Jane Wakefield: Unbundling is no bundle of laughs

Unbundling is coming apart at the seams

It was supposed to be the most exciting thing to hit the telecoms world since Sir Peter Bonfield turned up at the BT offices wearing a dress and demanded that all his staff refer to him in future as Daphne.

OK... I'm making that last bit up (it was Edna) -- but then, it is hard to think of a time when anything exciting happened in the world of telcoms, and I am somewhat over-egging the pudding when I describe unbundling in that vein.

But if you are a telco struggling to compete with the behemoth that is BT, unbundling offers a ray of light in an otherwise dark and dismal world. It is seen as a way to finally end the domination of the incumbent telcos across Europe in the age when the Internet demanded a full, open, thriving and competitive market.

For the European Union, desperate for its nations to compete on an equal footing with the US, unbundling was the answer to its prayers. The fact that the US unbundled its local loop earlier, and had no history of metered local-call charges, meant it has been able to forge ahead with affordable and innovative Internet services while the operators in Europe remained in the shadow of their national telco, forced to go cap in hand to BT or Deutsche Telekom whenever they wanted to roll out services.

BT has, of course, always been keen to play down its monopoly of the phone lines in the UK. It has an oft-repeated line about 50 percent of the country being passed by cable that has become its mantra. But cable was never going to be enough competition by itself and even Oftel admits that it should have forced unbundling on the telco a good two years earlier than it did.

I remember sitting in a meeting about unbundling two and a half years ago and wondering what in the hell everyone was talking about. Oftel has never been famous for snappy titles and unbundling of the local loop sounded to me like something you would ask severely disturbed young adults in a secure mental institution to do after basket weaving classes.

In fact the meeting was the first of many to decide whether it was a good idea to open up BT's network. It proved to be a long, tedious process and my God, did Oftel make a meal of it. Offering four or more ways in which unbundling could be rolled out and asking if everyone felt that broadband Internet services were going to be popular enough to warrant such a radical attack on BT's exchanges. As if the answer to that last question was going to be "No, I think people prefer to pay per minute for a slow service which offers no video clips and takes about a fortnight to download a picture".

Oftel, as ever, on the ball.

When eventually Oftel realised that unbundling was not just desirable but essential if the UK was to offer affordable broadband services it set about doing as little as possible to speed the process along. BT was allowed to decide when it could realistically deliver unbundled services, BT was allowed to decide if individual exchanges were suitable for unbundling, BT was allowed to set a price for unbundling.

BT's role in the whole process has been similar to that of a teenager experiencing its first bout of adolescent moodiness. "Ugh, Oftel. I HATE YOU," it is reported to have said on being told it had to hand over the keys to its exchanges before turning on its heels and storming off to its bedroom.

And in a way you can understand its reluctance to give up the keys. Its exchanges are very precious to it and -- as it increasingly struggles to make the same gargantuan profits it used to -- giving up its exchanges becomes tantamount to handing over the fatted calf.

It was bound to be a bit moody and like the teenager asked to tidy his bedroom, it was inevitable that it would do it as slowly as possible -- one sock at a time with a break after each one to listen to some thrash metal.

But then if you do have liberal parents like Oftel what do you expect? BT is used to getting away with things and it saw no reason whatsoever why it should not continue to do so. So we had the ridiculous situation of operators only be allowed into exchanges in a month where Tuesday falls on the 5th, when Jupiter aligns with Mars and when the pink things that live on farms are spotted in the flight path of the Boeing 707's afternoon flight from Heathrow to New York.

No surprise then that with high costs, unresolved issues, exchanges spread out around the country that the operators who originally signed up for unbundling have begun to leave the process in droves. The saga of unbundling is coming dangerously close to resembling that of the unmetered fiasco.

That too promised a universal panacea for Internet access and that too saw a glut of interest, followed by collapse. ISPs which pledged unmetered services began increasingly to look like the lemmings at their annual picnic off Beachy Head.

And in order not to commit mass suicide the telcos have decided not to get involved with the potential crippling costs and uncertain future offered by unbundling. Of course we cannot underestimate the current state of the market and its role in putting telcos off.

Companies are now running scared of investing millions of pounds in a system that is untried, untested and still has many unresolved issues. Telcos now have to do their sums to the fourth decimal point before handing them in to whoever it is that reads business plans. And those people are going to be going through those plans with a finer than usual toothcomb to make sure it is an Internet venture that guarantees profit.

But we must remember that it is BT that has created the issues which are making the business plans look so silly. Just as it was BT's insistence on other ISPs paying it per minute for an unmetered service which made the unmetered business plans untenable.

Now that BT is deciding which exchanges can be opened and when, it is BT that is refusing to offer operators service level guarantees despite doing so for its wholesale service, it is BT which is not making it clear who will take responsibility for faults and making rivals sit around waiting to hear whether their applications for certain exchanges had been granted.

So it looks as if BT will get its way as usual, and as Sir Peter so calmly forecast in December, become the dominant supplier of ADSL services in the UK. In the ongoing contest between BT and Oftel the unbundling score is definitely one nil to BT.

Ball's in your court, Oftel.

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