MAIN STORIES: The Digital Britain report on the future of UK media and communications was published, painting a picture of the development of next-generation networks in the UK that looks very favourable for BT, although BTwatch considers the lack of ambition and level of compromise means the initiative could ultimately prove to be a missed opportunity. However, there were plenty of positives for BT, which could see regulatory pressures ease further as Ofcom is charged with encouraging investment as well as promoting competition. A £6-per-year fixed-line levy looks set to be introduced to effectively subsidise BT’s fibre rollout; and public money is also to be made available for bringing universal 2Mbps broadband across the country. [pp.512.]

Dan Marks, head of BT Television Services, resigned from the company and is to be replaced by his deputy, Marc Watson. Marks left BT Retail claiming frustration that lack of regulation in the pay-TV market has meant that BT Vision has been unable to make a significant impression. Chief Technology Officer Matt Bross looks set to follow Marks out the door in BTwatch’s view, after the last vestiges of significant responsibility appear to have been stripped from him as his Chief Technology Office BT Innovate is merged into BT Design. [pp.1819,29.]

Following rapidly on from criticism that it was throttling broadband speeds, BT Retail announced it was offering to upgrade its customers to ADSL2+ for the same price as they currently pay. The upgrade requires a new contract and was made available immediately to BT Business customers. BT is advertising the service as up-to-20Mbps, although the claim is optimistic, and Charles Dunstone of rival Carphone Warehouse noted that offering speeds far beyond those that can realistically be achieved by the average customer’s line is likely to lead to dissatisfaction. BT-owned PlusNet paused its ADSL2+ rollout due to unexpected technical problems. [pp.20,2627.]

It was confirmed that BT Wholesale is to manage the network assets of Kingston Communications, as part of a deal that could be worth up to £750m over the coming ten years. [p.49.]


Issue: 2009.05
Covering: June to early-July 2009
Published: July 2009
Next issue: August 2009

Mapping the activity and strategy of the UK’s largest telco. A unique monthly report for the industry.

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EXECUTIVE BRIEF

MAIN STORIES: The Digital Britain report on the future of UK media and communications was published, painting a picture of the development of next-generation networks in the UK that looks very favourable for BT, although BTwatch considers the lack of ambition and level of compromise means the initiative could ultimately prove to be a missed opportunity. However, there were plenty of positives for BT, which could see regulatory pressures ease further as Ofcom is charged with encouraging investment as well as promoting competition. A £6-per-year fixed-line levy looks set to be introduced to effectively subsidise BT’s fibre rollout; and public money is also to be made available for bringing universal 2Mbps broadband across the country. [pp.512.]

Dan Marks, head of BT Television Services, resigned from the company and is to be replaced by his deputy, Marc Watson. Marks left BT Retail claiming frustration that lack of regulation in the pay-TV market has meant that BT Vision has been unable to make a significant impression. Chief Technology Officer Matt Bross looks set to follow Marks out the door in BTwatch’s view, after the last vestiges of significant responsibility appear to have been stripped from him as his Chief Technology Office BT Innovate is merged into BT Design. [pp.1819,29.]

Following rapidly on from criticism that it was throttling broadband speeds, BT Retail announced it was offering to upgrade its customers to ADSL2+ for the same price as they currently pay. The upgrade requires a new contract and was made available immediately to BT Business customers. BT is advertising the service as up-to-20Mbps, although the claim is optimistic, and Charles Dunstone of rival Carphone Warehouse noted that offering speeds far beyond those that can realistically be achieved by the average customer’s line is likely to lead to dissatisfaction. BT-owned PlusNet paused its ADSL2+ rollout due to unexpected technical problems. [pp.20,2627.]

It was confirmed that BT Wholesale is to manage the network assets of Kingston Communications, as part of a deal that could be worth up to £750m over the coming ten years. [p.49.]

BT GROUP: Tony Ball, former BSkyB Chief Executive, was appointed as non-executive director for BT Group. Current board member Patricia Hewitt is to take on senior independent director duties, following the departure of Maarten van den Bergh. [pp.34.]

BT is looking at creative cost-cutting solutions that avoid redundancies, including offering to “loan out” staff to other companies, and enabling employees to take additional time off or take career breaks while taking a 75%-salary cut. Despite BT efforts to demonstrate it is not rewarding failure, executive pay at the company continued to be scrutinised, with particular anger expressed towards the £3m pay-off for Global Services scapegoat François Barrault. [pp.13,15.]

Tech Mahindra appointed new executives and re-branded Satyam as Mahindra Satyam, as it started to get to grips with rejuvenating the scandal-hit services provider. [pp.1617.]

STRATEGY & OPERATIONS: BT channel partners were said to be concerned about a lack of clarity from BT regarding 21CN plans, with the project appearing to take a back seat to the roll out of fibre, in terms of coverage. BT Chairman Sir Michael Rake hinted at BT plans for FTTH following quickly on from FTTC, suggesting that 2014 could see a roll out of fibre to premises. [pp.22,23.]

