Local loop unbundling (LLU or LLUB) is the regulatory process of allowing multiple telecommunications operators to use connections from a telephone exchange to the customer's location. The physical wire connection between the local exchange and the customer is known as a "local loop" and is owned by the incumbent local exchange carrier (also referred to as the "ILEC", "local exchange", or in the United States, either a "Baby Bell" or an independent telephone company). To increase competition, other providers are granted unbundled access.

LLU is generally opposed by ILECs, which are generally either former investor-owned (North America) or state-owned monopoly enterprises. ILECs argue that LLU amounts to regulatory taking, which causes them to be compelled to provide competitors with business inputs, so they believe that LLU stifles infrastructure-based competition and technical innovation because new entrants prefer to use the incumbent's network instead of building their own and that the regulatory interference required to make LLU work (e.g., to set the LLU access price) is detrimental to the market.

New entrants, on the other hand, argue that since they cannot economically duplicate the incumbent's local loop, they cannot provide certain services, such as ADSL, thus allowing the incumbent to monopolise the respective potentially competitive market(s) and prevent innovation. They argue that alternative access technologies, such as wireless local loop, have been proven uncompetitive or impractical, and that under current pricing models, the incumbent is in many cases, depending on the regulatory model, guaranteed a fair price for the use of its facilities, including an appropriate return on investment. Finally, they argue that the ILECs generally did not construct their local loop in a competitive market environment, but under legal monopoly protection and using taxpayer's money, meaning that, according to the new entrants, that ILECs should not to be entitled to continue to extract regulated rates of return, which often include monopoly rents from the local loop.

Most industrially developed nations, including the US, Australia, the European Union member states, and India, have introduced regulatory frameworks that provide for LLU. Regulators are tasked with regulating a changing market without preventing innovation and without improperly disadvantaging competitors.

The first action^[which?] in the EU resulted from a report written for the European Commission in 1993. It took several years for the EU legislation to require unbundling and in individual countries in the EU, the process took further time to mature to become practical and economic rather than being a legal possibility. The 1993 report referred to the requirement to unbundle optical fibre access and recommended deferral to a later date when fibre access would be more common. In 2006, there were signs that, as a result of the municipal fibre networks movement in countries such as Sweden, where unbundled local loop fibre is commercially available from both the incumbent and competitors, there was a potential for policy evolving in a different direction.

In 1996, Section 251 of the United States Telecommunication Act defined unbundled access as:

The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service.

Some provisions of World Trade Organization (WTO) telecommunications law can be read to require unbundling: