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UK Study Finds Lower Home Broadband Penetration in Unbundled LLU Areas

Monday, March 12th, 2012 (1:36 pm) - Score 844

New Ofcom (UK telecoms regulator) commissioned research from Imperial College London (ICL) claims to have discovered that the process of freeing up an incumbent operators (e.g. BT) telephone exchange so that rivals can install their own kit inside, which is better known as Local Loop Unbundling (LLU), actually results in “lower penetration levels” (about -2%) for residential broadband access than areas without unbundling (i.e. BT only).

Unbundled ISPs, such as TalkTalk, O2 UK (BE Broadband) and Sky Broadband, are effectively able to bypass BT and offer greater product price and service flexibility. As a result some of the cheapest and most flexible broadband packages often come from the same providers, albeit only in areas covered by their LLU platform. Most LLU based ISPs cover around 75-85% of the UK, although TalkTalk claims to reach around 90%. Sadly areas outside of an ISPs LLU coverage have to be delivered over BT’s more expensive platform.

Naturally it has long been assumed that LLU, with its lower prices and improved product choice, would also help to boost broadband penetration in residential areas but surprisingly that could now be incorrect.

ICL’s Professor Tommaso Valletti explains (Computer World UK):

If you look at the historical time series, you can see that the use of broadband goes up over time in all areas. It’s a success. However, this increase in broadband penetration might just be because people are becoming PC literate.

So, overall results show that broadband penetration is on a positive trend. However, what’s very intriguing is that over and above this increasing trend, areas with LLU have lower penetration levels than those without.

The raw difference was that in areas with LLU, broadband penetration is two percent less.”

In fairness it’s very difficult to look back at what the market today would have been like without LLU because that never happened. Likewise many people might view -2% as being within the margin of error. On the other hand LLU, quality improvements aside, rarely if ever brings broadband to telephone exchanges that can’t already deliver it via BT or Virgin Media’s own platforms.

Professor Tommaso Valletti also suggests that another part of the reason for this result could be that some LLU ISPs have withdrawn their “cheap packages” in favour of better quality ones at a higher price. “This seems to result in less take up of those services in areas with LLU,” said Valletti.

Sadly it’s unclear which ISP examples, packages or time lines were used here and most of the primary providers tend to only charge more in non-LLU areas. As most of our readers already know, broadband packages cannot easily be compared by speed and price alone. It will certainly be interesting to read the final report, whenever it surfaces.

Leave a Comment
4 Responses
  1. Avatar Ethel Prunehat says:

    Correlation is not causation.

  2. I wonder whether the Ofcom raw data was correct.

    The 2% difference might be down to 1-2% of people using 3G, particularly as the areas with LLU are more likely to have 3G available, than the most rural 10 to 15% of the UK.

    As for LLU increasing the price to provide quality. I take it they’ve not looked at the price of TalkTalk and Sky services at all.

    Question is whether any of the data is available for peer review, so that assumptions can be challenged.

  3. Avatar nicknick says:

    And as these are generally the more built up exchanges, there will be a lot of Business Broadband lines used as residential, and unless you see the data it will be difficult to see what they have ‘missed’

  4. Avatar Somerset says:

    ‘..actually results in..’. So when an exchange gets LLU some customers cease their broadband?

    Another meaningless report we paid for.

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