Vodafone shutters At Home, switches from BT Wholesale to Plusnet
February 1, 2012
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Vodafone UK is closing its Vodafone at Home fixed-line broadband and voice business, and is switching customers to Plusnet, BT Retail’s low-cost broadband service provider, from February 2012.
Vodafone’s At Home service had been stagnating for several years, with revenue hovering for some time at around £30m-per-year — although the start of the 2011-12 financial year recorded a notable bump up in revenue to £10m for quarterly revenue, up from the norm of £7m-£8m.
Vodafone emailed customers subscribing to the service in December 2011 informing them of the change in service provider, and introduced a section to its website answering questions on how the change would affect them. Switching customers are being offered free bundled voice services from Plusnet for six months as part of the move. Vodafone customers will be entitled to switch to an alternative service provider rather than Plusnet on request, but would face a £25 fine to end the service altogether.
It appears that customers will see download caps and some inclusive minute features enhanced with the switch from Vodafone to Plusnet, and the Yorkshire-based service provider will see another boost to its consistently growing customer numbers. The usage cap is to be set at 60GB. Vodafone had an “unlimited” use claim in place, although it appears this was effectively capped by a 40GB fair use policy. Plusnet acknowledged its traffic management policies will be applied to Vodafone joiners, although these principally relate to shaping traffic in peak evening hours. It was noted that Plusnet customers’ use of their connection between midnight and 8am does not count towards their usage total.
“ While we believe Vodafone At Home provides great service and value-for-money to customers, the residential phone and broadband market in the UK is not a strategic focus at the present time. After assessing the whole market, we chose Plusnet as the provider that can best support Vodafone At Home customers in the future. ”
– Vodafone statement on the switch.
Plusnet a good advertisement for a ‘hands-off‘ approach at BT
The Plusnet business is a strong example of BT being able to exploit demand for low-cost services from a provider ostensibly acting independently, and the Vodafone deal can be seen as another victory.
Keeping Plusnet at arm’s length has worked for BT Retail’s consumer business in contrast to companies bought to serve business customers. These units have fared less well, and the division is still attempting to integrate the businesses Basilica Computing, DABS, and Lynx Technology into its operations through BT Engage IT (see separate report).
On the negative side for BT Group, the Vodafone move will see responsibility for the mobile operator’s fixed-line customers shift from BT Wholesale to BT Retail, which can be seen as another small, but meaningful, blow to the wholesale business. The division has recently experienced a rapid exodus of customers, and difficulty in providing profitable services on its managed services contracts (BTwatch, #223), and the Vodafone decision only adds to woes.
[Further reference: Questions about Plusnet support from 7th February 2012 -- Vodafone, December 2011; Vodafone UK scraps home broadband service and migrates users to PlusNet -- ISPreview, 20 December 2011.]
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BTwatch Report #229 December 2011-January Executive Brief
February 1, 2012
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- BT Group launched a patent infringement suit against internet giant Google, claiming that technology featured within the Google Android operating system uses BT intellectual property. The BT claims relate to six patents covering location-based services, navigation, and personalised access to content and services. While BT could be portrayed as jumping on the litigation bandwagon that is seeing the big players in the mobile space using patents as part of a wider strategy, the telco has a track record of development in these areas. [pp.6-7.]
- As Smart TV was identified as a key technology trend for 2012, and the UK market saw the arrival of on-demand content provider Netflix, BT Retail promised more interactivity for its BT Vision pay-TV offering. Details of the anticipated launch of BT Vision 2.0 are still sketchy, however, and it was noted that BT has not yet introduced many of the existing social elements of the Microsoft Mediaroom platform upon which the service is built. BT Group Chief Executive, Ian Livingston, also downplayed the significance of YouView‘s eventual arrival in the market to the telco, and indicated a mid-2012 launch for the platform is the best that can be expected at this stage. With the increasing presence of connected TVs, set-top devices, and mobile and web applications already making the leap towards social-TV a market reality, BT is in danger of seeing any advantages it may have had from its early investment in these areas evaporate. [pp.11-12.]
- Wi-Fi is another area where BT Retail is at risk from increased competition; and the telco was trumped by its former mobile business, O2 UK, to a deal to provide public wireless connectivity to Kensington & Chelsea and Westminster councils in London. The loss of the contract is all the more surprising and painful as BT already had a relationship with Westminster for the provision of a Wi-Fi cloud. [p.14.]
- As part of a swathe of new contract announcements, BT Global Services trumpeted a contract extension with Bristol-Meyers Squibb that will see BT provide network services to the US pharmaceuticals company until 2017. When the initial £250m deal between the companies was signed in 2005, it was by far BT’s largest contract in the USA, and, although the renewal is unlikely to be for as significant a sum, it appears to demonstrate BT’s ability to build its portfolio of standardised services. It also features compliance management solutions, opening a potentially rich seam of opportunities to bring its strengths in this area into a key vertical market for the Global Services division. [p.19.]
- Stephen Yeo, Chief Executive of BT Southeast Asia, provided some insight into BT‘s plans for growth in the region. As well as noting the party-line on multinational corporation growth, both into and out of Asia in the coming years, he suggested that the potential for revenue growth is not coming without significant customer expectations of what they can get for their money. He also indicated that BT’s strong financial services business in his region may not have as rosy an outlook in the short term, but appeared confident that a tipping point on business demand for unified communications was drawing nearer. [pp.26-27.]
- There were signs in the Office of the Telecommunications Adjudicator’s latest update on the access services market that Openreach talks with major customers to support efficiency in its work processes are beginning to reap benefits, although expected levels of repairs look set to flatten out at a higher rate than previously anticipated. [p.31.]
- BT‘s representatives on the board of Tech Mahindra stood down, in the latest step towards the cessation of the telco‘s involvement as a shareholder of the business process outsourcing company. However, a final disposal of the BT stake is still not expected until after the details of the merger between Mahindra Satyam and Tech Mahindra are finalised. BT’s stake in the enlarged entity is expected to amount to between 12% and 15%. The ongoing commercial relationship between the two companies is considered important to potential buyers, and both entities were keen to stress their working relationship. Nevertheless, it was reported in the Indian press that BT has agreed a 10% cut in its IT budgets across the Group for 2012, which could affect the value of deals with suppliers including Tech Mahindra. [pp.4-5, 8.]
