After months of industry debate and political pressure, Oftel's vision of opening up BT's local networks to competitors appears to be crumbling.

Each week it seems another major player in the UK telecoms market is turning down the opportunity to grab a slice of BT's network, with Kingston Communications and Thus adding their names to the list this week. The action appears strange considering many of them were lobbying hard for the same spaces just weeks ago.

However, the dream of an unbundled local loop has not materialised for most operators, and for many, the exchanges they wanted - generally in densly populated areas - are not available or are already full. Analysts have also questioned whether BT's rivals know exactly what they will do when they get their hands on the networks.

On Wednesday, Kingston Communications announced that it was scaling back its plans to deliver high speed internet services to UK consumers, using unbundled BT loops. Kingston said it would not be expanding its digital subscriber line (DSL) network beyond its current offerings in East Yorkshire until spring next year.

Steve Maine, chief executive at Kingston, said rollout was "contingent on securing sufficient exchange space. Under the current allocation process, this has not yet become possible and we have taken the decision to defer initial rollout until Spring 2002 when we expect further capacity to become available".

The decision comes only a day after Scottish telco Thus revealed it was scrapping plans to install DSL equipment in BT's exchanges. The telco, which decided that the market was not economically viable, will instead offer DSL services via a wholesale product from BT.

Oftel said it is continuing to concentrate its efforts on ensuring that the highest priority exchanges become available to other operators before Easter. The watchdog said it is not in a position to comment on a company's commercial decision to drop out of the unbundling process, adding that "unbundling is just one way of creating competition".

Bernt Ostergaard, research director with analyst group Giga, said "the ball is very much with Oftel" to ensure that unbundling happens faster and more successfully. "BT has been allowed to set the agenda, not the competitors," he said. "It has chosen when and where access to exchanges is available - Oftel needs to get its act together."

"Competitors are pulling out of unbundling because they are being offered second rate locations which do not offer interesting business propositions," added Ostergaard. "Other operators have found it difficult to install equipment."

Oftel contacted vnunet.com to contest Ostergaard's opinions. An Oftel spokesman said it was incorrect to say that BT had set the agenda for unbundling. He said the operators nominate which exchanges they want access to.

Hamish Mackensie, senior research analyst with IDC, said telcos are discovering that the current options available to them make offering DSL services economically unviable.

"The impression I get is that many operators do not think it is economically viable to offer DSL services due to a combination of things. For one, they can't get into the exchanges they want to, making it difficult to do anything in the short-term."

"I also think many operators don't know exactly what they want to do with unbundling or how they will make money," Mackensie added.