AOL today announced its decision to make a substantial investment in a new telecoms infrastructure in the UK, which will open up the local telephone network and related services to increased competition and innovation.
The investment will be made in ‘Local Loop Unbundling’ (LLU), which is the process that allows telecoms and Internet companies to replace BT as the provider of services over the telephone line from the local exchange to the phone socket in the home, known as the ‘local loop’. This will enable AOL to deliver Internet, telephony and other broadband related services, such as Video on demand, television over broadband and advanced gaming services, directly to these consumers.
AOL’s decision to invest in telecoms infrastructure in the UK follows Ofcom’s recent mandates on LLU and the Strategic Review of Telecommunications , which has laid down the regulations and targets that BT must adhere to as it opens up its local telephone network to competitors.
Karen Thomson, Chief Executive and Chairman of AOL UK Limited, said: “We finally have the opportunity to bring large-scale competition into the UK’s national telephone network. This will drive innovation and efficiency in the market, which I believe will result in consumers benefiting from greater choice, better value and new kinds of digital services.”
The initial phase of the programme, costing around GBP50m, will take place in the first half of 2006 and reach up to 300 exchanges in the UK, equivalent to 20% of UK households. If successful, AOL may extend this rollout to up to 1,000 exchanges in the UK, based on an estimated additional investment of GBP70m, in order to be able to offer the possibility of ‘unbundling’ the telephone line for more than 50% of UK households. AOL’s investment in the local telephone network in the UK is being funded by parent company Time Warner.
Thomson added: “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. We look forward to working with Ofcom and BT to bring these benefits to British homes.”
AOL 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. AOL’s unbundled services will be ADSL 2+ compatible, creating the potential for broadband services of more than 8Mbps in the future.
The AOL Internet service and AOL Talk are provided to UK subscribers by AOL Europe Services SARL, a company in the AOL group based in Luxembourg. AOL has more than 1.1m broadband subscribers out of a total of more than 2.3m members in the UK, as at November 2005. AOL members in the UK spent more than two billion hours connected to the Internet during 2005.
Local Loop Unbundling is a service regulated by Ofcom that allows a telecoms or Internet service provider to place their own equipment in local telephone exchanges. This enables the provider to have a more direct relationship with the customer, depending on whether it is undertaking partial or full unbundling. Partial unbundling is where another provider takes over the Internet connection; full unbundling also covers the line rental and billing relationship.
Oftel created the original regulatory framework for LLU, but it did not prove suitable for LLU investment on a large scale. Ofcom has put in place a revised framework of regulations for the LLU service and associated processes, including targets for BT set by the OTA, the adjudicator appointed by Ofcom, based on speed and volume of customers unbundled.
The success of the LLU process will be dependent on BT meeting or exceeding those targets and Ofcom’s continued monitoring of progress toward these targets.
There are currently about 24m residential phone lines in the UK, of which about 82% are owned by BT, according to Ofcom’s Communications Market Report – August 2005 Quarterly Update. In exchanges where it is not economic for AOL to have equipment installed, it will continue to deliver broadband and telephone services using wholesale access services.
About AOL:
AOL is the leading online interactive services provider to the UK, with more than 2.3 million members, including more than one million on AOL Broadband. AOL offers a range of services in the UK, including dial-up, broadband and voice, as well as unrivalled content and community for all the family.
Members spend more than one hour a day online on average, enjoying access to more than 20 channels of online content, from Entertainment and News to Parenting, Shopping and Money, as well as email and the Internet.
The AOL branded online interactive services and AOL Talk are supplied to UK subscribers by AOL Europe Services SARL, a company in the AOL group based in Luxembourg. Both companies are part of AOL Europe, a business unit of America Online Inc., which is the world’s leading interactive services company with more than 26 million members worldwide.
America Online Inc. is a division of Time Warner Inc., a leading media and entertainment company, with businesses including interactive services, cable systems, filmed entertainment, television networks and publishing.