- BT Retail signed up to feature in interactive solutions provider Rovi‘s Rovi Advertising Network, which enables advertisers to make consolidated media purchases across platforms. [p.13.]
- BT’s value brand ISP, Plusnet, is taking over the customer base of Vodafone‘s At Home fixed-line broadband and voice service from February 2012. The service generated around £30m-a-year for Vodafone, and, while it was considered a somewhat stagnant non-core element of the mobile operator’s business, it presents a nice boost for Plusnet. The switch is less positive for BT Wholesale, which had provided managed services underpinning the Vodafone offering. [p.15.]
- BT Engage IT provided more detail on its restructuring, with new management appointments announced as it looks to finally integrate its portfolio of SME-oriented IT services businesses. Interestingly, the BT iNet unit was flagged as an element of the Group that could work more closely with BT Engage IT. The division also took steps to drastically slim down its suppliers from 60 to 15. Major players such as HP and Microsoft featured, as did more niche providers such as Palo Alto. It appears though that BT iNet is to be used in some areas where Cisco might have been the default partner. [pp.17-18.]
- In Europe, BT trumpeted two, five-year framework contracts with the European Parliament, collectively valued at £99m. Under the agreements, BT will provide communications infrastructure and systems, as well as related professional services, on an exclusive basis. Deals to provide wide area network services to supermarket chain Sainsbury’s, clothing manufacturer Triumph, and office supplies retailer Staples Europe were also announced. [pp.20-21.]
- BT Global Services launched BT Advise, a newly-named unit incorporating its global consulting, systems integration, and managed services teams. Ray Stanton and BT Global Services EMEA President, Luis Alvarez will lead the unit’s 4, 500 professional staff, as the division attempts to provide a clearer purpose for disparate professional services operations. [pp.22-23.]
- BT announced the availability of its Ethernet Connect virtual private network service in North America, as new nodes were added to its networks in Canada and the USA. It is also offering pilots of enterprise-class Microsoft Lync Voice hosted services at its operations centre in Texas in conjunction with Microsoft. [pp.23, 25.]
- BT in Spain sparked a competition authority investigation into possible margin squeeze by the country‘s mobile operators, in relation to charges to virtual network operators. There were suggestions that the BT complaint initially focused on its network provider in the country, Vodafone, but was subsequently expanded. [p.28.]
- UK business ISP Vaioni flagged a new range of Ethernet-based leased-line offerings that employ the BT Wholesale Ethernet portfolio of products. [p.30.]
- There was a minor management reshuffle at Openreach, following retirement of its Service Delivery Managing Director, John Small. Network investment and service delivery are now to have separate managing directors. [p.32.]
BTwatch Report #229 December 2011-January 2012 Snapshot
February 1, 2012
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Table of Contents
1 Executive brief
4 BT Group
4 Associates and investments
4 Director departure latest step in BT Tech Mahindra exit
4 BT exit plans continuing to evolve
5 Corporate social responsibility
5 Tech Mahindra confident it can continue independently
6 Digital Britain
6 Legal
6 BT sues Google over Android patents
7 Further possible litigation?
7 A surprising return to high-profile intellectual property litigation
8 Pension
8 Operations
8 BT cutting IT budgets
8 People
8 People movement highlights
10 Pricing and tariffs
10 BT Retail
10 Contracts
10 Patterson on Olympic Games sponsorship
10 Thinking behind the Olympic strategy
11 Television services
11 Infrastructure challenges
11 Success evaluation
11 BT promises social-TV as Vision competition increases
11 Netflix highlights content explosion
12 BSkyB defending its market position highlights BT vulnerability
12 Livingston cautious on YouView’s potential
13 Competitors
13 BT joins Rovi Smart TV advertising programme
14 Competitors
14 Wireless networks
14 BT loses out on Wi-Fi deal to O2
14 BT letting early Wi-Fi lead slip
15 Plusnet
15 BT Business
15 Vodafone shutters At Home, switches to Plusnet
15 Plusnet a good advertisement for a ‘hands-off’ approach at BT
17 BT Engage IT
17 Advertising
17 BT confirms business sales restructure, trims suppliers
17 BT putting positive spin on re-org
18 Advertising
18 List of suppliers reduced from 60 to 15
18 Rebranding due in spring 2012
19 BT Global Services
19 NHS contracts
19 Contracts
19 BT wins Bristol-Meyers Squibb contract renewal
20 BT wins European Parliament framework contracts
21 Public sector contracts
21 BT wins Sainsbury’s contract
21 Triumph selects BT
21 BT wins Staples network deal in Europe
22 Tech Mahindra/Mahindra Satyam
22 Consulting services
22 BT launches BT Advise
23 Re-badging an opportunity for professional services to re-group
23 BT International: Americas
23 BT expands Ethernet Connect in Canada and USA
25 BT to host US Microsoft Lync Voice pilot
26 BT International: Asia
26 BT SE Asia sees growth, but demanding customers
28 BT International: Europe
28 BT sparks Spanish anti-trust investigation
30 Wholesale
30 Regulatory
30 Partners
30 Vaioni trumpets Wholesale partnership
31 Openreach
31 OTA2
31 Demand for repairs rising suggests OTA market update
31 Provisioning times returning to target, but regional performance varies
32 People
32 John Small retires; Openreach reshuffles management
33 Regulatory
33 BT and C&W in Ethernet dispute
34 Index
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Digital Britain: BDUK critics turn on BT with doubts over viability
January 4, 2012
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The viability of Broadband Delivery UK (BDUK), and its ability to provide a competitive tendering process for the allocation of UK government funding for rural fibre rollout, has come under heavy scrutiny after the withdrawal of at least one “major” player and one local council from the process, and ongoing wrangling over access to BT Group’s poles and ducts.
Geo Networks withdraws from BDUK bidding
Geo Networks, a fibre network operator and network provider for the FibreSpeed Next Generation Access (NGA) project in North Wales, announced its decision to withdraw from BDUK’s Broadband Framework and from future NGA procurements, and heavily criticised the funding model under which BDUK works, and the pricing and restrictions of BT’s Physical Infrastructure Access (PIA) products.
