The investment into local loop unbundling, which is being funded by AOL's parent Time Warner, is the process that will allow telecoms and internet companies to replace BT as the main telephone service.
The investment is being made following Ofcom's recent mandates on LLU and the Strategic Review of Telecommunications, which laid down targets concerning how BT must open up its local telephone network to competitors.
The process will allow AOL to deliver internet, telephony and other broadband related services, such as video on demand, television over broadband and advanced gaming services.
The initial phase of the programme is costing Time Warner 拢50m, and will take place in the first half of this year, reaching up to 300 exchanges in the UK -- the equivalent of 20% of UK households.
If the launch is successful, AOL may extend this rollout to up to 1,000 exchanges in the UK, based on an estimated additional investment of 拢70m, with the service reaching more than 50% of UK households.
Karen Thomson, chief executive and chairman of AOL UK, said: "We finally have the opportunity to bring large-scale competition into the UK's national telephone network.
"This will drive innovation and efficiency in the market, which I believe will result in consumers benefiting from greater choice, better value and new kinds of digital services."
With the new regulations, companies will be able to compete with the incumbent BT and allow the UK to catch up with leading European countries, where unbundling is far more advanced in delivering higher value services to customers.
AOL has completed beta testing of the LLU process in two London exchanges, Battersea and Ealing, and has put together a team of more than 100 people in the UK to carry out a large-scale LLU rollout.
AOL's unbundled services will be ADSL 2+ compatible, creating the potential for broadband services of more than 8Mbps in the future.
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