Local Loop Unbundling Can be Used to Mitigate Unequal Conditions in Emerging Markets, Pyramid Finds

Aug 5, 2010

Local loop unbundling - if implemented correctly - will promote and enhance competition, broadband penetration, and economic welfare in emerging markets lacking this reform, according to a new report from Pyramid Research (www.pyr.com).

How Operators Can Benefit from Local Loop Unbundling Done Right examines the impact on private investment, service penetration, and prices that could result when the privatization process of the telecom sector lacks a regulatory framework promoting competition among the participants. It also examines how LLU could be used to mitigate those unequal conditions. Finally, case studies of three countries - the U.S., U.K., and India - look at the strategic challenges and difficulties involved in reform implementation.

Download an excerpt here: http://www.pyramidresearch.com/downloads.htm?id=5&sc=PRN080510_INSGL2.4

Purchase the report here: http://www.pyramidresearch.com/store/ins_gl_100720.htm?sc=PRN080510_INSGL2.4

Governments of developed and emerging countries have promoted the telecom sector by implementing public policies, such as local loop unbundling (LLU) to encourage service penetration, improve the competitive environment and increase their portfolio of services at prices affordable to the population, notes Jose Manuel Mercado, analyst at Pyramid Research. "Once privatization of the local loop took place, it was not always accompanied by appropriate public policies and regulations to encourage the new private company to invest in infrastructure, as expected," he says. "Even though the new company owned the local loop, without any competition to apply pressure, it did not invest in the infrastructure at desired levels."

"Competition among operators is what has driven most infrastructure investment; through local loop unbundling, a liberalized market will see services being offered at affordable prices and coverage improving," Mercado explains. "The competitive behavior promoted by unbundling will put all competitors on level ground."

However, LLU is not a sufficient condition on its own for achieving higher penetration rates; the economic situation of each country, literacy level, and income distribution, as well as other economic conditions affect the development of the telecommunications sector, but LLU is a prerequisite for success. Furthermore, price and cost adjustment is crucial for the entry of new telecom competitors as part of rolling out LLU. "If this process is not regulated before implementing LLU, entrants could face a price war and would not be able to offer their services above costs, leaving them out of the market," says Mercado.

How Operators Can Benefit from Local Loop Unbundling Done Right is part of Pyramid Research's Global Telecom Insider report series. Download an excerpt of this report here: http://www.pyramidresearch.com/downloads.htm?id=5&sc=PRN080510_INSGL2.4. This report can be purchased online here: http://www.pyramidresearch.com/store/ins_gl_100720.htm?sc=PRN080510_INSGL2.4 or by contacting info@pyr.com.

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SOURCE: Pyramid Research

CONTACT: Jennifer Baker of Pyramid Research, +1-617-871-1910,

Web Site: http://www.pyr.com/