What is unbundling?

‘Unbundling’ is a term used by telecommunications lawmakers and regulators to describe the case in which incumbent telephone companies (ex-monopoly national phone companies) are forced by law or regulations to rent the ‘bare wires’ of their network to their competitors. ‘Unbundling’ allows a competitor of the incumbent operator to use existing telephone cables to connect potential customers to the competing network, without otherwise using (and thus being dependent upon or restricted by) the network technology and/or manpower services of the incumbent operator. In deregulated countries,  ‘unbundling’ is intended to increase competition in telecommunications services – with the benefits of lower prices and a wider range of customer offerings.

 

In the case where an ADSL service provider chooses to use an ‘unbundled’ line to realise his ADSL line to a customer, he has full decision power over the use of the line. An operator using an ‘unbundled’ line provided by the incumbent is not usually mandated to provide for ‘line sharing’ with a third operator. Whether the ADSL operator chooses to provide a telephone or ISDN service over the same connection is up to him. Typically, operators try to persuade or force their customers to buy a complete package of ‘ISDN line and ADSL’, since this provides them with the highest revenue income from the line. But maybe: with the emergence of VOIP (voice-over-IP) as an increasingly popular means of telephone service using the Internet, ADSL service providers will increasingly be forced by the market to provide ‘ADSL only’ connections (without parallel telephone or ISDN service).

 

As with line sharing, the ADSL service provider usually pays a monthly fee to the incumbent operator for an ‘unbundled’ line. In addition, he may be required to pay a one-off installation fee, a one-off cancellation fee and service or fault repair charges. The charges are usually much higher than the equivalent charges for ‘line sharing’.

 

The prime benefit of ‘unbundling’ is the independence from the incumbent operator. The technology which may be used and its capabilities could therefore be exploited to provide a more powerful service than that offered by the incumbent operator. In addition, the service level is unconstrained by the skills and responsiveness (or lack of) of the incumbent.