BTwatch Report #225 September-October 2011 Snapshot
October 25, 2011
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Table of Contents
1 Executive brief
4 BT Group
4 Acquisitions and disposals
4 Advent in talks to acquire BT’s Tech Mahindra stake
5 Digital Britain
5 Corporate social responsibility
5 Five competitors to BT in BDUK race
5 First impressions suggest BT rivals limited
6 Corporate social responsibility
6 BT emphasising carbon reduction in supply chain
6 Innovation
6 BT seen slowly acclimatising to open source
7 BT green credentials recognised by The Climate Group
7 Intellectual property
7 Comcast sues BT over patents dispute
8 People
8 People movement highlights
9 Network
9 BT downplays value of copper
11 BT Retail
11 Advertising
11 ASA clamps down on claimed “up to” broadband speeds
12 Network
12 Impact and reaction — BT may not bear the brunt of changes
12 Modest “unlimited” clarification also included
13 Privacy
13 Customer service
13 BT remains in middle of complaints league table
14 BT Ireland
14 Warren Buckley: multichannel customer service
14 Customers’ use of customer services
14 Move to multichannel service
15 Strategy and priorities in customer service
15 Improvements to one-call resolution emphasised, scale of problem indicated
15 Digital content
15 Newzbin2 moves to circumvent BT block
16 BT Expedite
16 BT Expedite showcases iPad PoS system
16 BT and TalkTalk given right to appeal DEA ruling
17 Television services
17 YouView names new CTO
17 Television services
17 BT selects LBi to showcase Vision benefits
17 Branding facelift
19 Plusnet
19 Wireless networks
19 BT plans to expand London Wi-Fi network
19 BT network at risk of over-promising
20 Plusnet survey: price is still king…
20 …ISP living up to its ‘no-frills’ objectives
20 London Underground and buses to gain wireless coverage
20 Councils tender for public Wi-Fi with BT in driving seat
21 BT Business
21 BT Business launches KickStart Scheme
21 Financing supports BT Business recovery
22 BT Business Direct ties with snom UK
23 OnLive
23 OnLive launches in the UK
24 Innovative service needs new approach from BT
25 Contracts
25 BT Global Services
25 Smart meter tendering underway
25 Contracts
25 BT wins BASF contract
25 BT demonstrating it can still grow client business
27 Competitors
27 Virgin follows BT into cloud
27 Financial services
27 BT expands Unified Trading voice service
28 Tech Mahindra/Mahindra Satyam
28 BT International: Africa
28 BT agrees capacity deal with FibreCo
29 BT International: Europe
29 BT appoints Lagercrantz as Head of BT Nordic
29 Suppliers
29 BT deploys iWay messaging solution
30 BT Wholesale
30 Network
30 BT and Everything Everywhere begin LTE pilot
31 Openreach
31 BE delays fibre plans due to lack of partners
31 Openreach launches 110Mbps FTTP service early…
32 Speculation that dark fibre regulation is on the cards
32 …trumpets imminent higher speeds and 1Gbps trials
32 Openreach responds to future-proofing worries
34 “…out of context…”
34 BT on ‘white spaces’ potential for UK coverage
34 Openreach reveals revised PIA pricing
35 Summary of Openreach PIA pricing
35 Regulatory reaction — BT ready to resist further changes
36 Rival reaction — Virgin quick to criticise
36 Stakeholders slam Ofcom over BT stalling tactics, BDUK funding
37 Government increases focus on BT PIA prices
37 Sub-loop unbundling cancelled due to lack of interest
38 BT rival begins fibre trials
39 Suppliers
39 BT selects Perle for LDU access and management
40 Index
BTwatch Report #223 July-August 2011 Executive Brief
August 31, 2011
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- BT Group announced financial results for the first quarter of FY11-12, showing a slow start to achieving its goals for the year of halting underlying revenue decline, and bettering last year’s cash generation. Improving profit proved a bright point as the apparently endless capacity for cost cutting continued to contribute. [pp.4-10.]
- BT Global Services appears to be taking on more of the load in meeting Group targets, and the division has notably altered its strategy to encourage a rapid revenue return for new business. BT was adamant that lessons have been learned from previous experiences of more expansive strategy, and that profitable growth is paramount. [pp.29-31.]
- BT Group announced a new chief executive for its BT Wholesale business, with Nigel Stagg to replace Sally Davis from September 2011 as the former head leaves BT for personal reasons. Davis bows out on something of a low, as the division admits to struggles in meeting profitability expectations for managed services contracts, and its transformation stalls. Stagg is an interesting choice as replacement — having risen through the ranks of BT Retail units to lead BT Business — and it may be a challenge to adjust to the substantially larger-scale contracts and longer-term projects he’ll be faced with at Wholesale. [pp.43-46.]
- BT Retail continues to trumpet its broadband successes, although improvements to the bottom line are slower to come through. Retail’s Infinity fibre product is beginning to gather momentum, accounting for half of net adds in the past quarter and reportedly lifting overall profitability. Considered against its main triple-play rivals in voice and pay TV services, Retail’s performance makes a less positive story. However, the prospect of using technology behind YouView, and anticipated regulatory restrictions on BSkyB, to take a tilt at the substantial ARPUs of the main pay-TV players is enticing. [pp.15-19, 24.]
- Openreach indicated that fibre-to-the-premises could become more prevalent in the mix of its fibre rollout plans. Experience of next-generation rollout projects in Cornwall has suggested that a blend of FTTP and FTTC on a street-by-street level within an exchange can be effectively and efficiently managed. [p.53.]
- BT Group announced it is shutting down developer platforms and toolkits for its Ribbit internet voice subsidiary. However, development of the platform is to continue in-house, with support maintained for commercialised offerings. While the telco’s closing of a promising start-up, without apparent benefit from its innovation, may appear gloomily familiar, a recent re-focus on commercialising the capabilities BT can nurture in-house may mean that taking the Ribbit platform closer to its customer-facing businesses could be the making of it. [p.11.]
- BT Infinity was singled out in recent Ofcom broadband speed tests for its upstream capabilities. BT and Virgin Media efforts to roll out next-generation access have, according to the regulator, resulted in more than half of the UK population now living in areas capable of receiving higher speed services. Most of the coverage will be on the cableco’s network, but BT is playing its part through public-private partnerships, such as the initiative in Northern Ireland, which has resulted in widespread fibre coverage for the region. However, another regulatory study suggested that Northern Ireland is also an area where customers currently experience some of the lowest access speeds in the country, suggesting there is still something of a disconnect between availability and experience. [pp.19-21, 27-28.]
- The English High Court ruled that BT must take steps to block a website providing access to pirated digital content, following legal action brought by the Motion Picture Association using intellectual property laws. While BT technically lost the case, the telco demonstrated the need to obtain court orders for individual websites, highlighting the impracticality of current laws for addressing illegal content distribution. Newzbin2, the website affected by the ruling, threatened to disrupt BT’s already controversial internet access filters, to prevent the telco from complying with the order. [pp.21-23.]
- BT Retail is close to offering customers a cloud gaming service, as US-based OnLive prepares the launch of its hosted and streamed gaming service in the UK market towards the end of September 2011. BT is a shareholder in OnLive and launch partner for the offering. [p.26.]
- BT Global Services won a £133m contract with the Brazilian Post Office, providing tangible evidence of success in building international business. While BT has focused publicly on plans for building Asia-Pacific revenue, past acquisitions and investment in the comparatively healthy growth economies of Latin America may be proving more effective. [p.32.]
- BT won an £8m contract with Sunderland City Council, but continues to see its work on the NHS Programme for IT taken to task by the UK Parliament‘s Public Accounts Committee. BT still expects to be able to commoditise the services it has developed through its work on NHS contracts. [pp.33-35.]
- BT Radianz managed security solutions were launched in the Canadian market, as BT continues to exploit its strong position in the financial services sector to demonstrate its capabilities in providing emerging new services to demanding customers. The financial services unit also signed a partnership with TeleWare, to use the vendor’s solutions to offer Financial Services Authority-compliant call recording products. New managed authentication and anti-fraud solutions were also added to BT Global Services’ portfolio. Soft-ex announced it has expanded its partnership with BT, for the provision of hosted IP telephony offerings. [pp.37-39, 41.]
- BT is reportedly putting out to tender a number of contracts it currently has with Tech Mahindra, a business process outsourcing company in which it holds a stake. BT is also the Indian company’s largest customer. [p.42.]
- BT Wholesale is to extend its rollout of ADSL2+ services to cover 90% of UK premises by the spring of 2013. The goal marks an increase from previously outlined intentions to build an ADSL2+ network covering 80% of the country. There are, however, some indications that the timescale of the project may have lengthened. The move comes as the regulator Ofcom begins to implement stricter regulation on legacy copper broadband products in rural areas, with the objective of encouraging BT to focus on ADSL2+ as an alternative. [pp.48-50.]