“ The primary reasons for our withdrawal are threefold. Firstly, we feel that the current gap-funded subsidy model being adopted by BDUK and local authorities automatically favours the incumbent, which has the security and knowledge of revenue streams on its current network as the dominant and often only telecoms network owner in these regions. Secondly, the absence of any opportunity provided in the current procurements, either to underwrite any take-up risk or to guarantee public sector revenues — for example, under a public-private partnership model — removes the ability for us to share this with the public sector. And finally, the uncertainty around the terms and pricing for PIA, and the heavy restrictions as to what we can use it for, means that, in our view, this market is not contestable. ”
– Chris Smedley, Chief Executive, Geo Networks.
Smedley said that while Openreach’s October 2011 review of PIA pricing (BTwatch, #225) did not go far enough, the larger problem with its PIA products was the restriction of their use — they only cover providing the final drop from local exchange to customer premises. This means the new product portfolio cannot be used for more expensive backhaul provision, the connection of mobile or wireless infrastructure, or for the provision of leased lines to businesses.
“ BT does not suffer from any of these restrictions when it has to assess the business case for deploying new optical fibre cable over its existing infrastructure. Only BT can deploy fibre for backhauling traffic long distances from local exchanges for itself and the wholesale ISP [internet service provider] market. Only BT can build a business case including the revenues from the fast-growing mobile and wireless data market. Only BT can deploy services for businesses over this fibre. ”
– Smedley.
Smedley called on Ofcom to take “rapid action” to force Openreach to lift these restrictions, and offer PIA and dark fibre on a “truly open” and equivalent basis, as it is required to do with its local loop unbundling products. He noted that the current Business Connectivity Market Review being conducted by Ofcom is not due to conclude until late-2012, long after BDUK procurements are completed.
Geo’s complaints follow earlier signs of withdrawal
Geo’s latest announcement marks a continuation of its withdrawal from the BDUK process, after it withdrew its bid to become a pre-qualified bidder for the process under the Department of Culture, Media, and Sport’s Framework Contract in September 2011 (BTwatch, #225) — a move which would have anyway restricted Geo’s involvement in the wider project to the role of local sub-contractor.
BT bullish in response to Geo’s withdrawal
BT responded unrepentantly to Smedley’s comments in a statement to eWeek Europe, and cited the recently trumpeted progress made on its PIA trials with Fujitsu UK (see separate report).
“ Geo’s departure is disappointing, but hardly a surprise given fibre deployment requires a high degree of commitment and expertise. It is ironic that Geo are trying to blame BT, Ofcom, and BDUK for their withdrawal at the same time that the major players are making such good progress. ”
– BT statement.
In separate comments made to IT Pro magazine, a BT spokesperson said that BT had “never been ‘at war’ with anyone over PIA”, while making clear that there was no room for further negotiation. The telco has of late taken steps to try and move the debate on from pricing and to position itself as a dynamic force in the rollout, while rivals cavil over details.
“ The process has always been one of conciliation. Other companies now have all the information they need to compete with Openreach for BDUK funds. The time for talking is over. ”
– BT spokesperson.
Entanet predicts failure for BDUK
Following the comments from Geo Networks’ Smedley, Neil Watson, Head of Service Operations at wholesale communication provider Entanet, used the company’s website to forecast the ultimate failure of the BDUK scheme.
Watson cited an unconfirmed rumour that Cable & Wireless (C&W) has also withdrawn from BDUK bidding in the Cumbria region, and expressed cynicism over BT’s claimed trial success with Fujitsu.
“ The importance of the BDUK and the government’s plans for superfast broadband have already helped sway Ofcom to force BT to reduce its original PIA pricing, but Geo Networks (and other potential suppliers) believe this has not gone far enough; and their withdrawal from future bids has serious implications for the delivery of superfast broadband to rural and hard-to-reach locations. This means the BDUK is likely to become more reliant on the main existing broadband network providers such as BT and Virgin Media to reach the ‘last third’, which has obvious negative implications on competition within the market. ”
– Watson.
In a subsequent update to his comments, Watson also cited the news that both C&W and Fujitsu declined to bid for BDUK funding in Scotland’s Highlands and Islands region, leaving BT as the only major bidder (see separate report), as a vindication of his predictions for the future of BDUK.
INCA questions fairness of BDUK framework
Adding a further voice to BDUK’s critics, the Independent Networks Cooperative Association (INCA) also responded to Geo’s statement by calling for a government review of the tendering process for funding for fibre roll-out, and claiming that the current process fails to provide a level playing field for all potential bidders.
“ Geo and other operators, both large and small — Fujitsu Telecom, Gigaclear, Cybermoor, Fibre Options, IFNL, B4RN — are all working on plans that deliver much more [fibre-to-the-premises] — but they all require more investment than is currently on the table. If a proportion of that investment is to come from the private sector, there has to be a level playing field; the concern is that gap funding automatically favours the incumbent. ”
– Malcolm Corbett, Chief Executive, INCA.
As well as echoing Smedley’s calls for Openreach to be forced to extend its PIA offering to backhaul, and mobile or wireless infrastructure, Corbett also criticised a lack of integration between various government initiatives. In particular, he pointed to a failure to “intelligently link” the government’s rural broadband rollout plan with its £1.5bn project to roll out smart metering for businesses and homes.
“ As a rep from one of the main industry equipment suppliers said recently, ‘We’re happy to take the money off the government twice, but we can’t really see the point.’ Government needs to do more joining up of agendas at the national level whilst allowing more freedom to innovate at the local. ”
“ Government needs to move faster on the release of spectrum for wireless services, and more pressure needs to be applied to Ofcom to fix the PIA problem so we can ensure a level playing field for all operators. It needs a bit of ministerial table thumping. ”
– Corbett.
Bath and North East Somerset Council declines BDUK funding
Closely following the announcement of Geo’s withdrawal from the BDUK framework, the council for Bath and North East Somerset announced it made the decision to decline the offer of £670, 000 in BDUK funding, on the grounds that the associated £1m investment the council claims it would be required to make is too expensive, and has instead chosen to invest just £25, 000 in as-yet-undisclosed schemes to improve broadband across the area.
