Local-loop unbundling: Difference between revisions

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{{Short description|Telecommunications regulatory process}}

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{{Multiple issues|

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==Policy background==

{{Unreferenced section|date=July 2008}}

LLU is generally opposed by the ILECs, which inare most cases aregenerally either former investor-owned (North America) or state-owned monopoly enterprises forced to open themselves to competition. ILECs argue that LLU amounts to a [[regulatory taking]], thatwhich theycauses arethem forcedto be compelled to provide competitors with essential business inputs, so they believe that LLU stifles infrastructure-based competition and technical innovation because new entrants prefer to 'parasitise'use the incumbent's network instead of building their own and that the regulatory interference required to make LLU work (e.g., to set the LLU access price) is detrimental to the market.

New entrants, on the other hand, argue that since they cannot economically duplicate the incumbent's local loop, they cannot actually provide certain services, such as [[Asymmetric Digital Subscriber Line|ADSL]] without LLU, thus allowing the incumbent to monopolise the respective potentially competitive market(s) and stifleprevent innovation. They point outargue that alternative access technologies, such as [[wireless local loop]], have been proven uncompetitive and/or impractical, and that under current pricing models, the incumbent is in many cases, depending on the regulatory model, guaranteed a fair price for the use of its facilities, including an appropriate return on investment. Finally, they argue that the ILECs generally did not construct their local loop in a competitive, risky, market environment, but under legal monopoly protection and using taxpayer's money, whichmeaning meansthat, according to the new entrants, that ILECs oughtshould not to be entitled to continue to extract regulated rates of return, which often include monopoly rents from the local loop.

Most industrially developed nations, including the US, [[Australia]], the [[European Union member state]]s, and India, have introduced regulatory frameworks providingthat provide for LLU. GivenRegulators theare above-mentionedtasked problems, regulators face the challenging task ofwith regulating a market that is changing very rapidly,market without stifling any type ofpreventing innovation, and without improperly disadvantaging any competitorcompetitors.

The process has been long - the first action{{Which|date=November 2024}} in the EU resulted from a report written for the European Commission in 1993. It took several years for the EU legislation to require unbundling and then in individual EU countries in the EU, the process took further time to mature to become practical and economic rather than simply being a legal possibility. The 1993 report referred to the requirement to unbundle optical fibre access and recommended deferral to a later date when fibre access would be more common. In 2006, there were signs that, as a result of the municipal fibre networks movement in countries such as Sweden, where unbundled local loop fibre is commercially available from both the incumbent and competitors, there was a potential for policy evolving in a different direction.

In 1996, Section 251 of the United States [[Telecommunications Act of 1996|Telecommunication Act]] (in section 251) defined the [[unbundled access]] as:

{{Blockquote|The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service.<ref>{{cite web |title=47 U.S.C. §§ 251(c)(3) |work=[[United States Code]] |publisher=[[Office of the Law Revision Counsel]] of the [[US House of Representatives]] |url=https://www.law.cornell.edu/uscode/47/251.html |access-date=February 22, 2010 |archive-url=https://web.archive.org/web/20100222010657/http://www.law.cornell.edu/uscode/47/251.html |archive-date=February 22, 2010 |url-status=live |df=mdy-all }}</ref>}}

The 1993 report referred to the logical requirement to unbundle optical fibre access but recommended deferral to a later date when fibre access had become more common. In 2006 there were the first signs that (as a result of the municipal fibre networks movement and example such as Sweden where unbundled local loop fibre is commercially available from both the incumbent and competitors) policy may yet evolve in this direction.

==Unbundling developments around the world==

===World Trade Organisation===

Some provisions of [[World Trade Organization|World Trade Organization (WTO)]] telecommunications law can be read to require unbundling:

* Sect.Section 5(a) of the [[General Agreement on Trade in Services|GATS Annex on Telecommunications]]<ref>{{Cite web |url= http://www.wto.org/english/docs_e/legal_e/26-gats_02_e.htm |title=WTO {{!}} legal texts - Marrakesh Agreement |access-date=2004-06-20 |archive-url= https://web.archive.org/web/20040623051211/http://www.wto.org/english/docs_e/legal_e/26-gats_02_e.htm#articleXXIX |archive-date= 2004-06-23 |url-status=live }}</ref> requires WTO Members to guarantee service suppliers "access to and use of public telecommunications transport networks [...] for the supply of a service". New entrants arguehave argued that without LLU, they cannot supply services such as [[ADSL]].