- While Openreach said it is working with partners on the early stages of duct- and pole-sharing trials, Ofcom indicated it currently has no intention of requiring cableco Virgin Media to open physical access to its networks. The regulator claims there is no evidence to suggest that commercial negotiations to reach such an agreement would fail. While it could be an own goal for BT Retail to enter talks with its rival, BTwatch wonders if a cheeky request from its PlusNet subsidiary might cause a stir. [pp.50-51.]
- BT acknowledged that it is unlikely to secure all of the major tranches of state funding to be provided for the roll out of fibre services in rural areas, but warned of the perils of authorities selecting less experienced network providers. [pp.52-53.]
BT completes Northern Ireland Next Generation Network project first phase
August 31, 2011
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Arlene Foster, Enterprise Minister for the Northern Ireland Assembly, announced that BT Group has completed the initial construction phase of the Next Generation Broadband Project to roll out faster broadband across Northern Ireland (NI) to time and budget.
Under a deal signed in 2009 (BTwatch, 2009.10), the project was jointly funded by BT (£29.8m) and the European Regional Development Fund through the UK’s Department of Enterprise, Trade and Investment (DETI) (£16.5m), with a further £1.5m invested from the Department of Agriculture and Rural Development (DARD) under the European Union’s (EU) ERADF Rural Development Programme. The additional DARD and EU investment subsequently sparked an additional outlay from DARD, DETI, and BT totalling £4m.
Under the scheme, BT has upgraded equipment in 166 exchanges, provided 1, 265 new access points across Northern Ireland, and deployed fibre-optic cable deeper into Northern Ireland’s cities, towns, villages, and rural areas. Next-generation access is said to be available to 85% of businesses, offering minimum download speeds of 10Mbps for operations in urban areas, and 2Mbps in rural areas.
Graham Sutherland, Chief Executive of BT Ireland, said that at least 89% of all phone lines will be connected to a fibre-enabled street cabinet by March 2012.
Network there, but where’s demand?
While BT trumpeted the availability of its high-speed network in Northern Ireland, its announcement is worth considering in the context of Ofcom’s recent map of broadband availability across the UK.
This indicated that Northern Ireland had the highest levels of super-fast broadband coverage in the UK, apparently available for more than 90% of the population across almost the entire region. However, it also showed that the area had among the highest proportion of customers receiving broadband speeds of less than 2Mbps. More than 20% of the user base outside the city of Belfast is using broadband services at levels around those available at the turn of the century, suggesting that rollout from BT has not been matched by a shift in customers.
While it is still relatively early days for the Northern Ireland rollout project, and more time should be given before its success can be determined, it is hoped that improving trends will be soon seen to justify the investment from BT and the public sector. It is probably not a coincidence that swatches of Northern Ireland record some of the lowest levels of broadband uptake in the UK; and there is now an opportunity to build a customer base that proves there is pent-up demand for high-speed broadband services.
[Further reference: Foster announces completion of Next Generation Broadband Project -- Northern Ireland Executive, 27 July 2011; £52m scheme rolls out even faster broadband -- Belfast Telegraph, 29 July 2011.]
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BTwatch Report #223 July-August 2011 Snapshot
August 31, 2011
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Table of Contents
1 Executive brief
4 BT Group
4 BT Q1 FY11-12 results
4 BT profits continue to rise, but revenue still declining
4 BT Group financial highlights, Q1 FY11-12
5 BT pension deficit hit by market woes
5 Retail and Wholesale revenue prompt worries
5 Openreach and Global Services offer some comfort
5 BT Group, performance by unit, Q1 FY11-12
6 Financial reports
6 Broadband a highlight, but new wave growth still meagre
6 BT Group, revenue by product type, Q1 FY11-12
7 Digital Britain
7 Vaizey looks for DEA solution
7 BT’s capacity for cost cutting apparently undiminished
7 Capital expenditure rising, and set to rise more
7 BT Group, capital expenditure, Q1 FY11-12
8 Advertising
8 Fixed line numbers keep rising, but not for Retail
8 BT Group, KPIs, Q1 FY11-12
8 Retail grows broadband share, Orange flatters Wholesale
9 Pension
9 BT pensioners criticise switch to CPI
9 BT Group, broadband KPIs, Q1 FY11-12
9 BT stands by outlook, but divisional expectations change
10 Government loses Crown Guarantee appeal
10 Cash flow mountain to climb for the year
10 People
10 People movement highlights
11 Suppliers
11 Ribbit
11 BT kills off Ribbit developer platform
11 Same old BT, or an opportunity to evolve?
12 Strategy
12 Williams outlines strategy for growth
12 Divisions taking individual responsibility for growth
12 Building customer accounts and international expansion stressed
13 Acknowledgement BT strategy needs to be about more than cost cutting
15 BT Retail
15 Q1 FY10-11: BT Retail
15 Broadband flatters, but decline barely slowing
15 BT Retail, financial highlights, Q1 FY11-12
15 New business areas faring little better than traditional business
15 BT Retail, revenue by product type, Q1 FY11-12
16 Advertising
16 Fibre shows first signs of significant traction
16 BT and BSkyB leading the way in broadband
16 Broadband customer numbers (’000), Q1 FY11-12
17 Operations
17 BT to add 280 jobs at Harton Staithes…
17 …Centre’s purpose shifts towards commercial services
17 Calls and lines, customer numbers (’000), Q1 FY11-12
18 Privacy
18 Could YouView enable genuine BT assault on Sky?
18 Pay TV customer numbers (’000), Q1 FY11-12
19 Wireless networks
19 Monthly ARPU, Q1 FY11-12, UK fixed line market
19 Broadband
19 Ofcom sees broadband speeds rise, but behind claims
19 Average UK broadband download throughput speeds
20 Regulator claims more than half of country has NGA access
21 BT Payphones
21 Ofcom maintains pressure on ISPs for clear advertising
21 Digital content
21 BT MPA piracy case loss could be good news for ISPs
22 BT Enterprises
22 Blocking looks impractical for all but most serious offenders
22 BT could be hit by service disruption
22 BT campaign of resistance may be bearing fruit with government re think
23 BT Expedite
23 Survey identifies rising interest in mobile commerce
23 Wider response spotlights need for entente between ISPs and rights holders
24 Television services
24 CC to rule on BSkyB pay TV dominance
24 Further cuts could bolster YouView launch
26 OnLive
26 OnLive sets date for UK launch
27 BT Ireland
27 BT Fresca
27 Fresca signs fashion brands
27 BT completes NI NGN project first phase
28 BT Northern Ireland wins civil service contract
28 Network there, but where’s demand?
29 BT Global Services
29 Acquisitions and disposals
29 BT sells Accel Frontline stake…
29 …Commitment to Asia Pacific emphasised
29 Q1 FY11-12: BT Global Services
29 Orders up as BT chases new business at Global Services
29 BT Global Services, financial highlights, Q1 FY11-12
30 BTGS focused on share of market, not customer wallet
31 BT insists new revenue will be profitable
31 The UK market a target despite headwinds
31 BT Global Services, revenue by product type, Q1 FY11-12
32 BT International: Asia
32 BT opens New Delhi Showcase centre…
32 Contracts
32 BT wins Brazilian Post Office contract
32 Tangible evidence of GS promised growth — but from lower profile target
33 …BT commits to India, Tech Mahindra investment
33 Public sector contracts
33 BT wins £8m Sunderland City Council contract
33 MPs renew calls to cancel BT’s NPfIT contracts
34 BT International: Europe
34 BT wins new Netherlands state contract
34 DoH accused of “clearly” overpaying BT
34 NHS reforms also threaten project
35 BT International: Middle East
35 BT continues to emerge in better light than rival
37 Financial services
37 Russian Uralsib joins BT Radianz
37 BT launches collaboration services suite in Canada
37 Financial services spotlighted as cloud pioneers
38 BT partners TeleWare for mobile recording service
39 Products and services
39 BT launches authentication service, builds security suite
40 Tech Mahindra/Mahindra Satyam
40 Strategy
40 BT exploiting re-useable solutions from NHS deals
40 Vertical targeting trumpeted, focused account management highlighted
41 Tech Mahindra/Mahindra Satyam
41 Future direction could see new verticals added
41 Suppliers
41 BT selects Soft-ex for Hosted IP Telephony
41 Deals see established relationship continue to expand
42 Tech Mahindra
42 Tech Mahindra reports improved profit, less BT business
42 BT tendering more widely for projects
43 Legal
43 BT Wholesale
43 BT wins CAT appeal on non-geographic MTRs
43 Q1 FY11-12: BT Wholesale
43 Wholesale shows worrying signs of contract troubles
44 BT Wholesale, financial highlights, Q1 FY11-12
44 Overall revenue at least stabilising, broadband another worry
44 BT Wholesale, revenue by product type, Q1 FY11-12
45 Executives
45 Stagg to replace Davis as Wholesale problems emerge
46 Signs of weakness again see board changes at BT
48 Network
48 BT extends ADSL2+ rollout, slows pace?
48 Extension hides possible deadline slip
49 Regulatory
49 Ofcom orders rural broadband price reductions
50 BT sanguine, smaller players criticise regulator
50 Ofcom denies BT access to Virgin Media cable ducts
51 Would BT talk to Virgin on wholesale access? Could Plusnet cause trouble?
52 Openreach
52 Q1 FY10-11: Openreach
52 Openreach positioned as BT’s good news story
52 Openreach, financial highlights, Q1 FY11-12
52 Openreach, revenue by product type, Q1 FY11-12
53 BT cautious on state fibre contract wins
53 FTTP could become a greater part of fibre mix
54 Network
54 Openreach adds 92 new apprentices in London
54 Work to begin on physical infrastructure sharing
54 BT broadband rollout criticised as “patchy”
55 Index
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BTwatch Report #222 June-July 2011 Executive Brief
July 28, 2011
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- A review of the BT Group Annual Report showed that BT did not reach its goals for improving customer service in the past financial year, despite continued progress in the area. There was also a marked change of policy in payment to suppliers, perhaps contributing towards improved cash flow performance. Senior executives have now also been set targets based on long-term revenue growth, although the Group remains wary of a return to unprofitable expansion. [pp.11-13.]
