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Topic this month:
LLU Local Loop Unbundling?

May 2009

If you heard this term before you may wonder what on earth it means, or if you haven't heard of it before, perhaps this short description and the links below might assist to demystify the unbundling of the local loop or LLU.

Many countries had or have an incumbent main fixed telephone network provider that provides the Public Switched Telephone Network (PSTN) and are generally state owned, part state owned, parastatals or state sponsored. In short many countries are (or had been) financing the PSTN with tax payer funds. The reasons for this can mostly be attributed firstly to the fact that putting up a PSTN needs a large capital investment and secondly that most governments perceive the PSTN as a strategic national asset. Due to this strategic perception, the high revenues involved and to make telephony accessible to the general public, telephony became somewhat over-regulated.

In recent decades there has been a big drive towards deregulation with the purpose to enable PSTN suppliers to become commercially viable and to introduce competing operators. Howver, new players find it difficult to compete with a state sponsored incumbent with established infrastructure, due to the massive capital outlays required to establish such a network. The infrastructure from the premises of a subscriber to the nearest switching exchange especially is prohibitively expensive to duplicate for a new player. This connection from the subscriber to the exchange is referred to as the local loop. Therefore governments and regulators are considering "unbundling" this part of the network. i.e. allow other operators to use the local loop to get access to subscribers.

In essence the local loop is then shared by multiple operators. A subscriber can for example, now decide he/she wants to switch all his/her local calls by operator 1 and all national calls by operator 2 and so on. It allows for subscribers to have a choice of operators, without having to get new lines or new equipment installed.

This is great for the subscribers and for the new operators, but the old incumbents find this a difficult pill to swallow as they installed the local loop over many years and now the competition is just walking in and making use of their now "disowned" infrastructure. The counter argument of course is that the local loop was paid for by the tax payers (who are the subscribers) in the first place.

New technologies like wireless and wireless ADSL make the local loop slightly less important. ULL is difficult to achieve through the regulatory environment not only because of the arguments suggested above, but also in order for the regulator to ensure that there is no undue advantage/disadvantage to anyone, that innovation is not stifled and that consumers benefit.

See the following links for more enlightenment.

Read more at the Open Reach UK
Wikepedia.
South African LLU a PDF.
OECD.

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