Europe: Local loop unbundling delivers nominal benefit

It may well be a fairly nebulous piece of cable – which links customers homes from the main telephone network – but the furore that the local loop has caused in the UK recently has been on a par with "Son of Star Wars," without the glamour of George Bush though, obviously.

So sensitive has this debate been that Government regulators and even the High Court has been dragged into the debate. But the Yankee Group has just poured scorn on the whole affair by stating that the benefits of local loop unbundling may be limited.

In a new report from the firm it claimed that the local loop unbundling (LLU) process in Europe does not, "adequately support alternative operators entering the market for broadband services, because of cumbersome regulatory processes and the entrenched dominance of the incumbents". That wasn't the good bit though. The real excitement was delivered via a cheeky sucker-punch that highlighted ignorance and naivete across both the industry and Government alike. Nobody, least of all the customer, is going to benefit from Local Loop Unbundling.

Local Loop Unbundling, for those of you that may have missed it, is, "the process where the incumbent operator (BT and Kingston in the UK) makes its local network (the copper cables that run from customers premises to the telephone exchange) available to other companies. Operators are then able to upgrade individual lines using DSL technology to offer services such as always on high speed Internet access, direct to the customer," according to the UK’s regulator OFTEL.

In terms of the benefits that we, the consumer, can expect to get from LLU; they are simple – fast Internet access and cheaper phone bills. In a nutshell, LLU sticks competition right at the heart of the telco business – and that should mean benefits for all.

According to the Yankee Group however, the process is failing miserably because of the usual red tape and bureaucracy, which is leaving telcos knee deep in costs and legal wranglings. This means that DSL services getting into homes is being sorely hampered by regulation. Further to that, even the loop is finally opened up the cost of loop rental and co-location services – which are required to install the DSL services at the incumbents offices – are stifling in themselves, claims the Yankee Group.

This however creates yet more problems for the industry. While the "New Age" telcos are being caught up in regulation and expense, the incumbents are stealing a march by rolling out their ADSL offerings – and that just defeats the whole purpose. The incumbents steal market share making it difficult for the telcos to get in – even though they will have spent millions on setting the service up.

Obviously this is bad news for Europe. No competition in the local loop means no low-cost broadband services and that, at least in the UK, means that the Government has to go back to the drawing board if it ever expects to take the country forward.

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