Tata Communications said it has won a deal worth an estimated $1bn to become the primary supplier of international direct dial minutes to BT, under a five-year contract. BT could also become the main distribution channel for IDD traffic for Tata in Europe, as the relationship develops. BT renewed its trading agreement with in-administration vendor Nortel, covering convergence products; and network solutions provider Harris Stratex talked-up a multi-year IP solutions deal with BT. [pp.2425.]

BT RETAIL: BT let it be known that it would not proceed with plans to introduce the BT WebWise targeted-advertising solution based on controversial technology from Phorm. The decision may have come too late to reverse the damage done to BT’s reputation by its drawn-out handling of the sensitive topic of online privacy. [p.28.]

Setanta Sports , one of the principal premium content services on BT Vision, was withdrawn from the platform just ahead of Setanta going into liquidation. ESPN, which bought the channel’s Premier League football rights, is to replace Setanta on the TV platform. There was a delay in the process of starting up IPTV initiative Project Canvas , as the matter remained under discussion at partner BBC. BT attacked BSkyB for attempting to block the project, but may have irked the BBC by calling for content providers to pay towards the cost of delivering their services via the internet. [pp.3032.]

O2 UK is to offer all its mobile broadband customers access to Wi-Fi via BT Openzone hotspots, extending a deal between the two companies that had previously seen only iPhone users benefit. BT Openzone also won a contract to provide Wi-Fi to branches of Starbucks in Portugal and Spain. A deal with ATM company Cashbox will see cash dispensers fitted with Wi-Fi kit. [p.33.]

There were reports that BT and AT&T were to agree an interconnection deal for Cisco TelePresence services, despite squabbling; and Nestlé announced it is to introduce Cisco TelePresence conferencing supported by BT. [p.34.]

Irish music publishers are to take BT Ireland to court, for refusing to agree to the industry’s demands for a strict policy on illegal file-sharing. [p.35.]

BT GLOBAL SERVICES: BT won a £22m contract extension with Spanish bank Caixa Galicia to provide an iVPN service, as well as a seven-year WAN services deal with Swiss firm Syngenta. Hertz Europe also extended its NITS contract with BT, and the Metropolitan Police in London is to deploy BT identity management systems. [pp.3739.]

The value of BT’s contracts with the NHS were said to have been boosted by £546m, following its agreement to take over Fujitsu contracts in the South of England. The additional money was said to be indicative of both BT’s underbidding for its original IT contracts with the NHS, and its stronger bargaining position when renegotiating the floundering South of England deals. [p.40.]

BT signed an MoU with Indian government computer security organisation CERT-In, as Chairman Sir Michael Rake emphasised the importance of the region to BT. BT Italia looked to bring in a new business plan that will cut staff and costs to help it compete more effectively. BT expanded its global media network to Holland, and agreed a deal for more satellite capacity in Latin America. [pp.4244.]

Hosting facilities were expanded, with a data centre added to serve the financial community in New York. A new virtual data centre solution was showcased ahead of its launch at a conference in Germany. [pp.45,48.]

BT WHOLESALE: Charles Dunstone of Carphone Warehouse pondered the possibilities for competing with BT Wholesale, as his company absorbed its recent acquisition Tiscali, and emphasised its right to a say in the development of future networks. [p.50.]

ISPs Spitfire and Entanet indicated they were to participate in BT Wholesale trials of VDSL, which are to be conducted as part of BT’s pilots of FTTC. [p.50.]

OPENREACH: Openreach was reportedly in ongoing talks with the Communications Workers Union over working practices, as the union attempts to resolve staff concerns over satellite tracking, and the access services’ business looks for concessions that might provide a cost-efficient alternative to outsourcing work. [p.52.]

The number of unbundled lines inched towards six million, as Openreach committed resources to a product development roadmap ahead of anticipated Ofcom approval. [p.52.]

EXTRACT

DIGITAL BRITAIN: Opportunities for BT as Digital Britain report published

The Digital Britain report was published by the UK government’s Department for Business, Enterprise and Regulatory Reform (BERR), with recommendations and proposals for engendering the development of a UK society that fully embraces digital technology. The scope of the report covered the future of television and radio, creation and control of digital content, the role of government in the digital world, and, most significantly for BT, the creation and maintenance of the appropriate infrastructure to make the transformation possible.

Fixed lines to attract £6 annual levy to build next-generation public fund

The headline-grabbing plan from the document was the introduction of a £6 surcharge to be levied on all fixed lines in order to subsidise the rollout of next-generation high-speed broadband to areas where it would not be economically viable otherwise.

A Next Generation Fund is to be raised through a £0.50 supplement-per-month on nearly all fixed lines, which was described as the “fairest and most efficient means of ensuring that the overwhelming majority of the country has access to next-generation broadband”. It is interesting to note that, at this stage, the report refers to providing next-generation coverage to the majority, and not all of the country.

