The part that local loop unbundling (LLU) can play in rolling out broadband is back on the regulatory agenda.
Speaking to the Trade and Industry Select Committee inquiry into broadband development in the UK, Dave Edmunds, director general of telecoms watchdog Oftel, said Ofcom would look at the issue when it takes over responsibilty for the sector at the beginning of 2004.
The committee's interest in LLU had been piqued by earlier evidence from other ISPs and providers, who had brought the issue to the fore.
Freeserve told the committee that all major ISPs were constrained by BT's IPStream and DataStream wholesale products.
LLU has failed because the price of accessing the exchanges had been set too high, said the ISP. Entry costs have been around 150 per cent above Germany's and almost double that in France.
The committee heard from Freeserve that "a much more vigorous adjustment to LLU costs would allow rivals to break away from dependence on BT and develop new services".
But in spite of this evidence, Oftel believes the cost of LLU will always present a barrier, said Edmunds.
"We do need to look at case of LLU but our focus has been on broadband rollout and we had no time," he added.
"LLU was the first piece of the jigsaw with broadband, but we found other ways of completing most of the puzzle. But now we are back to the first piece. It has to be a high priority, but it is a niche product."
Edmunds said he would be passing the puzzle on to Ofcom.
BT dismissed Freeserve's argument as "mischievous". Ben Verwaayen, the telco's chief executive, said DataStream and IPStream had not been available when original projections of cost and revenue for LLU were made, which meant that LLU business models now are "based on an unrealistic assumption of volume".
He also claimed that LLU had not been a success in Europe and that the business model for it was not strong enough.
But Easynet, which is unbundling local exchanges, accused BT of being disingenuous, and said LLU was clearly viable.
"For operators to sell purely to residential users LLU may be too expensive, but if public and private sector demand is aggregated, [LLU becomes] viable and can be rolled out to residential users," said Jill Ainscough, Easynet's marketing director.
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