases in telephone usage and associated revenue will contribute significantly to improving efficiency, reducing costs and ultimately to further reductions in tariffs. My Department will also continue its ongoing discussions with Telecom Éireann regarding other methods of increasing efficiency both in the company's core business and that of its subsidiaries.

There was a reference to the number of lines per head of staff in Telecom Éireann being substantially below the norm for other European countries. It is below the norm and I am the first to admit that there is room for improvement. Once again, however, I must ask the Progressive Democrats in this House to compare like with like. If we compare Ireland with, say, Belgium, we will find that Belgium has a population density almost seven times that of Ireland. It is easy to see that in Belgium it is much cheaper, in both manpower and cost terms, to provide cabling for the population which is compressed into a relatively small area. Terrain in Belgium is relatively level and the costs of providing underground cables, laying poles and so on is, therefore, much cheaper than in Ireland where the terrain varies from rugged and rocky to bogland.

In Ireland the population outside the cities, towns and villages is very scattered. On the Continent the population is more likely to be centred in towns and villages and there is not the same degree of service to isolated houses as in Ireland. All these factors impinge on Telecom Éireann's perceived efficiency. There is room for increased efficiency in Telecom Éireann. We must, however, recognise that efficiency does not always mean matching the best results attainable in other countries all the time. There are areas in which, because of circumstances outside our control, we will always be behind other countries. Similarly, I feel confident that there are areas in which we can surpass the levels attainable in other countries.

I am puzzled by the implication in the Progressive Democrats' motion that Telecom Éireann is not operating competitively in those areas which have been liberalised by EC Directive. Since 1984, when Telecom Éireann was set up as a commercial State body — and in advance of EC Directives — there has been progressive liberalisation starting with the terminal equipment market: that is equipment like telephones, answering machines and basically anything which is connected to the end of a telephone line. This market is now liberalised to the extent that a licence is no longer needed to supply, install or maintain terminal equipment.

In accordance with the terms of the EC Directive on Liberalisation in the Markets for Telecommunications Services there has been increasing liberalisation of this segment of the market in line with the requirements placed upon my Department. Licensed service providers may now sell-on capacity in leased lines for data transmission. Effectively, apart from the network infrastructure, the only monopoly areas left to Telecom are voice telephony, telex, mobile radio telephone, paging and satellite based telecommunications services.

The European Commission has proposed a range of measures which will apply full liberalisation and competition in a phased manner to telephone systems over an agreed period. Their proposal is for a five year implementation period. In addition I will give careful consideration to the recommendations of the Moriarty task force, subject to having due regard to maintaining an acceptable standard of public service obligations on all service providers. Why should Telecom alone have a public service obligation? Those who want to compete should do so on the same basis.

Members of the House will agree that a wide open competitive system which might see a large part of the county denuded of an affordable telephone service would be in nobody's interest. I also assure the advocates of competition that the local tariffs I have introduced for peak local calls look moderate in comparison with those that would have to prevail to make it worthwhile providing a local service in an open competitive situation. We have to look no further than the situation emerging in a number of European countries to see where the trend is leading.

The package of tariffs approved by me are reasonable steps towards achieving cost based tariffs for all telecommunications services and for ending the distortions that exist in the present tariff. The implementation of the package will allow our export industry, which is relatively labour intensive, to compete against its European and other international competitors. It will especially allow our developing food processing sector to market its goods and our developing services sector, which is also highly labour intensive, to export its services and expand its workforce.

The implementation of the package will encourage the setting up of international service sector employment — both Irish owned and foreign owned and, more importantly, provide a necessary incentive for those service industries already in Ireland to remain here. There was no reference to that in the Senator's speech.

Mr. Dardis

I do not know how the Minister can say there was no reference to it — he was not listening.

Acting Chairman (Mr. Sherlock)

An tAire, without interruption, please.

Mr. Cowen

I have carefully considered the impact on old age pensioners. They, even more than the average population, make proportionately more trunk and international calls than local calls and will benefit to a greater extent from reductions in these calls. This may be a surprising finding to many people but it is a fact.

I am satisfied that the average overall impact on the old age pensioners as a group will be neutral and that those who make mainly local calls will have increases limited to about 20p per week on average, based on the full statistical data available.

Telecom Éireann has set aside £0.5 million to assist in reducing the telephone bills of charitable organisations who provide helpline assistance to the public. They are at present surveying traffic patterns of the higher priority assistance lines and will shortly enter into discussions with the organisations concerned and other relevant parties to set up procedures for disbursing the assistance now being provided. This will reduce any concerns by members of the public and the organisations providing assistance that the cost of calling might be an impediment to seeking and providing assistance.

As in any rebalancing package there will be winners and losers. The Government is satisfied that every possible step has been taken to ensure that the number of losers has been minimised and that, where possible, facilities have been made available to subscribers to minimise the ill effects through the promotion of off-peak usage. Special measures were introduced to ease any problems in relation to helplines and for monitoring through the telephone users' advisory group of any undesirable results from the implementation of the package. I commend the Government amendment to the House.

The Progressive Democrat motion seeks to have it every way, for a party that places a high value on integrity, honesty and high standards. There is no question of a 400 per cent increase in day time local calls. I defy Senators in their reply to come up with any example to show me that on average, in any set of circumstances, any consumer's local call charges will increase by 400 per cent. Senators want VAT charges on telephone bills to be dropped. Perhaps Senators could suggest where we could recoup the £35 million generated by these charges? Are Senators suggesting that international calls should be charged at the present rate so that VAT may be removed? The Progressive Democrats believe in fiscal rectitude. How do they propose to balance the accounts in Telecom Éireann?

The Progressive Democrats say they want to encourage greater competition. So do I. If Senators want competition based on existing tariff structures, they are showing their ideological prejudice. They are suggesting that the Government should allow private operators to compete with Telecom Éireann while keeping the semi-State company on a non-commercial basis, so that private operators can "cherry pick" in areas where they will make a profit and let Telecom Éireann serve the unprofitable areas of the country. I want competition on a level playing pitch. The prelude to any competition must be to give Telecom Éireann a commercial tariff within which to operate. Then it can compete on the same basis as anyone who wants to come into the market.

