BT waking up to unbundling threat

That's why LLU important, says Wanadoo

Analysis Thanks to local loop unbundling (LLU), internet users in the UK are now able to hook up to broadband services with speeds of up to 24 meg - a million miles away from just a couple of years ago when getting your hands on a 512k service was all that many could hope for.

Snag is, LLU is only economically viable in large towns and cities which means large chunks of the UK are unlikely to benefit from increased competition and instead be forced to rely on wholesale services from incumbent telco BT.

Yet despite its recent setbacks, LLU is starting to have a marked impact on the UK's telecoms sector - not least because it has forced BT to act more swiftly to compete with rivals.

So says Douglas Lamont, Corporate Development Director at Wanadoo UK, who believes that without LLU, BT Wholesale would still be plodding along with little or no impetus to offer improved services.

"If LLU was not around, we would still be at 1 meg," Lamont told The Register.

Instead, the UK's dominant fixed line telco looks set to increase broadband speeds across its network to 8 meg from next spring as it plays catch-up to an ever-increasing number of ISPs lining up to take advantage of LLU and the promise of faster speeds and more innovative services.

LLU - the process by which ISPs and telcos install their own kit in telephone exchanges to provide services direct to end users while by-passing BT - is on the verge of taking off in the UK. According to the latest figures there are around 125,000 unbundled lines in the UK with an extra 4,000 being added each week.

On Monday, Wanadoo UK which is owned by France Telecom and boasts more than 800,000 broadband users in the UK, became the biggest name to date to press the button for LLU. From next month, Wanadoo will begin connecting customers to 150 unbundled exchanges across Leeds, London, Bristol, Manchester and Birmingham.

"The clear economic driver [for investing in LLU] is our existing customer base," said Lamont.

Migrating them over to LLU gives Wanadoo greater freedom to provide other services such as VoIP and video-on-demand. And it can make providing broadband more cost effective than reselling a service from BT Wholesale.

But Lamont insists that the ISP is not looking solely to cherry pick the most lucrative exchanges. Instead, the ISP plans to target specific towns and cities so that its marketing and advertising can be tailored to draw in new consumers. Over the next year or so Wanadoo expects to install its kit in around 500 BT exchanges, and has plans to unbundle more still.

But unless the current economics of LLU change noticeably, Lamont reckons that Wanadoo is only ever likely to unbundle between 1,000 and 1,200 exchanges.

Which is still a formidable task given the "disappointment" registered by the Office of the Telecoms Adjudicator (OTA) last week. The OTA - whose task it is to oversee the development of LLU - warned that operational problems reported over the last couple of months "continue to persist and are giving me significant cause for concern".

With so much at stake, isn't Wanadoo being rash by going ahead with LLU before all the processes needed to switch customers are slick and error free, especially in light of the damaged reputation caused to Bulldog? The Cable & Wireless-owned LLU operator was the centre of an Ofcom investigation after the regulator received hundreds of complaints from people who had signed up to the service.

Lamont doesn't see it that way.

"The Bulldog service is fully unbundled [providing unbundled phone and broadband] which makes the migration of consumers much more difficult. Ours is shared unbundling [just broadband] and we have had no such problems with BT...no more than you would expect with existing services."

What's more, Wanadoo is confident it has the nous and the people to deal with any spike in calls to its support centre if something were to go wrong.

"Our expertise in customer service means Wanadoo won't get caught out," he said.

But he acknowledges that "the biggest test is still to come" as LLU becomes a mass market product.

"The systems are not perfect. It is a concern," he admits. "But, we're working very closely with BT to get it right."

"We've got to get it right," he said. ®