The supplement is to be applied to “all copper fixed lines” (residential and business equivalent) from 2010. Mobile lines are not to be included as they are considered to contribute through licence coverage requirements for mobile telephony and broadband. Confusingly, while the report says the levy will be applied to copper lines, it actually includes Virgin Media cable connections in this definition. Customers on social-telephony schemes will not be required to pay the charge.

The levy was justified in terms of the overall falling prices of services in the UK. Rather disingenuously, the report highlighted the existence of “free” broadband, and suggested that 10Mbps DSL could be found for £5.99-per-month, but it seems likely that this would be as part of a bundle with other services.

It was predicted that £150m- to £175m-per-year would be raised by the levy. It is considered that this level of annual subsidy would make connecting the “Final Third” as commercially viable as connecting the rest of the country by 2017. Estimates from Business Monitor International suggested there would be 32 million fixed lines in the UK by the end of 2009, which could be the starting point for the levy collection, and could see nearer £192m collected in 2010, although this figure would be reduced by the trend for declining fixed-line connections. The estimated total includes cable lines, which appear to attract the levy.

90%-fibre coverage by 2017

A Final Third project is proposed that would deliver 90%-coverage of next-generation broadband for homes and businesses by 2017, which is also hoped to accelerate the rollout of coverage from the 50% range to two-thirds. The report authors considered targeted subsidies as more effective than tax incentives to deliver this target, which is why a supplement on fixed lines is to be imposed.

As areas in need of investment are identified and classified, a reverse auction would be conducted to select the company that wins each next-generation upgrade project to be developed under the initiative. A coherent framework for network design, operating systems, common processes, and regulatory requirements is to be agreed upon to ensure consistent quality and choice.

Although possible, it is unlikely that any company other than BT is going to be in a position to make viable tenders for the projects, considering that they would still carry risks, require experience and personnel, and may have no significant upside. Virgin Media is perhaps one exception, although its experience remains in provision of services in densely populated urban areas.

The cost of a national fibre rollout

Analysis conducted for the report suggested coverage can be brought to between 60% and 70% of the country before incremental rollout costs begin to rise notably. The Digital Britain report showed initial costs-per-connection in higher density areas hover around £400 for fibre-to-the-cabinet (FTTC), and around £2,000 for fibre-to-the-home FTTH (Gigabit Passive Optical Network/GPON slightly higher than point-to-point/PTP).

Analysys Mason figures, released by the Broadband Stakeholder Group, were used by Digital Britain to make its assumptions on costs. According to the source material, a nationwide deployment of FTTC with scope for competition at cabinet infrastructure-level would cost £5.6bn, compared to £5.1bn for a network with some competition in more dense areas, and £4.6bn if infrastructure-sharing was not a requirement (although the report suggested that, in practice, competition would only be practical for just under 70% of the population).

BT doubts levy-level

Subsequent to BT’s initial positive response to the report (see below), there were indications that the company does not consider that the levy alone will be sufficient to bring broadband to the 90%-level envisaged by the report.

” There’s £1bn on offer here, but the devil’s in the detail about which areas will get funded. If [the charge] is for the ‘Final Third’, we would be very surprised if that could cover it. All our modelling shows differently. If you’re going from 55% to 85% [coverage], then I can see that that could be delivered. I can see a way to get to 85% with that kind of money. But we will struggle to get to 100% — in fact, it would be impossible to get to 100%. “
— Liv Garfield, BT Group Strategy and Portfolio Director.

The comments from the BT executive do not actually appear to stray too far from the logic of the Digital Britain report, although they do appear to be based on different assumptions of what the levy funds can be used for. BTwatch’s reading of the Digital Britain report considers that the fund would be available only for the areas where the economic case for fibre is the weakest — the final 30% of the country where the report’s research indicated the cost of deploying fibre begins a steep rise. The report left a somewhat grey area as to plans for how coverage will be boosted from levels of around 50% to approaching 70%, but suggested that by supporting the rollout in the most remote areas, competitive pressures (and presumably public demand) would see an operator (presumably BT) speed up plans to deploy in those areas. Garfield appears to suggest that the funds would be available in a much larger area of the country than Digital Britain is proposing.

It was interesting to note that, according to Garfield, the levy could bring in funding of £1bn. Assuming the executive was considering the 2010-2017 period, from when the levy is introduced until the 90% target is hoped to be achieved, this would mean BT is predicting a fairly steep continued decline in fixed lines. Digital Britain had predicted annual levy revenue of between £150m and £175m, which would give a range of £1.2bn to £1.4bn over the same period. As noted elsewhere, a research estimate put the potential sum that could be collected in the first year as high as £192m.

Comment: does BT forecast a halving of wireline connections by 2017?

BTwatch (issue 2009.04) recently calculated that the UK had 30.4 million fixed-access connections at 30 March 2009 (excluding broadband, but including cable), and, in very crude terms, this base has been declining at an annualised rate of around 2.6%.