Mr. Ross

The Joint Committee on Commercial State-sponsored Bodies had a long interview yesterday with Mr. McGoyern, the chief executive of Telecom Éireann. What he told us was impressive, if disagreeable. I left the meeting disagreeing with him but far better informed of the reasons he made that decision. Although this whole episode has been badly handled, and although I disagree with the decision taken, the Minister has shown courage, which many Ministers would not, in the way he dealt with this situation. There is no doubt that these measures are deeply unpopular, but at least on the Fianna Fáil side there has been no effort to duck the issue.

When Mr. McGovern explained the reasons for these measures being taken, he did at least equip us with some new statistics and information, which the Minister touched on just now. The population spread is wide and the geographical area is larger in Ireland than in other European countries. There are special situations here which we must acknowledge. They do not justify the increases in telephone charges or the way they have been implemented, but the terrain and population distribution in Ireland means that we are not identical to any other country in Europe. Every country must be treated differently. We cannot make direct comparisons with other EC countries and simply say that these charges are wrong.

The difficulties in the last few days are symptomatic of a problem in Telecom Éireann and of problems in the semi-State industry. There has been an outcry because Telecom Éireann has been run inefficiently, in a manner which is typical of semi-State bodies. The difficulty which Mr. McGovern touched on, and which we should consider, is a broader one than the charges. Mr. McGovern said that, in order to come to an agreement with the Department of Finance on many issues, he relied on his staff arguing with the Department, for hours and weeks and months. They were unable to come to agreement on some issues.

The problem with semi-State bodies, including Telecom Éireann, is that when a semi-State company wants to do certain things for commercial reasons it is stopped, because the Government has a different agenda. All Governments have non-commercial agendas in certain circumstances. Telecom Éireann is on one hand a tool of Government policy, and on the other it must be run on a commercial basis. Telecom Éireann has made a terrible mistake, despite all the statistics which have been thrown at us by the Minister and the chief executive of Telecom Éireann, because those who will suffer most as a result of these charges are among the most vulnerable in our society. If that means that Telecom has sacrificed its public service role, let this be acknowledged.

There is no doubt that there are people who will not be able to afford to pay these increased telephone charges. They may be a minority, but does not mean they should be ignored, or treated differently from the large majority. Statistics are continuously thrown at us which indicate that only a tiny proportion of calls will suffer from these increases. It is about that tiny proportion we are arguing today. That is precisely where the abuse of the monopoly occurs, it affects the small proportion of the population whose option is to disconnect their telephones or to pay the charges which have been imposed upon them. There is no abuse of monopoly where Telecom Éireann is facing competition. Telecom Éireann has reduced charges on international calls, for competitive reasons. The Government, and spokesmen for Telecom, say that the Culliton report required these changes. This would have happened regardless of the Culliton report because Telecom would have been forced by competition to reduce charges.

Telecom's problems are not recognised. They are not simply as a result of the charges which we have heard about in the last few weeks. The problem is the cost base of the company and over staffing. Why do people not say this aloud? The problem was tacitly acknowledged by the Minister today, and acknowledged yesterday by the chief executive of Telecom Éireann. Telecom's annual report talks about the intention to reduce staff further, saying that Telecom has a comparatively larger staff than similar type companies in other European countries. The Minister touched on this matter when he mentioned that staff per telephone is much higher here than anywhere else in Europe, despite the interesting extenuating circumstances he mentioned. That is something we have failed to tackle despite the Minister's assurances and those of the chief executive yesterday that it was intended to reduce staff numbers by 2,000 within five years.

I do not believe there is the political will to reduce staff, because in each of the last four or five years it has only been reduced by approximately 100 people — I stand open to correction by about ten. Staff has been reduced from about 13,600 to 13,100, that is, by less than 1 per cent per annum. Every independent economist and analyst — those not confined by their positions in the public or political arena — will say quite straightforwardly that Telecom Éireann is overstaffed by about 4,000 people.

The people who are paying the price of that overstaffing are those who are paying the increased charges. The reality is that it is politically easier to charge more money per individual telephone call to vulnerable people than it is to produce redundancy packages. It is time people were honest about that reality and said straightforwardly that the staff problem must be faced.

The chief executive was asked about Telecom Éireann's application for Structural Funds. Apparently it has applied for £10 million of EC Structural Funds. I suppose everybody is entitled to apply for Structural Funds, but this application tells one a great deal about the philosophy of the company. It indicates that Telecom Éireann does not regard itself as a stand alone company which exists to produce a credible return for capital invested in it. Its return on capital invested is only 12 per cent, which Telecom Éireann describes as a very modest return.

The company is content to take charity from the EC; one may call it investment but it is charity when it does not require a return. We cannot insist that Structural Funds are taxpayers' money and that we want a return on it. It is a once off charity payment indicating that Telecom Éireann regards itself not only as a monopoly, but as one which is not obliged to return a profit but will take money from anywhere it can.

Mr. Magner

The Senator wants to sack 2,000 workers.

Mr. Ross

I did not talk about sacking anybody.

Mr. Magner

That is Fine Gael policy.

Mr. Ross

What I said was that we have to be realistic and honest about the fact that the company is overstaffed.

Mr. Magner

That is the logic of what the Senator is saying.

Acting Chairman

Senator Ross without interruption.

Mr. Ross

Finally, I would like to say something about the Labour Party's attitude to privatisation. The Labour Party, thankfully, has been extremely honest about privatisation in the last two days. As Tánaiste, Deputy Spring has said that the Coalition will end if there is privatisation. I hope, Acting Chairman, that is a prophecy and that we get two in one.

Mr. Cassidy

I second the amendment. I have been a member of Seanad Éireann for 11 years and I have always taken an interest in the operation of Telecom Éireann. As a former employee of the old Department of Posts and Telegraphs, before becoming a Member here, I have much experience of telecommunications in Ireland.