However, subsequent to the council’s announcement, 14 opposition councillors questioned the decision, and have forced an official review of the move to reject the government funding.
[Further reference: BT's PIA product inhibits a competitive fibre network landscape -- Geo Networks, 16 November 2011; Geo lashes out at BT and quits broadband scheme -- eWeek, 16 November 2011; BT fibre PIA plans 'fatal' to competition -- IT Pro, 16 November 2011; Is this the beginning of the end for the BDUK? -- Entanet, 22 November 2011; BT left as only BDUK bidder for Highland and Islands superfast broadband -- ISPReview, 28 November 2011; Bath and North East Somerset UK shun government BDUK broadband funding -- ISPReview, 17 November 2011; Is BDUK on the right track? -- INCA, 18 November 2011.]
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BTwatch Report #228 December 2011 Executive Brief
January 4, 2012
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- A visit by UK Prime Minister, David Cameron, to BT’s Adastral Park R&D centre, where Ian Livingston set out BT’s fibre ambitions, served as a timely symbol of BT’s success in political manoeuvring to reinforce its position as a dominant incumbent, as the need for next-generation networks becomes more pressing. The volume of complaints from BT rivals can also be a good barometer of BT’s success in defending its territory; and network provider Geo led a chorus of objections about the adequacy of the Broadband Delivery UK programme for bringing competition to fibre infrastructure provision to rural areas of the UK, with several stakeholders claiming the initiative is heavily weighted in favour of the incumbent. Some local councils are set to turn down BDUK funding due to the cost of their own contributions; and operators are reportedly withdrawing from the scheme’s pilot projects in difficult geographic conditions, leaving the field open for BT. £100m in additional government funds was made available for next-generation network projects, although this tranche is set to be used to fund urban rollouts. [pp.6-9, 11.]
- Fujitsu, meanwhile, was more positive on BT’s approach to opening its network for fibre deployment, claiming “strong progress” in physical infrastructure access trials ahead of the service’s commercial launch in November 2011. Openreach made much of supportive comments from the vendor, which is also a significant BT supplier, but Fujitsu did note that there are still issues around price and scalability that need to be resolved with the access services division. [p.33.]
- While much of BT’s progress in setting the fibre agenda can be viewed as the result of defensive power games of an entrenched incumbent, the telco is also taking steps to consider innovative approaches to broadband provision in underserved areas. The telco’s trials with mobile operator Everything Everywhere in Cornwall are said to have demonstrated the potential for two operators to use LTE infrastructure to support both fixed-wireless and mobile services simultaneously. The trials, which have quickly confirmed the findings of the operators experienced in laboratory conditions, suggest that BT is responding to the need to consider alternatives to its traditional fixed networks to meet the requirements of delivering broadband in remote areas. [pp.31-32.]
- BT Retail trumpeted the launch of an up-to-100Mbps service, although availability is limited to a handful of exchanges where fibre-to-the-premises technology has been deployed. The launch was used by the telco to claim, rather grandiosely, that it offers services that equal rival Virgin Media in download speed, but with market-leading upload speeds. Perhaps more significant is the absence of download caps, which will become increasingly relevant as demand for over-the-top online video content continues to surge. Of more present concern, BT Retail was identified as a “serial offender” in relation to throttling customers’ broadband connections, in a Europe-wide study of broadband speeds conducted by the Max Planck Institute of Germany. [pp.16, 18.]
- Ciena secured a contract to provide optical transport equipment for the core BT 21CN network, reinforcing its relationship with the telco. This follows fast on the heels of rival ADVA trumpeting its BT relationship. [p.12.]
- BT Retail may benefit from a decision by the European Court of Justice that appears to limit the demands that intellectual property owners and national governments can able to place upon internet service providers in order to protect their intellectual property rights. A case relating to a dispute in Belgium led to a ruling that placing a requirement to monitor customer activity could impinge on a service provider’s rights to do business, and on the right to privacy for communications. [pp.14-15.]
- BT’s SME-oriented IT hardware and services business, BT Engage IT, is continuing an apparently painful transformation, with a raft of senior executives leaving the division, as it consolidates operations, and looks to address a softening of business prompted by supposed SME caution on IT spending. [pp.20-21.]
- BT Conferencing, which quietly appointed a new chief executive, flagged the interoperability capabilities of its video-exchange platform, and also signed a deal with Orange Business Services, enabling their respective customers to use each other’s Cisco telepresence platforms. [pp.4, 19.]
- BT Global Services highlighted a £42m contract with Spanish utilities and infrastructure company FCC, which will see the telco deliver a global data network and fixed-line communications services. Notably, the deal may enable BT to boost its Latin American business, which is an area in which FCC is planning to expand. BT also provided more details of its recently signed contract with brokerage CLSA: the operator said it had signed a seven-year, £45m deal that builds on the existing relationship that BT’s consistently successful financial services business has with the firm. [p.22.]
- The Department of Work & Pensions spent 8%-less on services from BT in 2010-11 than it did a year earlier according to recently released figures, possibly reflecting the terms secured in a renegotiated contract between the parties that was signed at the beginning of 2010. BT remains one of the top-five suppliers to the government department, although other major IT-related businesses did not appear to be as heavily affected by cutbacks as the telco. [p.23.]
- In Asia, BT welcomed iSoftStone as a new local shareholder in MDCL-Frontline, a unit that is its main route-to-market for IT services in China, and in which it holds a 47% stake. BT also heralded a new network-to-network interface agreement with China Unicom, which will enable connection to more than 300 additional cities in China. While demonstrating that BT is finding ways to increase its capabilities and influence, the timing may indicate that regional expansion goals set 18 months ago are proving a challenge. [pp.25-26.]
- BT Global Services made its Ethernet Connect offering more widely available, with 28 new countries across Asia, Europe, and North America added to its footprint. [p.26.]
- Tech Mahindra, in which BT has a 23% stake, acknowledged it was feeling the impact of BT’s review of its outsourcing strategy and tougher stance on prices for services. However, the Indian business was bullish on the potential to widen the scope of its work with the telco, and appeared relatively unfazed by expectations that BT will further reduce its stake in the company. [pp.27-28.]
