Prior to the growth of LLU, the channel was forced to offer broadband to end users at relatively no margin, simply to reduce churn. According to Ian Fishwick, managing director at Adept Telecom, the situation was made worse when Carphone Warehouse offered residential broadband customers ‘free broadband for life' on its TalkTalk plan in April last year. Fishwick explains: "The bottom line was a perception from the residential market that broadband is something that you give away. Over the last few months we've been looking at broadband as a commodity."
Today there are 11 million broadband users in the marketplace, including cable subscribers. BT Wholesale claims to have around eight million of the total, the majority of which are consumer users.
The residential market for broadband sales has already reached at least 50% penetration, according to Tiscali, with the maximum penetration available at around 70%. With the diminishing number of people in the residential market left to target and the hot competition in that sector, the area to focus on is the business market, states Lance Spencer, product and marketing director at Tiscali Business Services. He says the SOHO to mid-sized company is where resellers should be focusing with LLU broadband as a way to upgrade and reduce cost from existing, expensive products.
The rate that companies are unbundling local loops is increasing, giving viability to broadband products in this sector. Tiscali has unbundled around 450,000 lines so far on around 400 unbundled exchanges. Meanwhile Carphone Warehouse Networks, a full unbundling LLU operator, has already unbundled 1150 exchanges, including those from its AOL UK acquisition and claims it will have 1650 ready by the end of its financial year, March 2008. This will give it coverage of 80% of the UK population for voice and data packages.
Daisy ceo Matthew Riley commented on Daisy's efforts in broadband and LLU: "We are currently working with existing business partner Griffin in formulating business solutions for small to medium sized businesses, offering a range of different service wraps. We are also working with partners Opal, Cable and Wireless and Griffin on LLU."
According to Carphone, LLU and the next generation network are about moving from minute based charging to access based pricing and bundles of products. "Resellers have to embrace access charges and move away from minutes," states Neil McArthur, managing director at Carphone Warehouse Networks. "The business model is moving in that direction, so it's not surprising that many resellers are talking about what to do now. If carriers don't build next generation networks and resellers don't embrace next generation carriers businesses won't survive the next few years as this model shifts.
"Resellers need to ensure they have a relationship with a next generation LLU network operator. They also need to prepare themselves for the customer in terms of access management. Resellers need to be more sophisticated, so they need to improve their IT skills and they also need electronic interfaces to the carrier."
In order for a reseller to meet these aims it has to be big enough to cope with the financial and time pressures. The reseller that wishes to sell LLU broadband to its customers in order to get on the bandwagon for value added differentiated services, service bundles, fast network speeds and vast capacity should be doing at least £100,000 of billing a month with the carrier in order for it to be a worthwhile investment required, states McArthur.
Fishwick says the onus is now on resellers who have to decide whether they intend to stick with BT or to move to an LLU provider. He comments. "In many ways 21 Century Networks is a catch up network. LLU operators already have what 21CN is aiming for so they need to grab as much market share as they can before BT gets in on the act."
Riley agrees: "The huge advantage over BT for LLU providers will be over the next two years. But with BT being as cunning as it is, you never know what BT has up its sleeve particularly with plans for WLR3."
As an LLU provider the biggest problem for Tiscali is BT. When phone lines and therefore broadband lines go down, albeit occasionally on BT standard care the end users could have to wait three to four hours for a fix. So Tiscali offers its customers BT Enhanced Care, which reduces downtime to two days as an optional extra on all products except its premium offerings, which it comes as standard with.
However what Tiscali want is a five hour fix time. Spencer believes this may be available by the end of next year under the name Total Care.
Many of the current issues regarding LLU are focused on the migration of customers onto broadband LLU. A business switchover is not currently available out of office hours, although Riley expects the situation to change regarding this issue in the coming months as BT starts trails during the summer.
On the negative side for LLU there is still an issue of reliability with equipment compared to the well established PBX industry, states McArthur. Yet he explains that this negative is actually a positive for resellers. "The thing about brand new equipment is that it's less reliable than stuff that's been around for 10 years. We've gone from PBXs to routers and now to VoIP boxes and the like, which are not as mature. Plus there is less expertise in looking after them from the customer side. But this means a potential new dawn for resellers to serve their customers better."
Another major concern is the length of time over which the customer is coupled to a network. Riley states: "Once committed to a network you are tied to them for a long period of time. It is almost like a marriage and if the relationship breaks down it'll be much like an expensive divorce. It's therefore essential that the customer picks the right partner."
However Spencer comments "LLU is good for the channel, as there isn't just one player controlling the market. The channel can choose from a number of providers to see who can best meet the needs of the customers."