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Last Updated: Tuesday, 18 October 2005, 14:28 GMT 15:28 UK
Pipex deal to speed up broadband
A telephone exchange
Local loop unbundling involves putting kit in BT's exchanges
Internet service provider Pipex is stepping up its plans to rival BT, with the acquisition of Freedom2Surf.

As well as gaining 40,000 extra broadband subscribers, the 10m deal will make Pipex's investment in an alternative network to BT more viable.

Local loop unbundling, where operators install their equipment in BT's telephone exchanges, is gathering pace in the UK.

Pipex plans to unbundle 40 more exchanges in urban areas of the UK.

It already has the keys to 60 of BT's exchanges.

Broadband divide?

The extra customers it has gained via the deal will help make its unbundling efforts more profitable.

"Adding Freedom2Surf to the Pipex group will further increase the density of customers around exchange, thus improving the return on capital and enabling us to offer higher speeds to a greater number of our customers," said Mike Read, chief executive of Pipex.

Almost all of the broadband telephone lines in the UK are based on BT's wholesale products and BT has been slow to introduce faster speeds
Ian Fogg, Jupiter Research

Local loop unbundling gives providers such as Pipex direct access to customers without having to buy services wholesale from BT.

It is regarded as one of the best ways to offer super-fast broadband and introduce innovative services.

"Almost all of the broadband telephone lines in the UK are based on BT's wholesale products and BT has been slow to introduce faster speeds," explained Ian Fogg, an analyst with Jupiter Research.

With more and more providers looking at alternatives. those that continue to resell BT's service may find themselves at a disadvantage.

"In the UK, internet service providers such as Wanadoo, Pipex, Easynet and Bulldog are investing in equipment in BT's exchanges so they can offer faster services. It will become harder for those that continue to resell BT-based broadband," he said.

According to Chris Panayis, the managing director of Freedom2Surf, the company will continue to offer wholesale broadband which it buys from both BT and Pipex's rival Easynet.

Price war

Ofcom estimates there are more than eight million broadband connections in the UK, with 250,000 households signing up for high-speed services every week.

Freedom2Surf was one of the first internet service providers to offer high-speed net access for under 15 a month, kick-starting a price war which has been aggressive ever since.

It was also one of the first to introduce an 8Mbps (megabits per second) service.

Wanadoo, which announced its 8Mbps service this week, also has aggressive plans for local loop unbundling.

It hopes to install its kit in 500 exchanges over the next year, allowing it to reach out to 40% of the population.

Meanwhile BT is continuing to test its 8Mbps service which is plans to roll out across the UK next spring.

Some providers using unbundled lines are promising to introduce speeds of up to 24Mbps.

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