- BT Global Services signed a renewed contract with Liverpool City Council to continue their Liverpool Direct joint venture, which manages a range of outsourced business processes for the council. The contract renewal until 2017 came at a price for BT, with the value of the deal reduced, commitment to additional investment, writing-off previous spending, and a doubling of the council’s stake in the venture. [p.21.]
- BT is participating in trials delivering next-generation broadband services using spectrum “white spaces” created by the shift to digital television broadcast. Testing of the capabilities and potential drawbacks of the spectrum are being undertaken with a number of heavyweight partners in Scottish islands and Cambridge in England. [p.37.]
- BT Wholesale highlighted several new developments and plans for the growing digital content delivery sector. The division is promising an “end-to-end linear TV delivery service” for 2012, through multicast-based TV Connect. The new offering is expected to accommodate a wide range of digital rights management standards, and provide opportunity for content to be broadcast via the BT network independently of other traffic, until it reaches the ‘last mile’ to the end user’s home. Future developments for the upcoming YouView platform are at the core of BT’s expectations for the service. BT Vision is also expected to make use of the service, to deliver premium subscription content, such as Sky Sports, at more economically viable costs. BT Wholesale is additionally hoping to see success for digital “locker-based” content management solutions that could break dominance of big players in the nascent digital video market, thus creating an essential role for network providers in a fragmented ecosystem. [pp.28-32.]
- BT Group failed in its attempt, alongside TalkTalk, to secure leave to appeal the decision of the UK courts to uphold the validity of the Digital Economy Act, which will require BT Retail to take an active role in policing online content piracy. The BT Retail unit is also in court contesting demands from the Motion Picture Association that it block access to websites making illegal downloads available, expressing concern that a requirement to block one site could open the floodgates to further demands. [pp.4-5, 14.]
- BT Group lodged objections to the regulator Ofcom’s plans to cut mobile termination rates, claiming the proposed reductions do not go far enough, quickly enough. The wireline incumbent is also concerned by proposals for auctions of 4G spectrum in the UK, suggesting that, as they stand, the plans could see it face unfair competition in the development of next-generation access networks. [pp.7, 8.]
- Despite continued cutbacks in spending on R&D projects, BT extolled the virtues of investment in innovation, and collaborating on open standards, to bring services to market — an approach that, if backed with action, could see BT increase its return on development investment. [p.9.]
- BT Retail was accused of monitoring customers’ broadband network connections in a manner that could be exploited commercially. While BT rightly dismissed the claims as overblown, they nevertheless highlighted that BT is still susceptible to media alarmism on privacy matters, after its brush with controversy over trials of the Phorm targeted web advertising solution. [p.15.]
- BT Retail confirmed that the BBC iPlayer had now been rolled out across the customer base for its BT Vision television offering. [p.16.]
- BT Openzone is said to still be considering its options for the provision of wireless network coverage during the 2012 Olympic Games in London. The BT unit is anticipating unprecedented levels of demand during major events, and pondering the possibility of offering tiered levels of access. BT Openzone also signed an agreement to roll out wireless network hotspots across the Hilton hotel group, in the UK and Ireland. [pp.16, 17.]
- BT Engage IT is continuing to trumpet plans for growing its share of the market for networked IT services in the enterprise sector, with the goal of taking a 5% share of a £20bn market, ten-times its foothold at the £100m revenue mark. The BT Retail unit is said to be working with the lower echelons of BT Global Services’ corporate customer base, as well as the very top-end of BT Business’s SME customers, prompting BTwatch to ponder whether the unit might shift home to Global Services business, along with the mid-size enterprise customer base. [pp.19-20.]
- BTGS’ financial services unit added offerings from Aphelion and LockPath to its BT Radianz platform. [pp.22, 23.]
- BT Global Services signed a Global Innovation Partnership agreement with Deutsche Post DHL, an international logistics and mail group, to work on new projects around sustainable logistics, RFID, and supply chain security. There will be a focus on projects for Asia-Pacific markets, where the two companies have an existing contract. [p.23.]
- BT in the USA added Microsoft Lync to the BT Onevoice converged communications platform, following earlier introduction in Europe. BT Germany expanded the coverage of its BT Etherflow service in the country, amidst plans to extend availability elsewhere in Europe and the USA. [p.24.]
- Kingston Communications was awarded a contract extension to provide outsourced contact centre services, supporting a BT contract with a government agency. BT Supply Chain Partners is to upgrade its transport management system with new mobile communications solutions from Skillweb. [p.26.]
- BT Wholesale faced public criticism from customers complaining of poor service delivery on 21CN infrastructure, and failure to recognise problems when they arise. [pp.33.]
- BT Wholesale predicted increasing demand for Ethernet services from mobile operators as the strain on backhaul networks continues to mount. The division’s Head of Data Solutions also highlighted BT’s expertise and experience in network management, but bemoaned complexity of both vendor offerings around Carrier Ethernet, and impractical customer demands. Backhaul capacity is also viewed by BT as a potential brake on cloud services evolving on mobile platforms. [pp.34, 35.]
- Openreach’s roll out of commercial fibre-to-the-premises is to be slightly delayed, as problems with blocked ducts in the network are overcome; but initial pricing has been unveiled. The division also overhauled prices for fibre-to-the-cabinet offerings, although changes are unlikely to allay industry complaints about fibre costs. [pp.38, 39.]
- The Office of the Telecommunications Adjudicator indicated that growth of LLU has levelled off, although there is still a shift towards fully-unbundled lines. Openreach is said to be getting closer to a return to an even keel on delivery of provisioning and repair services to communications providers. The OTA is also managing two working groups on the development of physical infrastructure access, a central element of alternative operators’ plans for competing with BT on fibre broadband. [p.40.]
BT to launch multicast TV broadcast platform
July 28, 2011
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BT to launch multicast TV broadcast platform
In an interview with IPTV News, Simon Orme, Strategy Director of Content Services at BT Wholesale, explained that his company is set to launch a service called TV Connect in the coming year, which will effectively be a new platform for broadcasting video content, including live television.
The BT executive said the telco is currently working with UK internet service providers (ISPs) ahead of a launch. Technical testing is already underway and small-scale trials are expected to involve customers later in 2011, prior to a commercial launch in 2012.
Orme suggested that the new TV Connect offering is similar to, but not the same, as the BT content delivery network offering Content Connect, which was launched earlier in 2011 (BTwatch, #219). He described the upcoming service as the evolution of BT strategy on content delivery.
“ There are massive benefits to [the television industry, and the ISP and operator community] in engineering a multicast solution; it has really been a question of when is the right time to introduce that, and we have felt that the way into this market is to build our on-demand platform — our Content Connect platform — get that into the market first and start the process of building the commercial models around that, and customer engagement models around that; and then bring in the bigger development some time later, which is the TV Connect element. ”
– Orme.
TV Connect will see BT enable broadcasters and operators to deliver media feeds via a television headend directly into the BT network. While using the same physical infrastructure as BT’s broadband network, this streaming will be managed entirely separately from existing broadband traffic until it is merged with the rest of the broadband traffic carried on the network on the ‘last mile’ link to the end user. The service will reportedly offer live real-time encoding of all broadcast television content, including content protection, conditional access, and digital rights management (DRM) functions, and allow the creation of broadcaster-specific electronic programme guides (EPG).
“ We could have built a multicast-enabled network, and then just sat back and seen what happens, but we don’t believe that is going to answer the problem. What we have actually built with TV Connect is an end-to-end linear TV delivery service. ”
“ We are not actually delivering TV Connect through the broadband route: we are delivering it from the headend directly into the exchanges; and that has effectively enabled us to build a television network, as opposed to having to find a way to push multicast television through the broadband network. ”
– Orme.
