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Unbundling Heats Up in UK

Light Reading
News Analysis
Light Reading
5/31/2005

British broadband service providers are racing to offer unbundled services to business and residential customers, setting off a mini boom in DSLAM sales in the U.K. that's set to last for the rest of the decade.

At least five competitive carriers are planning to install their own access gear in BT Group plc's (NYSE: BT; London: BTA) local exchanges so they can control and provision their own triple-play services. This means DSLAM vendors will be fighting over a total capex pot worth hundreds of millions of dollars over the next three to five years.

The most immediate vendor beneficiaries are Huawei Technologies Co. Ltd. and Marconi Corp. plc (Nasdaq: MRCIY; London: MONI).

Tiscali chooses Huawei's DSLAM
Huawei's latest European coup comes from broadband service provider Tiscali UK, which will install the Chinese vendor's MA5300 IP DSLAM in BT's local exchanges (see Tiscali UK Unbundles With Huawei).

That decision means Huawei will have multiple DSLAMs sitting in BT exchanges, as it has also been chosen to supply access equipment for the incumbent's next-generation network (see BT Unveils 21CN Suppliers).

The Tiscali unit plans to spend €90 million (US$111 million) on unbundling in the U.K. during the next three years, adding Huawei's DSLAMs to 27 exchanges by the end of July. If that process is successful, Tiscali plans to have 200 exchanges unbundled by the end of 2005, and 600 by 2007.

Huawei's DSLAMs will enable Tiscali to offer not only high-speed broadband but VOIP, TV, and video over IP, though a spokeswoman for the operator says no decisions have been taken about those services yet.

She also says that while the company checked out DSL gear from a number of vendors, she couldn't name any of the also-rans.

Tiscali says it based its decision on technology, product roadmap, and the availability of vendor support services. Commercial matters, a key issue in BT's decision-making, was not cited by Tiscali, though Huawei is known to be aggressive on pricing (see Bross: More to Come on 21CN).

Huawei has also had success in selling its IP DSLAMs in France, another European country where local loop unbundling has proved popular with competitive broadband operators (see Neuf: Time Is Right for IPTV).

And it's not just in Europe that the Chinese company is registering access equipment success: It is well placed to execute on its aggressive international expansion plans, according to the latest Light Reading Insider report, China’s Big Three Vendors Take On the World (see Huawei Deepens DSLAM Penetration).

C&W plans cheer Marconi
Following its recent 21CN rejection by BT, Marconi was in need of some good news, which came as Cable & Wireless plc (NYSE: CWP) announced its latest annual results (see C&W Reports FY05 Results).

As well as choosing the vendor's metro multiservice provisioning platform for traffic aggregation, BT's main U.K. rival announced it is expanding its local loop unbundling plans, a process for which it has already chosen Marconi's access hub and softswitch technology from Italian supplier Italtel SpA (see Huawei Deepens DSLAM Penetration and Marconi Wins C&W Deal).

C&W plans to spend $150 million over three years on its unbundling plans, and it now aims to have its own gear in 600 BT exchanges by March 2006 and 800 exchanges a year later. That's up from its original target of 400 exchanges, but there's no indication from C&W that it plans to increase its total capital outlay to reach that target (see C&W Has $150M Broadband Plan).

C&W is also moving towards an all-IP network, on which it plans to spend $365 million (see C&W Plans Its Own 21CN and C&W Moves Ahead With NGN).

NTL, Wanadoo, AOL at early stages
The U.K.'s other unbundling hopefuls are at much earlier stages. NTL Group Ltd. (Nasdaq: NTLI), which has earmarked £65 million ($118 million) for its unbundling plans, has applied to install its own equipment in 250 of BT's exchanges, but is taking a cautious approach.

It has installed equipment in just two locations to test equipment and services, and has announced it is trialing ADSL2+ equipment from Ericsson AB (Nasdaq: ERICY). (See NTL Trials ADSL2+ With Ericsson.)

A spokeswoman says the unbundling process could take years and there's no fixed timetable or rollout targets. Its unbundling process could be influenced by any merger talks it has with fellow U.K. cable company Telewest Communications Networks plc (Nasdaq: TWSTY). (See Europe Is M&A Feverish .)

AOL UK and Wanadoo UK have both announced their intentions to unbundle the local loop, but neither has announced any concrete plans, with AOL saying it is still analyzing the financial implications of such a move. But based on the capex plans of the other operators, it seems that to install equipment in the key urban locations requires an investment of more than $100 million, so those two players could add at least another $200 million to the potential spoils available to the DSL vendors (see Who Makes What: IP DSLAMs).

Not all of the U.K.'s operators believe that unbundling is the way to win a piece of the broadband action, though. A spokeswoman for Thus plc (London: THUS) says the operator "decided not to proceed based on the economics," and is instead trialing 8-Mbit/s DSL with BT.

— Ray Le Maistre, International News Editor, Light Reading

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