European Union reforms designed to extend the availability of ADSL and consumer choice through Local Loop Unbundling are failing.

That's the stark conclusion of Renato Soru, chief executive of Tiscali, who plans to tell a Brussels meeting today that Local Loop Unbundling (LLU) legislation has failed to create healthy competition between new entrants and incumbent carriers.

Soru argues that it is too expensive for competitive carriers to install their own hardware in exchanges, a necessary part of LLU. Tiscali, which has laid 40,000km of fibre optic cables in Western Europe, wants the EU to do more to free up the wholesale market.

"Local loop unbundling doesn't make economic sense," Soru told the FT. "It will cause a lot of disasters in this industry."

Last month, BT complained that LLU unbundling cost it "million of pounds" of infrastructure work despite only limited demand. In February, BT announced that there were 200 unbundled phone lines in Britain.

BT's criticism can be seen as a reflection of fears that its prized asset is been taken out of its control, but complaints from the likes of Tiscali might prove harder to dismiss.

The European Commission, however, remains unmoved by these criticism and maintains that LLU is a needed to give consumers a wider choice of broadband services.

The telecomms sector has been particularly hard hit by the current economic downturn, and there are calls to relax regulations because of these financial pressures or to allow freer competition.

Describing EU regulations as a "bottleneck for broadband investment", Telekom Austria CEO
Heinz Sundt warns that the current regime is failing to encourage innovation and investment in broadband infrastructure, which will leave Europe lagging behind the US.

"To achieve this the EU's strategy should be to regulate those markets where competition does not exist and phase-out regulation where competition works well," said Sundt. Specifically Sundt believes that regulation governing interconnection charges - FL-LRAIC pricing rule (Forward Looking Long Run Average Incremental Costs) - is wrong because it allows new entrants to offer the same series as incumbents without having to invest in building infrastructures.

However the FT reports that EU competition commissioner, Mario Monti, is unlikely to relax competition regulations, despite these lobbying efforts by carriers. ®

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