Local Loop Unbundling (LLU) is the means by which other broadband operators connect to consumers via BT's copper local loops – a service for which the LLU operator has to pay BT, at prices that Ofcom, the regulator for the communications industries, has deemed too high.
Following a review of the wholesale local access market, Ofcom has decided that development of the LLU market, allowing operators to target infrastructure investment and to develop scale in the creation of high-speed data services, is critical in order to ensure a fully competitive and innovative long-term telecoms market.
It has therefore ordered a further 60% reduction in BT's charges for the transfer of an existing fully unbundled connection to £34.86, and a 36% reduction in the cost of providing a new line on a fully unbundled connection (where the broadband operator has exclusive use of the copper line) to £168.38.
Where there is shared access – between the operator of a broadband channel and the customer's fixed-line provider – the charges will be reduced by 70% to £34.86 for connection and £15.60 for rental.
Ofcom is not determining the fully unbundled rental charge ceiling at this stage. A high proportion of the costs for this service are determined by the cost of laying and maintaining the copper loop between the Local Exchange and the home or business premises, and Ofcom is currently consulting on the appropriate way to value BT's copper access network.
"This year has seen lot of progress on local loop unbundling," said Ofcom Chief Executive Stephen Carter. "This has been achieved through a combination of industry investment, regulatory review and, importantly, constructive engagement from BT."
Speaking to the BBC, Paul Reynolds, chief executive of BT Wholesale, said: "BT has been working hard with Ofcom since May on this issue, and these price reductions are absolutely in line with what we jointly agreed then."
According to commentators, the cut is unlikely to work its way through to consumers, at least in the short term, as many operators are currently offering broadband connections as a loss-leader.