Major players desert unbundling in droves

The process conceived as a way of introducing much-needed competition to BT now has few friends

Broadband Britain stumbled deeper into crisis on Tuesday as Oftel admitted the majority of players have withdrawn from the process to open up BT's network.

Local loop unbundling -- the process which Oftel director general David Edmonds hoped would end once and for all BT's stranglehold of the telephone networks in Britain -- was also conceived as a way of allowing other operators to roll out high-speed broadband services. At the last count nine operators had withdrawn from the process, citing high costs and delays. Now Oftel admits the figure is closer to 25.

It is hard to get hold of definitive numbers as the watchdog refuses to give a figure for either those that have deserted the process or those that are still on board. Players come in and out of the process, it claims. The regulator is equally non-committal about how many operators originally applied for space in BT's exchanges. Previously it has claimed 28 operators were involved. Now it says the figure was more than 30.

Either way it is clear the majority of operators are no longer interested in unbundling. "You can take that number [25] as a ballpark figure," says an Oftel spokesman. The regulator still denies that this means the process is doomed.

"It is not in crisis. What has happened is that the situation has changed very rapidly and a lot of companies have reassessed their involvement," he says. Lack of demand throws in doubt BT's original plan to open up 600 of its 6,000 exchanges by the summer. "The target can only be reached if there is the demand. We can't force operators to place orders," says the spokesman.

Oftel acknowledges that cost is a major factor in most operators' decision to withdraw from the process. Some smaller players suggest that a co-mingling solution, in which they share space with BT's equipment rather than have the expense of building their own extension, would drastically reduce costs. BT has refused to consider a co-mingling solution and Oftel says it is currently investigating this refusal.

Local loop unbundling has been plunged into a series of rows and crises, culminating in a damning select committee report which described the process as "farcical". According to a report from research firm NetValue the UK is bottom of the worldwide broadband league with just one in 32 online households having a broadband connection. This compares to one in nine homes in the US, one in sixteen in France and one in two in Korea. This is bad news for a UK government determined to make the UK the best place for broadband by 2005.

Now research firm Jupiter MMXI has added its voice to the gloomy broadband scenario, claiming that only 10 million households across Europe will have broadband access by 2003. This represents just 14 percent of households and Jupiter blames the high price of access, and lack of competition for the slow rollout. Most of Europe is tied down by an incumbent operator and many countries are following the UK's lead in experimenting with local loop unbundling.

Unbundling as a way of introducing competition to the broadband market is fundamentally flawed, say some commentators, as it relies on an unwilling incumbent to get the work done. Ovum analyst Tim Johnson believes that local loop unbundling was never about competition but rather about putting pressure on the incumbent to get on and roll out its own broadband solution. For the foreseeable future broadband Britain will rely on BT, he says.

"It comes down to the incumbents in the end because they own the copper in the ground," he says. "The only way broadband in the UK will be cheaper is if BT brings down the price."

Is broadband coming to your neighbourhood? Find out with ZDNet UK's Broadband Britain Guide.

It's still too soon to claim that there's good news on the ADSL front in the UK, but the time has probably come to point out that the bad news is changing -- and BT ADSL is getting more reliable. Guy Kewney says -- install ADSL and enjoy the low cost, and unexpected reliability -- but he also says you'd be a fool not to have a proper backup strategy. Go to AnchorDesk UK for the news comment.

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