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The UK Still Lags Behind Regarding Local Loop Unbundling - The local loop unbundling (LLU) market in the five largest Western European countries, France, Germany, Italy, Spain and the UK, is significantly growing
The UK Still Lags Behind Regarding Local Loop Unbundling

 

PRZOOM - /newswire/ - Stuttgart, Baden Württember, Germany, 2007/05/04 - The local loop unbundling (LLU) market in the five largest Western European countries, France, Germany, Italy, Spain and the UK, is significantly growing.

   
 
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The total number of LLU in these five countries increased from 7.97 million lines at the end of 2005 to 12.39 million one year later (+62%). With 4.75 million unbundled loops, Germany still has the largest share (37%) among the examined countries followed by France with 3.92 million (share 30%) and Italy with 2.03 million (16%).

In terms of LLU, end of 2006, the UK recorded 1.3 million unbundled local loops and still lags behind other countries such as France, Germany or Italy — but with +575% the growth rate was significantly higher in 2006; also Spain with 0.93 million lines reached a strong year-on-year growth rate (+116% — see Fig.1).

In order to promote competition in particular in DSL markets, the regulatory regime regarding local loop unbundling and the provision of wholesale services from the Incumbent to their competitors is an intensely discussed topic. In the UK, the creation of the division openreach within the BT group as a result of the national regulator’s (Ofcom) Strategic Review of Telecommunications shall foster competition and provide equality of access to local access (e.g. through LLU) and backhaul networks for providers on equal terms (i.e. for BT’s own business units and external providers).

Yet the success of LLU is also a question of available alternative wholesale products, which had an impact on LLU evolution in the past. In Germany for instance, until 2004 LLU was the major wholesale product for operators to provide voice and/or Internet services, since resale offers (including the end-user relationship) for DSL have only been introduced in late-2004 and regulated bitstream offers for DSL will only be introduced in 2007.

In comparison, in the UK resale offers (e.g. for telephony) as well as bitstream offers (for DSL) have a longer tradition. Although, LLU was introduced back in 2000/2001, alternative operators provided DSL services mainly based on BT’s other wholesale products (bitstream products such as IPStream and DataStream). Only in 2006, did the share of total DSL lines based on LLU grew to nearly 13% compared to 3% in 2005.

The UK showed a strong increase in LLU only after organisational changes, so one might argue this proves the success of the UK approach. Nevertheless, in other larger European countries with developed LLU markets without specific organisational changes for the provision of wholesale services (regulated wholesale services, such as LLU or bitstream) considerable year-on-year growth rates of LLU lines (France +39%, Germany +46%, Italy +62%) occurred.

In fact, BT had the lowest retail DSL market share with 32% end of 2006 of all examined incumbents. But many DSL offers are based on BT’s wholesale bitstream access products accounting for 54% of the total DSL lines. From a wholesale perspective it must be stressed that BT generates comparably high revenues from its wholesale bitstream access products (sold on a retail-minus formula to its competitors), which are higher than revenues from LLU services (based on cost-oriented prices). Regarding infrastructure-based competition based on LLU or own infrastructure, which promotes competition, the UK market is still quite protected compared to Germany. The latter shows a much higher competition intensity, in particular visible through the high number of full unbundled lines (over 99% of total unbundled lines) and Deutsche Telekom’s significant loss of retail access lines to its competitors in 2006.

In general, in countries such as France and the UK, further migration processes are underway and operators shift from traditional bitstream or resale offers to LLU and invest in LLU infrastructure, with the possibility to gain a better control over their service offers and to provide more flexible services to their end-users.

Another point showing that the discussion about competition levels in broadband markets is more complex than some statements might transpose, is the fact that in some countries with more developed LLU markets, such as France and Germany, product offers of alternative providers vary more from the incumbents offers — e.g. higher bandwidths for DSL, bundled products (e.g. telephony, broadband) — and by consequence intensifies competition; not to speak about cable modem competition, urbanisation rates, etc.

About InfoCom
InfoCom is a market research and consultancy company with almost 20 years experience providing strategic analyses and planning assistance to stakeholders in the telecommunications, IT and multimedia industries. InfoCom’s independent and fact-based analyses highlight trends and opportunities, supporting decision makers to understand market dynamics in order to improve their competitive advantage.

 
 
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The UK Still Lags Behind Regarding Local Loop Unbundling

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