Before the present Taoiseach, Deputy Reynolds, became Minister for Posts and Telegraphs in the early 1980s, I remember delays of a year or even two in getting a telephone. Today, Ireland has one of the most modern telecommunications services in the world. This country's communications system was displayed by RTE in Millstreet as the Eurovision song contest on Saturday, 15 May last. We are the envy of many countries throughout the world, in communications.

If we leave aside the political debating engaged in by Senators who wish to become Deputies, we can take a level look at the question we have to address. As one who uses the international calls system and has a wealth of experience in trying to maintain the jobs and livelihoods of around a 100 people, I am well positioned to speak of the high cost borne by those involved in maufacturing and exporting. I welcome the proposal to reduce the price of international calls by 40 per cent. This will make Irish companies and international companies based here more competitive and will give an opportunity to employers, myself included, to create further jobs.

We have to look at the future direction of the EC. The Minister addressed that in his statement when he said that by 1998 competition from outside, as well as within the EC is envisaged here. The Minister is correct in saying that Telecom Éireann will have to prepare itself for that eventuality. As an Irish company we have to allow Telecom become competitive and, perhaps, gain some share of the outside market.

I was Fianna Fáil spokesman when legislation on telecommunications was going through this House in 1984. Telecom Éireann has made tremendous progress since then and is to be congratulated on the improvements which give Ireland one of the most modern communications systems in the world.

In his speech the Minister said he wants to protect old age pensioners and the underprivileged who use the telephone as a means of communication, particularly in rural Ireland. I welcome this intention; our older generation have made a massive contribution to this country. For many who live alone — in the city or in the country — the telephone is the only means of communicating with their neighbours and relations with whom they may need to speak daily. In this respect I welcome the relevant part of the Minister's contribution in this House today when he said:

The impact on the old age pensioners has been very carefully considered by me. Old age pensioners, even more so than average residents, make proportionately more trunk and international calls than local calls and will benefit to a greater extent from reductions in these calls. This may be a surprising finding to many people but it is a fact.

I must confess this was a surprise to me. However, when one considers the number of people in rural Ireland with children living abroad with whom they wish to keep in contact it is not too surprising. Such relatives are no further away than the end of the telephone, and that is a great mental comfort, if nothing else. The Minister's modification of the proposed changes so that they will not create undue hardship for these people is to be welcomed.

It is easy for the Opposition to criticise these measures. I too found it easy to be critical of the Government when I was sitting on the other side of the House.

Mr. Dardis

Do not feel excluded.

Mr. Cassidy

Simple arithmetic tells us we will be in Government for a further four years.

Great progress has been made since 1987, and this must be maintained. As I said on the national airwaves, over recent years Ireland has had the highest growth rates in the western world. As a country we are highly self-critical, however, if we considered how much progress we have made over the past 20 years we would be even more self-congratulatory.

People in the communications business, particularly editors and those with responsibility for presenting programmes and news reports take a negative view of our achievements. They should emulate the achievement of RTE in presenting the Eurovision Song Contest from Millstreet by encouraging people and highlighting the positive rather than the negative. For example, there should be talk not only of unemployment but also of employment.

I welcome the 40 per cent reduction in telephone charges for business calls and look forward to more progress of this kind.

Mr. Quinn

I welcome the Minister to the House. I listened carefully to his contribution and he has a great deal of which to be proud. I agree with Senator Cassidy when he speaks of pride in our telephone system.

There are four facts concerning Telecom Éireann I want to consider in this debate. The first concerns profit. I believe that we do not recognise the need for profit and the requirement of profit. Peter Drucker wrote that profit is future cost. We should not be concerned or shy about the fact that a company like Telecom Éireann makes a profit of approximately £90 million. It needs the kind of investment and, in the past, the Government has not always recognised that profits at that level are required. All Governments in recent years have been siphoning off this profit which is required by Telecom Éireann for investment in its future if it is to be viable in the years ahead.

The second fact concerns Telecom Éireann's monopoly. The EC has now decided that it wants to end the monopoly enjoyed by each member state's national telecommunications network with all member states eventually having a choice of telecommunications suppliers. I have no difficult with that nor do I have any difficulty with the idea that Telecom Éireann should fight commercially to defend its own territory as far as possible. If only one supplier emerges in Ireland but that supplier satisfies customers, that would be a satisfactory situation. By way of example, in most other countries there are two or more suppliers of mobile phones who engage in intense competition with each other. Telecom Éireann is our only supplier of such phones because its mobile service is priced so aggressively that it discourages other suppliers from entering the market. As a result, Ireland has the cheapest mobile phone services in Europe, cheapest in terms of calls and in the monthly connection payments. I was not aware of that until I checked it out. That is good for business and is to be welcomed.

There are 45,000 subscribers to this mobile service, most of them businesses. This is to be welcomed. There is nothing essentially wrong with having a single supplier as long as the threat of competition ensures the supplier satisfies the customer's requirements. However, it is important to ensure that a single supplier does not abuse its position in those parts of its business where there is no threat of competition. This is the issue under consideration here. The increases Telecom Éireann is implementing are in the part of its business that is not open to competition.

The third fact concerns Telecom Éireann's operating costs. These costs are too high, especially when considered in the context of international comparisons. The Culliton report pointed out that Ireland spends twice as much of its GDP — approximately 2.7 per cent — on telecommunications as that spent by the other EC countries, yet Ireland has a much lower use of the telecommunications services. Our pattern is low usage and high operating costs. These are two factors that are inextricably linked, one playing off against the other. That is no way to run a business.

The Culliton report stressed the importance of reducing costs and reducing operating costs. The report pointed out that Telecom Éireann's costs were unacceptable and must be addressed in a three year programme of cost reduction. Culliton did not talk about rebalancing, and that case has been made earlier by Senator Dardis. This issue of reducing costs, emphasised in the Culliton report, has been evaded in this debate. Telecom Éireann has offered to reduce some charges where it is exposed to international competition by increasing charges in the areas where it is sheltered from that competition. That is not the agenda envisaged in the Culliton report; it is the very opposite.

