Unbundling the Bundle
When BT was forced to open itself up to competition under the monopoly regulations (do not pass go, do not keep all the customers for yourself), there began a process of local loop unbundling (LLU), which allows multiple telecoms companies to use the connections from the telephone exchange to the clients homes. It was designed to increase competition and drive down prices for broadband and telephone services. BT set up a company, OpenReach, which was charged with looking after its wholesale business and LLU activities.
By 2006, around a quarter of a million local-loop connections had gone through the LLU process and had been released from BT to other telecoms operators. A year later, this number had grown to almost 2 million. Broadband providers were keen to have their on their own services, rather than reselling BT’s, to have greater flexibility in pricing and services. Despite the notion that these services would belong to the new broadband provider, for the most part they still used BT equipment and there were still charges to pay. Over time, there have been a few operators who have developed their own equipment and technology, enabling them to offer full unbundled services, but this has not been a trend that has grown fast.
As dial-up has grown up and become broadband, we now see broadband moving into something else. No longer are we impressed by the 8Mbps service we get down our telephone lines. Now, thanks to the millions of pounds spent on upgrading the infrastructure to fibre optic, many homes can enjoy speeds of 50Mbps or more. Thanks to FTTH technology, these internet speeds are increasing all the time, with internet service providers claiming they will be able to offer speeds in excess of 300Mbps from 2013. Also on the horizon are the new 4G mobile services, promising mobile and smart-phone users unheard of hi-speeds and services.
As the internet evolves, so the providers have started to change their tactics. Just last year, Orange announced it was giving up on offering its own unbundled services in favour of reselling BT connectivity. Apparently, this would allow them to ‘concentrate on taking advantage of technology developments’, a move which is almost certain to be echoed by other ISPs as superfast broadband pushes its way into our homes and businesses.
The Future for Unbundled Services
For internet service providers, superfast broadband is triggering a complete market shift in the way things work at the provider level. Rather than worrying about maintaining costly equipment at the exchange, providers want to free up their cash to buy as much bandwidth as possible, so that they can offer their customers the cheapest, fastest and most unlimited broadband on the market. For BT, this means OpenReach could see a surge in services returning to its control. For the customer, its good news too as speeds and specifications improve while the price continues to drop.