Unbundled broadband faces grim future

Tuesday's damning government Select Committee report into the state of unbundling in the UK has left analysts questioning if the process has a future at all.

Unbundling had been viewed as a way of introducing much needed competition into the Internet market and ending the stranglehold incumbent telcos like BT have over telephone lines. Following problems with the process in the UK, a select committee was called to investigate and in its summing up described the progress so far as "farcical".

Hamish Mackenzie, senior research director at analyst firm IDC agrees with the reports findings that, while everyone involved needs to share blame, Oftel is especially culpable. He worries the process has no future. "It is not necessarily the universal solution people thought it would be," says.

Some operators are looking to buy wholesale broadband services from BT as an alternative to taking part in local loop unbundling. The wholesale process has not been without glitches though. Freeserve and AOL both claim that the network division of BT is unfairly favouring BT's own ISP BTopenworld and has called on Oftel to launch an immediate investigation.

With the splitting off of the network division -- NetCo -- happening in the near future as part of BT's reorganisation plans, Mackenzie believes Oftel has a real opportunity to make amends for the mistakes it has made with unbundling. "The key thing is to put regulatory pressure on the separation of NetCo to make sure it is completely separated from BT and brings about a viable wholesale market," he says.

Separate ownership structure and shareholders have been suggested as ways of ensuring ties with BT are properly severed.

The Select Committee is more hopeful that local loop unbundling can be rescued, but points out there is a long way to go. Oftel welcomed the report and while it wasn't prepared to admit fault, did promise to "study the recommendations" carefully. It is also keen to shift blame away from itself. "The problems need to be addressed by all parties," a spokesman says.

While BT came in for criticism in the report the Select Committee accepted that the telco was bound not to want to open its exchanges to other operators. Oftel, on the other hand, was duty-bound to push the process through. "We expect BT to protect its market but we expect Oftel to do its job and make sure it doesn't stand in the way of competition," says Select Committee member, MP John Butterfill.

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