UK Broadband Deals Local Loop Unbundling Brings More Competition

The local loop is currently owned by BT in the United Kingdom but as of 13 January 2005, 31,000 local loop connections have been unbundled. While this is short of the target of 50,000 Ofcom hopes that 1 million local loop connections will be unbundled by June 2006.

LLU is generally opposed by the Incumbent Local Exchange Carriers (ILECs) such as BT, which in most cases used to be state monopoly enterprises before the telecommunications sector was liberalised. They argue that LLU amounts to a regulatory taking, that they are forced to provide competitors with essential business inputs, that LLU stifles infrastructure-based competition and technical innovation because new entrants prefer to 'parasitise' the incumbent's network instead of building their own and that the regulatory interference required to make LLU work (e.g. to set the price) is detrimental to the market.

New entrants, on the other hand, argue that, since they cannot economically duplicate the incumbent's local loop, they cannot actually provide certain services, such as ADSL, without LLU, thus allowing the incumbent to monopolise the respective market and stifle innovation. They point out that alternative access technologies, such as Wireless Local Loop (WLL) have proven uncompetitive and/or impractical, and that under current pricing models, the incumbent is guaranteed a fair price for the use of his facilities, including an appropriate return on investment. Finally, they argue that the ILECs generally did not construct their local loop in a competitive, risk-fraught environment, but under state monopoly protection and using taxpayer money, which means - according to the new entrants - that ILECs ought not to be entitled to continue to extract monopoly rents from the local loop.

Telecoms watchdog Ofcom has previously said that LLU is the most effective way of delivering more innovation, greater choice and lower prices in broadband.

Put simply, it allows operators the chance to offer higher speeds, lower prices and extras such as cheap net telephone calls, without having to wait for BT to offer them first.

Most developed nations, including the USA and the EU Member States, have introduced regulatory frameworks providing for LLU. Given the above-mentioned problems, regulators face the challenging task of regulating a market that is changing very rapidly, without stifling any type of innovation, and without improperly disadvantaging any competitor.

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