* Sect.Section 2.2(b) of the 1998 [[WTO Reference Paper|Reference Paper]],<ref>{{Cite web |url=http://www.wto.org/english/tratop_e/serv_e/telecom_e/tel23_e.htm |title=WTO {{!}} Services: Telecommunications - Negotiating Group on Basic Telecommunications 24 April 1996 |access-date=5 February 2016 |archive-url=https://web.archive.org/web/20160310122428/https://www.wto.org/english/tratop_e/serv_e/telecom_e/tel23_e.htm |archive-date=10 March 2016 |url-status=live |df=dmy-all }}</ref> to which some Members have subscribed, requires "sufficiently unbundled interconnection" with major providers. However, the Paper's definition of interconnection appears to exclude LLU. Section 1 of the paper requires members to maintain "appropriate measures [...] for the purpose of preventing [major] suppliers [...] from engaging in or continuing anti-competitive practices." New entrants argue that such practices include not giving competitors access to facilities necessary for market entry, such as the local loop.

* Sect. 1 of the Reference Paper requires Members to maintain "appropriate measures ... for the purpose of preventing [major] suppliers ... from engaging in or continuing anti-competitive practices." New entrants argue that such practices include not giving competitors access to facilities essential to market entry, such as the local loop.

The question has not been settled before a WTO judicial body, and, atit anyis rate,thought that these obligations may only apply where the respective WTO Membermember has committed itself to open its basic telecommunications market to competition. About 80 (mostly -developed) Membersmembers have done so since 1998.

===India===

{{Update|inaccurate=yes|date=October 2014}}

LLU has not been implemented in Indian cities yet. However, [[BSNL]] recently{{when|date=October 2014}} stated that it willwould open up its copper loops for private participation. In addition to this, theThe proliferation of WiMax and cable broadband has increased broadband penetration and market competition. By 2008, thea price war had reduced basic broadband prices to INR 250 (US$6), including line rental without any long-term contracts. In rural areas, the state player, BSNL, is still the leading, and often the only supplier. Although BSNL is a monopoly, it is used by the government to create competition.

Although BSNL is a monopoly, it is used as a tool to ensure competition by the government.

===European Union===

{{Unreferenced section|date=July 2008}}

The implementation of local loop unbundling is a requirement of European Union policy on competition in the telecommunications sector and has been introduced, at various stages of development, in all member states (Operators with Significant Market Power shall publish (from 31 December 2000, and keep updated)as a postreference offer for unbundled access to their local loops and related facilities. The offeroffers shallare berequired sufficientlyto be unbundled so that the beneficiary does not have to pay for network elements or facilities whichthat are not necessaryunnecessary for the supply ofsupplying its services, and shallare required to contain a description of the components of the offer, associated terms, and conditions, including charges).

European States that have been approved for membership to the EU have an obligation to introduce LLU as part of the liberalisation of their communications sector.<!-- (Operators with Significant Market Power shall publish (from 31 December 2000, and keep updated) -->

===United Kingdom===

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{{Update|inaccurate=yes|date=September 2011}}

On 23 January 2001, [[Easynet]] became the first operator in the mainland U.K.UK to unbundle a local loop of copper wire from [[BT Group|British Telecom's]] network and provide its own broadband service overwith it.<ref>Richardson, Tim (24 January 2001). [https://www.theregister.co.uk/2001/01/24/easynet_coughs_up_to_battersea/ "EasyNet coughs up to Battersea first"] ''The Register''. Retrieved 24 April 2023.</ref>

By 14 January 2006, 210,000 local loop connections had been unbundled from [[BT Group|BT]] operation under local loop unbundling. [[Ofcom]] had hoped that 1 million local loop connections would be unbundled by June 2006. However, as reported by ''The Register''<ref>{{cite news |url=https://www.theregister.co.uk/2006/06/15/llu_openreach/ |title=UK LLU hits half million |first=Tim |last=Richardson |date=15 June 2006 |access-date=14 August 2022 |work=The Register}}</ref> on 15 June 2006, the figure had reached only 500,000, but was growing by 20,000 a week. Ofcom announced inIn November 2006, Ofcom announced that 1,000,000 connections had been unbundled.<ref>{{Cite web |url= http://www.offta.org.uk/updates/otaupdate20061107.htm |title=A Million Lines Unbundled in the UK |date=8 November 2006 |author=Office of the Telecoms Adjudicator |access-date=2016-02-05 |archive-url= https://web.archive.org/web/20160304105755/http://www.offta.org.uk/updates/otaupdate20061107.htm |archive-date=2016-03-04 |url-status=dead }}</ref> By April 2007, the figure was 2,000,000.<ref>{{Cite web |url=http://www.offta.org.uk/charts.htm |title=Key Performance Indicators |author=Office of the Telecoms Adjudicator |access-date=2007-05-10 |archive-url=https://web.archive.org/web/20070423050243/http://offta.org.uk/charts.htm |archive-date=2007-04-23 |url-status=dead }}</ref>

