Understanding Local-loop Unbundling

Local-loop unbundling is a process that allows multiple service providers to access and share the same physical infrastructure, specifically the local loop, which is the connection between a customer's premises and the nearest telephone exchange.

This allows for increased competition and innovation in the telecommunications market.

The local loop is typically owned and operated by a single service provider, who has traditionally had a monopoly on this infrastructure.

In the UK, for example, the local loop was previously owned and operated by British Telecom (BT).

Local-loop unbundling has been implemented in various countries, including the UK, the US, and Japan.

It has been shown to increase competition and drive down prices for consumers.

Local-loop unbundling is a regulatory measure that allows multiple providers to access the local loops, the copper wires that connect households to the local exchange.

In the UK, only BT is currently required to unbundle its network, making it the first step towards introducing competition in the telecommunication market.

This regulatory measure aims to improve broadband provision by reducing prices, improving service quality, and allowing for greater product differentiation.

By obliging incumbents to allow local loop access to market entrants, unbundling can lead to better services for consumers.

Regulation of LLU pricing may also be involved, giving the telecoms regulator, Oftel, the power to set different prices for local loop access.

The potential for extending regulation in the area of bitstream access, which has been recently deregulated, could also have a significant impact on the market.

Local-loop unbundling has been a topic of debate among telecommunications carriers and regulators. The policy background is complex, but let's break it down.

The European Union's first action on LLU resulted from a 1993 report written for the European Commission. This report referred to the requirement to unbundle optical fibre access and recommended deferring the decision to a later date.

Most industrially developed nations, including the US, Australia, the European Union member states, and India, have introduced regulatory frameworks that provide for LLU. The goal is to regulate a changing market without preventing innovation and without improperly disadvantaging competitors.

In the US, Section 251 of the United States Telecommunication Act in 1996 defined unbundled access as the duty to provide nondiscriminatory access to network elements on an unbundled basis at any technically feasible point.

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LLU, or Local Loop Unbundling, is generally opposed by ILECs, which are former investor-owned or state-owned monopoly enterprises.

Most industrially developed nations, including the US, Australia, the European Union member states, and India, have introduced regulatory frameworks that provide for LLU.

The first action in the EU resulted from a report written for the European Commission in 1993, which recommended deferring unbundling until fibre access was more common.

In 1996, Section 251 of the United States Telecommunication Act defined unbundled access as the duty to provide nondiscriminatory access to network elements on an unbundled basis at any technically feasible point.

New entrants argue that ILECs should not be entitled to continue to extract regulated rates of return, which often include monopoly rents from the local loop, as they generally did not construct their local loop in a competitive market environment.

Regulators are tasked with regulating a changing market without preventing innovation and without improperly disadvantaging competitors.

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A public hearing on the unbundling of the local loop was held on July 8, 2002.

The hearing was opened by Commissioner Mario Monti, who emphasized the importance of getting competition in local access.

Pierre Buigues from the European Commission presented the latest progress in Local Loop Unbundling (LLU) as reflected by the sector inquiry.

Speakers from various companies, including Cegetel, QSC, and Tiscali, discussed the challenges and opportunities of high-speed data access and local loop unbundling.

Here are some of the key speakers and their topics:

Other speakers, including Marc Fossier from France Telecom and Rafael Diez from Vega Telefonica, presented their views on local loop unbundling and broadband development in Europe.

Additionally, presentations were made by Christian Hocepied from the European Commission, M. Camanzi from TItalia, and Andrea Costa from Wind on various topics related to LLU and broadband access competition.

In 2000, the European Commission launched a sector inquiry into the telecommunications market, specifically focusing on the issue of local loop unbundling (LLU).

The purpose of the inquiry was to investigate the state of the market and identify any barriers to competition. This inquiry was a crucial step in understanding the complexities of LLU and its impact on the industry.

The inquiry was conducted through a series of questionnaires addressed to incumbent operators, which helped gather valuable information about their practices and policies.

The inquiry aimed to shed light on the issues surrounding LLU, including the regulatory framework and the role of incumbent operators in the market.

Here are some key findings from the inquiry:

This inquiry marked an important milestone in the development of LLU policies and regulations in Europe, setting the stage for future reforms and improvements in the telecommunications market.

In the United States, the Telecommunications Act of 1996 mandated local-loop unbundling, requiring incumbent carriers to open their networks to competitors.

The European Union's Universal Service Directive of 2002 also encouraged local-loop unbundling, and by 2009, more than 70% of the EU's local loops had been unbundled.

Incumbent carriers in the US, such as Verizon and AT&T, were required to lease their copper lines to competitors, increasing competition and choice for consumers.

By 2010, over 50% of US broadband subscribers were using unbundled services, with many more choosing to bundle services from different providers.

In the UK, local-loop unbundling led to a significant increase in broadband adoption, with the number of broadband subscribers growing from 1.5 million in 2001 to over 10 million by 2009.

