New Yankee Group Report Cautions That Benefits of Local Loop Unbundling Are Limited.

Business/Technology Editors

LONDON--(BUSINESS WIRE)--July 18, 2001

The process of local loop unbundling (LLU) is stifling the development of competition in Europe's broadband markets, rather than bringing about cheaper and faster Internet access for end users, as originally intended. According to a new Yankee Group Report, "Europe's Unbundled Local Loop: Chasing a Rainbow," alternative operators' entry into the market for high-speed Internet services via DSL is being hampered by the long-winded regulatory procedures associated with local loop unbundling. They are also being deterred from their plans to gain access to the last mile by the prohibitive costs of loop rental and collocation facilities required to install their DSL equipment at the incumbents' central offices. Meanwhile, many incumbents are stealing a lead by aggressively rolling out their commercial ADSL offerings as their would-be competitors struggle through negotiations over prices and the tangle of red tape surrounding the allocation of collocation facilities.

"LLU does not adequately support alternative operators entering the market for broadband services, because of cumbersome regulatory processes and the entrenched dominance of the incumbents," says Jonathan Doran, senior analyst with the Yankee Group's Convergent Communications Europe Planning Service and author of the Report. Doran also makes the following key observations:

-- Alternative operators seeking unbundled access face significant cost hurdles and delays to market entry.

-- Incumbents will benefit from LLU as its initial processes implementation slows down the entry of effective competition.

-- In the short to medium term, consumers will also benefit from LLU as it drives down broadband access prices. However, these benefits will not last if LLU has the overall effect of deterring newcomers from offering competitive broadband access.

Doran advises new entrants to think twice before pursuing full unbundled access, suggesting they consider less costly possibilities such as resale of the incumbents' wholesale service as well as the emerging options of line sharing and sub-loop unbundling. However, wholesale remains expensive in most markets where it is available. Doran warns that, although the wholesale/resale model provides an interim strategy for gaining market share while LLU finds its feet, its current form ultimately benefits the telcos more than the alternates.

NOTE TO EDITORS: For more information or to schedule an interview, please contact Jonathan Doran at [e-mail].

The Yankee Group (www.yankeegroup.com)

As a global leader in technology research and strategic consulting, the Yankee Group provides accurate, reliable, and trusted research; custom consulting; and personalized one-to-one client interaction encompassing all areas essential to e-business success: Internet, electronic commerce, communications, wireless, computing, and enterprise applications. Established in 1970 and headquartered in Boston, the company maintains offices throughout North America, Europe, Latin America, and the Pacific Rim.