News 

Two years ago, the unbundling of the local loop was touted as the final hurdle in de-monopolising BT and providing the UK with a competitive Internet market in which network providers could compete to provide for the ISP community. As cheaper broadband is now with us, end users can't help but hope we're finally on track to meet Tony Blair's vision of Broadband Britain.

But rivals to the UK's telecom giant now claim we're back where we started, with BT maintaining a tight grip over its network and ISPs still playing second fiddle to a company that controls all the costs.

BT has substantially reduced the price of wholesale ADSL in the UK, meaning ISPs can purchase and resell broadband Internet access at a lower rate. Rather than coughing up a £25 monthly rental fee, ISPs are charged £14.75, and the £10 saving is being passed on to consumers.

The move has been welcomed by users dismayed by the stunningly slow progress made by British regulators in introducing attractively priced broadband across the nation, but the decision has led a potential competitor to cry 'unfair' as it attempts to set up a competing wholesale product in BT's own exchanges.

In the spirit with which local-loop unbundling was conceived, Bulldog Communications plans to put its own equipment in BT's exchanges, leasing the space and the copper wires into businesses and homes, thus providing an Internet service almost directly competing with BT's own wholesale offering. But the company claims it will be unable to sell services to third parties at anything other than a loss if it matches BT's new pricing structure.

'We think it's in the best interests of broadband Britain to bring prices down, but we're not keen on allowing BT to reduce its wholesale pricing without reducing the costs it charges us to develop a competitive wholesale product,' claimed Bulldog chief executive Richard Greco.

The company feels broadband Britain desperately needs competition from ISPs and wholesale providers, but claims the business case for the latter could disappear now that BT has implemented the wholesale price cuts.

It's a situation that BT is well aware of, and - not surprisingly - it isn't concerned about

ADVERTISEMENT

potential threats to its direct competitors. The incumbent admits wholesale price cuts will put the squeeze on the 'competitors' that rely on its infrastructure.

'It will be difficult for them to operate at that price,' said BT's David Orr.

'It will make the comparative cost of wholesale tougher, and therefore to operate through the LLU (local loop unbundling) route they'll have to have their costs even lower, which will be very difficult.'

Certainly, the price cuts would seem to entrench BT's control over the UK's telecom infrastructure, thus branding Oftel's bid to unbundle the local loop a wasted exercise in part. As well as blaming the UK system, Greco points an accusing finger at other national regulators, particularly Germany's.

'The history with the incumbents across Europe shows they've foot dragged, they've been obstructive about giving access to their exchanges and they've increased prices to competitors. This means there's no choice for the consumer in terms of differentiating services.'

But anyone thinking of criticising the German approach may do well to take a look at the broadband Internet access figures there. Deutsche Telecom is the dominant Internet provider in a country that has two million broadband subscribers compared to around 150,000 in the UK.

And those that have been chomping at the bit to get attractively priced broadband may side with BT's opposition to direct competition.

'You can't have everything,' said Orr. 'If you look at the German model, where they have mass broadband already rolled out, they've not gone down the competitive route. You're never going to get mass-market broadband roll-out through local-loop unbundling.

'Is it possible to have competition in this market? The only way you're going to get mass broadband in the UK, which we're told the country needs, is through us.'

It appears to split observers into two groups - those who feel the long-term route to better prices, different services and improved roll-out are achieved through competition, and those who are prepared to back one all-powerful leader. Underwriting broadband will certainly stoke demand in the near term. Within hours of the announcement, several ISPs informed subscribers and potential new customers that they'd see an immediate and significant price benefit.

The long-term route to broadband Britain may derive from improved competition at the root of the UK's Internet infrastructure. However, the fact that BT's national competitors in the provision of telecom services - heavyweights such as Energis and Cable & Wireless - are weaker now than a couple of years ago may say more about BT's sudden ability to afford price cuts now. Either way, it's likely the UK's largest telecom firm will continue to be damned.