Local Loop Unbundling

Local Loop Unbundling (LLU) is the process where each incumbent telecommunications operator (BT and Kingston in the UK) make its local network (the copper cables that run from customers premises to the telephone exchange) available to other companies. This will enable competition to be introduced into the “last mile to the residential user, leading to the prospect of reduced prices and enhanced services, particularly Broadband capability. Operators are then able to upgrade individual lines using Digital Subscriber Line (DSL) technology to offer services such as always on high speed Internet access, direct to the customer.

Types of access

For LLU, operators have the choice of a number of options for gaining access to the local loop.

a) Physical space within the incumbent’s site

BT offers other operators a number of options for co-location within its exchanges. The location of an operator’s equipment in a site can either be within a hostel, a room that is built to a standard design to house a number of operators, or in a bespoke arrangement. The basic unit of capacity of a hostel is the “equipment bay. In the standard hostel arrangement the unit of space is a three rack bay which has footprint of 1.8m x 0.8m and a total area, including circulation space, of 10m2. This area is separate from the incumbent’s operations.

If an operator does not wish to be located within a hostel (e.g. where they have non-standard requirements) they have the option of requesting a bespoke arrangement.

Co-mingling

Co-mingling is a form of physical co-location where an operator’s equipment is fitted and operated in the same area in an exchange as BT houses its own equipment without any physical separation. Oftel has directed that BT shall meet all requests for co-mingling unless it is impracticable to do so (e.g. technical or network integrity grounds).

Access to BT’s exchanges for third parties

On 13 December, OFTEL determined that operators can have unescorted access to BT’s exchanges (on the same basis as contractors acting on behalf of BT) in order to carry out maintenance on their equipment. Escorted access will only be necessary where BT requires its own contractors to be accompanied by a member of BT staff. This measure aims to ensure that operators are not subject to unnecessary costs and that operators’ staff are treated in the same way as BT’s own contractors.

b) Distant co-location

One of the other options available to operators is distant location. This is where an operator houses its equipment away from the incumbent’s building and uses a tie cable to connect the incumbent’s exchange with this remote site. The remote site can be a building or a “green cabinet on the side of a road.

c) Shared access and sub-loop unbundling

The EU Regulation on LLU requires incumbents to offer shared access (or line sharing). Line sharing enables operators and the incumbent to share the same line. Consumers can acquire data services from an operator while retaining the voice services of the incumbent. Some operators may choose to offer data services only, so with line sharing consumers can retain their BT service for voice calls while getting higher bandwidth services from another operator without needing to install a second line.

The EU Regulation also requires that other operators can interconnect with the local access network at a point between the incumbent’s site and the end user. This arrangement is referred to as sub-loop unbundling. In sub loop unbundling the connection point is the primary connection points (PCP’s), which are the green street cabinets. Sub-loop unbundling can be used for emerging technologies such as VDSL (very high data rate DSL) where the equipment needs to be much closer to the home to deliver very high bandwidth services. Typically, an optical fibre would deliver the high-speed services to the local green cabinet and VDSL used to send them along the copper pair to the consumer’s premises.

Shared access charges

On 18 October 2001, Oftel published its final charges for shared access to local loops. Oftel has set an annual rent of £53 plus a connection charge of £117 per shared loop. These final prices are lower than those originally proposed and the rental charge is below the EU average.

Site clearance

BT must not charge operators separately for clearing a site in preparation for co-location build in its exchanges, but must recover these costs through the rent charged for co-location space.

Legal framework for LLU

In the UK, Public Telecommunications Operators (PTO’s) are subject to compliance with conditions set out in their Telecommunication Act Licence. A new condition (Condition 83) was inserted into BT’s licence in April 2000. Condition 83 sets out the co-location products BT must offer, the conditions which apply to the supply of these products and unbundled loops, how the prices will be set and how disputes can be resolved.