Service providers will be responsible for arranging their own carriage deals with content providers, and then BT will enable the delivery of the service to end users. One of the reasons provided by Orme for the telco waiting up to a year more before launching the service, is to provide time for the industry to agree standards for the delivery of television content around areas such as DRM, hardware, picture resolution, and set-top boxes, among other things. Orme appeared optimistic that TV Connect will be able to support a range of DRM solutions should the industry agree a standard encryption base.
“ That [DRM diversity] is perfectly viable in this wholesale model — that is exactly the way our wholesale model is designed, so that the retailer entity, whoever they are, manages their own key, their own EPG look and feel, user experience; we are just providing the enabling delivery technology underneath. ”
– Orme.
Orme noted there could be considerable economic benefits for content and service providers in using the TV Connect service compared to existing methods of digital television broadcast. The service is seen as offering ISPs revenue-generating opportunities from pay-TV (such as BT Retail and its BT Vision service) with lower costs than traditional broadcast. It is also expected to make niche broadcasting more viable, as it does not have the same level of annual costs, which are fixed regardless of the size of the actual customer base.
“ We know, for example, that in our broadcast services business, we launched the Eurobird [satellite] service to allow smaller channels to get onto the Sky platform at much lower costs — I can’t remember what the economics were, but it practically halved the economics overnight — and it just spawned literally hundreds and hundreds of channels coming into the market that otherwise couldn’t have survived: TV Connect is much more disruptive or radical than that, and we are anticipating a new wave of innovation in the television on the back of it. ”
– Orme.
Media experience key to new offering
Orme was keen to stress the capabilities and experience BT Wholesale has in providing television network services through its Media & Broadcast business, which has been managing television delivery on a global basis for many years.
“ Because we have been building broadcast television networks for years, we have a whole load of technical ‘smarts’ that enables us to do proactive network monitoring: we have robots in the network, and all of this kind of smart stuff that we have had for years in our global broadcast network that we have been providing the global broadcast network industry with for many years; and we are able to deploy those kinds of techniques into the TV Connect network because it is a dedicated television network, and it is not fighting with other traffic. ”
– Orme.
BT acted with YouView in mind
While the YouView internet television platform may launch before the availability of TV Connect from BT, the potential for the service to use the new platform was an important element of BT’s rationale for developing TV Connect, according to Orme.
“ I think YouView will be a major catalyst for TV Connect: the YouView partners are planning to support multicast within the YouView specification, so, at some point in the service’s evolution, the set-top boxes will be multicast-ready; and clearly because there will be a huge marketing drive behind the deployment of those boxes, and we anticipate large-scale take-up, that is going to be one of the catalysts we think of multicast adoption. And also because YouView is a joint venture between the ISP industry and the broadcast industry — all of those things make it a perfect fit for the TV Connect model; and of course part of the TV Connect thinking was in anticipation of YouView coming to market. ”
– Orme.
BT Retail likely to be key customer
While Orme would not discuss BT Retail plans for using TV Connect, elsewhere executives at the Retail division indicated there are plans to introduce multicast routers across most of its network from 2012, paving the way for full Internet Protocol television (IPTV) services, using quality of service protocols.
The company previously said that, given its BT Vision devices include a DVB-T tuner to receive Freeview digital television services, there was little point in building out its network with multicast routers, and would instead rely on the strength of Freeview plus its own video-on-demand services.
However, speaking at the Connected TV Summit, Steve White, Head of Information Systems and Technology for IPTV at BT Retail, said that cost and the addition of non-DVB-T channels to its offering were the primary drivers for the change of heart.
“ It’s too expensive renting DVB-T multiplex space to deliver Sky Sports to BT Vision customers, so we want to send it multicast. ” – White.
White explained that when BT gained the right to re-broadcast a number of BSkyB channels, it took the decision that sending signals over the internet without full quality-of-service protection as an adaptive stream was not good enough, and it was forced to rent a channel on one of the UK DVB-T multiplexes that drive Freeview.
[Further reference: BT plans to be a super head end to all UK ISPs for multicast TV -- Rethink research, 23 June 2011; BT to embrace IPTV as it upgrades broadband network to multicast -- The Register, 30 May 2011; BT: “TV Connect is actually the engineering of a dedicated television network for online TV” -- IPTV News, 22 June 2011.]
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BTwatch Report #222 June-July 2011 Snapshot
July 28, 2011
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Table of Contents
Symbols
2e2, 20
A
Accenture, 5
Advertising Standards Authority, 14
Alcatel-Lucent, 27
AlgoSec, 20
Andrews & Arnold (AAISP), 33, 34
ANZ Bank, 22
Aphelion, 23
Apple, 31, 34
Arqiva, 6
ATVOD (VoD regulator), 16, 17
B
BAE Systems
- Detica, 6
Berg Design, 37
BlackRock, Inc., 13
British Broadcasting Corporation (BBC), 16, 37
- iPlayer, 16
British Chambers of Commerce, 20
Broadband Delivery UK (BDUK), 5
BSkyB, 14, 30, 37
- Sky Sports, 30
BT Group, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14, 16, 19, 25, 33, 37, 38
- Asia
- – Tech Mahindra, 26
- BT Global Services, 5, 9, 11, 19, 21, 22, 23, 24, 25, 26
- – BT Al Saudia, 22
- – BT EMEA, 5
- – BT Germany, 24
- – BT Global Telecom Markets, 35
- – BT International, 22, 23, 24
- – BT Italia, 5, 24
- – BT Onevoice, 24
- – BT Radianz, 22, 23
- – Etherflow, 24
- – Liverpool Direct Limited, 21
- – Onevoice, 24
- – Radianz Proximity, 23
- – Virtual Data Centre, 9
- – Virtual Private Network, 24
- BT Innovate & Design, 5, 9, 13
- – 21CN, 9, 27, 33
- BT Retail, 5, 11, 12, 14, 15, 16, 17, 19, 20, 29, 30, 39
- – BT Business, 19, 20
- – BT Engage IT, 19, 20
- – BT Homehub3, 6
- – BT Ireland, 20
- – BT Openzone, 16, 17
- – BT Payphones, 26
- – BT Total Broadband, 17
- – BT Vision, 16, 29, 30
- – MyDonate, 6, 17
- – OnLive, 17, 19
- – Text Relay, 23
- – Together, 6
- BT Wholesale, 16, 26, 27, 29, 31, 33, 34
- – Content Connect, 27, 31, 32
- – DataStream, 27
- – IPStream, 27
- – TV Connect, 27, 29, 30
- Directors
- – Brendish, Clayton, 5
- – Rake, Sir Michael, 7, 25
- – Symon, Carl, 13
- Executives
- – Arden, Zoe, 5
- – Balaam, Martin, 19
- – Bergin, Sean, 35
- – Burger, Bas, 9, 23
- – Campenon, Olivier, 5
- – Carsberg, Bryan, 13
- – Chanmugam, Tony, 12
- – Chapman, Clare, 5
- – Dunne, Niall, 5
- – Garfield, Olivia, 37, 38, 40
- – Hubbard, Tim, 34
- – Leonidas, Marjorie, 16
- – Livingston, Ian, 11, 12
- – Martinez, Jose Antonio, 22
- – McCann, Kim, 24
- – McQuoid, Johnny, 38
- – Orme, Simon, 27, 31, 32
- – Patterson, Gavin, 5, 12, 19
- – Pettit, Stephen, 13
- – Radley, Peter, 13
- – Sciolla, Corrado, 5
- – White, Steve, 30
- – Whitley, Tim, 13
- Ex-executives
- – Raja, Himanshu, 13
- – Ramji, Al-Noor, 5
- – Whitby, Tricia, 5
- Openreach, 11, 13, 26, 37, 38, 39, 40, 41
- – Copper Integrated Demand Testing, 41
- – Equality of Access Board, 13
C
Cable&Wireless Worldwide plc, 20
Cambridge Consultants, 37
Cambridge TV White Space Consortium, 37
Carillion, 6
- Carillion Telent (Marconi), 6
Cisco Systems, Inc., 19, 22
Coca-Cola, 5
Competition Appeal Tribunal, 7
Competition Commission, 7
Computacenter, 20
Credit Suisse, 6
D
Dell, 19
Department for Business, Innovation & Skills
- Hunt, Jeremy, 5
Deutsche Post DHL, 23
- DHL Innovation Center, 23
Digital Economy Act (UK), 4, 5, 14
Digital Entertainment Content Ecosystem (DECE), 32
- UltraViolet, 32
DMSL, 14
DTV Services
- Freeview, 30
E
Enel SpA, 24
Environment
- Wind turbines, 6
European Union
- European Commission, 7
Everything Everywhere (Orange UK, T-Mobile UK), 7, 8
F
Facebook, 16, 34
Fastweb, 24
Fujitsu, 5, 8, 27
G
Google
- YouTube, 32
H
Hewlett-Packard, 19
High Court, 4, 14
Hilton Group, 17
