Carphone talks tough on LLU deadline
Get it right - or else
Analysis It's been just over 24 hours since Carphone Warehouse announced details of its cut-price bundled telecoms and broadband service - and the war of words has already escalated to threats of legal action.
The Times reports that Carphone would be prepared to sue BT if the monster telco failed to meet its June deadline for a new local loop unbundling (LLU) delivery system designed to automate the complex process of unhooking customers from BT's network onto LLU operators' networks. Without such a system, migrating thousands of customers would cause a major headache for telecoms operators.
If this system is not up and running on time then Carphone will be losing money on its £21 a month all-in offer for calls, broadband and line rental. And the firm is not prepared to foot the bill.
"BT will owe the difference between IPStream (the wholesale end-to-end broadband product BT flogs to ISPs) and LLU for every customer that should have been switched over," Carphone chief exec Charles Dunstone told the paper.
He ain't kidding either. One of the interesting comparisons made over the last few days is how Carphone's "free" broadband offer is being likened to the impact Freeserve (now Wanadoo) made on the UK's net sector at the end of 1990s with the introduction of subscription free services. There's also another similarity. Just like Freeserve, Carphone is also feisty and prepared to challenge the former monopoly at a time when other operators and ISPs prefer not to rock the boat.
Earlier this year BT launched Openreach - a new division designed to give all operators equal and transparent access to the BT network. Less that a month after Openreach adopted its new role Carphone lodged a formal complaint against Openreach with Ofcom claiming that the charges imposed for the bulk migration of fully unbundled lines were "discriminatory" and in breach of Openreach's "obligations".
The problem for Carphone is that while LLU changes the economics of providing telecoms services, making it possible to cut bills in half, LLU is a nightmare to get right.
Migrating consumers onto LLU networks is complex and there are plenty in the industry who believe Carphone has underestimated the challenges involved.
But according to BT, the telco is "fully committed to seeing LLU a success" and is "committed to continuing our work with the industry to improve the operational processes surrounding LLU".
Surely, that's enough to give people confidence in LLU?
Maybe not. Earlier this week the Office of the Telecommunications Adjudicator (OTA) said BT's delivery of backhaul - the lines that link unbundled exchanges to rival operators' networks - was "still unacceptable" and that "this has been an outstanding issue for some time". At the moment, plans are in place to speed up the process and clear the backlog, but delays are still being measured in months, not weeks. And it was only six months ago that the OTA said operational problems "continue to persist...giving significant cause for concern".
"Current poor performance is being caused by a combination of automation instability, poor software problem handling, volume growth and resource shortfalls. This has led to an overall deterioration in the quality of delivery," said the OTA in October.
With observations such as these, it should come as no surprise that Dunstone is already making threats. Carphone needs LLU to work flawlessly if its free broadband offer is to be a commercial success. But operators also need BT to make LLU work. With less than three months to go until Carphone kicks off its great adventure, LLU has a long way to go before all those glitches and gremlins are ironed out.
For proof, just ask Wanadoo customers who are currently complaining about being left without a broadband service for almost three months. Wanadoo's explanation is that "LLU is a very complex technology and a number of things can go wrong". But that doesn't explain why consumers are fed misinformation about their lack of connection or why they are left broadband-less for weeks on end.
Which leads onto another area that could trip up Carphone - the "Bulldog scenario".
Last year the Cable & Wireless (C&W) owned ISP attempted to grab a lead in the broadband arena with an aggressive price offer for its unbundled service and a blanket marketing campaign. But it was unable to cope with demand, became bogged down with LLU technical problems and didn't have sufficient workers on board to handle customer enquiries and complaints.
Last year's debacle led to a formal investigation by regulator Ofcom, and Bulldog's brand was damaged and dented by a PR disaster much of its own making. Carphone execs will be hoping that something similar doesn't happen later this year. ®