The increased competition driven by local-loop unbundling also led to lower prices for consumers, making broadband more affordable and accessible.

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Local-loop unbundling (LLU) has been shown to be an effective way to increase broadband adoption, with five out of six studies finding a positive effect on household broadband adoption.

One of the main concerns with LLU policies is that they may discourage investment in new broadband infrastructure, but only one study suggests that LLU has a negative impact on broadband infrastructure stock.

LLU regulation that lowers the one-off fee for accessing local exchanges or the monthly rental price for leasing lines leads to greater broadband adoption, according to four out of five studies.

The impact of LLU regulation on broadband speed and price is unclear, with one study finding no effect on speed and another study finding that it increased the market share of fibre, which may imply faster internet speeds.

Setting lower LLU prices leads to greater broadband adoption, but setting low prices might not be recommended if it discourages further investment.

LLU policies can be expected to increase household adoption of broadband, but they do not guarantee that broadband access is expanded to underserved areas.

Here are some key takeaways on the effectiveness and cost of LLU policies:

In the United Kingdom, local loop unbundling was first implemented by Easynet in January 2001, and by 2006, 500,000 connections had been unbundled, with a growth rate of 20,000 per week.

The UK government had initially hoped for 1 million unbundled connections by June 2006, but this target was eventually met in November 2006. By April 2007, the figure had risen to 2 million connections.

In New Zealand, local loop unbundling was initially recommended against by the Commerce Commission in 2003, but was later implemented in 2006 after the government intervened. By 2008, Telecom had activated ADSL 2+ services from five Auckland exchanges, allowing other ISPs to take advantage.

In South Africa, the Local Loop Unbundling Committee recommended full unbundling, line sharing, and bitstream access in 2007, but by 2010, nothing had occurred, and a deadline of November 2011 was set for the monopoly holder, Telkom SA, to finalize the unbundling process.

In India, local loop unbundling has not yet been implemented, but BSNL has stated that it will open up its copper loops for private participation, and by 2008, basic broadband prices had been reduced to INR 250 (US$6) due to market competition.

The United States has a unique approach to broadband infrastructure, thanks to the Telecommunications Act of 1996. This law requires ILECs to lease local loops to competitors, known as CLECs.

Prices for these leased local loops are set through a market mechanism, allowing for competition to drive down costs. This has led to a more dynamic and responsive broadband market.

The FCC plays a crucial role in regulating the telecommunications industry, ensuring that ILECs comply with the law and provide fair access to their networks.

The European Union has implemented local loop unbundling as a requirement of their policy on competition in the telecommunications sector.

This means that all member states must offer unbundled access to their local loops and related facilities, ensuring that beneficiaries don't have to pay for unnecessary network elements or facilities.

In fact, European States that have been approved for membership to the EU have an obligation to introduce LLU as part of the liberalisation of their communications sector.

The offers must contain a description of the components, associated terms, and conditions, including charges, to give beneficiaries a clear understanding of what they're getting.

The United Kingdom has a rich history of local loop unbundling, a process that allows multiple operators to provide broadband services over the same copper wire network. On 23 January 2001, Easynet became the first operator to unbundle a local loop from British Telecom's network.

By 2006, 500,000 local loop connections had been unbundled, with AOL UK having invested £120 million to unbundle 100,000 lines. This investment paid off, as AOL UK was later purchased by Carphone Warehouse for £370 million, making Carphone Warehouse the third largest broadband provider in the UK.

In 2009, TalkTalk, owned by Carphone Warehouse, acquired Tiscali UK's assets for £235 million, becoming the largest home broadband supplier in the UK with 4.25 million subscribers. Most LLU operators in the UK only unbundle the broadband service, leaving the traditional telephone service using BT's core equipment.

The UK government initially aimed for 1 million local loop connections to be unbundled by June 2006, but this target was reached in November 2006, with 2 million connections unbundled by April 2007.

Here's a brief timeline of key events in the UK's LLU history:

The UK's LLU experience demonstrates the importance of regulatory support in driving competition and innovation in the telecommunications sector.

Local-loop unbundling is a complex topic, but let's break it down with some key reports and studies.

The European Commission published a final report on March 3, 2002, which included several annexes with useful information. Annex 1 was a questionnaire for new entrants, while Annex 2 provided a glossary of terms.

Annex 3 highlighted some particular problems identified by access seekers, and Annex 4 featured reports from EEA states. Annex 5 listed LLU services offered across the EEA states, and Annex 6 provided the number of responses to the questionnaire.

For a quick overview of the report, you can check out the press release "Slow progress in unbundling of the local loop: Commission publishes report on sector enquiry", IP/02/348, dated March 1, 2002.

Some notable presentations from the press release include "Infrastructure competition in Austria" by Stefan Köhler, TAustria, and "Broadband development: the need for a technology neutral approach" by Paul Maertens, Belgacom.

Here are the annexes included in the final report: