Forrester: Europe's Local Loop Unbundling to Fail

Telecommunication regulators' efforts to unbundle the local loop in Europe are too little, too late, and users should not wait for unbundling to deliver better prices or new services, according to a report released yesterday by Forrester Research BV.

The warning came on the same day that the president of the French telecommunications regulatory authority, Jean-Michel Hubert, reaffirmed his commitment to unbundling of the copper local loop in France. Unbundling is aimed at giving alternative carriers physical access to maintain their customers' lines in the local loop networks, which in most cases currently are owned and operated exclusively by the incumbent telecommunications carrier.

A working group to study issues of technology compatibility, operational procedures and tariffing would be convened shortly, he said, going on to explain that unbundling was not just about voice but also high-speed data services. "This year is a key year for the development of ADSL (asymmetric digital subscriber line) services in an emerging market; the aim of this work is to enable the development of the technology in conditions compatible with the creation of competition in the high-speed Internet access market," he said.

But users in France have little to gain from unbundling, according to Lars Godell, analyst for European corporate technologies at Forrester and author of the report "Europe Moves Beyond Unbundling."

"The huge irony is that the regulators that are most active in unbundling are in countries with the lowest telecom prices already," he said, contrasting the situation in Northern Europe with that in the South, where prices were still high. "France is in a position in between, users are not as bothered with high prices as in Italy and Spain."

"It's rather tragic that the regulators are wasting a lot of time on this, because there are so many other things they should have done instead. There are lots of quality and service concerns for users, especially corporate users, that will convince them that unbundling is not really for them," he said.

However, it is possible prices would fall for some customers simply as a result of the introduction of unbundling, he said, without them even having to change operators, as incumbents moved to counter the competitive threat.

One area in which the French regulator has got it right was in focusing on ADSL, which has been mentioned as the "killer application" of the copper local loop, said Godell. "People started to realize that there was no real interest in using unbundled local loops for voice."

In France, said Hubert, ADSL trials would be held this summer, with the intention of making this form of unbundling technically available by the end of the year.

But Forrester's Godell said it was "totally unrealistic" to think unbundling would speed the introduction of ADSL.

Rather than devoting energy to unbundling, regulators would better serve users by encouraging the resale of services such as local calls, which few countries had yet done. The only practical difference for users between resale of services and unbundling was in billing for the line rental, but even there offerings such as British Telecommunications PLC's Calls and Access local loop resale tariff in the U.K. were showing the way.

"In the U.S.," he said, "resale is eight times more popular with new entrants than unbundling local loops."

In related news, Sweden's incumbent telecommunications carrier, Telia AB, today said that its planned Jan. 13 unbundling of the copper local loop will be delayed somewhat, but is still scheduled to take place in this year's first quarter. Telia blamed the delay on fallout from its failed merger with Norway's Telenor AS.

Forrester Research BV is based in Amsterdam, Netherlands, and can be reached at +31 20 305 43 00, or on the Web at http://www.forrester.com.

(Additional reporting by Terho Uimonen in Stockholm.)

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