By June 2006, AOL UK had unbundled 100,000 lines through its £120 million investment.<ref>{{cite report |author=Ofcom |title=The Communications Market: Broadband. Digital Progress Report |date=April 2, 2007 |url=https://www.ofcom.org.uk/__data/assets/pdf_file/0021/16185/broadband_rpt.pdf |archive-url=https://web.archive.org/web/20180723135130/https://www.ofcom.org.uk/__data/assets/pdf_file/0021/16185/broadband_rpt.pdf |archive-date=2018-07-23 |url-status=live }}</ref><ref>{{Cite web|last=Richardson|first=Tim|date=30 June 2006|title=AOL UK chalks up 100k LLU lines|url=https://www.theregister.com/2006/06/30/aol_llu/|website=[[The Register]]|language=en}}</ref>

On 10 October 2006, [[Carphone Warehouse]] announced theits purchase of [[AOL]] UK, the leading LLU operator, for £370m.<ref>

{{cite press release

|url = http://www.timewarner.com/corp/newsroom/pr/0,20812,1544859,00.html

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}}</ref> This made Carphone Warehouse the third largest broadband provider and the largest LLU operator, with more than 150,000 LLU customers.<ref>

{{cite news

|url = http://www.thinkbroadband.com/news/i/2842.html

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</ref>

On 8 May 2009, [[TalkTalk Group|TalkTalk]], whowhich werewas owned by Carphone Warehouse, announced that they would purchase ailing Tiscali UK's assets for £235 million. On 30 June 2009, Tiscali sold its UK subsidiary to Carphone Warehouse following regulatory approval from the European Union. This purchase made TalkTalk the biggestlargest home broadband supplier in the UK, with 4.25 million home broadband subscribers, compared withto BT's 3.9 million. The service was rebranded as TalkTalk in January 2010.

Most LLU operators only unbundle the broadband service, leaving the traditional telephone service using BT's core equipment (with or without the provision of [[carrier preselect]]). WhereWhen the traditional telephone service is also unbundled (full LLU), operators usually prohibit the facility where selected calls can bebeing made usingwith the networks of other telephone providers (i.e. accessed using a three- to five-digit prefix beginning with '1'). These calls can usually still be made by using an 0800 or other non-geographic (NGN) access code.

Although regulators in the UK admitted that the market could providebecome competitive offerings in dueover time, the purpose of mandatory local loop unbundling in the United Kingdom was to speed up the delivery of advanced services to consumers.<ref>{{cite journal |first1=Jerry A. |last1=Hausman |first2=J. Gregory |last2=Sidak |title=Did Mandatory Unbundling Achieve Its Purpose? Empirical Evidence from Five Countries |volume=1 |issue=1 |journal=Journal of Competition Law and Economics |pages=173–245 |date=March 2005 |url=https://academic.oup.com/jcle/article-abstract/1/1/173/848962 |doi=10.1093/joclec/nhi005 |publisher=Oxford University Press |access-date=14 August 2022|hdl=1721.1/63450 |hdl-access=free |url-access=subscription }}</ref>

===United States===

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===New Zealand===

The [[Commerce Commission]] recommended against local loop unbundling in late 2003 as Telecom New Zealand (now [[Spark New Zealand]]) offered a market-led solution. In May 2004, this was confirmed by the [[Fifth Labour Government of New Zealand|GovernmentNew Zealand government]], despite the intense "call4change"<ref>{{cite web |url=http://www.call4change.co.nz/ |title=Call for<!--sic--> Change |date=February 2004 |url-status=dead |archive-url=https://web.archive.org/web/20040926051624/http://call4change.co.nz/ |archive-date=2004-09-26 |access-date=14 August 2022}}</ref> campaign made by some of Telecom's competitors. Part of Telecom's commitment to the Commerce Commission to avoid unbundling was a promise to deliver 250,000 new residential broadband connections by the end of 2005, one-third of which were to be wholesaled through other providers. Telecom failed to achieve the number of wholesale connections required, despite anthe attemptmanagement bymaking management toa claim that the agreement had been for only one-third of the growth rather than one-third of the total.<ref>{{cite book |chapter=3. Trade Policy |title=Policy Framework for Investment: A Review of Good Practices |author=OECD |date=24 August 2006 |chapter-url=https://www.oecd.org/daf/inv/investment-policy/40287346.pdf |access-date=23 July 2018 |url=https://www.oecd.org/investment/investmentfordevelopment/policyframeworkforinvestmentareviewofgoodpractices.htm}}</ref> ThatThe claim was rejected by the Commerce Commission, and the publicised figure of 83,333 wholesale connections out of 250,000 was held to be the true target. The achieved number was less than 50,000 wholesale connections, despite total connections exceeding 300,000.