Hutchison Whampoa, 7
- 3 Group
- – 3 UK, 7, 8
I
Invesco, 13
J
Juniper Networks, 19
K
Kingston Communications (KCOM), 26
L
Lenovo, 19
Liverpool City Council, 21
LockPath, 22
Logica, 13
M
Mahindra Satyam, 5
Metropolitan Borough of Sandwell, 21
- Transform Sandwell, 21
Microsoft, 15, 24, 26, 31, 37
- Lync, 24
Ministry of Defence, 7
Misys, 5
Mobile Termination Rates (MTR), 7
Motion Picture Association (MPA), 14
Motorola, 26
N
National Health Service (NHS, UK), 5
NetApp, Inc. (Network Appliance), 19
Netflix, 31
Netpropagate, 37
Neul, 37
Nokia, 37
O
Ofcom, 4, 7, 8, 13, 16, 20
- Carrier pre-selection, 40
- LLU, 40
- Strategic Review of the Telecoms Sector, 13
- Wholesale Line Rental, 38, 39, 40
Office of the Telecommunications Adjudicator (UK), 40
- OTA2, 40
Olympic Games, 16
- London 2012, 16
ONI, 14
OnLive, Inc., 17, 19
P
Phorm, Inc. (121Media), 15
S
Samsung, 37
SCC, 20
Serviced Office Group, 6
Skillweb, 26
SmartReach (BT, Arqiva, Detica), 6
Sony, 31
Spectrum Bridge, Inc, 37
Steepest Ascent, 37
Surrey County Council, 37
T
TalkTalk Telecom Group plc, 4, 5, 14, 39
Tech Mahindra, 26
- Mahindra Satyam, 5, 26
Technology
- 3G, 7
- BluRay, 31, 32
- Broadband, 5, 8, 9, 11, 14, 15, 20, 24, 25, 27, 30, 31, 32, 34, 37, 38, 39, 41
- – ADSL, 27, 41
- – ADSL2+, 9, 27
- – SDSL, 27
- CCTV, 22
- Ethernet, 24, 34, 38, 39
- Fibre, 5, 27, 37, 38, 39, 40
- – FTTC, 39
- – FTTP, 38
- GPRS, 26
- IP, 15, 24, 34
- IPTV, 27, 30
- LAN, 34
- LLU, 39, 40
- LTE, 8, 34
- Multicasting, 27, 30
- Next-generation access (NGA), 38
- PLT, 15
- R&D, 5, 23
- RFID, 23
- Unified communications, 14, 22
- Video-on-demand, 16, 17
- VoD, 16, 17, 30, 32
- VoIP, 33
- VPN, 20
- White spaces, 37
- Wi-Fi, 16, 17, 37
- WLAN, 22
Technology Strategy Board (UK government funding body), 37
Telecom Italia SpA, 24
Telefónica, 20
- Telefónica Europe (O2)
- – UK, 8
Tesco, 5
Timico, 27
TTP, 37
U
UBS, 6
UK Government
- Joint Intelligence Committee, 7
United Nations, 4
University of Strathclyde, 37
V
VimpelCom, 5
Virgin Media, 14
Vodafone, 7, 8
- UK, 7, 8
W
West Berkshire Council, 22
World Economic Forum, 25
X
Xerox, 21
Y
YouView (Project Canvas), 30
Z
Zen Internet, 37
ZTE, 7
Read more
BTwatch Report #221 April-May 2011 Executive Brief
June 22, 2011
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- BT Group released its results for the FY10-11 financial year, with an unexpectedly sharp dip in revenue, but continued progress on profitability. Pension fears also continue to be allayed, and the company remains soundly managed fiscally, but there remain concerns as to where promised growth will to come from. While BT is minimising the impact from declining legacy services, and playing up prospects for further efficiencies, compelling evidence of a trend in new services revenue growth has yet to emerge. [pp.4-18.]
- BT was publicly sceptical about the potential for Fujitsu to deliver on plans for a fibre-to-the-premises network covering rural areas of the UK, although it also officially welcomed the help in the heavy lifting of network rollout. In an interview with BTwatch, Andy Stevenson, Fujitsu Telecom Chief Executive, set out a defence of the business case behind the initiative, and maintained that its relationship with BT need not be impacted by the vendor’s entry into a strategy of “co-opetion”. [pp.20-26.]
- Fujitsu was also among a group of BT network rivals, featuring Geo, TalkTalk, Virgin Media, and Vtesse, that wrote to the government expressing disquiet at Openreach pricing proposals for physical infrastructure access (PIA) to enable fibre deployment. The group also wrote to Ian Livingston expressing its concerns, with BSkyB lending its name to the letter; and the BT Chief Executive called for more constructive participation from the signatories. The satellite company may be concerned about pricing, but, alongside niche ISP Call Flow, it is also participating in a three-month test of the Openreach PIA offering. Ofcom is considering intervening in the rumbling PIA dispute. [pp.65-67.]
- BT announced a research and development partnership with Chinese vendor ZTE, to jointly develop standards for next-generation fixed, mobile, and wireless communications systems, with a particular focus on convergence and interoperability. The link with ZTE follows on from the announcement of an agreement to work with mobile network Everything Everywhere, and vendors Huawei and Nokia Siemens Networks, on LTE trials in Cornwall to test the capabilities for fixed-wireless broadband services. The deals with cellcos and vendors both highlight BT’s embrace of the need to leverage its existing network assets to serve increasingly important service provider customers at BT Wholesale, and reflect the need for the telco to regain the upper-hand when claiming it is leading innovation on next-generation access rollout. [pp.29,59-60.]
- The National Audit Office reviewed spending on the NHS National Programme for IT, with BT Global Services emerging relatively unscathed thanks to earlier efforts to address its problems with the project. While there was some sabre-rattling around the prospect of cancelling the project altogether, there may yet be further opportunities for BT in resolving current problems with the initiative. [pp.46-51.]
- BT Group saw the majority of the grounds for its judicial review of the Digital Economy Act rejected by the High Court. BT, along with rival TalkTalk, which had joined the attempt to block the Act coming into law, requested the decision be considered by the Court of Appeal. [p.27.]
- BT is working with Irish IT companies Amartus, Intune Networks, and Openet on a liquid bandwidth project that is part of the TM Forum Catalyst programme, and is hoped to improve capabilities for bandwidth-on-demand. [p.19.]
- BT Retail pointed to another strong quarter on broadband sales, but, while BT Infinity fibre uptake is improving, BTwatch considers the division’s figures, and those from the wider retail sector as a whole, to raise questions as to why anticipated widespread consumer demand for fibre is not translating into more rapid adoption. [pp.31-34.]
- BT Retail is to deploy a new customer care management tool from Alcatel-Lucent’s Motive subsidiary, which is intended to facilitate support for bundled offerings, potentially including IPTV and VoIP. BT Broadband will be offering more value-added services from late-2011, with the OnLive cloud gaming service expected to exclusively debut in the UK with BT in the autumn. [pp.35-36.]
- BT Engage IT is in the midst of a recruitment and promotional drive, as BT Retail attempts to grow its business providing IT services to SMEs. [p.37.]
- BT Ireland is to provide a backbone fibre network supporting expansion of 3 Ireland’s mobile broadband network capabilities. The £33m deal is expected to enable the operator to provide connection speeds of up-to-100Mbps. [p.40.]
- BT Global Services claimed it had a strong end to the financial year for contract wins, and is aiming to see its annual order book reach £8bn from its current £7.3bn runrate. While expansion in Asia-Pacific has garnered the most attention over the past year, performance in Latin America suggests earlier investments in the region are beginning to reap reward. Additionally, BT recently highlighted potential to expand in Africa and the Middle East. Global Services was also seen to be pursuing its industry verticals drive, which is working in unison with a regional push, through promotion of deployment of its solutions within the pharmaceutical sector. [pp.41-42,54,55.]
- BT Group signed a Deed of Undertaking with the UK government that will see BT Wholesale become a key supplier of conveyance network services, as part of a project to create a secure private internet. BT Global Services is to be among the group of approved service providers able to offer local authorities solutions using the network. Global Services also signed a framework agreement with the Scottish government for the provision of managed services to the body, and provided more information on a previously-flagged £400m deal with Lancashire County Council. [pp.44,45.]
- BT launched BT Onevoice featuring Microsoft Lync in Asia-Pacific. The telco’s converged communications platform now features the IT giant’s collaboration and communications services, which are said to be particularly well suited to the varying degrees of technology adoption across the region. A rollout in North America is expected in the near future. [p.53.]
- BT Wholesale’s business continues its gradual transformation, and Ian Livingston boasted that the division stands apart from many of its traditional European peers. However, there is still much to be done, as evidenced by the highlighting of the wholesale business having successfully completed a period of playing catch-up on Ethernet services. [pp.57,59.]