If crudely extrapolated, this suggests a reduction to around 24.5 million connections by 2017 (down 19% over the period), and an income from the proposed levy of around £1.3bn in the eight years to that date (seemingly bang in line with the Digital Britain estimates).

However, if BT’s internal estimates reduce this income to £1bn (rather than just conveniently rounding it down), it could be projecting far sharper annualised decline in region of 8.5%, which, conceivably, could involve the fixed-line base being cut in half over the same period. At present, the major line-base losers are BT Retail and BT Wholesale, with rivals until very recently still growing their bases, so such a scenario could get even worse from a competitive standpoint. Should BT hold a far more pessimistic view, as outlined above, it could fear that fewer than half of UK homes will be connected to fixed networks in 2017 (compared to over 90% at present).

Even the more moderate decline suggested by BTwatch‘s back-of-an-envelope calculations raises further questions related to Digital Britain, or at least BT’s role as a wireline participant and presumed prime beneficiary. The current norm is for fixed-broadband to share a voice connection, but a decline to 24.5 million fixed-connections would considerably undershoot the number of households and business premises in the country, with perhaps as many as 25% of homes without a fixed connection, leading to the conclusion that wireless access could prove a critical component of the Digital Britain vision. However, BT might successfully argue that ‘availability’ is the key criteria, as opposed to ‘provision’.

Universal Service commitment for broadband by 2012

Prompted by research showing that more than 10% of households cannot achieve 2Mbps, Digital Britain introduced a Universal Service Broadband Commitment that will see 2Mbps delivered to all areas of the UK by 2012.

This is expected to be completed using copper and wireless networks, possibly including satellite if necessary. It may be that mobile networks are the most cost-effective and quick way to complete this exercise, and it is not clear to whom the obligation of coverage provision would be handed. The view of many observers, including Openreach Chief Executive Steve Robertson, is that the fixed-line network is the most effective way to complete the project (see separate report), although more creative solutions may be needed for a tiny proportion of remote areas.

£200m of direct public funding is to be made available to fulfil the broadband commitment, with additional funds and support including: putting contracts out to tender; contributions in kind from private partners; public sector organisation contributions in areas that will benefit from contributions; consumers themselves paying for in-home upgrading; and wider coverage obligations on the mobile operators.

A Network Design Procurement Group is being established to deliver on the commitment, with a Chief Executive to be appointed in the autumn of 2009.

The BBC Trust will also have a view on the rollout, presumably linked to proposals for widespread IPTV/internet television plans as part of Project Canvas (see separate report).

Ofcom role to encompass investment as well as competition

Ofcom is to have its role “modernised”. This would see it given an “explicit general duty” to encourage investment in networks to further interests of consumers, alongside its duty to promote competition. It will also be required to alert the government of any significant deficiencies in coverage, capability, or resilience of the UK communications infrastructure, and report every two years on the overall state of the infrastructure.

The need for modernisation was the result of an “accelerating picture of investment in multiple types of next-generation networks”. This seems to reflect a long-standing BT argument that it should no longer be considered dominant due to the availability of alternatives such as mobile coverage (some evidence of which can be found in BT’s performance extrapolated from BT Key Performance Indicators by BTwatchBTwatch, 2009.04).

BTwatch considers it is difficult to see a way in which the report does not provide BT with considerable licence to build-out networks as it sees fit, and could mark a longer term return to the levels of monopoly and imperiousness to regulatory decisions made by Oftel that BT enjoyed at the turn of the century.

