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January 22, 2006

AOL to invest in UK LLU

The battle lines continue to be drawn up as companies position themselves to take advantage of the all-important triple-play market in the UK. This time it is the turn of the giant internet service provider, America Online Inc, which has announced plans to invest as much as 120m pounds ($211.5m) in local loop unbundling, LLU.

By CBR Staff Writer

LLU refers to the process of installing your own equipment in local telephone exchanges. This allows the installer to bypass the lines of the former incumbent BT Group Plc, which owns the valuable last-mile telephone line that runs from the local exchange into all UK customer homes. Under regulatory pressure, BT was forced in 2005 to open its telephone exchanges to competitors so they could install their own lines to people’s homes.

AOL has now said it will initially invest approximately 50m pounds ($88m) in the first half of 2006 to install its own lines in 300 telephone exchanges, equivalent to 20% of UK households. If successful, AOL could then extend this roll-out to 1,000 exchanges in the UK, which would cost it another 70m pounds ($123.5m). The funding will be provided by AOL’s parent, Time Warner Inc.

We finally have the opportunity to bring large-scale competition into the UK’s national telephone network, said AOL UK chief executive Karen Thomson. The opportunity to compete on a level playing field with the incumbent will encourage substantial investment in digital services and content in the UK. This will allow the UK to catch up with leading European countries, where unbundling is already delivering higher value services to consumers.

AOL is one among many organizations that have recently opted to invest in the expensive process of local loop unbundling. The advantage of LLU is that the companies will bypass BT’s lines, and they can control the speed of access. This will allow service providers to offer pay-TV (including video on demand and IPTV), fixed-line and VoIP services, as well as generic internet access.

Companies that have already gone down the LLU route include the Carphone Warehouse Plc, Pipex Communications Plc, British Sky Broadcasting Group Plc, Bulldog Communications, and Wanadoo.

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