LOCAL LOOP UNBUNDLING : CHALLENGES AND ALTERNATIVES Presented by: Purva Adke Chandan Bhagat Rohit Shetye Kedar Raje
LOCAL LOOP UNBUNDLING : CHALLENGES AND ALTERNATIVES
Presented by:Purva Adke
Chandan BhagatRohit Shetye
Kedar Raje
AGENDA
Overview of Local loop unbundling and its necessity
Projected benefits for the customers Regulatory and Policy Objectives for Local Loop
Unbundling Challenges and Issues in implementing LLU Implications of Local Loop Unbundling Alternatives to Local Loop Unbundling Conclusion
Local Loop Unbundling
Local loop unbundling (LLU or LLUB) is the regulatory process of allowing multiple telecommunications operators to use connections from the telephone exchange's central office to the customer's premises.
The physical wire connection between customer and company is known as a "local loop," and it is owned by the incumbent local exchange carrier (also referred to as the "ILEC," "local exchange,"
Why is Local Loop Unbundling Required?
The incumbent local operator operates as a monopoly in the telecom industry and acts as a barrier to new entrants.
The new entrants do not have sufficient finances to build up an entire network and hence, have to rely on the incumbent’s infrastructure to enter the market and provide services to the end user.
Projected Benefits of LLU to customers
Operators will provide good quality at competitive prices
Emergence of new technologiesCustomers will get more choiceDissolve monopoly
Regulatory and Policy Objectives for LLU
Why A Regulatory Authority is Required ?
LLU service & technical descriptions
Frequency plan and quality of service measures
Defining Collocation space and facilities
Costing and tariffs
Addressing Commercial issues and disputes
Federal Communications Commission (FCC)
Telecommunications Act of 1996◦Title I, "Telecommunications Service" ◦Title II, "Broadcast Services" ◦Title III, "Cable Services◦Title IV, "Regulatory Reform" ◦Title V, "Obscenity and Violence" ◦Title VI, "Effect on Other Laws" ◦Title VII, "Miscellaneous Provisions"
Challenges & Issues Faced by Regulator
Regulating a market that is changing very rapidly
Regulating without stifling any type of innovation, and
Without improperly disadvantaging any competitor.
Implications of LLU
Implications of LLU
OpportunismEconomic dependencyTechnical difficultiesCosting problemsRegulatory Uncertainties
Opportunism
Competitors will be involved in hiding and distorting information
Incumbent will have stronger incentives to behave opportunistically
New entrants will use regulatory threats against the incumbent to gain better performance
Opportunism is the dominant strategy of both the new entrant and the incumbent
Economic Dependency
LLU Operators (new entrants) heavily rely on the incumbent to provide continuous supply of low-priced loops and related facilities
There are transaction hazards involved like hold-ups and margin squeezing
Technical Difficulties
A new entrant might ask the incumbent for network information but the incumbent will require additional information from the new entrant to plan its network design
Appropriate management of problems such as interference at high frequencies is an issue due to the contractual nature of some LLU options
Costing Problems
No correct costing rule exists for fixed costs unaffected by operations
There is always a dispute between the incumbent and the new entrants regarding the regulatory costs involved in the provided services
Competition may lead to destructive price wars between the incumbent and the new entrant
Regulatory Uncertainties
Regulators hesitate to disclose their commercially sensitive information to new entrants
Incumbents have to sign service level agreements with new entrants
The more regulatory the LLU, less is the incentive for incumbents to open their network to access by new entrants
Alternatives to Local Loop Unbundling
Alternatives to Local Loop Unbundling
Local ResaleLocal InterconnectLocal Loop Infrastructure
Local Resale
Network operator provides wholesale services to the service provider and the service provider sells that service on to the customer
Products are priced on the basis of a discount on the retail tariff, with the level of discount reflecting the proportion of costs avoided by the incumbent
Local Interconnect
An entrant operates its own local switch and interconnects on the network side of the incumbent’s local switch.
Prices for local interconnect are typically regulated on the basis of the network operator’s costs plus a reasonable rate of return.
Local Loop Infrastructure
The entrant lays its own transmission facilities between the local switch and its customers.
Entrant is not required to use any other operator’s facilities to provide local services.
Conclusion
Without appropriate safeguards, Local Loop Unbundling will be an unviable business model
LLU does offer benefits to the end users but also faces regulatory issues and other challenges
Alternative technologies which are sustainable in the long run should be looked at
References
http://mora.rente.nhh.no/conferences/TCEWorkshop2003/papers/Ulset_Spiller.pdf
http://www.oecd.org/dataoecd/25/24/6869228.pdf
http://encyclopedia.jrank.org/articles/pages/6657/Local-Loop-Unbundling.html
http://link.wits.ac.za/papers/LINK.pdfhttp://www.cdoyle.com/papers/llurisk.pdfhttp://www.itu.int/ITU-D/hrd/tc/ec ecowas/DOCS/E
/ Workshops/Workshop%205_Interconnection/2.%20Conferences/Doc%203.6%20Local%20loop%20unbundling.ppt