Have cost advantages of LLU being eroded?
While actual solid information is sparse, when a mobile provider as large as Vodafone decides to eschew LLU, and go for the wholesale option from the incumbent it is big news. To this extent a snippet of analysis over at DowJonesNews.com. An analyst from Bridgewell Securities feels that the Vodafone news may indicate the cost advantages of LLU are not as great as once thought.
Many providers have embarked on an unbundling programme, that in a number of cases offers no actual advantage to the providers customers, other than perhaps the option of higher speed services in the future. Some LLU providers, have already embraced ADSL2+, but a great many LLU lines are still being deployed using slightly aging ADSL standards. The immediate advantage would appear to be the lower headline price, but from the posts of customers on our forums for those providers undertaking a joint IPstream and LLU course all is not smooth for some, which is resulting in longer support queues which increases costs. In short a £1 saved by the provider on the ADSL, may mean they find 90 pence of that now being spent on handling the 5 to 10% who have problems when switched from IPstream to LLU. One real issue that has still not being fully addressed, is migration away from or between LLU provider, some weeks people appear to be able to get a migration code, but many traditional providers do not accept a LLU migration code, or worse the LLU wholesaler is not issuing a migration authorisation code at all.
It may be that in view of the level of problems which do seem to be higher with LLU compared to IPstream, that Vodafone is taking the safe route. Some will question why should LLU appear to have more issues, well for one Openreach, BT & ISP staff have had six years of getting used to IPstream based services, and back in 2001 even IPstream was not as stable as it is now. One area changing now is the equivalence within the ordering processes, all BT Wholesale orders for IPstream services will now be going through the same ordering system as for LLU. Nothing physical will change, i.e. IPstream services still connect to the same hardware at the exchange, but how the order gets from ISP to person doing the jumpering at the exchange will alter.
Another fly in the ointment for LLU providers is that currently they have it easy, BT Wholesale costs have not altered substantially since April 2004 with the introduction of CBC (Capacity Based Pricing) pricing. This is likely to change as there is a growing expectation that prices will fall at the BT Wholesale level in 2007. While price drops have traditionally meant price drops to the end-user, it is likely that while some providers will lower their entry level products price to make for good advertising, many are likely to use wholesale price drops to buy more capacity to cope with the growth in demand for high bandwidth services like Video on Demand.