Brave entrepreneur joins the local loop unbundlers

Telecoms entrepreneur Rod Matthews has found funding for his bid to take on BT in the broadband market.

Matthews, the former CEO of Scottish Telecom, has arranged funding for a plan to enter the business that almost everyone else has left - supplying rival DSL services to BT through the local loop unbundling process (LLU).

When LLU began in 1999, some 40 companies expressed interest in offering DSL services to consumers through equipment sited in BT's local exchanges. However, most decided the business was not viable and dropped out.

Aside from Matthews' company, accessUK, only one company, Bulldog Communications, is still planning to deliver ADSL services to consumers via LLU. A few more companies, including EasyNet, are planning to address the corporate market. Fewer than 200 customers are currently connected nationwide.

Nonetheless, Matthews has arranged enough funding to install his own DSL equipment in 1,000 local exchanges. His backers are a consortium of investors led by US firm Sandler Capital Management.

He hopes that by 2005, the company's networks will be available to two thirds of the UK business population, who will be the core of Matthews' end users. He also expects demand to connect residential customers to his broadband equipment.

The value of the investment has not been disclosed, but Matthews' insists the business plan is "fully funded".

Matthews hopes to start building in the next few months, as soon as BT can allocate space in its local exchanges.

accessUK will not sell its services direct to the end user, but will instead offer big telcos such as Cable & Wireless, Colt, Energies and WorldCom an alternative to BT for the 'last mile' of their networks - from local exchanges to customer premises.

The company has also identified cable operators NTL and Telewest and ISPs such as Demon, EasyNet and Uunet as potential customers.

Matthews said: "My guess is that eventually even the AOLs and Freeserves will be interested in having one alternative supplier as a minimum, as at the moment they're not best-pleased with BT."

The recent cut in wholesale broadband prices has made margins in the local access business even tighter than they were last year when Matthews started the venture, but he is undaunted.

He told silicon.com: "I don't expect further price erosion, as all the evidence suggests that once the incumbent has a reasonable foothold they put prices up, not down. But my business plan is robust enough to survive even if BT does cut prices further."