Local loop: BT must raise level of service to rivals

The U.K. telecommunication regulator announced on Thursday that it will take a harder line with British Telecommunications PLC (BT) by hitting the former incumbent with fines if it does not raise its level of service for offering access to the local loop to its competitors.

BT's rivals need access to the local loop, the "last mile" of copper wiring the connects individual businesses and consumers to the network to begin offering competitive broadband services.

After reviewing a formal complaint made by a number of BT's competitors in May, the U.K. national telecommunication regulator, the Office of Telecommunications (Oftel) has determined that BT's offer for unbundling the local loop has been inadequate, the regulator said in a statement.

Companies such as Scotland-based Thus PLC, WorldCom Inc., Bulldog Communications PLC and Dutch company Versatel Telecom International NV have all been vocal in their contentions that BT has been dragging its feet in establishing collocation sites where local loop is being unbundled.

BT's rivals insist that BT's process for gaining access to the last mile has been purposely lengthy, difficult and expensive. As a result, rivals have said that the option of building their own high-speed internet access switching equipment in the exchanges is simply far too expensive.

BT has always strongly contended that it has been following the time frames and standards set by Oftel and made that same argument Thursday. Far from impeding the unbundling of the local loop, BT actually began construction of collocation facilities in April, well before its July deadline, to allow its competitors to install broadband Internet access equipment in the most sought-after local exchanges, a BT spokeswoman said.

But Oftel has determined that BT has been manipulating its position as the incumbent to keep its dominance in the marketplace intact. To deal with the speed of BT's unbundling project, Oftel floated the prospect of a 10 pound (US$14.50) fine for BT for each working day an unbundled loop is unavailable, as well as an additional fine of 80 pounds per day to be paid by BT to each operator for each working day's delay in providing collocation facilities, Oftel said.

BT would also face additional costs if it fails to have its automated system for ordering local loops in place by Nov. 5, Oftel said.

Oftel has faced plenty of its own criticism for being ineffectual and impotent in its dealings with BT, and it remains to be seen if Oftel could even collect fines from a company that is currently struggling under a massive debt of 17.5 billion pounds and a continued decline in its revenue.

Pushed for the past two years by BT's competitors to level the broadband market, Oftel has argued that BT's local loop unbundling would provide competition that will in turn drive down prices. That position has so far failed to pan out and is one that BT's rival telecommunication operators have not bought. For example, when BT opened up the first 25 of its local exchanges to collocation bids in January, BT's rivals placed orders at only 14 of those sites.

BT's local loop has about 5,500 exchanges connecting more than 25 million customers to its network, BT said.

Earlier this month, Earthlease, a consortium headed by the U.S. private investment companies Babcock & Brown LP and Chancery Lane Capital LLC, confirmed it had made an offer of 8 billion pounds for BT's local loop network, but BT declined to consider the deal.

BT and other telecommunication companies have until Sept. 20 to respond to Oftel's proposal, the U.K. regulator said.

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