Select Committee on Trade and Industry Appendices to the Minutes of Evidence



APPENDIX 17

Letter from the Group Director of Regulatory Affairs, British Telecommunication PLC to the Chairman of the Committee

  I thought it might be valuable if I wrote to provide an update on developments on Local Loop Unbundling since we gave evidence to your Committee in December.

  The seven trial sites were all completed on, or ahead of, time—with the exception of Leeds where we still await planning permission (as we mentioned at the Committee). The Operators have been rather slow to take possession of the sites and install their equipment. However, Eircom in Belfast has now completed the process and has unbundled the first trial loop.

  As has been widely reported, BT delivered the designs for the next tranche of rooms before Christmas, but despite our extending the deadline for replies at the request of Oftel, the actual orders have been exceptionally disappointing. Designs and costings had been produced for co-location rooms in 25 exchanges, covering a total of 141 operators' points of presence. Within these designs, there were on average between five to seven operators planned for each hostel site on the basis of previous expressions of interest.

  The operators' responses showed that for 19 out of the 141 points of presence the Operators did wish to proceed to the next stage. For the remaining 122 points of presence on offer, there was either no response from the Operator or an indication that the Operator did not wish to proceed with room build.

  Out of the original 25 exchanges, there are now 14 sites where one or two Operators wish to proceed to room build. In these sites the current design is based on an average of five to seven operators sharing because that had been our understanding of demand.

  If any of the operators now wish to proceed the sites will need to be re-designed for the reduced level of demand.

  Oftel have asked us to freeze any re-design work on this first round of exchanges, in order to concentrate our design activity on the more popular Bow-wave two sites.

  As you will appreciate from your visit to Morningside exchange a room built for seven operators will be more expensive than a room designed for one, so if six operators drop out the costs will either go up for the remaining operator, or we need to go back to the drawing board resulting in further delay.

  Although the level of demand is very disappointing it is not entirely unexpected for the reason we mentioned at the hearing. Local Loop Unbundling has a place in a competitive telecoms market but the economics are such that it will never generate a widespread, mass roll-out of broadband. Some drop-out was to be expected. Additionally, the exchanges in Oftel's first tranche were not the high priority sites.

  Oftel has proposed measures to get the programme back on course and we fully support them—indeed we initially suggested bringing forward Bow Wave 2 before Christmas. We have always argued operators should make a financial commitment up front. We think this is important to get a more realistic assessment of demand. Oftel are now investigating such a proposal.

  We do not think Oftel are justified in carrying out a further investigation of our costs. They were involved throughout the trials and design stages and know the detail. However, we shall, of course, co-operate.

  We are keen to do whatever we can to produce a realistic programme of demand and to fulfil it.

  On a broader point we have recently updated our summary of the position across Europe. You will see from the attached that BT and it's Spanish equivalent are the only Telecoms companies in Europe to be fully compliant in publishing a reference offer for all three variants of LLU. It is also clear that there is a very wide variation in proposed prices but that BT's prices are around the average of Europe.

  On a point of detail, in the oral evidence session with the Other Licensed Operators on the same day as BT's hearing, Kingston Communication made the comment that they did not expect demand for LLU in their region and that they had not encountered any interest to date.

  You will see from the attached[36] that BT first showed interest in understanding Kingston's offer of LLU as early as 19 October and we repeat this enquiry once the EU regulation was passed. Kingston have not published a reference offer, making them in breach of the EU Regulation. We will be considering our position but I think you can see that BT, if not others, has been showing interest in LLU in Hull for some time. It is perhaps a reflection of the complexity of the LU process that Kingston—which operates in a far smaller area than BT—has been unable to meet the EU deadline, and we feel that some credit is due to BT for meeting all deadlines.

24 January 2001


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