Cable company Telewest abandons its ADSL plans Monday and withdraws from the unbundling process saying it will not pay the millions it would cost to roll out services over BT's network.
Telewest is one of the biggest players in the broadband arena, but not the first to bail out of the unbundling process: WorldCom and KPNQwest quit earlier this year also citing expense. The move will embarrass both the telecoms regulator Oftel and the government. Both are keen to see unbundled services available to as many operators as possible.
The process -- which allows rival operators to put equipment in BT's local exchanges -- has drawn much industry criticism, mostly over the time it is taking to enforce. Oftel boss David Edmonds recently described BT's attitude to unbundling as "bordering on the obstructive".
Telewest is abandoning its ADSL plans to concentrate on its broadband cable service. "We've been exploring opportunities for ADSL outside of our franchise area but after looking at it, along with other operators, we have decided the investment risks are too high," says a spokeswoman. "Unbundling costs a fortune and at the moment we don't see an economic model that is viable," she adds.
Analysts estimate it would cost Telewest £800m to roll out ADSL in the areas not covered by its cable network, a price the firm is not prepared to pay.
There are also doubts about the benefits of the technology. Up to 40 percent of the country will never be able to receive an ADSL connection and even users in urban areas have to live within a three kilometre radius of the local exchange. Telewest is confident its cable network is simply better than ADSL. "It offers more bandwidth and is quicker, faster, better," says the spokeswoman.
Cable also appears cheaper. Whereas most ADSL services cost around £40 per month, ntl is now offering a cable modem service for £19.99.
Ovum analyst Yum Petkovic is not surprised by Telewest's decision: "They have a cable network which is under their control and they will focus on that," she says. Caution among investors who have become wary of funding Internet services is also a factor in Telewest's decision she believes.
Telecoms watchdog Oftel is responsible for overseeing the unbundling process but claims it can't force companies to get involved.
"Ultimately it is a commercial decision for Telewest. It is our job to put a process in place," says an Oftel spokesman. He denies that the withdrawal from the unbundling process of high profile firms has damaged the process. "Companies like Redstone and Kingston have been fairly vocal about their enthusiasm for unbundling," says the spokesman.
While it is generally assumed unbundling the local loop will lead to cheaper broadband for consumers, the cost to operators of implementing such services is not cheap, says Petkovic. As well as charging to install equipment and for each local loop they use, BT also insists operators pay a rental charge. Currently Oftel only has responsibility for setting the price on buying local loop but now it claims it will also look at rental costs if operators ask it to.
While the watchdog continues to be happy with the pace at which unbundling is happening, not everyone shares its enthusiasm. "They [Oftel] have to say that but I believe it will take another one and a half years before we have something in practice," says Petkovic.
BT has promised to have 600 exchanges ready for other operators by the summer of 2001. That figure represents one tenth of the UK's exchanges.
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