The politics of premises: Co-location and unbundling the local loop

First, they argued that the selection of premises made available was unsatisfactory. Second, the cost of co-locating equipment in exchanges that were appeared largely prohibitive. Regulator Oftel met with BT and the newcomers but, as Mark Graham explains, the way ahead is still uncertain.

The unbundling of the local loop, or lack thereof, has become even more contentious since last year's European Commission directive to free telephone lines from the grip of incumbent telcos. However, with UK regulator Oftel instructing BT to bring forward to April access to its more popular urban exchanges and review its access charges, the path may finally become smoother. BT's rivals are ready to take the next step. The question now is whether they take it alone or hand in hand.

Although no major players vying for exchange space are commenting - for now - analysts believe sharing the costs associated with co-location may be their best option. Distance location strategy is a hot topic because telcos find they are facing a paradox: either dig deep into their pockets and access exchanges alone, or share the expense with the very companies they will be competing with in the future.

One of the factors that triggered the emergency meeting called by Oftel on 18 January was telcos pulling out of the first wave of opening of rurally situated exchanges. Initially, the incumbent BT wanted to split conversion costs between the companies wanting space in exchanges. If any dropped out, those remaining were expected to make up the shortfall. Richard Greco, CEO of start-up Bulldog Communications, accused BT of over-charging, saying it must be building "gold-plated rooms".

Alan Pyne, analyst at Schema, reckons it isn't feasible for new entrant broadband companies to build completely separate exchange premises due to the high cost. However, he said: "Companies are already talking with one another about the possibility of sharing co-location, to spread costs."

A spokeswomen from Colt Communications, represented at the Oftel meeting and now acquiring exchange space, said she couldn't say whether the company is looking to share with others or BT. "We are looking at the breakdown of the costs," she said.

Other telcos contacted - including Bulldog Communications, Cable & Wireless, Energis and MCI WorldCom - all gave similar responses.

Redstone Telecom has chosen to go it alone, hooking up its equipment by building boxes adjacent to BT exchanges. Redstone announced on 19 January that its broadband services will be available in some areas by April.

However, it is targeting SMEs and has said it won't be sharing space with other telcos. Others have already indicated their wish to focus on more lucrative parts of the market, and in some cases opt out of the uncertain local market and high-speed services over legacy copper lines altogether.

In response to Redstone's announcement, a spokesman from the industry watchdog said: "Oftel expects other operators to take up this option and others do have the option of tele-housing." By tele-housing, he means other operators are now even looking at renting rooms in nearby houses and installing broadband networking equipment.

According to Tim Anker, vice president of co-location at bandwidth exchange Band-X, tele-housing is a sharing option that telcos may find attractive. He said: "BT already have a head start with their own ADSL in place," and added that this advantageous position is precisely why "the sharing of costs is such an important part of co-location".

With Redstone leading the way, non-BT supplied ADSL services will be available to some customers by 1 April. However, analysts are reluctant to predict others being in this position until next year.

According to a spokesman for the Communication Managers Association (formerly the TMA), the entire undertaking has "a very mixed flavour of complexity". He was referring to the obstacles in the way of sharing, such as maintenance agreements between telcos and the transfer of customers, but as the US market has shown, even as roll out of DSL services over the open local loop gets under way, the politics and practicalities of supplying high-speed net access rarely become easier.