- BT Wholesale signed a strategic agreement with Daisy Group that will see the business communications provider direct its CPS traffic over the BT Wholesale network. The agreement builds on an existing relationship with a Daisy subsidiary, ServAssure, for PBX services. [p.29.]
- Openreach nominated another 178 exchanges to be fibre-enabled, mainly over the course of 2012. While the announcement does not mark any further acceleration of the recently-revised schedule for covering two-thirds of the UK with fibre access by the end of 2014, the telco is maintaining a steady stream of positive developments on its progress. [p.33.]
BTwatch Report #228 December 2011 Snapshot
January 4, 2012
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Table of Contents
1 Executive brief
4 BT Group
4 People
4 People movement highlights
5 Acquisitions and disposals
6 Digital Britain
6 UK to invest an extra £100m in broadband coverage
6 BDUK critics turn on BT with doubts over viability
6 Geo Networks withdraws from BDUK bidding
7 UK to invest an extra £100m in broadband coverage cont’d
7 Geo’s complaints follow earlier signs of withdrawal
7 BT bullish in response to Geo’s withdrawal
7 Entanet predicts failure for BDUK
8 Awards and accreditations
8 INCA questions fairness of BDUK framework
8 Bath and North East Somerset Council declines BDUK funding
9 Brokers’ reports
9 Credit Suisse maintains rating on BT cost-cutting efforts
9 Bidders quit Highlands and Islands fibre project
11 Intellectual property
11 BT files multiple trademarks
11 Government visit highlights BT fibre strength
11 BT expertly playing fibre politics
12 Suppliers
12 BT selects Ciena for 21CN optical rollout
12 Ciena announcement emphasises BT history
13 Pension
13 BT considers early pension payment
14 BT Retail
14 Digital content
14 BT rivals also requested to block Newzbin2
14 Digital content
14 BT may benefit as ECJ rules against ISP file-share blocks
15 Industry response
15 Impact on BT to be felt in longer term
16 Plusnet
16 Broadband
16 BT Retail launches limited 100Mbps broadband
16 Zen follows suit
18 Study criticises BT for broadband connection throttling
19 BT Conferencing
19 BT and Cisco flag LOCOG conferencing contract
19 BT and Orange Business Services sign telepresence deal
19 BT Conferencing broadens interoperability
20 BT Engage IT
20 BT Engage IT cuts jobs as part of brand merger
21 Cuts go deeper than BT admits claim unnamed sources
21 Changes come as BT SME business suffers
22 BT Global Services
22 Contracts
22 BT Global Services wins £42m FCC contract
22 BT puts £45m value on CLSA contract
23 Public sector
23 BT adds 300 new jobs at Sandwell
23 Public sector contracts
23 DWP spending with BT falls, but telco’s share rises
25 Financial services
25 BT Radianz offers access to Trad-X platform
25 BT International: Asia
25 iSoftStone becomes MDCL-Frontline shareholder
26 Financial services
26 BT Radianz adds Qatar Exchange
26 BT signs network deal with China Unicom
26 Products and services
26 BT expands Ethernet Connect services internationally
27 Tech Mahindra/Mahindra Satyam
27 Tech Mahindra results slip on falling BT business
28 Nayyar plays down impact of BT cuts
29 BT Wholesale
29 BT Media & Broadcast
29 Contracts
29 BT Wholesale signs Daisy agreement
31 Network
31 BT and EE update on LTE trials
31 Next steps for triallists unclear
32 Resource sharing success an important milestone, as BT boosts NGN image
33 Fibre
33 TalkTalk warms to Openreach fibre options
33 Openreach
33 Fibre
33 Openreach announces 178 more fibre exchanges
33 Openreach claims PIA trial success with Fujitsu
34 Network
35 Regulatory
35 Ofcom consulting on ancillary LLU costs
36 Index
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BTwatch Report #227 November 2011 Executive Brief
November 25, 2011
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- BT Group announced its financial results for the half-year and quarter to the end of September 2011. The main headlines that emerged from the presentation were of the telco’s plans to accelerate its fibre broadband, of its Retail business leading the broadband sector, and continued recovery at its Global Services division. Looking deeper, however, the picture becomes less rosy. [pp.4-10.]
- BT Retail continues recent impressive form in the broadband sector, supported by its BT Infinity offering — the fibre subscriber base now comprises 5% of the division’s customer base. The good work in broadband is feeding through to the BT Vision pay-TV business, which reported net adds in the quarter that surpassed the combined efforts of BSkyB and Virgin Media. The telco is still coy on the level of revenue these TV customers are generating, but momentum is building. The strong performance of broadband and Vision should not be allowed to disguise the ongoing fundamental crisis at the Retail business, however, which is the ongoing haemorrhaging of calls and line revenue and associated customer relationships. The division continues to squeeze more revenue from each of its remaining customers, and has a seemingly endless appetite for cost cutting, but the core is shrinking alarmingly. [pp.11-13, 18-20.]
- Global Services increasingly looks to be chasing short-term growth over longer term profitability, perhaps under pressure as other divisions struggle to make their anticipated contribution to Group goals. Slim margins on major projects were apparently accepted as a fact of life, as the division chases cash in choppy waters. Nevertheless, the Global Services order book is down substantially on a year earlier, which was explained by the effect of early contract renewals. The telco also claimed its blended contract mix of new and renewing customers is more evenly balanced. However, the rebalancing appears to have more to do with lower re-signs than a surge in new business. [pp.28-31.]
- Openreach was the star of the results presentation, as BT pushed its fibre credentials, with more detail provided on plans to bring forward to the end of 2014 the roll out of fibre coverage to two-thirds of the UK population. BT insisted it can complete this project inside the original fibre budget, and within current capital expenditure, without squeezing investment in other areas. The Group is attributing its ability to bring forward the fibre schedule to its experience in deployment to date, and a series of modest but significant innovations. In addition to new equipment that cuts the cost of civil engineering works and speeds up installation of new exchanges, a new DSLAM offering from ECI was flagged as potentially boosting BT’s fibre network efficiency. [pp.35-37, 38-39.]
- BT Wholesale looks to be entering a period of substantial pain, with transformation to a managed services business perhaps proving tougher than anticipated. The division is losing customers, revenue, and profit, and a shift to a more stable cost base is not expected until an unspecified point in the next financial year. [pp.32-33.]