Further report highlights

  • In his introduction to the report, Lord Carter noted that it is vital for the private sector to invest and build next-generation infrastructure, but also that the money and value in the market is shifting to service and application development rather than infrastructure. Interestingly, this move towards applications was predicted by BT when it introduced the 21CN project in 2003, and the rapid delivery of applications over the new network was considered to be one of the keystones of the project (BTwatch, 2003.05). However, because of the barriers and hurdles that the project encountered on the way, and a failure to address immediate competitive threats while focusing on future markets, BT is now in a position where it is still catching up on rivals with an ADSL2+ rollout, and has failed to introduce the layers of 21CN that would have seen it already well placed for this movement in the market.
  • The Digital Britain report suggested that the UK is on the verge of a digital “big bang” , with the volume of digital content expected to increase by a factor of between ten and one hundred times in the next three-to-five years.
  • Virgin Media is not to be required to open its network to rivals, but forcing it to do so in the future was not ruled out.
  • The report also emphasised the importance to government of a shift of public sector services to digital “as part of the financial solution for the public services” . This could be a possible further indicator that BT may be in a strong position to push for public investment and minimal regulation on its new infrastructure. Some commentators observed that the majority of the public that are most dependent on public services are those least likely to be online, which could also mean a push to bring basic broadband services into homes that have so far resisted the technology, perhaps suggesting there will be scope for a broadband equivalent to BT’s low-user/low-income voice line rental products.
  • A factor to be taken into account in considering the Digital Britain report is the prospect that the government behind it could be replaced within the next twelve months, and a Conservative Party spokesman on the topic of Digital Britain was critical of the levy and on BT’s own levels of commitment to super-fast broadband networks.
  • It was noted that wholesale prices for copper line services had fallen £8-per-year since 2005 in real terms. The combined retail cost of voice and broadband has fallen by £7.50 over the same period in real terms.
  • Consensus has not yet been reached between the government and the mobile operators on the future of mobile spectrum, which is an obstacle on the roadmap for future developments of next-generation mobile services. Should agreement between the parties be reached, auctions of 4G-suitable spectrum could quickly follow in 2010 (for more on the impact of Digital Britain on mobile operators, see Telefonicawatch and Vodafonewatch).
  • In discussing the importance of establishing the standards of online privacy, it was noted that the Information Commissioner is developing a new code of practice for personal information online. Also, Sir Tim Berners-Lee has been appointed by the Prime Minister to form a panel to determine the best way to manage public data. Berners-Lee has in the past spoken out against targeted advertising services such as Phorm, which BT until recently was expected to launch on its network (see separate report), due to privacy concerns. It is unclear whether Berners-Lee will directly touch upon the use of data for advertising purposes, but it is significant that a high-profile figure in a prestigious role that is considering the management of online data is concerned about the rise of such services.
  • Francesco Caio in his earlier report on next-generation network deployment set out a number of recommendations that Digital Britain said could still be carried through as part of, or in addition to, its main plans. These include: guidelines for homebuilders to mandate embedded next-generation broadband; relaxation of regulations on overhead lines; and ensuring there is no discrimination on non-domestic rates.
  • Digital Britain considered Long Term Evolution (LTE) 4G mobile networks as capable of bringing mobile broadband speeds of 50Mbps in a competitive market, but with challenges to a rollout in the Final Third of the country. The report foresees mobile data connection speed increases for the Final Third that would not be based on truly next-generation mobile broadband technology.
  • The report described fixed-to-mobile substitution as “modest” .

Comment: will the levy actually hurry fixed-lines’ demise?

In its current state, the fixed-line telecoms market is moribund, with lines being shed at increasing rates and alternatives increasingly viable. Passing on a £0.50-per-month line rental increase to customers already seeing increased line costs, and finding that advantages of fixed-line access are dwindling, must be questioned.

Beyond the core network that will remain essential, the wisdom of burdening the dwindling customer base of fixed-line services in order to make it a more viable offering in the long term runs the risk of building a network for which many find they have little use.

The decision to set aside funds for bringing 2Mbps to the homes across the UK that are at present unable to receive such speeds also highlights the compromised ambitions of the project. A grand infrastructure project could surely have begun by grasping the opportunity to leapfrog currently (barely) acceptable 2Mbps for the introduction of fibre as a showcase for a new network’s capabilities. Instead, the remote areas of the country look set to remain technological backwaters saddled with a service that has already been identified as insufficient for future needs.

Reaction — BT the winner

Expressing a view that no doubt had been shared with Lord Carter prior to the announcement of the levy, BT Group Chief Executive Ian Livingston indicated that BT could now seriously consider running FTTC past 90% of UK homes by 2017, while at the same time downplaying the potentially positive impact of the report on BT. Virgin Media, meanwhile, appeared satisfied that its network was not to be subject to increased regulation.

” BT agrees with the government that next-generation broadband will be important to the country’s economic future, and we will continue to play a leading role in strengthening the UK’s leadership in communications. It is important that the government finds ways to encourage investment in super-fast broadband, particularly in the parts of the country where the economics currently do not work. The report recognises this, and Lord Carter should be praised for offering a creative solution. “

” BT is alone in having an open network that hundreds of other companies can, and do, access, so we are well placed to be at the heart of the government’s plans. Funding should only be available to companies that are prepared to open their networks to others to ensure that [the] UK retains the most competitive telecoms sector in the world. “

” What this might well do, and has a good chance of doing, is providing enough support to make the risk and rewards of doing this programme acceptable. “

” I don’t think BT looks radically different today [after the publication of the report] from how it did yesterday. The most important thing for BT is operational excellence. “
— Livingston.

” As both Ofcom and the government have acknowledged, there is no immediate case for mandating access to Virgin Media’s network. “
— Virgin statement.

The view among the analyst community largely shared BTwatch‘s opinion that the report is favourable for BT (with little apparent consideration for the longer term effects that strongly favouring BT could have on market development).

BT is expected to be the primary gainer from government subsidies, and the changes at Ofcom are expected to give the incumbent more of a free hand.

” BT has now had a considerable hand up from the government. It means that the company can now start to tell a credible longer term story. “
— Robin Bienenstock, analyst at Bernstein Research.

Analysts at UBS considered that, on the apparent assumption that BT’s current plan to spend £1.5bn on fibre rollout would cover 40% of the country (and it should be noted that, at all stages, BT has said that some spending will be dependent on public sector contributions), taking FTTC to 90% of the population will cost an additional £3bn. UBS also said the levy could contribute between £1.1bn and £1.4bn to this total.

