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C&W Has $150M Broadband Plan

Cable & Wireless plc (NYSE: CWP) is significantly ramping up its investment in local loop unbundling (LLU) in the U.K., and plans to spend up to £85 million ($152.5 million) on central office broadband systems by March 2006.

The carrier, which bought its way into the LLU market earlier this year with the acquisition of Bulldog Communications Ltd., is targeting the top end of the broadband user market in an effort to generate annual revenues of £250 million ($449 million) a year within four years (see C&W Buys British Bulldog).

C&W plans to unbundle up to 400 BT Group plc (NYSE: BTY; London: BTA) exchanges, about 30 percent of the national total, by the second half of 2005, though it isn't specifying which exchanges. The unbundling process involves alternative carriers installing their own equipment in the incumbent's local exchanges and controlling the connection to the customer instead of reselling the incumbent's service.

To reach its target of 400 exchanges, C&W is planning capital expenditure of between £40 million and £50 million ($72 million and $90 million) by the end of March 2005, and an additional £15 million to £35 million ($27 million to $63 million) in the following 12 months, depending on user uptake.

In addition, C&W believes the expansion will result in operational costs of about £30 million ($54 million) by the end of next March, and a similar sum during the following year.

The news of C&W's investment plans didn't thrill U.K. investors. The carrier's share price on the London Stock Exchange fell this morning by 2.75 pence, or 2.5 percent, to 107.25 pence in morning trading.

C&W says nothing has been announced regarding systems suppliers for its central office broadband systems, although Bulldog's incumbent DSLAM provider Alcatel SA (NYSE: ALA; Paris: CGEP:PA) looks well placed. Alcatel had not returned calls regarding its Bulldog relationship.

Through its Bulldog subsidiary, C&W is targeting the "top end of the broadband market, including business and residential users. Residential is an important market, and there's a lot of overlap there with the business market as increasing numbers of people are working from home," says a C&W spokesman.

Bulldog has already shown that it has Britain's big spenders in its sights. While a multitude of U.K. ISPs launch cut-price (sub £20/$36 a month), low-speed (sub 500 kbit/s) broadband offers, Bulldog this week announced a combined 4-Mbit/s data access and traditional voice line service at prices starting from £40 ($72) per month. Earlier this year, however, it had to cancel the introduction of a new, higher capacity broadband remote access server (B-RAS) when its migration failed and left customers without service.

Bulldog representatives hadn't returned calls for comment.

The unbundling process has been made more affordable in the U.K. this year following pressure by the regulator Office of Communications (Ofcom). (See Ofcom Sets Out B'band Plan, Ofcom Proposes New LLU Rates, and BT Cuts DSL Wholesale Rates.)

With Bulldog and Easynet Ltd. already offering their own unbundled services, other service providers are also looking to capitalize on the opportunity to own their own customers (see Easynet Upbeat on 2003 Results and UpData Emerges as UK Unbundler).

The U.K. isn't the only European country where unbundling is proving increasingly popular: BT's competitors will take heart from the success of the LLU brigade in France (see Iliad Ramps Up Broadband to the Homer and Cegetel Picks Italtel for VOIP Over DSL).

— Ray Le Maistre, International News Editor, Light Reading

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