- BT’s cost-cutting efforts are benefiting from insourcing, with the telco claiming savings of up to 25% by returning work in-house. Nevertheless, there may be other opportunities for outsourcing partners, amidst signs of a shift towards centralising support functions at Group-level, in preference to divisional-level delivery. [pp.8-9.]
- On the back of its results, BT proposed an interim dividend of 2.6p-per-share, an 8% increase on a year earlier. While cash generation beat analyst predictions, the dividend figure was a little below expectations. Ian Livingston reassured that there remains scope for further increases, should this not undermine other Group priorities, and reminded that a rising dividend is something of a telco sector rarity these days. [p.10.]
- Ian Livingston was keen not to overstate the upside of the BT results, underlining his reputation as a hard taskmaster with high expectations — a characteristic seemingly evidenced by the 50% turnover rate amongst divisional leadership since the start of 2011. However, BTwatch questions whether demand for immediate results has prompted a counter-productive short-term focus, contributing to divisional level challenges now being faced, particularly at Global Services and Wholesale. [p.10.]
- As broadband helps support BT Retail pay-TV plans, the division is looking to expand further into content provision with a deal to build a new online music service. Talks with the music industry have stalled, but the telco is supposedly offering to support a new service ‘at cost’ to get the ball rolling. BT’s ongoing interest in legitimised online content offerings comes as the music publishers join the film industry in taking legal action to require the telco to block illegal downloads, with The Pirate Bay targeted by the BPI. [pp.24-26.]
- BT Business experienced a weaker quarter, which was attributed to a slowdown of SME spending in the IT sector. The telco appeared confident that this challenge was a result of macro-economic conditions, and was buoyant on its prospects of competing as rivals circle. The BT Ireland business was held up as an example of what can be done even in a very difficult economic environment; the Irish unit has seen success against a troubled incumbent in the large corporate space, and is turning its attention to SMEs with an IP voice platform based on Avaya technology. [pp.21, 26.]
- Ian Livingston set out a mid-term future for broadband in the UK that could see 75% of premises able to receive speeds in excess of 50Mbps, and broadband ‘have-nots’ reduced to less than 2%. The prediction was based on BT completing current rollout plans, upgrading existing connections through Band Plan, taking a significant share of BDUK public money, and also considering vectoring technology. BT stressed its scale and experience as enabling it to build a fibre network; and industry figures questioned whether the UK investment environment makes alternatives to the incumbent viable. Despite this, there are signs that smaller players are securing funding for more targeted projects. [pp.15-16, 36.]
- BT completed preparation of the voice element of the cloud-based network it is said to be delivering for the Organising Committee of next year’s Olympic Games in London, in its role as communications service partner. Separately, the company is also supporting Timico’s capability to provide cloud-based services, with BT iNet partnering Cisco, EMC and Juniper on development of a new data centre. [pp.22, 31.]
- There were rumours that BSkyB signed with Openreach as a wholesale fibre partner for 2012, although BT declined to comment on the supposed relationship. [p.37.]
BT Retail still cutting costs to blunt revenue decline impact
November 25, 2011
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Q2 FY11-12 results: BT Retail still cutting costs to blunt revenue decline impact
BT Retail reported another quarter of improved profitability based on its trademark relentless pursuit of operating cost cuts, but the division is showing few signs of being able to halt the equally characteristic quarterly slump in revenue.
Overall revenue decline at BT Retail of -3.4% for the quarter, and -3.8% for the half year, did not meet analyst expectations that the company will manage to cap the contraction at 3% for the full year, although the second quarter saw some improvement in the trend. The performance at BT Retail is adding more pressure onto the revenue-generating abilities of the apparently revitalised Openreach, and the deal-hungry Global Services business.
Table 8. BT Retail, financial highlights, Q2 and H1 FY11-12
[Table omitted from excerpt]
Source: BT and BTwatch.
Retail sees broadband gain, but ongoing fixed-line loss
The division’s woes appear bound up with the decline of its traditional calls and lines business. More than half of the Retail division’s turnover is generated by revenue from calls and lines, and this is currently shrinking at around the same average rate as it has since the start of 2008 (BTwatch, #221).
To put the challenge faced by the Retail unit into context, as it attempts to stem revenue decline and evolve its business, it is worth considering the performance of broadband and convergence revenue — the only areas of the business showing consistent growth aside from the opaque world of internal revenue — against the calls and lines decline. Should calls and lines revenue continue to drop at current rates for the full year, the division would lose £360m in revenue. To get even close to negating this loss, broadband and convergence services would need to see annual growth in excess of 25%. Currently, it is around 5%. Considering that managed solutions revenue at the Retail division is on a downward trend, and transit and conveyance revenue is an unlikely source of anything other than shrinkage, another year of substantial top-line decline for the division should be expected, and hopes of limiting this to -3% look very optimistic.
Table 9. BT Retail, revenue by product type, Q2 and H1 FY11-12
[Table omitted from excerpt]
Note: * Transit, conveyance, interconnect circuits, Wholesale Line Rental, global carrier, and other wholesale products.
Source: BT and BTwatch.
BSkyB gaining from BT decline
BT Retail needs to address questions regarding the level where decline in calls and line revenue can be expected to level off, in order to determine the future direction of the business, and enable the company and stakeholders to look beyond seemingly remorseless decline.
Currently, rival BSkyB is the most apparent beneficiary of customers leaving BT Retail, and it is building a substantial base. The digital broadcaster appears to be having success with its aggressive bundling of broadband and television packages, perhaps showing BT how it should be done, as the telco makes somewhat slower progress with its bundled phone and television offerings.
Table 10. Major player calls and lines, customer numbers (’000), Q2 FY11-12
[Table omitted from excerpt]
Note: * Total consumer lines sold by BT Retail, including Northern Ireland and Plusnet. Includes analogue and ISDN.
** MPF fully unbundled lines.
*** Line rental customer base.
Source: BT; other companies; BTwatch
Fibre central to broadband positivity for BT Retail
BT Retail was buoyed once again by a strong performance in the broadband sector, taking a claimed 63% of net adds in the copper market. Increasingly, this broadband strength is driven by the performance of BT Infinity, the division’s fibre-based offering.