The fourth fact is concerned with Telecom Éireann's charges. It is useful as a start to survey how these charges compare with telecommunications charges in other countries. I undertook such a survey and concluded that the new charges to be implemented by Telecom Éireann are not excessive in absolute terms. At present, Telecom Éireann's international charges are higher than elsewhere, as the Minister has stated, and the proposed changes would bring them into line. At present, local charges are considerably cheaper than in most other countries and the proposed changes would bring them into line with the average of such charges elsewhere. At present, Telecom Éireann's charges for installing a line and the monthly rental charge are high by international standards.

Changes are not suggested in this regard and, therefore, installation and rental charges here would still be very high and out of line with other countries. That is one way of looking at it, but there is another way, and here I have to challenge the Minister. We are talking about increasing some local charges by as much as 400 per cent. While, admittedly, the Minister said there was no example of customers paying 400 per cent more on average, it would seem that the issue is not so much the absolute amount of the new charges but the abruptness of their introduction and the way they are being handled. In any business I know of it is not possible to introduce a 400 per cent increase without causing great pain for customers.

What should be the approach of Telecom? I have four short principles to advance. First, Telecom should be in the business of growing its market. The more we use the network the better value we get out of it, and the more people who use Telecom's services, the more demand there is in the long term to sustain the healthy growth of that company. Everything that Telecom does, including pricing, should be aimed at making it possible to increase the market. It does not require a PhD. to realise that the present exercise is not geared to growing the market for Telecom users, quite the reverse.

Secondly, Telecom must make a massive attack on its operating costs. The Government must insist, as Senator Ross said, that a definite cost reduction programme be started without delay, exactly as Culliton proposed. If we fail to face up to the fact that Telecom's operating costs are too high we will stir up trouble for the company and taxpayers in the future. Unless Telecom gets its costs right the company will run into big trouble sooner rather than later.

Thirdly, Telecom needs to get closer to its customers. The way the increases have been announced shows all the insensitivity of which monopolies are accused. Business does not believe that this is in its interests. Most businesses believe they will pay more for Telecom services under the new arrangement, and that this was something done in the guise of helping business.

Fourthly, national policy should insist that Telecom Éireann is especially sensitive to customers' needs in the parts of its business sheltered from competition. It is our job as legislators to ensure that customers of a State monopoly are fully protected. The price of allowing a monmercia opoly to exist is eternal vigilance on our part.

Bearing in mind these four facts and seeking to apply these four principles, what should be done in this case? It is very simple. We should firmly link the question of Telecom's charges to the question of its operating costs, and insist that at least half the cost of this rebalancing is met from operating profits. Telecom should phase the increases, thus reducing the pain to allow people to adjust. That is done by most companies when they have to adjust prices. Equally, Telecom should phase the reductions, giving priority to overseas calls for the export market that are of most importance to Irish-owned companies. In effect, this means starting the reductions with calls to Britain and the United States.

I repeat the plea to provide free telephone services to all charges operating help lines. I am delighted that the Minister has moved on this issue. I understand that the average call from a client to the Samaritans and Childline lasts 45 minutes. I hope the Government will rethink its approach, I think it can get everything it requires by making some of those changes. I thank the Minister for coming here and giving us an opportunity to suggest changes that will be taken into account.

Mr. Calnan

I welcome the Minister to the Seanad. I will speak in favour of the amendment to the motion. The motion highlights two items in an overall package, one relating to local calls and the other to VAT. However, one cannot take items in isolation from an overall package. The budget demands a balancing exercise, and the current Telecom Éireann rebalancing proposals are worthwhile for many reasons, which I will outline. Ireland is to become, effectively, a local telephone call area for four months of the year, 113 days in all, including weekends and public holidays. So, if one is ringing from a peripheral area, as I do from west Cork, to another peripheral area like Donegal or Northern Ireland, the call will be a local call during that time. In addition, the duration of local calls is being reduced, and many calls last less than three minutes anyway where messages have to be passed on. If people want to stay on the telephone longer, chatting with their neighbours or others, they should pay for that luxury. I defend that decision.

It is important to note that all international calls are being reduced by an average of 40 per cent. Some £900 million will be invested in upgrading the service over the next five years, thus assisting job creation. There will be reductions in the cost of most calls as an incentive to off-peak usage. Short-distance trunk calls will cost 25 per cent less from 1 April 1994. The reduction in the cost of international calls will mean a big promotion for industry. We are trying to encourage industry to locate here, but if foreign industrialists find that telephone bills form a hefty part of their expenses, it will be a disincentive. The lower costs, however, will amount to an incentive for industry. They will also help to promote tourism because guest houses and hotel owners advertise abroad by telephone in many cases. Old age pensioners were mentioned in the debate. How many pensioners have sons, grandsons and granddaughters living abroad and wish to have frequent communication with them? It is good for those people to have international calls reduced by such an amount.

If we want a service like this it must be paid for. There is no manna, it has to be paid for through a balancing exercise. I welcome the 25 per cent reduction in trunk calls. Government services, apart from those based in Dublin, are based in Cork city. These include many industrial services as well as agricultural and social welfare services. A call from west Cork to Cork city is a trunk call, therefore, the reduction is welcome. Most calls will be reduced in cost, with the call unit going down from 11.17p to 9.5p. In an innovative special tariff, not available in other countries, Telecom will offer countrywide calls at the rate of 9.5p per ten minute interval on Saturdays, Sundays and public holidays. This is a reduction of up to 94 per cent on current trunk calls. A ten minute call from Clare Island, Oilean Cléire, in Cork to Rathlin Island in Antrim, over 300 miles, will cost 9.5 pence instead of the present £1.56. That is a considerable reduction. There is no change in connecting and rental fees.