On 3 May 2006, the Governmentgovernment announced it would require the unbundling of the local loop. This was in response to concerns about the low levels of broadband uptake. Regulatory actionactions such as information disclosure, the separate accounting of Telecom New Zealand business operations, and enhanced Commerce Commission monitoring waswere announced.<ref>{{cite press release|url=http://www.beehive.govt.nz/ViewDocument.aspx?DocumentID=25636 |work=Beehive |first=David |last=Cunliffe |agency=Government of New Zealand |date=3 April 2006 |title=Government moves fast to improve Broadband |url-status=dead |archive-url=https://web.archive.org/web/20071117061320/http://www.beehive.govt.nz/ViewDocument.aspx?DocumentID=25636 |archive-date=November 17, 2007 |access-date=14 August 2022}}</ref>

On 9 August 2007, Telecom released the keys to exchanges in Glenfield and Ponsonby in [[Auckland]]. In March 2008, Telecom activated [[ADSL 2+]] services from five Auckland exchanges – (Glenfield, Browns Bay, Ellerslie, Mt. Albert and Ponsonby –), with further plans for the rest of Auckland and other major centres, allowing other ISPs to take advantage.

With the number of copper (DSL) connections falling rapidly in New Zealand as of 2023, a large majority of internet connections are now through [[Fiber-optic communication|fibre]] as opposed to copper, which is wholesaled by Telecom-spunthe offformer Telecom company [[Chorus Limited|Chorus]], rendering local loop unbundling a minor percentage in DSL connections.

===Switzerland===

{{Unreferenced section|date=July 2008}}

[[Switzerland]] is one of the last [[Organisation for Economic Co-operation and Development|OECD]] nations to provide for unbundling,. because theThe Swiss Federal Supreme Court held in 2001 that the 1996 Swiss Telecommunications Act did not require it. The government then enacted an ordinance providing for unbundling in 2003, and the [[Federal Assembly (Switzerland)|Swiss Parliament]] amended the act in 2006. While infrastructure-based access is now generally available, unbundled fast bitstream access is limited to a period of four years after the entry into force of the act.

Unbundling requests tend to be tiedmanaged up beforeby the courts,; however, because unlike in the EU, Swiss law does not provide for an ''ex ante'' regulation of access conditions by the regulator. Instead, under the Swiss ''ex post'' regulation system, each new entrant must first try to reach an individual agreement with [[Swisscom]], the state-owned ILEC.

