By targeting the local loop in a £50m project, AOL intends to deliver internet, telephony and other broadband related services, such as video on demand, TV over broadband and advanced gaming services, directly to consumers.
The ISP said that its decision to invest in telecoms infrastructure in the UK follows Ofcom's recent mandates on BT opening up the local loop. AOL added that it would focus on ADSL 2+ compatible technologies, paving the way for future offerings at 8Mbps speeds.
The initial phase of the programme, costing around £50m, will take place during the first half of 2006 and reach up to 300 exchanges in the UK or 20 per cent of UK households.
AOL said that it may extend this rollout to up to 1,000 exchanges, or 50 per cent of households, with an estimated additional investment of £70m. AOL's investment in this area is being funded by parent company Time Warner.
The ISP has completed beta testing of the LLU process in two London exchanges, Battersea and Ealing, and has created a team of more than 100 people in the UK to carry out a large-scale LLU rollout.
Karen Thomson, chief executive and chairman at AOL UK, said: "The opportunity to compete on a level playing field with the incumbent will encourage substantial investment in digital services and content in the UK.
"This will allow the UK to catch up with leading European countries where unbundling is already delivering higher value services to consumers."
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