LLU’s success could turn says analyst

The success of local loop unbundling across Europe could be its undoing, according to a new report from industry analyst, Analysys.

The analyst firm argues that exchanges are becoming overcrowded and, pointing to the Netherlands as an example, suggests “the balance of power may shift back to incumbents”.

In its latest report, “The Competitive Dynamics of DSL in Western Europe,” Analysys predicts “an infrastructure-based revolution in broadband access” in the region, as the number of unbundled local loops there grows from 10.9 million in June 2006 to an estimated 28.6 million by the end of 2010.

“Local loop unbundling (LLUB) is one of the big successes of 2006, across Western Europe,” says the report’s co-author, Martin Scott. “However, LLUB could potentially become a victim of its own success.

Scott told that he doesn’t expect LLUB to backfire “as alternative operators will still migrate a vast majority of their DSL services to LLUB rather than take the incumbent’s wholesale offer”. However, he does believe that incumbents’ steady cede to alternative networks will slow “as incumbents have the economies of scope and scale in their favour, as well as the increased content negotiating power that comes with this.” Rather than bleeding customers to the alternative networks, Scott reckons incumbents are likely to slash their prices rather than lose subscribers.

“As fixed telecoms services become bundled/converged with mobile and TV/media the new regulatory landscape will give incumbents less of a dominance in a new all-encompassing ‘fixed-mobile-media-comms’ market, meaning that they will get more regulatory lee-way, while at the same time still having a dominance within just the broadband access part of that market. This means that they are more likely to keep that dominance.”

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