The end of an era is nigh. BT’s near-monopoly over the local telephone network will end in 2001, when industry regulator Oftel will enforce competition within the local loop of the UK’s telephone network.
The local loop, installed and largely owned by BT, connects the national network to a customer’s doorstep.
Oftel’s decision should break the last part of BT’s historical local dominance. This in turn should mean new broadband network technologies becoming quickly available at a time when ecommerce and hosted applications see customers requiring fast and affordable network services.
Users are unlikely to see a competitive marketplace until well after 2001. And despite the hype expected from suppliers, the success of new broadband network technologies is not guaranteed.
Oftel’s decision finally leads the UK down the same path taken by the US, where local services were formally unbundled in 1996. New companies have since launched, and offered services based on asymmetric digital subscriber line (ADSL) – an emerging broadband technology.
John Matthews, principal telecoms consultant at UK researcher Ovum, says the UK could see the same pattern. “Unbundling will accelerate the competition and the types of competitor,” he said.
Competition should oil the wheels for the rollout of ADSL. Oftel says that more than one supplier will be needed to meet the anticipated customer demand for ADSL and other new technologies.
“Alternative infrastructure providers should have the ability to roll out their own technology,” stated Oftel director general David Edmonds. “They should not have to wait for BT to make decisions that determine the timetable for the rollout of new services.”
ADSL multiplies the copper-based telephone network’s bandwidth, so users get permanent access to high-speed networking across the existing telephone network. Previously, users had to install ISDN, which had costly tariffs and delayed connection times. ISDN lines are dropped when not in use and a connection must be re-established, whereas ADSL is permanently connected.
BT has piloted ADSL since October, and last week announced the first phase of its service rollout.
But the company has a mixed record delivering certain new technologies, and was heavily criticised for the high price of its broadband ISDN services.
Like ADSL, ISDN runs over the existing copper telephone network, but BT had to modify its local telephone exchanges to support new ISDN users.
BT’s rivals are prepared to invest in ADSL, and it is a key part of MCI WorldCom’s strategy. “BT’s competitors are more than willing to take the risk and invest in ADSL,” says Shalon Simmons, senior manager of international carrier connection at MCI Worldcom.
Companies relying solely on ADSL could hit trouble. The condition of the network over which the signal runs is important, because poor quality copper results in a weaker signal.
Deregulation of the local loop is important because it should prompt new carriers to upgrade the network or install new copper, rather than waiting for BT to do the job.
Another problem is ADSL’s limited bandwidth compared to fibre-optic cable. Matthews predicts that telcos will be able to afford the installation of fibre direct to the doorstep in seven years, giving ADSL a limited window of opportunity. ‘Early in the next century we will see people building their access networks that take fibre to the customer,’ he says.
The deregulation timetable could also be a sticking point. Edmonds has recommended 1 July 2001 as a date for deregulation, and before that there will be hard negotiations between BT, potential competitors and Oftel.
Those competitors must work fast in the next two years, building themselves up to take on the might of BT’s established infrastructure, technology advantage and marketing budget.
If they fail, it’ll be back to square one.
Oftel’s decision should open the floodgates for new services, but don’t expect changes at the stroke of midnight on 1 July 2001. Full competition will happen only in the long-term, while new suppliers who rely solely on ADSL are likely to lose out.
It’s more like the beginning of the end of BT’s local loop domination, rather than the end itself.
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