LLU unsuccessful in delivering competition

After five years of local loop unbundling (LLU) the global verdict is that it has not delivered the degree of competition on a telephone exchange level that regulators anticipated when they first developed the policies for LLU in the late 1990s.

Perhaps the most successful country has been the Netherlands, with 40% of competitive DSL based on LLU. France was an early starter in 2003 but, after an initial explosion, growth has petered out.

This also has far-reaching consequences for the future of wholesale services on a fibre network. It is, therefore, questionable whether subloop unbundling on fibre networks (currently under discussion) will be successful.

However the principle of unbundling remains important and we need to learn from the DSL experience. It is crucial that the incumbents be given no incentive to boycott unbundling (‘there is no room in the exchange’ and the ‘key is lost’).

Australia’s Telstra is one of the worst offenders in the western world. It is determined to charge $30 for LLU (roughly 3x the price stipulated by the regulator). The self-regulatory regime in Australia allows Telstra to delay the introduction of a competitive environment for ten years or more. It simply ignores ministers, governments and regulators, with no serious penalties imposed as a consequence. It has finetuned its legal tactics in great detail and with great success!

Important also is the fact that FttH networks need to be designed from a basis of structural separation. This would force incumbents to acknowledge wholesale as a serious business and to include the needs of their wholesale companies in the design of the network topology.

That will mean that unbundling will need to take place as close to the exchange as possible (network aggregation points), not at street locations.

The key barriers are lack of access to ducts, poles and internal wiring – very little competition will occur on these new networks without robust government regulations that specifically address these access issues.

Once separated, incumbents start to understand that a sound business case for the deployment of their FttH networks will not exist without wholesale.

KPN in the Netherlands is adjusting its wholesale plans to make it more attractive for other telcos and ISPs to use its network. It is building its new All-IP network with the requirements of its wholesale customers in mind.

Once such a business reality is recognised the need for regulations will begin to disappear.

Paul Budde