The EC Regulation on Local Loop Unbundling

The EC Regulation on Local Loop Unbundling (EC/2887/2000) came into force on 2 January 2001. The Regulation requires incumbent operators throughout Europe to offer unbundled access to their local loops on reasonable request. Condition 83 sits alongside the Regulation and provides the detail, which may be needed to ensure that the Regulation can be applied effectively in the UK. The text of the Regulation can be found at: http://europa.eu.int/eur-lex/en/lif/dat/2000/en_300R2887.html

As well as mandating local loop unbundling, the Regulation also requires the incumbents to offer shared access and sub-loop unbundling. Both BT and Kingston have published reference offers, as required under the Regulation. The BT reference offer can be found at http://www.btinterconnect.com while the Kingston offer is at: http://www.kingston-comms.com/reg-unbundle.html

ANF Agreement determination

In September 2000, Oftel was asked to investigate certain conditions in the Access Network Facilities (ANF) Agreement, the contract which operators need to sign to take LLU facilities. On February 21 2001, the final determination was published. The determination includes the following measures: operators will be able to trade space in exchanges with each other, BT will have to pay compensation to operators if service levels are not met, operators can refer disputes about LLU to an independent expert, and BT’s and operators’ liabilities were capped.

Service level agreements (SLAs)

SLAs set out the timescales within which BT is required to provide the various elements necessary for LLU service.

As a result of complaints from a number of operators involved in the LLU process, on 15 November 2001, Oftel published the final statement and direction setting out the service levels that BT must offer to operators. BT must pay compensation if it fails to meet agreed service levels.

For example, BT should pay £10 for each working day an unbundled loop is unavailable and £80 per operator for each working day’s delay in providing co-location facilities.

Progress on LLU Roll-Out

(As at 31.12.2001)

UK

Co location at BT exchanges - 16 sites completed

- 39 sites construction ongoing

Distant location - 45 sites completed

- 5 sites construction ongoing

Operators at four trial sites (Battersea, Edinburgh, Belfast and Leeds) have started to switch some loops over to commercial service.

EU

On 20 December 2001 the European Commission commenced the first stage towards “Infraction Proceedings under Article 226 of the EU Treaty, against Greece, Portugal and Germany for failure to implement local loop unbundling in their domestic markets.

In November 2001 the Commission had threatened to take action against a number of additional Member States including Ireland and Luxembourg, none of whom had made any proposal to implement access to the local loop.

Shared access to the local loop for voice telephony and data is operational only in Belgium, Denmark, Finland and Sweden but the number of lines for which shared access is enabled is only a few hundred. Trials are proceeding in France.

Greece, Portugal and Germany now have two months to respond to the Commission with their proposals for implementation. If they fail to implement the Regulation within this period then the Commission can issue a “reasoned opinion demanding swift corrective action.

If that is ignored the Commission would then commence “Infraction Proceedings against those Member States in the European Court of Justice. Any judgement against those Member States could lead to the imposition of fines and legal costs.

In December 2001 the European Commission obtained a Judgment in the ECJ against France for failing to open up its market for telecommunication services by failing to implement a European Directive relating to interconnection and interoperability. France was fined and ordered to pay all legal costs in the case.

First EU Probe of Internet Service Provider Pricing

The EU Commission has opened an investigation into “France Telecom subsidiary “Wanadoo Interactive.

At issue is the charges made to the public for ADSL (Asymmetric Digital Subscriber Line) High speed internet services

The Commission believes that Wanadoo has been providing those services below cost, which under EU competition rules represents abuse of a dominant position, (Article 82 EU Treaty).

This is the first EU Commission probe into an internet service provider and was initiated not as a result of complaints from a competitor but as a consequence of the EU Commission’s wider investigation into local loop unbundling. France Telecom still controls the local loop in its domestic market and has given its subsidiary “Wanadoo a huge pricing advantage over its competitors.

The Commission has suggested that the combined pricing power of France Telecom and Wanadoo had led to one French competitor “Mangoosta folding.

France Telecom is also active in providing internet access by cable modem through another subsidiary “France Telecom Cable giving it an overall share of around 70% in the high speed market.

For further information please contact either David Roberts by telephone on +44(0)20 7367 3678 or br e-mail [email protected] or Richard Eccles by telephone on +44(0)20 7367 3996 or by e-mail at [email protected]