AOL pushes towards unbundled broadband

One of the UK's major ISPs wants to partner with one of BT's rivals to offer broadband services, potentially shaking up the whole market

AOL UK is looking to break away from its dependency on BT for its broadband services by embracing local-loop unbundling (LLU).

The ISP, one of the UK's largest, has created an in-house LLU operation and is in the process of appointing a director of LLU.

Once the director has been hired, possibly early in the New Year, this team will work with alternative telcos -- such as Easynet and Bulldog -- to try and find superior wholesale ADSL packages to those offered by BT.

"To get the most out of LLU will require a substantial up-front investment in terms of resource and people, but we think the greater freedom it gives AOL to offer a wider choice of products to consumers is worth it," said David Carr, AOL's vice-president of broadband, on Tuesday.

"We think our large subscription base and extremely fast broadband uptake gives us the critical mass to make the most of LLU and emancipate a large number of exchanges," Carr added.

Although AOL only offers consumer services, a successful move into LLU could have more wide-ranging implications for the UK telecoms sector. In the long term, it could help to break BT's tight grip on the UK's broadband market.

BT does experience robust competition from NTL and Telewest, the UK's cable operators, but in terms of wholesale ADSL -- delivered down a standard copper phone line -- the UK's incumbent telco enjoys a near-monopoly.

LLU, which lets rival operators install their kit in BT's telephone exchanges and offer competing wholesale services, was meant to end BT's wholesale dominance. But so far this decade it has been a big disappointment, with just a few thousand lines being unbundled.

Ofcom took firm action earlier this year, forcing BT's LLU prices down and encouraging companies such as Cable & Wireless and NTL to announce plans to invest.

AOL's first move into unbundling is likely to be a small trial in the first half of next year, possibly just involving its own staff.

"We'd hope to get some genuine customers unbundled by the end of 2005," said Jonathan Lambeth, AOL UK's director of communications.

Easynet and Bulldog (recently bought by C&W) both offer services that are faster than those offered by BT Wholesale, so AOL could use unbundling to bring ultra high-speed broadband to its user base.

"BT offers a fixed menu, but if we partner with another telco they will hopefully cook whatever we ask for," Lambeth explained.

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