LLU rethink needed as UK reaches 6m lines

11 Aug 2009

The contrast between the UK and Ireland’s respective approaches to local loop unbundling (LLU) has never been starker – the UK has now 6m lines unbundled while in the Republic of Ireland a paltry 16,500 unbundled lines have been sold.

LLU effectively means an operator gains access to a local exchange and by being able to put in their own equipment they can offer higher speeds and newer services such as TV via broadband. This is different to bitstream broadband where an operator simply resells an incumbent operators’ product and cannot change or innovate with the product.

In 2005 BT and Ofcom reached a landmark deal whereby BT agreed not to compete with its bittream product until the UK had 1.5 billion LLU subscribers. BT established a new division called Openreach to provide unbundling services to rivals.

Ofcom said today that the number of unbundled lines – where providers like Sky or Carphone Warehouse can offer services directly to customers via unbundled exchanges has reached the 6m mark.

When Ofcom and BT reached an agreement in September 2005 there were just 123,00 unbundled lines in the UK and the majority of people could only get their broadband and landline telephone service from one provider, BT.

Today more than 30 different companies are offering unbundled broadband services to homes and small businesses, driving broadband uptake and driving down fixed line prices.

Broadband penetration in the UK jumped from 37pc in 2005 to 65pc today.

In addition consumer broadband costs have fallen from stg£23.30 a month (ex VAT) in 2005 to stg£13.61 today.

“In just four years unbundling has gone from a flicker on the dial to a major competitive force in telecoms,” said Ofcom chief executive Ed Richards.

“This has delivered the dual benefits of driving up broadband take-up and driving down prices,” Richard.

However, after more than 10 years since deregulation of the Irish telecoms market began, LLU can be seen as a market failure in this country, with 96pc of copper DSL lines sold in Ireland originating with incumbent operator Eircom either directly or as ‘resold’ services.

Despite millions of euros invested in LLU by alternative operators Smart, Magnet and BT, only 16,500 people in this country subscribe to LLU products.

If a similar agreement to the BT/Ofcom deal were to be struck by ComReg and Eircom, the Irish market for LLU could potentially grow to 150,000 subscribers, observers say.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years