Telecom Éireann employes 13,500 people. Those jobs should be preserved and protected and indeed increased. It shocked me to hear a Member in this House promoting redundancies. Redundancy is a nice way of saying sacking. We spoke earlier today about employment through enterprise. People are doing everything they can to promote and encourage jobs and it is inappropriate for others to speak about redundancies.

Privatisation has been mentioned as a solution. One has only to see the concern expressed by the public in Britain about the privatisation of certain services to know it is not. That process started in the Thatcher era and continued under Mr. Major. Many people are apprehensive about the ultimate result. Following a policy of privatisation without due consideration to the social needs of a country is a dangerous course.

Taxpayers' money was spent and borrowings made in the 1980s to set up the excellent service Telecom Éireann now provides. I remember when telephones were hand-operated and it was a major task to get through to exchanges to make a call. It was a bad system. Within a few years we had a fine service thanks to the workers and technicians in Telecom. The proposal before us will guarantee the jobs of 13,500 employees and increase their number.

As chairman of Cork County Council, I take this opportunity to compliment the work of Telecom Éireann in hosting the Eurovision Song Contest in Millstreet. It proved that the company could compete and indeed be the best in the world. Tremendous credit is due to RTE, Telecom Éireann and everyone concerned for televising this fine show to 300 million people all over the world.

I support the amendment because the proposals are balanced. If one takes items such as the local calls and the VAT out of context one does not get a true picture. If VAT is not imposed, how will money be raised? Should we reduce child benefit or the number of houses built to compensate?

Mr. Burke

I welcome the Minister to the House. I am disappointed in the increased telephone charges as the poorer sections of the community will suffer most. I disagree with the Minister on a number of issues, first in relation to old age pensioners. The Minister stated that the impact on old age pensioners had been very carefully considered by him and that old age pensioners, even more than the rest of the population make proportionately more trunk and international calls than local calls and will benefit to a greater extent from reductions in these calls.

How did the Minister amass this information? In my constituency, a person received a telephone bill for approximately £12,000. When he sought to have it itemised he was told that was not possible. How can Telecom Éireann give the Minister the information that old age pensioners make proportionately more trunk and international calls?

I was told the call out charge of Telecom Éireann has been increased to £30 and for each hour after that there is a charge of £128. No company in Ireland charges as much for service calls, whether for washing machines, televisions or anything else. Will the Minister confirm that the call-out charge is £30? If so, when did it — and the charge of £128 for subsequent hours — come into force? The latter is an exorbitant charge.

The Minister also said that 29 in every 100 people in Ireland have telephones while the average in the EC is 45 in 100. The Minister might have thought it appropriate to reduce the installation charges to bring us closer to the EC average.

I concur with speakers who said the £500,000 given to the helplines was a small sum. Senator Quinn said the average call to a helpline lasted 45 minutes. The Minister should re-examine that area because those helplines are important to a vulnerable segment of the community.

The Minister said he has to raise £34 million to £35 million at a time when Telecom Éireann makes a profit of £90 million. To raise the sum mentioned, someone must suffer, it appears it will be the poor. Over the last number of years, £300,000 has been spent on plush offices for the chairman and chief executive of Telecom Éireann. That is to be expected when the company makes £90 million profit every year. It seems now the poor have to pay. I wish to share my time with Senator Cotter.

An Leas-Chathaoirleach

Is that agreed? Agreed.

Mr. Cotter

I thank Senator Burke for sharing his time. I welcome the Minister to the House, it is my first opportunity to do so. I commiserate with him in his difficulties over the last week. It has not been a happy time for him. He may eventually decide to reverse his decision and reduce the burden as people are now becoming vocal in their opposition to these increases. Public criticism of the Minister will probably be at its highest in the autumn when people, particularly the elderly and the poor who need telephones, will become aware of the full extent of the changes introduced by him. At that stage he may be forced to reverse this decision. It is one of the most unpopular decisions ever made by any Government and outrage is being expressed throughout the community.

Many small business people who provide employment now find that unless they greatly restrict their calls their telephone bills will be inordinately increased. Before setting up in business one must assess the cost of business overheads. Insurance, bank charges and telephone and ESB bills are much more expensive today than in the past. Previously these costs were considered to be peripheral and minimal but a much greater proportion of turnover is now required to finance them. The Minister now proposes to increase rather than reduce these costs.

Increased telephone charges, together with the 1 per cent income levy and the other taxes which have been introduced this year, have lowered morale. The Government seems to be increasing the burden of taxation on everyone, including orphans and widows, to finance ever greater expenditure and I believe it will because of its present bad public image, find governing the country increasingly difficult.

There have been no major public demonstrations against the new telephone charges. There was a small protest last week outside the Houses of the Oireachtas by people in wheelchairs and others who were attempting to win public support for their plight. It was sad to hear people in wheelchairs say that although they need telephones to maintain contact with the outside world and make their lives bearable, they will not now be able to afford them. Elderly people in remote areas are entitled to free telephone rental but must pay for calls. Many of them may now decide not to install telephones because they cannot afford to pay for calls.

The Minister's party has never been reluctant to do U-turns. I urge him to reverse this decision, reduce charges for local calls and inform Telecom Éireann that they must improve the efficiency of their operation rather than increase charges. The Minister would have no difficulty in advancing cogent reasons for reversing these changes. He would not lose face by taking this step although people might criticise him for making the decision in the first place. He should do it before November because people will then receive telephone bills which they cannot afford and will take to the streets in protest.

Mr. D. Kiely

I welcome the Minister to the House and congratulate him for announcing these changes. Some may regard them as a retrograde step but if Telecom Éireann experienced serious financial difficulties in a few years time the Minister and the Government would be criticised for not taking remedial action although they saw problems. However, the Minister recognises the potential for such difficulties and is taking firm action to prevent them. Members on the other side of the House argue, on the one hand, that Telecom Éireann must be cost effective and efficient and, on the other, advocate the free provision of thinks like telephones and electricity. Such provision must be paid for by somebody.

Mr. Dardis

Nobody ever asked for free phones.

