Cable & Wireless opened up a new assault on BT on Friday by purchasing Bulldog Communications for £18.6m.
This acquisition will give Cable & Wireless a foothold in the UK local-loop unbundling (LLU) market, letting it create and sell businesses broadband packages that are different and potentially more innovative than those sold by BT Wholesale.
Bulldog is one of the few companies attempting to compete with BT by installing its own equipment in its telephone exchanges. So far it has unbundled 38 exchanges.
Cable & Wireless now plans to raise this number to 200, which should give many thousands of businesses more choice when selecting a high-speed Internet connection.
The telco isn't yet revealing which exchanges it will unbundle or what products it will offer, but says the deal will give it valuable experience.
"The purchase will enable us to develop our own broadband services, rather than just including products from BT Wholesale as part of our portfolio," explained Peter Eustace, head of media relations at Cable & Wireless.
LLU has largely been a disaster. It was meant to give rival telecoms operators a chance to compete fairly with the incumbent, but in most European countries relatively few lines have been unbundled.
Britain's regulators finally lost patience with the process earlier this month, when Ofcom demanded that BT cut the cost of unbundling. BT actually pre-empted some of Ofcom's actions by announcing significant price cuts on the same day.
Eustace denied that the purchase of Bulldog was a direct response to Ofcom's tougher line on LLU, insisting that Cable & Wireless had been considering a move into LLU before this happened.
Jan Dawson, senior manager at Ovum, believes that the takeover is a smart move for Cable & Wireless because it gets its hands on four years of unbundling experience.
"Most likely, Cable & Wireless will use this advantage to secure wholesale contracts with the larger ISPs looking to migrate their customers from bitstream to LLU services, although we may also see C&W providing retail DSL services to businesses over unbundled loops. All of which should help to fill up what is still the UK's second-biggest fixed-line network," Dawson said.