===Hong Kong===

Mandatory local loop unbundling policy (termed '''Type II Interconnection''' ([[Traditional Chinese]]:第二類互連) in Hong Kong<ref>{{cite web|url=http://tel_archives.ofca.gov.hk/en/tas/interconnect/ta950603.html|title=Interconnection Configurations and Basic Underlying Principles, Interconnection and Related Competition Issues Statement No 6|author=[[Office of the Telecommunications Authority]], Hong Kong Government|date=1995-06-03|access-date=2009-10-19|archive-url=https://web.archive.org/web/20130627070904/http://tel_archives.ofca.gov.hk/en/tas/interconnect/ta950603.html|archive-date=2013-06-27|url-status=live}}</ref>) started on 1 July 1, 1995 (the same day of telephone market liberalisation), to ensuregive choicechoices to customers.<ref>{{cite web|url=http://tel_archives.ofca.gov.hk/en/tas/interconnect/ta950328.html|title=Interconnection and Related Competition Issues, Statement No 1|author=Office of the Telecommunications Authority, Hong Kong Government|date=1995-03-28|access-date=2009-10-19|archive-url=https://web.archive.org/web/20130411023633/http://tel_archives.ofca.gov.hk/en/tas/interconnect/ta950328.html|archive-date=2013-04-11|url-status=live}}</ref> After 10 years, new operators have built their networks, covering a large region of [[Hong Kong]]; the government considered it a good time to withdraw mandatory local loop unbundling policy, to persuade operators to build their own networks, and let businesses run themselves with a minimum of government intervention. At the meeting of the Executive Council on 6 July 2004, the government decided that the regulatory intervention under the current Type II interconnectionInterconnection policy, which was applicable to telephone exchanges for individual buildings covered by such exchanges, should be withdrawn, subjectas tooutlined by conditions documented in a statement by the [[Office of the Communications Authority|Telecommunications Authority]].<ref>{{cite web |url=http://tel_archives.ofca.gov.hk/en/tas/interconnect/ta20040706.pdf |url-status=dead |archive-url=https://web.archive.org/web/20210127111027/https://tel_archives.ofca.gov.hk/en/tas/interconnect/ta20040706.pdf |archive-date=27 January 2021 |title=Review of Type II Interconnection Policy: Statement of the Telecommunications Authority |date=6 July 2004 |agency=[[Office of the Communications Authority|Telecommunications Authority]] |___location=Hong Kong |access-date=14 August 2022 }}</ref> After that, the terms of interconnection willwould be negotiated between telephone operators. Hong Kong is the only advanced economy that has withdrawn the mandatory local loop unbundling policy.<ref>{{cite press release |url=http://tel_archives.ofca.gov.hk/en/press_rel/2004/Jul_2004_r1.html |title=Type II Interconnection to be Withdrawn |publisher=Office of the Telecommunications Authority, the Government of the Hong Kong Special Administrative Region |work=Commerce, Industry and Technology Bureau (CITB) |date=2004-07-06 |access-date=2008-04-15 |archive-url=https://web.archive.org/web/20130627074419/http://tel_archives.ofca.gov.hk/en/press_rel/2004/Jul_2004_r1.html |archive-date=2013-06-27 |url-status=live }}</ref>

===South Africa===

On 25 May 2006, the Minister of Communications of South Africa Dr, [[Ivy Matsepe-Casaburri]], established the Local Loop Unbundling Committee (chaired by Professor [[Tshilidzi Marwala]]) to recommend the appropriate local loop unbundling models. The Local Loop Unbundling Committee submitted a report to Minister Matsepe-Casaburri on 25 May 2007. ThisThe report recommendsrecommended that:

* modelsModels that permit customers to access both voice and data should be offered by many different companies.; Thethe models recommended arewere Fullfull Unbundlingunbundling, Lineline Sharingsharing, and Bitstreambitstream Access.access
* It is recommended that customersCustomers should exercise carrier pre-selection and thus be able to switch between service providers. It is also recommended that
* anAn organisation be created to manage the local loop and that this organisation should be under the guidance of the regulatorregulatory organizagtion [[Icasa|ICASA]] and that IcasaICASA be capacitated in terms of resources.
* The committee recommended that serviceService providers approved by IcasaICASA should have access to the telephone exchange infrastructure whenever necessary. The
* committee recommended that aA regulatory guideline should be established and be managed by IcasaICASA to guarantee that strategic issues like the quality of the local loop be optimised for the regulation and delivery of services.

Based on this report, the Minister has issued policy directives to IcasaICASA to move swiftly withundergo the unbundling process.<ref>{{cite web |url=http://www.doc.gov.za/index.php?option=com_docman&task=doc_view&gid=47 |title=Local Loop Unbundling: A Way Forward for South Africa |format=PDF |work=The Local Loop Unbundling Committee |date=May 23, 2007 |access-date=2008-04-15}}</ref> At the end of March 2010, nothing hashad happenedoccurred; yethowever, however a deadline of November 1, November 2011 was set by the Minister of Communications for the monopoly holder, [[Telkom SA]], to finalise the unbundling process.{{citation needed|date=April 2015}}

==See also==

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==External links==

* [http://www.oecd.org/dataoecd/25/24/6869228.pdf OECD, Developments in Local Loop Unbundling]

* [http://www.samknows.com/broadband/llu-league.php LLU Exchange List]

* [https://web.archive.org/web/20150709014106/http://ec.europa.eu/competition/liberalisation/overview_en.html EU telecommunications liberalization framework]

* [https://web.archive.org/web/20130514034337/http://www.mlltelecom.com/what-we-do/local-loop-unbundling Local Loop Unbundling - What is it?]