Mr. D. Kiely

Business people who make international calls are subsidising the charges paid by those making local calls. Senator Quinn spoke of the losses incurred by small businesses. I live in a rural area and business people there are delighted with the new charges which will enable them to operate more efficiently by competing on equal terms with people from other parts of the country. Charges for calls from Kerry to Dublin or to the Department of Social Welfare in Sligo are extremely high.

Senator Calnan spoke of our old telecommunications network. When I returned from the United States to Ireland in the early 1970s my mother was a postmistress. She frequently had to get up at four or five o'clock in the morning to put calls through on behalf of people who were ill. The Taoiseach, Deputy Reynolds, when he was the Minister responsible for the telephone network, introduced a new system which we were told was the best in the world and proved a big selling point for the IDA when attracting foreign investment.

Promotional authorities in other countries were jealous of the Irish telecommunications system. One could dial a telephone number in the United States directly from Ireland whereas to dial a number in Ireland in the US required the assistance of an operator. We were a step ahead of them and I compliment them for that. Some people are being selective and are trying to mislead the public in relation to new phone charges. What counts is not the change in a rate but the bill which the subscriber gets at the end of every two months. Furthermore, these changes will contribute to job creation by levelling the playing field, so to speak, and creating new opportunities to enable all phone customers to control their costs.

In the main office of the Department of Social Welfare 50 per cent of the calls received are less than three minutes long, a further 25 per cent are less than six minutes and the remaining 25 per cent are more than six minutes. Of the outward calls from the same office 75 per cent are less than three minutes long. That cannot be ignored.

Mr. Dardis

There must be a lot of answering machines.

Mr. D. Kiely

Senator Ross insisted on more efficiency and cost effectiveness yet to achieve that he proposed adding another 4,000 to 5,000 to the number of unemployed.

Mr. Cotter

The Government are doing that but more slowly than Senator Ross suggests.

An Leas-Chathaoirleach

Senator Kiely without interruption.

Mr. D. Kiely

On the other hand his colleagues say that perhaps we should give everyone free telephones. However, the bottom line is that there has to be a commercially based tariff, and that is how these new charges will work. The playing field will have to be levelled. For example, in County Kerry, the finance company Fexco is running an effective, international business from Killorglin, a rural town, thanks to a good telecommunications service. That business will grow since their telephone bills will drop with these new charges.

Mr. Cotter

The poor Irish people will pay for that.

Mr. D. Kiely

My mother had 16 children and 14 of those emigrated to the USA. My mother is now a widow and living alone and spends more time on the phone to her family in the USA than she does to her family in Ireland. If we want to talk about needy, old age pensioners remember that most of their families are living in the UK or in the USA, and this provides an ideal opportunity for these people to speak to their loved ones. They can do so on an economical basis by phoning at the weekends when they can stay on the phone for much longer than at peak times.

The kernel of the issue and the point on which the Minister has to be complimented is the potential effect on job creation. If we wish to create jobs and increase efficiency we must reduce the cost of international calls. Business people will welcome these changes.

Another point to mention concerns members of the public whose local calls last all day. I have seen people remain in phone boxes for ten or fifteen minutes probably discussing what the woman next door has on her washing line while a queue forms outside the phone box. If that 20 pence lasted only three minutes then people would get their business done in three minutes.

The effect of these new charges is being exaggerated out of all proportion. The Minister should be congratulated for grasping the nettle as it had to be done. When I listened to others quoting the Culliton report it reminded me of another report, the McKenzie report, concerning train services. If we had followed the recommendations of that report there would now only be a skeleton train service from Dublin to Cork, Limerick and Athlone perhaps. However, one of the Culliton report's proposals was for a radical realignment of telephone charges and that recommendation is being implemented.

With regard to the cost of a telephone connection I compliment Telecom Éireann that the cost of a connection is the same in urban and rural areas. Even if it costs more to make a connection in a rural area the cost to the customer is the same. This however is not the case with the ESB. In my constituency which is rural, many people have had to pay £3,000 or £4,000 for an ESB connection, but when a telephone, which may be a vital part of their lives or business is connected, they pay the same amount as in urban areas. The playing field must be levelled and tariffs must be commercially based.

Mr. Sherlock

I welcome the Minister of State and although he spoke with great conviction he will not convince those at the receiving end of these increased charges. It is true that in latter years Telecom Éireann has become more efficient and I wish to refer to one aspect of that. In the past a lengthy application period was necessary for a telephone, but in recent times it is not even necessary to fill out an application form as one can apply by telephone and connection can take place the next day. In recent times many people living alone or in isolated areas sought advice as to whether they should get a telephone and were advised that they should. I advised many people to install a phone and they were delighted. However, they are not so pleased now with this increase in charges.

The Minister's announcement of these changes is another part of a budget which included a one per cent levy and an increase in VAT on clothing. There is no doubt the Consumers Association of Ireland, ACRA and the National Association of Tenants' Organisations oppose the changes having appraised them for the impact they will have on the consumers who can ill afford an extra charge.

In most cases people do not have discretion as to when to use the phone and the cost of a 15 minute call will increase by 400 per cent. The day when the phone was considered a luxury is long gone; in the modern world it is a necessity. Phone ownership and use has grown steadily as a result of Telecom Éireann's extensive advertising campaigns urging people to get phones and promoting greater use. In 1991 the total number of telephone consumers increased by seven per cent to 983,000. I wonder whether that campaign was mounted in order to get people to subscribe with a view to imposing these increases which will make it impossible for some to pay.

Mr. Cassidy

Senator Sherlock should be more positive.

Mr. Sherlock

I am being positive. People on fixed incomes who have to pay an additional amount will find it a burden. The Minister must revise the unacceptable increase in local charges which will affect both the domestic consumer and small businesses. I have discussed this matter with a representative of small businesses. He believe these increases will add considerably to their costs and small businesses will be unable to afford them.

