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What is Local Loop Unbundling?

The FCC’s Restoring Internet Freedom Order of 2018 established a framework of strong consumer protection, increased transparency, and the removal of unnecessary regulations.

By enacting this order, the FCC wants to protect an open Internet and provide faster, cheaper Internet access for businesses and consumers. To facilitate this, the FCC is currently seeking to modernize unbundling and resale requirements.

To open the competition-starved Internet service provider marketplace, many have proposed local loop unbundling. Local loop unbundling allows multiple Internet Service Providers (ISPs) to share the same wiring in the last mile to consumers.

By allowing competitors to share the last mile of broadband wiring, consumers would have more competitive choices for faster, cheaper Internet access.

What is a Local Loop?

The local loop, also known as subscriber line, is the last mile of cable connecting homes and businesses to the larger broadband network edge.

When broadband Internet first emerged, a few large broadband service providers spent resources and billions of dollars to lay the pipeline for the broadband cable infrastructure, connecting cable to every home and business–thus enabling the local loop.

Because they built the infrastructure, these incumbent local exchange carriers (ILECs) largely controlled the consumers’ Internet access choices.

As the market matured, technology and the demand for high-speed access grew exponentially to meet consumer needs. But smaller ISPs now had a more significant barrier to entry into the market. While they could build a broadband network that could connect to the larger network, they didn’t control the last mile of cable that reached their subscribers.

Because the cost of laying broadband cable lines to every subscriber is high, many smaller ISPs cannot compete with the ILECs. And if every ISP had to install a cable line to their subscribers, it would create a labyrinth of network cables. Controlling the local loop, this naturally created a broadband Internet monopoly for the ILECs.

Local Loop Unbundling Framework

Local loop unbundling is government regulation that allows multiple service providers to share the same physical infrastructure created by the ILECs. The framework for unbundling the local loop:

• The ILEC still owns the local loop to the consumer.
• Smaller ISPs lease the local loop from the ILEC to provide competitive Internet access rates to the consumer.

The Three Types of Local Loop Unbundling

Local loop unbundling options for ISPs include: Full Unbundling, Shared Access, and Bitstream Access.

Full Unbundling

Sometimes referred to as raw copper access, Full Unbundling allows an ISP to take total control of the copper pairs to provide services, including voice and video to their subscribers. In this case, the ISP leases the entire local loop of their subscriber from the ILEC. The ILEC still maintains ownership and maintenance of the unbundled loop.

While Full Unbundling is the preferred option for the ISP, the ILEC can no longer compete for the subscriber. Where the ILEC built the local loop and still has to maintain it, it generally charges a premium lease rate to the ISP, making it cost-prohibitive if not regulated by the government.

Shared Access

With Shared Access, the ILEC controls the copper pairs and provides some services to the subscriber. But the ILEC also leases to another ISP, allowing access to the same copper pairs where the ISP can also offer some services to the same subscriber.

Shared Access can pose some technical interface problems and slow down digital access speed. Also, the ILEC can throttle (slow down) the competing ISP services. In this case, the ISP needs to monitor its access speeds to its subscribers closely. An example of this is Verizon throttling Netflix’s subscribers.

Bitstream Access

Bitstream Access allows the ILEC to maintain control over the local loop and designates what types of services the ISP can provide to the subscriber. Bitstream Access reduces competition between the ISP and ILEC because the ISP can only leverage the technology allowed by the ILEC. Obviously, this is the least preferred option of unbundling for the ISP.

When Local Loop Unbundling Was First Introduced

In the 1990s, The Telecommunications Act of 1996 was enacted to break up the natural monopolies of the telecommunications industry. The Telecommunications Act determined which infrastructure elements could be unbundled and allowed the FCC to create rules and regulations for governing the local loop of the telecommunications infrastructure.

But when the Internet started to grow, the broadband service providers were not under the same regulations as the telephone providers. To compete with the ILECs, the telecommunications giants went to court, stating unfair regulations.

Eventually, the Supreme Court overruled the FCC’s unbundling regulations because it wasn’t as easy to distinguish which elements of the ILECs infrastructure were not proprietary and protected. And the telecommunications enterprises were handcuffed by the previous unbundling regulations which kept them from successfully entering the market.

Current Implementation

Today, many countries use local loop unbundling to create fair competition for broadband Internet service. But for most of these countries, it was because the government bought out or laid the pipeline instead of private companies.

Because the United States is a freer market and private enterprises established its pipeline, the FCC is still struggling to find a fair solution for the ISPs and ILECs. Until the FCC creates a viable solution, the ILECs will continue to enjoy a natural monopoly of the broadband local loop infrastructure within the United States.

What are the Benefits of Local Loop Unbundling

The benefits of local loop unbundling include:

• Allowing any business to enter the Internet service provider industry.
• Giving consumers competitive, affordable options for Internet access.
• Increasing innovation of the local access networks.
• Providing more services with high-speed Internet access.
• Preventing ISPs from throttling your internet service and applications.

While unbundling is excellent for the consumer and allows smaller ISPs to compete in the market, it has yet to be fully embraced in the United States.

Roadblocks to Implementing Local Loop Unbundling in the United States

There are several roadblocks to implementing local loop unbundling within the United States, such as:

Complexity of Implementation

While the ILEC makes money from the ISPs, the headache of implementation and maintenance of unbundling creates more issues for the ILEC. Contracts, service guarantees, collocation, and fiber-in-the-loop systems add to the complexity. Unless forced by government regulation, the ILECs are not motivated to adopt local loop unbundling.

Proprietary Technology and Infrastructure

What caused the Supreme Court to originally overrule the original FCC regulations were civil disputes over which infrastructure elements can be unbundled. Because Internet service is more than just wire, ILECs utilize proprietary systems, applications, and software to provide high-speed Internet access, services, and network infrastructure.

By arguing that the regulations interfere with their proprietary systems, ILECs have been able to prevent ISPs from sharing their infrastructure.

Some have proposed a municipal bond system that would pay off the ILECs infrastructure costs to have a government-run pipeline. But this may hamper innovation and development of a better infrastructure for the future, which is best left to the private sector.

Local Loop Unbundling is a Desirable but Complex Solution

Whether the FCC will create a solution that will allow local loop unbundling to become a reality, only time will tell. Unbundling is an excellent solution for breaking natural monopolies and providing fast, affordable Internet access to consumers. But the ILECs, rightfully so, will fight to control the pipeline they spent the resources and money to build and maintain.

And as the broadband infrastructure ages and becomes outdated, it does open a door for government contracts to build a more robust infrastructure for tomorrow’s services and applications. But this will require more government spending to create a faster, affordable, open Internet.