Understanding The Local Loop Concept
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Local loop in telecom is not a technical concept but more a business or a marketing term that has played a significant role is shaping the market. Over the years, changes centered on this concept have helped open up the markets and foster competition. It is also called last mile in certain texts.
In typical telephony terms the basic last mile is the copper link from central office switch to the customer house. In the past, there were primarily just one company per region which laid this last mile network. They were termed incumbents and they had complete monopoly on that network.
This monopoly on the network was the major road block in introducing competition in this monopolistic market. With total ownership of the last mile, no competitor could serve the customers without leasing this network from the incumbent. The incumbent could price the network to ensure that their services always turn out to be better value for money.
One of the major regulatory steps to overcome this problem was the unbundling of the local loop. What this meant was that all incumbents had to lease their last mile to competitors at a discount from the market price. This margin allowed competitors to compete and deliver services.
Of course, with time, there were better solutions presented by technological advancements itself. At the high speed connection level, today we have fibres being laid in the last mile and this is not a monopolistic network. Similarly, in rural areas, wired last mile is being replaced by wireless solutions. These changes are eroding the incumbent advantages.
Thus it is clear that the local loop is an important concept. With the unbundling of this network, competition was introduced in telecom business. With fibre and wireless solutions coming out, the incumbent advantage is slowly diminishing and customers are getting more options and better services.
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