Released on = May 3, 2007, 4:46 am

Press Release Author = Dimitra Gialama / InfoCom

Industry = Telecommunications

Press Release Summary = Stuttgart, Germany - 4th May 2007 - The local loop
unbundling (LLU) market in the five largest Western European countries, France,
Germany, Italy, Spain and the UK, is significantly growing.

Press Release Body = Stuttgart, Germany - 4th May 2007 - The local loop unbundling
(LLU) market in the five largest Western European countries, France, Germany, Italy,
Spain and the UK, is significantly growing. The total number of LLU in these five
countries increased from 7.97 million lines at the end of 2005 to 12.39 million one
year later (+62%). With 4.75 million unbundled loops, Germany still has the largest
share (37%) among the examined countries followed by France with 3.92 million (share
30%) and Italy with 2.03 million (16%).

In terms of LLU, end of 2006, the UK recorded 1.3 million unbundled local loops and
still lags behind other countries such as France, Germany or Italy - but with +575%
the growth rate was significantly higher in 2006; also Spain with 0.93 million lines
reached a strong year-on-year growth rate (+116% - see Fig.1).

In order to promote competition in particular in DSL markets, the regulatory regime
regarding local loop unbundling and the provision of wholesale services from the
Incumbent to their competitors is an intensely discussed topic. In the UK, the
creation of the division openreach within the BT group as a result of the national
regulator's (Ofcom) Strategic Review of Telecommunications shall foster competition
and provide equality of access to local access (e.g. through LLU) and backhaul
networks for providers on equal terms (i.e. for BT's own business units and external
providers).

Yet the success of LLU is also a question of available alternative wholesale
products, which had an impact on LLU evolution in the past. In Germany for instance,
until 2004 LLU was the major wholesale product for operators to provide voice and/or
Internet services, since resale offers (including the end-user relationship) for DSL
have only been introduced in late-2004 and regulated bitstream offers for DSL will
only be introduced in 2007.

In comparison, in the UK resale offers (e.g. for telephony) as well as bitstream
offers (for DSL) have a longer tradition. Although, LLU was introduced back in
2000/2001, alternative operators provided DSL services mainly based on BT's other
wholesale products (bitstream products such as IPStream and DataStream). Only in
2006, did the share of total DSL lines based on LLU grew to nearly 13% compared to
3% in 2005.

The UK showed a strong increase in LLU only after organisational changes, so one
might argue this proves the success of the UK approach. Nevertheless, in other
larger European countries with developed LLU markets without specific organisational
changes for the provision of wholesale services (regulated wholesale services, such
as LLU or bitstream) considerable year-on-year growth rates of LLU lines (France
+39%, Germany +46%, Italy +62%) occurred.

In fact, BT had the lowest retail DSL market share with 32% end of 2006 of all
examined incumbents. But many DSL offers are based on BT's wholesale bitstream
access products accounting for 54% of the total DSL lines. From a wholesale
perspective it must be stressed that BT generates comparably high revenues from its
wholesale bitstream access products (sold on a retail-minus formula to its
competitors), which are higher than revenues from LLU services (based on
cost-oriented prices). Regarding infrastructure-based competition based on LLU or
own infrastructure, which promotes competition, the UK market is still quite
protected compared to Germany. The latter shows a much higher competition intensity,
in particular visible through the high number of full unbundled lines (over 99% of
total unbundled lines) and Deutsche Telekom's significant loss of retail access
lines to its competitors in 2006.

In general, in countries such as France and the UK, further migration processes are
underway and operators shift from traditional bitstream or resale offers to LLU and
invest in LLU infrastructure, with the possibility to gain a better control over
their service offers and to provide more flexible services to their end-users.

Another point showing that the discussion about competition levels in broadband
markets is more complex than some statements might transpose, is the fact that in
some countries with more developed LLU markets, such as France and Germany, product
offers of alternative providers vary more from the incumbents offers - e.g. higher
bandwidths for DSL, bundled products (e.g. telephony, broadband) - and by
consequence intensifies competition; not to speak about cable modem competition,
urbanisation rates, etc.

Please visit http://www.infocom-de.com/pressarchives/press_040507.html to see the
graph.
Fig. 1- Number of unbundled local loops in top 5 Western European countries (in 1000)

About InfoCom
InfoCom is a market research and consultancy company with almost 20 years experience
providing strategic analyses and planning assistance to stakeholders in the
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to understand market dynamics in order to improve their competitive advantage.
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Fax: +49 711 870510-10
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