” [Digital Britain tilts] the playing field rather more in favour of BT [by] offering solace in the form of a changed Ofcom mandate and a ‘‘Next Generation Fund’ that will generate roughly £150m to £175m a year in subsidy for the provision of fast broadband to the ‘Final Third’ of the country. “

” Rather than having to choose between milking decaying assets into oblivion on one hand, and indebting itself to undertake massive investment on the other, BT now has the possibility of capturing cost savings and reinvesting them to sustain a longer term future as the country’s chief network access player. “

” The only point of caution that we can see for BT is that it is still unclear how the bidding process for any subsidy will actually work. “
— Sanford Bernstein Research.

” Whilst much discussed in recent months, a duty [upon Ofcom] to promote investment is generally seen as a positive for BT, given the previous 20+ year focus on competition within the UK market. ” Cazenove.

In the media, while the report was considered worthy if a tad unambitious, The Economist was notable for its contrarian view on the value of spending now on super-fast networks.

” Spending public money on whizzy new networks appeals to technophiles, but the benefits are not clear for others. Video-on-demand is the usual justification, but Sky, a satellite-TV firm, already offers such a service, and the BBC’s popular iPlayer service runs well enough over the existing network. Boosters claim the benefits of fast internet access cannot be predicted, and that history shows that extra bandwidth generates its own supply of data. Yet evidence from Hong Kong, which already offers speedy connections, suggests that super-high speeds appeal only to a few. And if demand for speed grows, the falling cost of hardware means it will be cheaper to provide in future than it is today. ” The Economist.

[Further reference: Taxpayers face bill to meet costs Financial Times, 16 June 2009; Digital Britain brings BT some cheer Financial Times, 17 June 2009; Vodafone and BT buck FTSE fall as miners slump again The Guardian, 17 June 2009; Digital Britain: what it means for shares Citywire, 17 June 2009; Logica advances as broker turns positive; Market report The Independent, 18 June 2009; And access for all; The future of broadband The Economist, 20 June 2009; BT has reservations over broadband tax plans — ZDNet, 2 July 2009; Phone tax not enough for full broadband rollout — v3.co.uk, 2 July 2009; Tax on fixed line to subsidise broadbandBusiness Monitor International, 1 August 2009.]

TABLE OF CONTENTS

3 BT Group

3 Appointments
3 BT appoints Tony Ball to the Board
4 BT Board
4 Brokers’ reports
4 Ball brings valuable expertise to BT Board
5 City reports
5 Community
5 Digital Britain
5 Opportunities for BT as Digital Britain report published
5 Fixed lines to attract £6 annual levy to build next-generation public fund
6 Community
6 Pensions
6 90%-fibre coverage by 2017
6 The cost of a national fibre rollout
6 BT doubts levy-level
7 BT Pension Scheme plans equities withdrawal
7 Marketing
7 Agencies pitching for £9m digital ad account
7 Comment: does BT forecast a halving of wireline connections by 2017?
8 Public relations
8 CSR agency dropped as part of PR shake-up
8 Universal Service commitment for broadband by 2012
8 Ofcom role to encompass investment as well as competition
9 Regulatory
9 Further report highlights
10 Annual General Meeting
10 BT bullish in face of AGM dissatisfaction, pension worries
10 Comment: will the levy actually hurry fixed-lines’ demise?
11 Reaction — BT the winner
13 Employment
13 BT to loan out staff
13 BT offers employees year off on 25%-pay
15 Executive pay
15 L&G leads complains about BT bonuses
16 Tech Mahindra/Mahindra Satyam
16 New name and new executives for Satyam
16 New name first phase on road to merger
17 Tech Mahindra raises funds to boost Satyam stake

18 Strategy and operations

18 BT Innovation & Design
18 BT holds international “code jam”
18 BT Design to merge with BT Innovate
19 End of the road for Bross?
20 21CN
20 PlusNet hits snags in ADSL2+ trials…
22 …begins tests of IPStream Connect
22 Partners and resellers bemoan 21CN uncertainty
23 Fibre
23 Rake hints at FTTH rollout by 2014
24 Suppliers
24 Tellabs beat Huawei to BT 21CN deal
24 Tata trumpets $1bn BT deal
25 BT renews trading agreement with Nortel
25 Harris Stratex heralds BT contract

