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)
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)
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;
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Fig. 1- Number of unbundled local loops in top 5 Western European countries (in 1000)
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