BT added 88, 000 Infinity customers during the period, although it is unclear how many of these were new additions, and how many were upgrades of existing customers. In previous quarters, the telco has indicated that the ratio of upgrades compared to new customers was around two-to-one (BTwatch, #221, #223), although it is not known if this mix is evolving. The media impression of BT’s performance suggests the 88, 000 new Infinity subscriptions constituted more than half of the 166, 000 net broadband adds claimed by the company; but BTwatch considers it more likely that fibre net adds were closer to the 30, 000 mark. Still, fibre is continuing to make its presence felt, and, with a total base of 300, 000, now accounts for around 5% of the broadband customer base.
Table 11. Major player broadband customer numbers (’000), Q1 FY11-12
[Table omitted from excerpt]
Source: BT; other companies; BTwatch
Pay-TV growth trumpeted as bigger rivals falter…
BT Retail boasted of outperforming BSkyB and Virgin Media in attracting customers for its television services during the quarter — a first for the telco. BT Vision added 41, 000 new customers, compared to 26, 000 for Sky TV, and a decline of around 6, 000 customers for the cableco.
Table 12. Major player pay-TV, customer numbers (’000), Q2 FY11-12
[Table omitted from excerpt]
Source: BT; other companies; and BTwatch.
…but pay-TV players still dominate on ARPU
The BT Vision performance compared to rivals needs to be tempered by consideration of the levels of revenue it generates. BT Vision offers on-demand programming through a range of content packages, with prices starting at £4 per month. The entry-level product is said to be popular, but attracts revenue at a substantially lower rate than BSkyB offerings, where such offerings start at around £20. BT is also coy on the level of uptake for the premium services it offers on Sky Sports.
Introduction of the £4 minimum subscription earlier in 2011 replaced a minimum monthly spend of £7; and BT has indicated that customers are upgrading to more extensive services after signing up. However, no figures are provided on average revenue per user (ARPU) or levels of churn. BT has said, though, that it is acquiring “good customers”, that acquisition costs are at appropriate levels, and that churn rates are improving.
However, aggressive pricing might be a sounder strategy for BT Retail in television, where it has no established or lucrative customer base to protect, and can still see its average revenue per customer household boosted without charging premium rates.
Table 13. Comparative monthly ARPU, Q2 FY11-12
[Table omitted from excerpt]
Source: BT; other companies; and BTwatch.
BT Business feeling SME pain…
BT Business was highlighted as an area of the Retail business facing ongoing market challenges (and is another area that has seen management changes of late, with its Managing Director moving to lead BT Wholesale, and the IT services businesses re-jigged — BTwatch, #223, #224).
The small- and medium-size enterprise (SME) unit saw year-on-year revenue decline of 5%, to £559m, and noted that IT services, which were recently a source of positive news for BT Business, had seen a drop off in sales.
BT appeared certain that the decline in IT-related hardware business for BT Business was principally due to small businesses putting off spending and investment decisions, and dismissed the idea that it marks the beginning of a shift towards cloud services for the SME sector. While BT acknowledged economic “headwinds”, it did state that, in its traditional calls and lines operations for the business sector, trends and performance were actually stabilising or improving. The traditional business was described as “solid”, and BT said it was maintaining market share.
“ There are some headwinds, particularly in the small- and medium-sized enterprises market. They are spending less on IT, and we are seeing some effects there. ”
– Ian Livingston, BT Group Chief Executive.
…BT Ireland seen managing economic conditions more effectively
While BT Business was said to be struggling with economy-related caution among the customer base, BT’s business in the even more beleaguered Republic of Ireland market saw revenue grow by 2% in constant currency, to £193m, and reportedly improved profitability.
The unit is said to be gaining share from a struggling incumbent in the large corporate sector, and Ian Livingston said the business was demonstrating “what you can do by self-help, even in a difficult economy”.
[Further reference: Results for the second quarter and half year to 30 September 2011 -- BT, 3 November 2011.]
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BTwatch Report #227 November 2011 Snapshot
November 25, 2011
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Table of Contents
1 Executive brief
4 BT Group
4 Q2 FY11-12 results
4 BT reports stronger quarter, but with worrying signs
4 Revenue beginning to move towards targets; profits up
5 Corporate social responsibility
5 BT promotes Get IT Together campaign
5 Table 1. BT Group Financial highlights, Q2 and H1 FY11-12
6 Operations
6 Smart systems to save £13m in energy bills…
6 Headlines hide mixed performance for BT divisions
6 Openreach fibre providing the foundations for hope
6 Retail dominating broadband; pay-TV seeing benefits
7 …carbon reduction has additional commercial upside
7 Wholesale woes quickly brushed over
7 Global Services increasingly chasing growth
7 Table 2. BT Group, performance by unit, Q2 FY11-12
7 Table 3. BT Group, performance by unit, H1 FY11-12
8 People
8 Traditional business drop still dominates revenue picture
8 Table 4. BT Group, adjusted revenue by product type, Q2 and H1 FY11-12
8 BT flags continued insourcing benefits
9 Insourcing savings trumpeted; bolstering moral case for re-training
9 Group focus on costs trumping line of business concerns
9 Table 5. BT Group, operating costs, Q2 and H1 FY11-12
10 Dividend up, but BT cagey on further rise prospects
10 Livingston’s unforgiving objectives risk short-termism
12 Key performance indicators
12 BT sharply losing retail share as copper base grows again
12 Table 6. BT Group, KPIs, Q2 FY11-12
13 Broadband shift to full unbundling continues
13 Table 7. BT Group, broadband KPIs, Q2 FY11-12
14 Digital Britain
14 Williams: fibre technology moving faster than demand
15 Flexible new fibre rivals sidestepping BDUK funding
16 Smaller players belie BT faith in scale
16 Rothschild chief attacks fibre investment environment
18 BT Retail
18 Advertising
18 Q2 FY11-12 results: BT Retail
18 Retail still cutting costs to blunt revenue decline impact
18 Table 8. BT Retail, financial highlights, Q2 and H1 FY11-12