26 BT Retail

26 Broadband
26 BT to boost broadband speeds to 20Mbps
26 Broadband Accelerator to boost speeds on customer premises
27 Mobile
27 Up-to-20Mbps still an optimistic claim
27 Dunstone doubts BT’s ADSL2+ play
27 BT finally catching up with rivals?
28 Tariffs and pricing
28 Rivals, consumer groups criticise rolling contracts
28 Phorm dropped by BT in face of negative publicity
29 BT Television Services
29 Watson replaces Marks at BT Vision
29 BT Business
30 BT Vision removes Setanta Sports
30 BT highlights Setanta collapse as sign of pay-TV market weakness
31 Reseller predicts widespread SMB uptake of 20Mbps offer
31 BT calls for VoD contribution to broadband network costs
31 BBC Trust delays decision on Project Canvas
32 BT Payphones
32 Community
32 BT warns Sky over Project Canvas objections
33 Wireless networks
33 O2 UK extends Openzone deal
33 BT wins international Starbucks Wi-Fi deal
33 BT ties with Cashbox for ATM Wi-Fi
34 BT Conferencing
34 BT, AT&T close to TelePresence deal despite “politics”
34 Nestlé chooses Cisco TelePresence from BT
34 BT DirectorIes
35 BT Ireland
35 Clark pushes “sustainable cost‑transformation” message
35 BT wins deal with CryptoLogic
35 Record labels to sue BT Ireland
36 Clark pushes “sustainable cost-transformation” message cont’d
36 Marketing
36 BT uses Twitter to contact unhappy customers
36 A double-edged sword?

37 BT Global Services

37 Appointments
37 Contracts
37 BT wins five-year Caixa Galicia contract
37 BT wins Syngenta deal
39 Awards and accreditations
39 Hertz extends BT’s NITS contract
39 BT wins identity management contract with Met Police
40 NHS contracts
40 Value of BT NHS contracts up £546m
41 BT International: Americas
41 Foster: Breaking into the US security market
42 BT signs MoU with CERT-In
42 BT International: Asia
43 Rake underlines focus on Asia
43 BT International: Europe
43 BT Italia negotiates with unions over restructuring
44 BT expands media network to Netherlands
44 BT International: Latin America
44 BT signs satellite deal for remote coverage
45 Financial Services
45 BT expands hosting capacity
45 BT optimistic on financial services business
46 Partners
46 BT partners Secerno
48 Products and services
48 BTGS announces Virtual Data Centre service

49 BT Wholesale

49 Contracts
49 KCOM outsources network management to BT
50 Competitors
50 Carphone Warehouse ponders rivalling BT Wholesale
50 Fibre
50 Spitfire joins ISPs in Wholesale VDSL trial
51 Openreach
51 Disgruntled BT engineer “damages exchange”
51 Robertson on broadband for Digital Britain
52 Openreach in talks with unions over outsourcing
52 OTA2
52 OTA2 updates on network progress
53 BT fibre acceleration plans receive coverage boost
54 BT proposed fibre exchanges, second phase