The imposition of an additional 10 per cent VAT rate is severe and will wipe out potential savings. The VAT charge will, I imagine, also apply to line and equipment rental. The average telephone bill for a two month period is £60 to £70 and the VAT increase will cost an additional £42 per annum, irrespective of the number of calls made. This will be an additional burden on people on a fixed income. I accept that our charges for international calls are higher than in other countries and that this can create problems for companies trading on the international market but that cannot be rectified at the expense of the small businessman or consumer, and that is what the Minister is doing.

The Minister should clarify reports that Cable and Wireless were attempting to buy a 25 per cent share in Telecom Éireann. I have no objection to a joint venture between Telecom Éireann and private enterprise. However, a venture such as this must create additional jobs as well as providing services. Telecom Éireann has a high level of expertise and there is potential for expansion abroad. There should be no question of surrendering to any multinational company.

I do not agree with the Fine Gael spokesperson that Telecom Éireann workers should be made the scapegoats for these new charges. He made the point that because of overstaffing these charges had to be introduced. The workers have made great sacrifices to turn Telecom Éireann around — an annual loss of £80 million has been transformed into an annual profit of £80 million. Furthermore, the waiting time for connections has improved immensely.

We must encourage people to use the telephone but these increases will place an added burden on them. The Minister must reverse this decision and produce a comprehensive telecommunications policy setting out his strategy in relation to EC liberalisation of telecommunications and its implications for Telecom Éireann.

Mr. McGowan

I am delighted the Minister was available to explain to the House this important issue. There are people in the House and in the country who are trying to mislead telephone users. There is a lot of scaremongering. I believe some Members of the Progressive Democrats might have played a more honourable role. I am surprised, without being dogmatic, at the banner some Progressive Democrat Members are carrying on this issue. Our people are highly educated and intelligent and they are not easily fooled.

Most telephone users welcome the reduction in the cost of trunk calls which brings us in-line with the rest of Europe. In the past, people from the North would question how they could be expected to join the Republic when our standard of living was lower and we had a poor telephone service. At that time there was some truth in that statement. Coming from a peripheral and remote county, County Donegal, I take pride in the fact that we have an excellent telephone service. We have video conference facilities in Letterkenny regional technical college. There are no such facilities in Derry or Strabane, but two exist in Belfast, at the BBC and UTV. We, in County Donegal, are proud that we can linkup with Europe, visually and technically. This can be done thanks to the input and help of Telecom Éireann.

We are no longer a backward country. We are to the forefront in technology thanks to the efforts of those in charge of development at Telecom Éireann. Those intent on misleading the public are small-minded and frivolous. In my view, scaremongering is the motive behind this motion.

I welcome the attempt to level the playing pitch — a cliche that has been used before. However, it is not yet level. County Donegal has five area codes — 072, 073, 074, 075 and 077. I will welcome the day when we have all calls within Ireland at the local rate. We must do this if we are to compete in Europe.

I meet many people who return to County Donegal, especially Americans. They cannot believe the advances we have made in providing free electricity, free travel and free telephones for the elderly. I am proud of these advances in the social welfare area.

I commend the Labour Party for their support on this issue because people criticised them and said they would not support these measures. Fianna Fáil is a party with a social conscience as good as any other party. We understand grass roots politics and we have a concern for people living in rural areas.

Telecom Éireann has done an excellent job. We can encourage American companies to come to Ireland in the knowledge that they will have a first class telephone service. I compliment Telecom Éireann on the technical advances they have made and for the proposed reduction in charges. One no longer needs to drive to Strabane or Derry to make a cheap telephone call. Now one can make a cheap telephone call in County Donegal.

I compliment the Minister and Bord Telecom for providing my county with a first class telecommunications service, this attempt to lower the price of trunk calls is a step in the right direction. I also wish to thank the Minister for coming to the House and explaining the situation, in view of the misinformation being spread about the issue to the general public.

Mr. Farrelly

I welcome the Minister to the House. Under my new proposals, cheaper telephone calls will be available at the weekends. The Minister informed us that only 25 per cent of people will pay higher prices for their calls. I have timed how long it takes to make a local call to a State Department or county council. The average time to find the right person is one minute and it takes five minutes to conclude business. It is not true that 75 per cent of calls take three minutes or less.

If what the Minister says is correct, then 25 per cent of subscribers will pay the large increases of £14 and £21 million respectively. Senator McGowan said earlier that these measures will help business. How many businesses work on a Saturday or Sunday?

Mr. Cowen

How many businesses have local calls only?

Mr. Farrelly

I used to think the Minister was one of the most practical members of the Government——

Mr. McGowan

He is.

Mr. Farrelly

——but he got this wrong.

Mr. Dardis

Within the past few minutes, it was claimed by Senator McGowan that this motion is an example of scaremongering by the Opposition. I assure the Senator that there are many scared people in the community, politicians are not scaremongering on their behalf. People came to Leinster House — some in wheelchairs — to register their protest at these measures. I also assure the Senators opposite that if this was targeted at stronger sections of the community, there would be a much greater number of protesters but the poorer and more vulnerable groups cannot organise themselves as effectively. There was also a reference to certain individuals and parties in this House being more socially minded than others. If those qualities were present in these parties, this measure would not be before us.

The Minister and many Senators constantly talked about making Bord Telecom competitive — that is not the issue here. The issue is the means by which that competitiveness is achieved and at whose expense. What this motion attempts to say is that mainly homeowners, the elderly and the disabled will bear the burden, which is not fair. The Minister also referred to the cost to the State of removing VAT on telephone bills. The motion does not refer to this but calls for the retention of the present position.

Mr. Cowan

The £35 million must be found somewhere if the accounts are to be balanced. Where do you get it otherwise?

Mr. Cassidy

Where do you find the £35 million?

Mr. Dardis

The Minister has spent the money which he has not even collected. This is a new development.

Mr. Cowen

That is not what I said.

Mr. Cassidy

The Opposition is again scaremongering.

Mr. Dardis

Regrettably, we belatedly heard the contents of the Minister's speech, I cannot find the reference but I am certain he asked us to show him a case in a million where this 400 per cent would apply. In his opening remarks, the Minister said that this type of increase would apply only to one local call in 25. That is a long way from one million.