- Video production company Aframe flagged the benefits of BT Wholesale Ethernet products for online collaboration on media projects. BT Agilemedia announced integration of its Online Participation Media platform with social-networking site Facebook. Incorporation of the platform, which is used for voting on popular television talent shows, is expected to enable real-time online voting using Facebook‘s virtual currency. [pp.60,62.]
- Openreach spending on its fibre rollout is said to be on track, although there are signs that operations could be run more efficiently and cost reductions accelerated at the access services division — something likely to be a priority for the unit’s new Chief Executive. To address the need to rapidly address pockets of unexpected demand for services, and support the fibre rollout, a phalanx of ex-armed forces personnel are to be drafted by BT in engineering roles. [pp.63-65,69.]
- Openreach is proposing changes to spectrum allocation for fibre services, which it claims could see the headline speeds for fibre-to-the-cabinet double. [p.68.]
BTwatch Report #221 April-May 2011 Snapshot
June 22, 2011
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Table of Contents
1 Executive brief
4 BT Group
4 FY10-11 results
4 BT continues financial recovery, but revenue falls
4 BT upbeat on underlying revenue, but clearly more to do
5 Annual Report
5 BT Group Financial highlights, Q4 and 12m FY10-11
5 Annual revenue decline across all divisions
5 BT Group, divisional revenue performance by unit, Q4 and 12m FY10-11
6 Financial reports
6 Return to growth predicted, but where from?
6 Openreach propping up new-wave growth
6 BT Group, revenue by product type, Q4 and 12m FY10-11
7 Community
7 Retail suffers as GS and Wholesale continue rehab
7 BT Global Services, revenue by type FY08-09 to FY10-11 and compound annual growth rate (CAGR)
7 BT Retail, revenue by type FY08-09 to FY10-11 and CAGR
7 BT Wholesale, revenue by type FY08-09 to FY10-11 and CAGR
7 Openreach, revenue by type FY08-09 to FY10-11 and CAGR
8 Regulation
8 Revenue trends for BT divisions
8 BT Global Services, revenue by type FY08-09 to FY10-11
9 BT Retail, revenue by type FY08-09 to FY10-11
9 BT Wholesale, revenue by type FY08-09 to FY10-11
9 Openreach, revenue by type FY08-09 to FY10-11
10 Continuing cost reductions provide some comfort
11 BT Group, operating costs, Q4 and 12m FY10-11
11 Profitability up, but a short-term consolation?
12 BT Group, adjusted EBITDA performance by unit, Q4 and 12m FY10-11
12 BT Group, operating cash flow performance by unit, Q4 and 12m FY10-11
13 Capital expenditure to continue on stable path
13 BT Group, capital expenditure, Q4 and 12m FY10-11
14 Are purely cost-driven profit gains a worry?
15 Pension woes ease as BT shows merit of holding nerve
16 Pensions Regulator also backs off
16 Markets yet to shed scepticism
18 BT KPIs — total lines faintly positive, but BT share declines
18 BT Group, key performance indicators, Q4 and 12m FY10-11
18 BT Group, broadband key performance indicators, Q4 and 12m FY10-11
19 Cloud services
19 BT to test “liquid bandwidth” through Catalyst project
19 TM Forum Catalyst expands
20 Fujitsu interview
20 Andy Stevenson, Chief Executive, Fujitsu Telecommunications Europe
20 Fibre
20 Interview: Fujitsu confirms rural fibre business case
20 BT’s network an asset… and possible legacy liability
20 Fujitsu predicts dramatic rollout cost reductions — if BT prices revised
21 Fibre
21 More fibre competition in high-density areas
21 Fujitsu confident its numbers stack up; BT appears isolated in scepticism
22 Partnering Openreach on fibre appears unlikely
22 International models influence “truly open access plans”
23 Fujitsu riding “perfect storm” as BT surprised
23 FTTC described as already dated, with inadequate future-proofing
24 Still obstacles before investment a done deal
25 Scope to expand plans beyond the “Final Third”
25 Ambitious plan intended to provide strategic appeal for retailers
25 Fujitsu emphasises partner engagement, but altnets less effusive
26 Fujitsu to stand on the shoulders of earlier network builders
26 Fujitsu confident on continued BT relationship, despite “awkwardness”
26 Will BT raise the stakes in its fight-back?
27 Legal
27 BT/Phorm case thrown out
27 Legal
27 BT loses judicial review of DEA
28 Legal
28 BT/Phorm case thrown out cont’d…
28 People
28 People movement highlights
29 Research and development
29 BT R&D ties with Fraunhofer Fokus for OpenEPC
29 Research and development
29 BT ties with ZTE for R&D
29 BT continuing focus on network convergence
31 BT Retail
31 Advertising
31 FY10-11 BT Retail
31 Broadband growth disguises Retail woes…
31 …Signs BT success built on rival’s slip-ups
32 Products and services
32 BT launches MyDonate
32 BT Retail, financial highlights, Q4 and 12m FY10-11
32 BT Retail, revenue by customer group, Q4 and 12m FY10-11
32 Wi-Fi continues to add value, Vision less so…
33 Pricing and tariffs
33 BT seeks maximum PR from its fixed-to-mobile rate cut
33 BT Infinity — smouldering but not yet catching fire
33 BT not alone in underachieving on fibre
34 Pricing and tariffs
34 Customer relationships
34 BT outperforms copper rivals in Ofcom complaints review
35 Television services
35 Suppliers
35 BT selects customer care solution from Alcatel-Lucent
35 Television services
35 Marks: what went wrong with BT Vision
36 BT Conferencing
36 BT Conferencing launches cross-platform mobile app
36 OnLive
36 OnLive to launch in the UK
37 BT Conferencing
37 BT Conferencing launches cross-platform mobile app cont’d…
37 BT Engage IT
37 BT Engage IT prepares for customer push
38 BT Expedite
38 Lowe: future retail trends
38 Technology investment falling
38 Self-service revolution
39 Integration is key for multichannel retailers
39 Rise of mobile PoS
40 BT Ireland
40 BT Ireland
40 BT Ireland signs fibre backbone deal with 3 Ireland
41 BT Global Services
41 Awards and accreditations
41 FY10-11 BT Global Services
41 Contract wins flagged as £8bn order book pursued
42 Awards and accreditations
42 GS focus on regional and international government work
42 Cash flow at GS expected to continue improving
42 BT Global Services, financial highlights, Q4 and 12m FY10-11
43 Contracts
43 BT completes first stage of Carglass contract
43 Public sector contracts
43 BT signs supplier contract for government network
45 Financial services
45 BT Radianz achieves 15,000 member sites
45 BT wins part of Scottish government framework deal
45 BT trumpets ten-year Lancashire Council deal
46 Tech Mahindra/Mahindra Satyam
46 Gurnani: TechM-Mahindra Satyam merger slated for June
46 NAO slams NPfIT; calls for “damage limitation”
47 History and reductions in scope
47 Summary of reductions in scope of NPfIT contracts in London and the South
48 BT’s progress to date suggests lessons learned
48 Progress on delivery NPfIT contracts in London and the South (BT contracts)
49 Progress on delivery NPfIT contracts in East, Midlands, and North (CSC contracts), and overall completion rates
49 Work unlikely to be completed in time
50 Alternative system incurring extra costs
50 BT defended in government response
51 Implications for BT not yet clear
52 Government to open contracts up to smaller firms
52 BT International: Americas
52 BT to expand Brazilian data centre
53 BT trumpets North American UCaaS capabilities
53 BT International: Asia
53 BT launches Onevoice and Microsoft Lync in Asia-Pacific
54 BT International: MEA
54 BT to double connections in African and Middle East
55 Products and services
55 BT promotes cloud services to pharma industry
56 Suppliers
56 BT selects B2M Solutions for mobile management
57 BT Wholesale
57 FY10-11 BT Wholesale
57 BT Wholesale still slowly turning around
57 BT Wholesale, financial highlights, Q4 and 12m FY10-11
59 Wholesale catching up on Ethernet
59 Contracts
59 BT to work with Everything Everywhere on 4G trials
60 Hints at BT taking a more creative approach to next-generation rollout
60 BT Media & Broadcast
60 Aframe partners with BT for launch of Media IP Nexus
61 Products and services
61 BT Wholesale admits ongoing SFI2 billing errors
62 BT Agilemedia
62 BT Agilemedia adds TV voting platform to Facebook
63 Openreach
63 Fibre
63 Openreach names exchanges for next fibre rollout phase
63 FY10-11 Openreach
63 Openreach external growth shows need for efficiencies
63 Fibre spending on track, although landscape is changing
64 Openreach, financial highlights, Q4 and 12m FY10-11
64 Cost reductions not reaching expectations at Openreach
65 Network
65 BT disputes Fibrestream’s ‘inferior’ cable claim
65 Garfield needs to lead reforms
65 Network
65 BSkyB and Call Flow to trial Openreach PIA products…
66 …but rivals gang up to question pricing
66 Fujitsu’s comparison between Openreach prices and claimed efficient market prices for physical infrastructure access
66 Livingston also alerted to concerns…
67 …and BT boss is belligerent in response
67 Further calls for full separation of network assets
67 Ofcom looks set to intervene
68 BT aims to boost FTTC to 80Mbps
69 Openreach to recruit ex-MoD personnel for fibre rollout
69 Fibre rollout or crisis management?
70 Index
Interview: Fujitsu confirms rural fibre business case (exclusive)
June 22, 2011
|
Following its recent announcement that it is planning, in collaboration with Virgin Media, TalkTalk and major broadband retailers, to roll out a fibre network providing next-generation broadband access to up to five million homes in rural parts of the UK (BTwatch, #220), Fujitsu responded to doubts expressed by BT Group that the Japanese information and communications technology (ICT) giant had a viable economic model and the necessary corporate backing.
