From Socialist Voice, November 2004

Privatisation

Eircom rip-off continues

The saga of Eircom just won’t go away. Since the sale of Telecom Éireann—now Eircom—the company has been mired in controversy. We have no sympathy for all those small investors who thought they could make a killing by buying shares in a national asset. Their own greed and stupidity got the better of them, and they fell for the oldest trick in the capitalist dream book.
     It was pointed out at the time by the CPI and others that privatising a strategic industrial infrastructure such as Telecom Éireann was a major mistake and would affect future industrial development. Unfortunately we have been shown to be correct. The state invested hundreds of millions of Irish taxpayers’ money in building and upgrading a world-class telecommunications service throughout the country; then, after putting all that investment in, they sold it to their cronies. Since then there has been little or no investment in Eircom, as the owners have run it into the ground, eventually selling it off to venture capitalists looking for a quick buck.
     The government recognised that to sustain and build the technological sector in the economy they needed a world-class telecommunication system, in particular broadband, right across the country. They commissioned a report from Ira Magaziner of SJS Inc. (who had been head of e-commerce in the US government under Clinton) into broadband developments in Ireland. He submitted his report to the government in May after lengthy consultations within the technology sector and service providers. It has now been revealed by way of leaked government reports that Magaziner and officials of the Department of Communications, Marine and Natural Resources had discussions with both Eircom and Esat BT about the development and speedy expansion of broadband throughout the country, which is seen as a vital infrastructural necessity. Those talks collapsed.
     What has emerged is that the government offered a joint investment package with Eircom of €1.8 billion, which included increases in phone charges, tax breaks and debt guarantees that would assist Eircom in financing the introduction of broadband. The Eircom management turned down this offer, preferring to take hundreds of millions out of the company to repay the venture-capitalist investors who funded the takeover in 2001 rather than invest it in the broadband infrastructure. After the talks broke down the management completed a massive refinancing that has seen investors such as the Eircom chairman, Tony O’Reilly, and the American financier George Soros taking €450 million out of the company.
     As happened with most of the sales of state industries, those who buy them in the main are interested only in the “bottom line” profits: as much as they can get in the shortest time. That is the nature of the beast.
     There are natural monopolies within society, one of which is a fully integrated telecommunications infrastructure. It is an absolute necessity in any modern economy. So the government gave away a natural and necessary public monopoly to a private monopoly, which is now a block on the development of the economy—all for the short-term greed of a few individuals and finance houses.
     If Eircom was still in state hands the introduction of broadband would be almost completed. Our telecommunications would be a world leader, built on previous investment, thereby bringing the economy up to, if not ahead of, that of many developed economies. The state would have been able to set the priority areas and ensure the smooth flow of investment funds. This is not about socialism but sensible and rational capitalist economic policies and developments.
     What lies ahead is clear to those not blinded by the so-called market or neo-liberalism if we continue down the road of privatising state industries that are essential to the future well-being of our country and of Irish workers. If electricity—which is also a necessary and strategic natural public monopoly—is sold off, then the future is very bleak indeed.
     Another lesson from the Eircom debacle is that the much-talked-about independence of the “regulators” is just meaningless. They are clearly on the side of big business and do as they are told. They are no more independent than the editors of “Independent” Newspapers, also owned by Tony O’Reilly.

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