AOL is planning to spend £120m to provide broadband and phone services direct to punters in a move that will further erode BT's dominance of the UK's telecoms sector.

The ISP joins a growing number of companies - including Wanadoo, Sky, Bulldog and the Carphone Warehouse - that are committed to local loop unbundling (LLU).

The company then plans to spend an extra £70m unbundling another 700 exchanges, giving it the chance to offer broadband and phone services to about half of UK homes.

By controlling the line between the exchanges and people's homes, AOL would then be well-placed to roll-out other services such as internet telephony (VoIP), TV and video-on-demand, as well as other content services.

Over time, the ISP - which has 1.1m broadband users in the UK out of a total user base of 2.3m - plans to migrate hundreds of thousands of customers onto its unbundled platform.

In a statement, AOL UK chief exec, Karen Thomson, said: "We finally have the opportunity to bring large-scale competition into the UK's national telephone network.

"The opportunity to compete on a level playing field with the incumbent will encourage substantial investment in digital services and content in the UK.

"This will allow the UK to catch up with leading European countries, where unbundling is already delivering higher value services to consumers."

One senior source told us: "With LLU we can offer products when we want and not when BT makes these services available."

LLU's investment is being funded by parent company Time Warner. ®

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