[c-nsp] 802.1QinQ setup in local-loop provider network

[Martin T]

I made a following simplified network picture:

http://img26.imageshack.us/img26/4553/8021qinq.png

It's simplified in sense that there might be actually hundreds of
other ISP's like ABC using the local-loop provider services and each
such ISP might have hundreds of customers like "customer X", "customer
Y" and "customer Z". In addition, the network of local-loop is of
course much larger.

This local-loop provider provides a last-mile service in order to
connect ISP's with their clients. Each ISP configures dot1q trunk port
facing the local-loop provider and customers of ISP("customer X",
"customer Y" and "customer Z" in this case) will get an access port
from local-loop provider. ISP will just add a different VLAN for each
customer to the trunk port with local-loop.
The question is, how such local-loop provider network is made? Is this
possible at all? In my opinion, this
http://img26.imageshack.us/img26/4553/8021qinq.png should be one
possibility, but this solution has at least one disadvantage- there
might occur VLAN overlapping in the last switch of last-mile provider.
In addition, if local-loop provider switches check only the outer-tag,
then isn't all the traffic for each end-customer distributed across
entire outer-VID(VLAN 777 in the picture)?

All the design descriptions/suggestions are most welcome!

regarding,
martin