Mr. Cowen

Show me a telephone bill that will show a 400 per cent increase because that is what the Senator is saying.

Mr. Dardis

We have not got the telephone bills yet and——

An Cathaoirleach

Senator Dardis, without interruption.

Mr. Dardis

——I am confident that we will be able to come back to this House and show the Minister——

Mr. Cowen

It will be paid for by the Progressive Democrats' central office.

Mr. Dardis

The consumer has been misled and the Minister of State at the Department of Social Welfare, Deputy Burton, admitted as much in the Dáil last week. She said that most Members of the Dáil agreed that the misleading and disingenous advertisements placed by Bord Telecom were offensive and unhelpful. She also said it remains to be seen whether they are in breach of both domestic and European laws. That is a serious admission by the Government. She also said that the Labour Party, as a whole, is committed to an ongoing and thorough review of the proposed charges so that the overall economic objectives are achieved in a fair and equitable fashion. Will the Senators in the Labour Party state whether there will be an ongoing review or will this statement be forgotten like all the others?

The Government also claims that the Culliton and Moriarty reports advocate this measure, to improve Bord Telecom's competitiveness and business suvival. I defy anyone to show me where Culliton said this in the report.

Mr. Cowen

That is not being suggested.

Mr. Dardis

The Minister, during his address to the House, said that the Government looks forward to fulfilling all its obligations under the Culliton report. That is what I expect, and I do not doubt that the Government will do this, but Senator Kiely seems to have some difficulties with that commitment. The Minister also said that there was no question of maintaining the status quo much longer. I do not disagree with this or his remarks on competitiveness. He refers to it throughout his speech and that is to be welcomed. However, at whose expense is it to be achieved and is it necessary to do it this way?

Mr. Cowen

Show me an option.

Mr. Dardis

The preservation of jobs in Bord Telecom——

(Interruptions.)

An Cathaoirleach

Senator Dardis, without interruption.

Mr. Dardis

——is not in dispute either. What is in dispute is the effect this will have on jobs in small businesses elsewhere. In reply to Senator Cassidy, the jobs created by the many small businesses who do not export are just as important as those created by companies who do and Senator Cassidy should admit that.

Mr. Farrelly

What about the 25 per cent who will have to pay the increased charges? Senator Cassidy is not in touch with what is happening in rural Ireland anyway.

Mr. Cassidy

The 40 per cent reduction in trunk calls is welcome.

An Cathaoirleach

Senator Dardis, without interruption.

Mr. Dardis

The Minister in his address to the House said there are inefficiencies in Telecom Éireann. He is to be congratulated for that admission because it has substance.

The final point I wish to make is in relation to people in wheelchairs. If this measure goes through, and I sincerely hope it does not, I expect as a minimum that the welcome facilities which have been extended to organisations such as the Samaritans will be extended to the 4,000 people in wheelchairs. A spokes-person for the Irish Wheelchair Association said that the implementation of the local charges will greatly increase the isolation of people in wheelchairs, force them into passive roles and cause hardship. I support that view and I appeal to the Minister in the event of these proposals going though that he will at least bear that observation in mind. For that reason, and for the others which I have mentioned, I commend the motion to the House.

Amendment put.

The Seanad divided: Tá, 22; Níl, 17.

Tá

Byrne, Seán.
Calnan, Michael.
Cashin, Bill.
Cassidy, Donie.
Daly, Brendan.
Farrell, Willie.
Finneran, Michael.
Fitzgerald, Tom.
Hillery, Brian.
Kelleher, Billy.
Kiely, Dan.
Lanigan, Mick.
Lydon, Don.
McGowan, Paddy.
Mooney, Paschal.
Mullooly, Brian.
O'Brien, Francis.
O'Sullivan, Jan.
Ormonde, Ann.
Roche, Dick.
Wall, Jack.
Wright, G.V.

Níl

Belton, Louis J.
Burke, Paddy.
Cosgrave, Liam.
Cotter, Bill.
Cregan, Denis (Dino).
D'Arcy, Michael.
Dardis, John.
Doyle, Joe.
Farrelly, John V.
Honan, Cathy.
Manning, Maurice.
Naughten, Liam.
Neville, Daniel.
Norris, David.
Ross, Shane P.N.
Sherlock, Joe.
Taylor-Quinn, Madeleine.

Tellers: Tá, Senators Mullooly and Wall; Níl, Senators Dardis and Cosgrave.

Amendment declared carried.

Question put: "That the motion, as amended, be agreed to".

The Seanad divided: Tá, 22; Níl, 17.

Tá

Byrne, Seán.
Calnan, Michael.
Cashin, Bill.
Cassidy, Donie.
Daly, Brendan.
Farrell, Willie.
Finneran, Michael.
Fitzgerald, Tom.
Hillery, Brian.
Kelleher, Billy.
Kiely, Dan.
Lanigan, Mick.
Lydon, Don.
McGowan, Paddy.
Mooney, Paschal.
Mullooly, Brian.
O'Brien, Francis.
O'Sullivan, Jan.
Ormonde, Ann.
Roche, Dick.
Wall, Jack.
Wright, G.V.

Níl

Belton, Louis J.
Burke, Paddy.
Cosgrave, Liam.
Cotter, Bill.
Cregan, Denis (Dino).
D'Arcy, Michael.
Dardis, John.
Doyle, Joe.
Farrelly, John V.
Honan, Cathy.
Manning, Maurice.
Naughten, Liam.
Neville, Daniel.
Norris, David.
Ross, Shane P.N.
Sherlock, Joe.
Taylor-Quinn, Madeleine.

Tellers: Tá, Senators Mullooly and Wall; Níl, Senators Dardis and Cosgrave.

Question declared carried.

An Cathaoirleach

When is it proposed to sit again?

Mr. Mullooly

It is proposed to sit again at 10.30 a.m. on Thursday, 27 May 1993.

Seanad Éireann debate - Wednesday, 26 May 1993