Seminar Project

1. LOCAL LOOP UNBUNDLING : CHALLENGES AND ALTERNATIVES Presented by: Purva Adke Chandan Bhagat Rohit Shetye Kedar Raje

2. 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

3. 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,"

4. 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.

5. Projected Benefits of LLU to customers Operators will provide good quality at competitive prices Emergence of new technologies Customers will get more choice Dissolve monopoly

6. Regulatory and Policy Objectives for LLU

7. 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

8. 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"

9. 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.

10. Implications of LLU

11. Implications of LLU Opportunism Economic dependency Technical difficulties Costing problems Regulatory Uncertainties

12. 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

13. 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

14. 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

15. 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

16. 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

17. Alternatives to Local Loop Unbundling

18. Alternatives to Local Loop Unbundling Local Resale Local Interconnect Local Loop Infrastructure

19. 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

21. 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.

23. 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.

25. 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

26. 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.pdf http://www.cdoyle.com/papers/llurisk.pdf http://www.itu.int/ITU-D/hrd/tc/ec ecowas/DOCS/E/Workshops/Workshop%205_Interconnection/2.%20Conferences/Doc%203.6%20Local%20loop%20unbundling.ppt