Select Committee on Trade and Industry Minutes of Evidence



  As discussed earlier this week with both yourself and with the Chairman, please find attached a BT press release, issued today, which gives details of BT's commitment to advance the timescales of local loop unbundling as presented today to the industry operators' forum. As we said in our original submission to the Committee, BT is fully committed to the UK introduction of local loop unbundling and we are working hard to find creative ways to meet a challenging construction programme. We were unable to provide these details at the time of our submission, since much depended on the outcome of a number of scheduled meetings with Oftel and the industry, not least an important pre-scheduled meeting which was held this morning to finalise some outstanding issues.

   BT now expects to deliver unbundling in at least 600 exchange areas (190 where operators have equipment in BT exchanges and 410 where operators have equipment in adjacent buildings) to become available progressively between January and June 2000. This could mean as many as 2000 points of presence (POPs) by June for new entrants. A new phase to LLU from January, will allow lines to be unbundled earlier in the process for all operators who have established location. This phase will be partly manual, and partly supported by a short-term tactical OSS development.

   Industry LLU trials are proceeding ahead of original expectations. BT plans to work closely with the triallists whose co-location facilities are complete before the end of 2000 to provide unbundled lines which will allow technical trials and valuable advance testing of the delivery processes before January 2001. Currently the first facilities are expected to be ready by mid-November, with initial unbundled loops to follow thereafter.

  The press release describes additional proposals to:

    —  speed up significantly the initial surveying of popular exchanges;

    —  reduce delays in scheduling building work;

    —  provide penalty payments for late delivery.

  We are also anticipating greater use of nearby buildings. Unbundling can be achieved either by physically siting other operators' equipment in BT's exchanges (co-location) or by siting the equipment in nearby buildings and connecting it by tie cable to BT's main distribution frames (distant or adjacent location). Using nearby buildings can potentially enable every operator that wants it to have access to the lines in any given exchange area.

  We expect to continue making speedy progress towards widespread availability of unbundling facilities and to be compliant with the EU Regulation. Having agreed to deliver unbundling we will continue to deliver on our promises. We are acting appropriately in a pro-competitive way.

  Availability of unbundled loops will begin on or before the end of this year and we are working towards widespread availability by next summer. Even after BT plays its part, the speed and extent of unbundling still ultimately depend on the commercial plans of other operators.

   As we said in our submission, opening up exchanges is not the same as unbundling the local loop. Opening up exchanges—co-location—is simply one way of achieving unbundling. It is inherently tied to the physical space available in each exchange, and access/security issues. Another method of unbundling is available for every BT line—remote location, also known as adjacent location, where the operator equips his own site and connects it to BT's distribution frame by tie cable. This eliminates many risk factors for the OLO and at least one operator (Redstone) has said it's the way forward for them.

   BT has over 6,000 local exchanges and to date, BT has initial applications from 30 OLOs for more than 20,000 points of presence in up to 3,000 exchanges. Five LLU trial sites involving 14 operators are on schedule to be up and running by January and assuming trials are successful BT would expect to provide unbundling at around 100 additional exchange areas every month. But the eventual extent and rate of unbundling depends to a very large extent on the level of commercial interest and the orders we receive from OLOs. It is likely that operators will be most interested in offering services in areas of dense population. Some exchanges cover a lot more people than others. As few as 400 exchanges can cover 25 per cent of the population, 600 can cover around 33 per cent, and you can cover half the population with only 840 exchanges.

  In September, OLOs were invited to bid for the right to place their equipment in BT's exchanges. Some 30 operators applied and BT is currently processing the orders for a first tranche of 361 exchanges. Oftel is currently consulting on the method to be used for the allocation of space in the most "popular" exchanges where in some cases more than 25 operators are competing for limited space.

   BT has no role in determining which operator goes where and in what sequence orders are handled. To ensure fairness and transparency, the industry has agreed that an independent third party, the Electoral Reform Society, should prioritise the orders received from OLOs. Following Oftel's proposed allocation procedure, BT is currently processing the first tranche of orders for 361 exchanges.

  As we noted in our memorandum, Oftel has published a consultation document to give clear direction on the future operation of the "bow wave" process. We understand that Oftel aims to make a determination by mid-November so that the result can be applied to the second round due to begin in December. It is this round where space at the "most desirable" exchanges—from an OLO point of view—will be allocated.

  BT has no "black-listed" exchanges. Operators can apply for space at any BT exchange. Regardless of a lack of space or power, other operators are not prevented from unbundling loops in that exchange—distant/adjacent location remains an option. In June 2000, the industry supplied co-location demand forecasts. To ensure the rapid build-up of co-location sites, BT reviewed the forecasts and offered the industry a list of its exchanges where, from records, spare floor space and/or power capacity was known to exist. In the early days, to steer operators away from buildings where our records showed little or no space and/or a lack of spare power, a supplementary list was also compiled. Both lists simply offer an indication of the availability/unavailability of these basic co-location requirements.

  However, it is only after a site visit is undertaken that the real limitations of any BT exchange are definitely known. Where co-location is discounted, Oftel, or a nominated third party, will be invited to verify the outcome.

  Agreeing which OLO goes where is only the first stage of unbundling the loop. LLU is a complicated process because there are so many parties involved—OLOs, Oftel, local planning authorities, quantity surveyors, building contractors, workmen and suppliers, as well as ourselves—and the different stages of the development are frustratingly interdependent.

  For instance, we can't place any orders for materials and equipment until we know which OLOs will be in what exchanges and what their requirements are, then carry out a site survey to see if those requirements are practicable and to give them a full costing. Once that has been agreed, we have to seek planning permission for the building changes from the local authority and at the same time put orders in hand for the additional equipment and materials needed to carry out the work.

  Even those two apparently simple processes have significant potential for delay. Planning committees aren't known for their speedy response; and there are only a limited number of companies that can supply the equipment we use in our exchanges—for instance, for ventilation, fire and alarm systems—so doubling or trebling demand over a relatively short period is virtually certain to lengthen their delivery schedules.

  We also have to prime building contractors to be ready for action—but without being able to give them a firm date. BT is also keeping these processes under review to see what steps can be accelerated.

10 November 2000

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