18 Retail sees broadband gain, but ongoing fixed-line loss
19 Payphones
19 Table 9. BT Retail, revenue by product type, Q2 and H1 FY11-12
19 BSkyB gaining from BT decline
19 Table 10. Major player calls and lines, customer numbers (’000), Q2 FY11-12
19 Fibre central to broadband positivity for BT Retail
20 Pricing and tariffs
20 BT under fire for scrapping paperless billing discount
20 Table 11. Major player broadband customer numbers (’000), Q1 FY11-12
20 Pay-TV growth trumpeted as bigger rivals falter…
20 Table 12. Major player pay-TV, customer numbers (’000), Q2 FY11-12
20 …but pay-TV players still dominate on ARPU
20 Table 13. Comparative monthly ARPU, Q2 FY11-12
21 Television services
21 BT Business feeling SME pain…
21 …BT Ireland seen managing economic conditions more effectively
22 Contracts
22 BT completes voice component of Olympic network
23 Customer services
23 BT trials sign language customer service access
23 Customer services
23 BT studies customer effort
23 A holistic approach
24 BT Conferencing
24 BT Conferencing wins US Veterans deal
24 Savvy customers need experts
24 Digital content
24 Music industry turns attention to The Pirate Bay
25 Wireless networks
25 WBA welcomes new members
25 Questionable efficacy of blocking
25 BT offers to forego profit as music service talks stall
26 BT to host “River of Music” event
26 BT Ireland
26 BT Ireland launches Avaya IP Office
28 BT Global Services
28 Awards and accreditations
28 BT wins two World Communication Awards
28 Q2 FY11-12 results: BT Global Services
28 Strong quarter risks papering over cracks
28 Table 14. BT Global Services, financial highlights, Q2 and H1 FY11-12
28 “Choppy” cash flow challenges outlook
29 Competitors
29 Vodafone ups BT rivalry in public sector
29 Global Services’ order mix shifting to new customers
30 Competitors
30 Vodafone ups BT rivalry in public sector, cont…
30 Tech Mahindra/Mahindra Satyam
30 Mahindra Satyam revenues grow 27% in Q2…
30 Shorter-term deals entrenching churn and profit challenges
31 Tech Mahindra/Mahindra Satyam
31 …Strong performance raises questions over merger
31 BT still struggling for APAC payback
31 Table 15. BT Global Services, revenue by product type, Q2 and H1 FY11-12
31 Contracts
31 BT iNet wins Timico contract
32 BT Wholesale
32 Q2 FY11-12 results: BT Wholesale
32 Migration costs hit Wholesale, with no clear end in sight
32 Table 16. BT Wholesale, financial highlights, Q2 and H1 FY11-12
33 Public sector contracts
33 Managed services in media and IP a bright spot
33 Table 17. BT Wholesale, revenue by product type, Q2 and H1 FY11-12
34 Openreach
34 Q2 FY11-12 results: Openreach
34 Openreach in buoyant mood as fibre accelerates
34 Table 18. Openreach, financial highlights, Q2 and H1 FY11-12
36 Fibre acceleration to be completed within budget
36 Livingston stresses BT abilities to satisfy speed demands
37 Simple innovations praised for improving rollout
37 BT ducks claims BSkyB is a wholesale fibre customer
37 Openreach asserts independence of operations
38 Table 19. Openreach, revenue by product type, Q2 and H1 FY11-12
38 Fibre
38 Openreach brings forward fibre rollout schedule
39 Ofcom reveals seven-fold increase in demand for data
40 Index
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BT Vision: YouView axes marketing and PR staffers, heads
November 1, 2011
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YouView, the internet television platform backed by the UK’s major terrestrial broadcasters and telcos BT Retail and TalkTalk, has decimated its marketing and public relations (PR) functions.
The marketing team, variously reported to number four to 15-plus, has been led by Director of Marketing & Product Tim Hunt, the former Managing Partner of advertising agency St Luke’s, who joined YouView from Freeview in March 2010 (BTwatch, 2010.03). Reports indicate that Hunt and his whole team have been made redundant, effective 31 October 2011, with YouView’s PR personnel also affected. Seemingly also departing is Alia Ilyas, Head of Communications, who was previously a divisional PR Manager at BT. Her LinkedIn profile now features a Recommendation from Chief Executive Richard Halton.
“ Alia led Communications for YouView, a highly contentious and complex project with seven blue chip shareholders through its most challenging periods with huge professionalism and great humour. She simultaneously managed a complex trade, consumer and corporate PR function the peak of which saw her mastermind a brilliant brand launch in September 2012 [sic] which saw YouView splashed across the front pages of the national press… She leaves YouView with the delivery schedule in the rudest of possible health and with a communications strategy ready to go. ”
– Halton.
Despite the severity of the move, YouView claimed its strategy and revised launch timescale are unchanged. Head of Marketing Toby Hollis (ex-BBC, like Halton) appears still in place.
Marketing vital in face of delays
News of a revamp in its marketing comes as elements of the broadcasting industry question the relevance of YouView after such a long delay to its launch. Originally planned to debut in 2009, YouView is now scheduled to be released before summer 2012 (BTwatch, passim).
Speaking at MediaTel Group’s Connected TV Experience event, Bill Scott from easeltv, a television design and application development company, said it was a “great shame” that the project has been delayed, but that it is “still going to be incredibly important”, given the support of the major broadcasters. However, Scott’s optimism was not universally shared by delegates. It was, however, broadly agreed that the YouView platform would stand or fall on the quality of content and marketing.
“ The great thing about YouView is that it allows broadcasters to develop a relevant on-demand experience, which works for the consumer. And there is an element of control, which is very important to them. YouView will be vital to the quality of consumer experience, creating seamless links between linear and on-demand, which will allow the broadcast partners to lead the way. ”
– Scott.“ I think YouView is two years too late. It had a chance but it has lost it… The general public is unaware of YouView. Its technology lags behind others, and it is too late to market. ”
– Rhys McLachlan, Head of Broadcast Implementation, Mediacom.
[Further reference: YouView rethinks its marketing structure -- Marketing, 12 October 2011; Connected TV Experience: 'YouView still vital' -- Mediatel, 14 October 2011; Alia Ilyas -- LinkedIn, 25 October 2011; You're fired! Lord Sugar utters dreaded catchphrase to YouView staff -- Independent, 28 October 2011.]
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