Letter from the Group Director of Regulatory
Affairs, British Telecommunication PLC to the Chairman of the
I thought it might be valuable if I wrote to
provide an update on developments on Local Loop Unbundling since
we gave evidence to your Committee in December.
The seven trial sites were all completed on,
or ahead of, timewith the exception of Leeds where we still
await planning permission (as we mentioned at the Committee).
The Operators have been rather slow to take possession of the
sites and install their equipment. However, Eircom in Belfast
has now completed the process and has unbundled the first trial
As has been widely reported, BT delivered the
designs for the next tranche of rooms before Christmas, but despite
our extending the deadline for replies at the request of Oftel,
the actual orders have been exceptionally disappointing. Designs
and costings had been produced for co-location rooms in 25 exchanges,
covering a total of 141 operators' points of presence. Within
these designs, there were on average between five to seven operators
planned for each hostel site on the basis of previous expressions
The operators' responses showed that for 19
out of the 141 points of presence the Operators did wish to proceed
to the next stage. For the remaining 122 points of presence on
offer, there was either no response from the Operator or an indication
that the Operator did not wish to proceed with room build.
Out of the original 25 exchanges, there are
now 14 sites where one or two Operators wish to proceed to room
build. In these sites the current design is based on an average
of five to seven operators sharing because that had been our understanding
If any of the operators now wish to proceed
the sites will need to be re-designed for the reduced level of
Oftel have asked us to freeze any re-design
work on this first round of exchanges, in order to concentrate
our design activity on the more popular Bow-wave two sites.
As you will appreciate from your visit to Morningside
exchange a room built for seven operators will be more expensive
than a room designed for one, so if six operators drop out the
costs will either go up for the remaining operator, or we need
to go back to the drawing board resulting in further delay.
Although the level of demand is very disappointing
it is not entirely unexpected for the reason we mentioned at the
hearing. Local Loop Unbundling has a place in a competitive telecoms
market but the economics are such that it will never generate
a widespread, mass roll-out of broadband. Some drop-out was to
be expected. Additionally, the exchanges in Oftel's first tranche
were not the high priority sites.
Oftel has proposed measures to get the programme
back on course and we fully support themindeed we initially
suggested bringing forward Bow Wave 2 before Christmas. We have
always argued operators should make a financial commitment up
front. We think this is important to get a more realistic assessment
of demand. Oftel are now investigating such a proposal.
We do not think Oftel are justified in carrying
out a further investigation of our costs. They were involved throughout
the trials and design stages and know the detail. However, we
shall, of course, co-operate.
We are keen to do whatever we can to produce
a realistic programme of demand and to fulfil it.
On a broader point we have recently updated
our summary of the position across Europe. You will see from the
attached that BT and it's Spanish equivalent are the only Telecoms
companies in Europe to be fully compliant in publishing a reference
offer for all three variants of LLU. It is also clear that there
is a very wide variation in proposed prices but that BT's prices
are around the average of Europe.
On a point of detail, in the oral evidence session
with the Other Licensed Operators on the same day as BT's hearing,
Kingston Communication made the comment that they did not expect
demand for LLU in their region and that they had not encountered
any interest to date.
You will see from the attached
that BT first showed interest in understanding Kingston's offer
of LLU as early as 19 October and we repeat this enquiry once
the EU regulation was passed. Kingston have not published a reference
offer, making them in breach of the EU Regulation. We will be
considering our position but I think you can see that BT, if not
others, has been showing interest in LLU in Hull for some time.
It is perhaps a reflection of the complexity of the LU process
that Kingstonwhich operates in a far smaller area than
BThas been unable to meet the EU deadline, and we feel
that some credit is due to BT for meeting all deadlines.
24 January 2001
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