Speaking to BTwatch, Andy Stevenson, Chief Executive of Fujitsu Telecommunications Europe, expressed confidence in Fujitsu’s ability to deliver genuinely future-proofed services to the population beyond BT’s current plans for fibre rollout, highlighted industry and government support for the company’s efforts, and suggested BT’s doubts were based on a mindset at the incumbent focused on exploiting existing network assets rather than taking an innovative approach to next-generation services.
BT’s network an asset… and possible legacy liability
Stevenson suggested BT’s Openreach division is compelled by its ownership of legacy infrastructure to pursue an approach to next-generation access based on its traditional way of doing things, working to ‘sweat’ the copper and narrowband switching assets.
“ FTTC [fibre-to-the-cabinet] from our perspective would be a very much interim technology step that wouldn’t have the longevity or the capability to migrate [to] the likely landscape of new services that will come over the next ten-to-20 years. ”
“ Predominantly, the UK network — based on Openreach — is based on a fixed topology of exchanges and street cabinets that were there as part of the original copper network build up. That network — obviously through no fault of BT’s — is not necessarily optimised for the way that services have to be delivered to residents, and obviously things evolve over time. So one of the things that we think is really important is that while the [physical infrastructure access] PIA duct and pole access is critical to leveraging existing infrastructure, the topology of BT exchanges shouldn’t necessarily dictate the way that we plan our core fibre infrastructure, and that has a material effect on the way that you architect services. ”
Fujitsu predicts dramatic rollout cost reductions — if BT prices revised
While not revealing detailed figures, Stevenson expressed confidence that if a new network could be provided through a coordinated rollout in a relatively contiguous geographic region, the cost of fibre-to-the-home (FTTH) deployment could fall significantly compared to BT estimates.
In the past, BTwatch has interpreted BT predictions as putting the cost of a national fibre rollout at a level very roughly equating to £1,000 per household passed.
“ We did some techno-economic modelling around five million homes over a five-to-ten year period, [amounting to] about 50% of the ‘final-third’ UK challenge outlined by government. We carried out physical audit of assets in three Yorkshire towns and shared the findings with [Openreach], Ofcom and our industry collaboration[partners]. The reason why we chose the number five million is if you’re going for something that will be manifestly sustainable for the UK economy, and will attract retailers of sufficient national capability to want to go for something — the likes of Virgin Media, TalkTalk, Sky [BskyB], O2 [Telefónica], etc. You need to be talking at least half of that [2.5 million properties passed], let’s say, poorly served broadband footprint today — where there is very evidently pent-up demand. There’s nothing that stops you from going for the full nine million ["Final Third" of fibre-unserved properties]. Obviously, the deeper you get in terms of rural deployment, it gets harder, but that challenge and those economics would be robust and scale to the challenge. ”
Stevenson supported earlier criticisms from the industry of proposed PIA pricing from Openreach, which had cited Fujitsu-based commercial cost estimates to illustrate what they considered a more appropriate infrastructure access charges (see separate report). He noted the disparity that current proposed pricing would see the cost of building out the new elements of a rural fibre network outweighed by the expense of gaining the necessary access to existing Openreach infrastructure.
“ The techno-economic modelling we’ve done thus far would say that PIA, as it’s priced today, in BT’s [reference] offer, would represent more than 60% of the cost of building it out, which, as it’s purely a passive infrastructure already sat there on the ground, would seem disproportionate and unfair. Fujitsu, Virgin Media, TalkTalk, independent consultants, and many others in industry don’t think it’s a true cost-based model [or] priced up on a fair and reasonable term. ”
Fujitsu confident its numbers stack up; BT appears isolated in scepticism
Stevenson insisted that Fujitsu, which is both a significant customer and major supplier to BT, as well as a major IT services competitor, is in continuing talks with the incumbent. He said that, to date Fujitsu had been “very open” and shared information “very transparently”. Stevenson also said that (despite the public jibes by senior BT executives noted by BTwatch), Fujitsu had faced “no significant pushback” from BT on the calculations put forward. He noted the regulator Ofcom and the Broadband Delivery UK (BDUK) initiative had reviewed data from which calculations were made and Fujitsu proposals were welcomed.
“ We’ve done quite a lot of study in terms of various geographies in the UK that we feel are pretty representative of what we’re going to be facing in deploying to the five million homes. ”
Partnering Openreach on fibre appears unlikely
Stevenson drew back from suggestions that a partnership model with BT had initially been pursued, stressing the telco had given an impression of commitment to its existing rollout model. He suggested this was a commercial decision based on legacy assets that BT needed to maximise. The BT fibre plan was also positioned as an attempt to go some way towards reclaiming a stronger monopoly position in the wholesale market (BTwatch has previously drawn comparisons between the BT proposals for wholesale fibre access and the grip the incumbent exerted on the market prior to the 2006 Ofcom regulatory settlement which led to the creation of Openreach — BTwatch, passim).
“ Naturally we have discussed strategy with BT around NGA [next-generation access] in the past, and it was pretty clear that they [BT] were totally committed to their approach to it; and it’s not a case of ‘we didn’t want the engagement’ or that they hadn’t considered other things: I’m sure they are considering other things. ”
“ I just think there’s some commercial imperative that they [BT] look at, in terms of their [sunk] asset, their route-to-market, and that they believe they can — through Openreach — recapture at least part of the wholesale fixed-line monopoly that they’ve enjoyed before by going the route that they’re going. So, I think government’s move to get PIA back on the agenda, and to press that agenda quite hard, is actually changing their mindset and making BT rethink. But I think, because BT felt that nobody in industry would seriously put the money into the investment, that they could still defend the position that they’ve taken. ”
International models influence “truly open access plans”
Stevenson considers that a hybrid of existing fibre rollout models seen in Asian countries such as Japan and Korea, but also in Europe in Holland, Italy, and Spain, would suit the circumstances prevalent in the UK.
Stevenson cited Fujitsu experience in supporting fibre rollout plans in Australia through the government-backed National Broadband Network (NBN) as a particularly useful comparison, although recognised this is a significantly more heavily subsidised project than in the UK. Despite this, NBN was presented as an example of the type of “truly open” platform that the company is proposing to deliver from launch, which can support multiple technologies, and enable numerous service providers to be present in a single home — something Stevenson considers to be possible, but difficult, in the UK environment.
Interestingly, Stevenson also referred to Fujitsu work in Portugal where the company is involved in fibre network projects. When questioned around a year ago on fibre pricing, BT Group Chief Executive Ian Livingston responded by saying BT costs were broadly in line with other incumbent telcos in Europe, aside from Portugal, which he said had a “different topography”. This suggests to BTwatch that Fujitsu had been able to set out its vision of next-generation networks at senior executive level, but that BT was unwilling at that stage to consider alternative rollout plans.
“ We’ve talked to [BT] about what we’ve been doing in Saudi [Arabia] and what we’ve done in Portugal; we’ve given contacts all the way up to [senior management] in terms of those regions and what we’re doing. ”
Fujitsu riding “perfect storm” as BT surprised
The opportunity in the UK was described by Stevenson as a “perfect storm”, with government commitment to fibre investment, and a clear economic argument from a wholesale perspective for investing in a substantial and long underserved swathe of the country.
“ The opportunity in the UK is a bit of a perfect storm between market demand, nine million homes a largely untapped market in the final third, the need for major retailers to see competitive wholesale offerings, regulatory opportunity, [and] government funding coming together to address our embarrassing ranking in OECD [Organisation for Economic Co-operation and Development] studies of economies powered by broadband. ”
“ Fujitsu has a strong government [sector] base, also a strong telco [operational] case in the UK… and there is a need in the market, most importantly, that will be sustainable. ”
“ We see this [plan] as a good model that kind of polarises a lot of the value that we can bring to our own customers, so we do see this as a good opportunity, and, for the UK, it is something that is urgently needed. I mean, how long are we going to talk about the ‘Final Third’ being just left in the backwater? “
FTTC described as already dated, with inadequate future-proofing
Stevenson questioned BT’s approach to fibre deployment, relying as it does on FTTC and associated restricted speed and upgrade capabilities, as not reflecting the way the market is changing.
“ The market is accelerating at a pace that we can’t really predict. One thing that is certainly sure is that Nielsen’s Law [of internet bandwidth for premium consumers doubling every 21 months] is happening, as is Moore’s Law [that the density of microprocessors, widely interpreted as a yardstick of computing power, doubles approximately every 18 months, i.e. outpacing bandwidth expanding at the pace of Nielsen's Law]. “
“ By the time we’ve worked out how a 40Mbps — or even 80Mbps — connection will be delivered to people, services are coming on board that will just change the landscape in terms of what people would be interested in buying, and so our view is that an investment in infrastructure has got to give as much headroom in terms of future [bandwidth] growth as possible. ”
“ For us, FTTC is very much an interim step and the UK really needs something else, and, from a government perspective, if you really want the UK economy to be world class, you’ve got to be looking to something that stimulates truly next-generation access, rather than the interim step to go to copper as a halfway house. ”
“ I think if you take a hybrid of what’s happening, you can see the trend that more open access is actually driving more revenue onto those networks. ”
Still obstacles before investment a done deal
Stevenson said he was optimistic that conditions will be right to continue with Fujitsu’s plans, welcoming indications from Ofcom that it is willing to intervene in the dispute on PIA pricing between BT and the rest of the industry (see separate report). However, he also acknowledged that “BT will make a compelling case that their model and pace is sufficient for superfast broadband.”.
Yet, even if the investment environment is not appropriate for the major-scale investment in rural fibre that Fujitsu envisions, the company is still committed to investigating the case for regional deals. Stevenson reiterated that, while the speed of plans for fibre rollout are dependent on the regulatory environment and adequate linked-up regional government investment plans, work on delivering wholesale fibre services through the pursuit of local government contracts and public-private partnership efforts would continue, albeit at a “very considerably” slower pace, and with less investment.
“ There’s some conditionality about whether or not it gets done, and that conditionality is: firstly, does the regulatory regime in the UK support it, in terms of will there be compelling pricing on PIA?’, because, without it, it will happen, but at a very slow pace; and, secondly, is the government going to actually create the right vehicle through BDUK to aggregate demand that is coming out of the local regions to create a sensible framework in which a player can take a significant portion of it? If those two things don’t happen, then we end up with very small rural investments as we’ve done historically. That won’t attract the big retail brands because they’ll end up with 40 or 50 small networks — they just can’t afford the systems investment to sustain that model for competitive services. ”
It was this degree of conditionality that was said to account for UK investment plans not previously appearing in the roadmap of the division’s Japanese parent company. This absence had led to BT implying at its recent results presentation (see separate report) that financial backing from Fujitsu corporate headquarters may not be forthcoming. This scenario was dismissed by Stevenson, who was adamant that if the right economic conditions prevailed and there was a reasonable return on investment the case would be sufficiently compelling.
Stevenson also indicated that Fujitsu is working with Openreach and the wider industry towards agreeing a consensus, and that his company would be willing to increase the rate of its progress once a roadmap is in place. However, it appears there is some way to go in discussions before this becomes a likely prospect.
“ We are moving forward. We’re in discussion with Olivia Garfield and [TalkTalk Chief Executive] Dido Harding and [Virgin Media Chief Executive] Neil Berkett, etc., about how we move this forward together. Because we want to try as much as possible, everybody wants to try and avoid a long, protracted debate, so even if there was a roadmap or price reductions, if there was something which says ‘okay, we’ll work together on this, it starts this way, it moves down this way, and these are the efficiencies we look at’, then I believe the industry would start to accelerate its plans to support BDUK’s aspirations. ”
Scope to expand plans beyond the “Final Third”
Fujitsu indicated that the figure of targeting five million premises for its network had been chosen somewhat arbitrarily, simply representing a sensible and significant start towards addressing the nine million homes not currently featured in the UK fibre rollout plans of BT and Virgin Media. Covering the remainder of the population was described as difficult, but within the realms of possibility based on Fujitsu’s assumptions on rollout.
Stevenson said Fujitsu was not, at this stage, interested in areas where BT and Virgin Media are already well established and building out services, as in this scenario it becomes more of a marginal call for potential wholesale customers considering a switch of wholesale provider to a newcomer.
Ambitious plan intended to provide strategic appeal for retailers
Another telling reason for the five million homes figure was to create a more attractive proposition to major broadband/media retailers who want access to that market. While securing attention from major BT retail rivals would be possible with a substantially smaller footprint, a new network with five million potential customers is said to raise the project to ‘board-level status’, and thus merits an integral role in prospective major customers’ overall strategy.
“ Talking to the likes of Sky and Virgin Media, I mean, a million’s ‘interesting’ — they wouldn’t say ‘no’ — but four or five million is [At this scale,] this is board-level strategy that they would come on board, really work with us to draw volume and they would sign up to penetration models that they’ve studied very carefully. It’s that type of bond between, say, a wholesaler who’s got a real plan and a real scale behind it that gets them very excited. ”
Fujitsu emphasises partner engagement, but altnets less effusive
BTwatch has noted that the two named potential Fujitsu partners, TalkTalk and Virgin Media, have appeared positive but not overly committed to the project in recent public statements.
Recently, Dido Harding described the Fujitsu initiative as “one of a number of options” on fibre for TalkTalk, although she did go on to say that Fujitsu is a “very strong contender, and we’re very supportive of them and working hard with them to build a proposition that makes sense”. Virgin Media reiterated that its status as anchor tenant is contingent on the right rates for access, as an alternative to building out its own rural network.
Nevertheless, Stevenson pointed to consultants from the two telcos working with Fujitsu on plans to emphasise industry involvement. Regulator Ofcom was said to be “incredibly interested”, while the BDUK initiative is reported to be “very heavily and very positively engaged”.
“ We’ve spent some time with [the] government explaining to them what an alternative [to BT] could look like, and the real reason for doing that is nobody was really telling anybody there was an alternative. If the UK is going to be the best broadband network in the world what’s happening now will not do it. ”
During the interview, he indicated that Fujitsu were in early discussions with BSkyB and mobile operators Telefónica O2 UK and Vodafone UK regarding the feasibility of the project.
Fujitsu to stand on the shoulders of earlier network builders
It was highlighted that, in the UK, it is possible that around two-thirds of fibre laid as part of earlier efforts to break BT’s stranglehold on network assets remains unlit, and that tapping this capacity is “absolutely” part of Fujitsu’s plans.
“ There is plenty of fibre that goes deep enough within rural communities, [meaning] that you’re not making absolutely outrageous investments in terms of very, very long digs. There’s quite a lot of [sunk] asset [available that] you can use, and, if there is a real problem, then fixed-wireless access technologies these days for backhaul is very practical. Many mobile networks globally do that, and still deliver high-capacity bandwidth, so you can feed rural communities with fibre on a local basis and still do Gigabit backhaul using wireless, if it just doesn’t make economic sense to dig. So there is a variety of backhaul techniques that we can use. ”
Fujitsu confident on continued BT relationship, despite “awkwardness”
Despite a publicly sceptical response from BT to the Fujitsu network announcement, and BTwatch‘s belief that the project could have a material impact on BT’s abilities to tap the level of government support it is anticipating to support its fibre rollout plans, Stevenson maintained that his company’s working relationship with BT would continue relatively smoothly.
Stevenson also held out the prospect of BT Retail becoming a customer of his proposed new network, although this would be an outcome that might surprise Fujitsu as much as it would BTwatch.
“ ‘Co-opetition’ is the rubbish word that people use these days. I think the reality is that Fujitsu’s a big infrastructure provider: we provide technology to BT. We’re also a big customer of BT, and we do infrastructure for a lot of people in the UK I mean, we’re not wedded to one line of business within the UK. From BT’s perspective, we still collaborate very closely on what they’re doing around 21CN [21st Century Network] and their broadband build-out. Yes, it makes for some awkward conversations, but they’re no different to [the conversations between] any other couple of big corporations, I would say. Fujitsu views BT’s ventures into global IT services as a great opportunity for collaboration. “
“ It’s truly open access. We’d love BT Retail as a customer, but it is obviously a schizophrenic conversation for BT Group to have… If Fujitsu does this, would [BT] Retail get over themselves and go and buy some? ”
Will BT raise the stakes in its fight-back?
Stevenson suggested that BT attitudes have materially changed in the period since Fujitsu unveiled its wholesale fibre commitments, with increased executive engagement, and recognition that the proposal amounts to a serious, industry-backed challenge.
Whether this increased engagement will result in an acceleration of BT fibre proposals to seize back the initiative, a re-think on strategy to accommodate a new approach to next-generation access, or a return to regulatory squabbles and resistance, remains to be seen.
[Further reference: Interview with Andy Stevenson, Chief Executive, Fujitsu Telecommunications Europe -- Market Mettle, 26 May 2011.]