55 Index

INDEX

A
Accenture, 40
Alcatel-Lucent, 19, 39, 46
Analysys Mason, 6
Apple, 33, 36
AT&T, 34, 42
B
BAA, 33
Babcock & Brown
– Eircom, 35
Bank of America-Merrill Lynch, 5
Barclays, 5
Berners-Lee, Sir Tim, 10
Bernstein Research, 11
Breckland Council, 32
British Broadcasting Corporation (BBC), 8, 12, 13, 26, 29, 31, 32, 33
British Chamber of Commerce, 43
BSkyB, 3, 4, 30, 32
BT Group, 3, 4, 5, 6, 7, 11, 18, 23, 24, 25, 43, 49, 50
– Asia
– Tech Mahindra, 16, 17
– BT Community Connections, 5
– BT Global Services, 4, 15, 18, 19, 34, 37, 39, 45, 46, 48
– BT Americas, 41
– BT Benelux, 39, 44
– BT Global Video Exchange, 34
– BT India, 42
– BT International, 41, 42, 43, 44
– BT Italia, 43
– BT Spain, 37
– One Source for Cisco TelePresence, 34
– Quick Start, 46
– Radianz Proximity, 45
– Virtual Data Centre, 48
– Work Anywhere, 46
– BT Group
– Strategy and Operations, 18
– BT Pension Scheme, 7, 13
– BT Retail, 22, 26, 29, 30, 33, 34
– BT Broadband, 26
– BT Broadband Accelerator, 26
– BT Business, 19, 29, 30, 31, 36
– BT Care (Twitter), 36
– bt.com, 7
– BT Conferencing, 34
– BT Ireland, 35, 36
– BT Mobile, 39
– BT MyPlace, 33
– BT Openzone, 33
– BT Payphones, 32
– BT Tradespace, 30
– BT Vision, 29, 30, 32
– BT WebWise, 28
– PlusNet, 20, 22
– Together, 25
– BT Wholesale, 22, 24, 26, 49, 50, 52
– DataStream, 46
– i-Plate, 26
– IPStream, 22
– IPStream Connect, 22
– Directors
– Ball, Tony, 3, 4
– Hewitt, Patricia, 4
– Rake, Sir Michael, 3, 4, 23, 43
– Executives
– Blackburn, Mike, 39
– Bross, Matt, 18, 19
– Bruce, Chris, 33
– Burger, Bas, 44
– Campenon, Olivier, 34
– Cavestany Vallejo, Jacinto, 37
– Clark, Chris, 35
– Croxford, Ivan, 30
– Dalton, Careson, 13
– Davis, Sally, 49
– Faux, Martin, 36
– Fitzpatrick, Brian, 24
– Foster, Jean, 41
– Garfield, Liv, 7
– Geddes, Martin, 42
– Halbert, Bill, 49
– Lalani, Hanif, 18, 37, 48
– Livingston, Ian, 11, 15, 18
– Morgan, Peter, 8
– Moss, Kevin, 41
– Murphy, Bill, 29
– Narang, Sudhir, 42
– Nicholson, Andy, 45
– O’Neill, Colm, 35
– Patterson, Gavin, 26
– Prestel, Jeff, 34
– Ramji, Al-Noor, 18
– Rangaswami, JP, 18, 36
– Robertson, Steve, 8, 51
– Rodrigues, Mario, 44
– Schneier, Bruce, 41
– Sciolla, Corrado, 43
– Smith, Karl, 46
– Watson, Marc, 29
– Williams, Sean, 30
– Ex-executives
– Barrault, François, 15
– Cowen, Tim, 37
– Green, Andy, 19
– Marks, Dan, 29, 32
– Verwaayen, Ben, 19
– Goonhilly Earth Station, 6
– Openreach, 8, 51, 52
– WLR3, 52
– Strategy and Operations, 18, 19
– 21CN, 9, 19, 20, 22, 24, 50
– BT Innovation and Design, 18, 19, 36, 42
– BT Operate, 19
Business in the Community, 5
C
Caffe Nero, 33
Caixa Galicia, 37
Carphone Warehouse, 27, 28, 50
– TalkTalk, 27, 28, 50
Cashbox, 33
Ciena, 4
Cisco Systems, Inc., 34, 37, 39
Citigroup, 4
Communications Management Association, 27
Communications Workers Union, 13, 52
CryptoLogic, 35
D
Datamonitor, 4, 17
Deloitte, 30
Department for Business Enterprise and Regulatory Reform (BERR, UK), 5
Deutsche Bank, 49
Deutsche Telekom, 4
Diabetes UK, 13
Digital Britain, 5, 6, 7, 8, 9, 10, 12, 26, 31, 51
– Caio, Francesco, 10
– Lord Carter, 9, 11, 26
DMSL, 31
DTV Services
– Freeview, 29, 30, 32
E
Entanet, 50
ESPN, 30
European Union, 28
F
Federation of Communication Services, 22
Fishburn Hedges, 8
Football Association
– Premier League, 30
Fujitsu, 40
G
Gamma Telecom Ltd, 22
Gartner Group, 31
General Electric Co. (GE)
– NBC Universal
– Universal Pictures, 29
Globant, 18
Goldman Sachs, 4
Grupo VIPS, 33
H
Harris Stratex Networks, 25
Hertz, 39
– Hertz Europe, 39
High Court, 35
Hilton Group, 33
Huawei Technologies, 24, 43
Hutchison Whampoa
– 3 Group
– 3 UK, 27
I
iMMovator, 44
Indian Computer Emergency Response Team
– CERT-In, 42
Industrial Technology Research Institute, 29
iome, 33
ITV, 3, 4, 29, 31, 32
J
JPMorgan Chase
– JPMorgan Cazenove, 12, 49
K
Kabel Deutschland, 3
Kazoo, 8
Kingston Communications (KCOM), 49
L
Law Debenture, 6
LBI International AB, 7
Legal & General, 15
LinkedIn, 41
Logica, 12, 19
M
Mahindra and Mahindra, 16
Mahindra Satyam, 16, 17
Marketing Society, 31
Metropolitan Police Service, 39
Morgan Stanley, 4
N
National Health Service (NHS, UK), 40
– NHS Connecting for Health, 40
Nestlé, 34
Netgem, 29
New Skies Satellite, 44
Nortel Networks, 25
O
Ofcom, 8, 9, 11, 12, 29, 30, 52
– Carrier pre-selection, 52
– LLU, 52
– Strategic Review of the Telecoms Sector, 52
– Wholesale line rental, 22, 52
Office of Fair Trading, 32
Office of the Telecommunications Adjudicator, 52
– OTA2, 52
Omnicom Group
– Abbott Mead Vickers BBDO, 7
– Agency.com, 7
Open IPTV Forum, 29
Ovum, 40
P
PCCW, 43
Phorm, Inc. (121Media), 10, 26, 27, 28
Pirelli, 29
R
Ramada Jarvis, 33
RapidShare, 26
Redwood, 36
S
Samsung, 30
Sanford Bernstein, 12
Secerno, 46
Setanta, 29, 30
– Setanta Sport, 29, 30
SkyTeam, 33
Sony, 35
Spitfire, 50
Starbucks, 33
Syngenta, 37
T
Tata Communications, 24
– Global Voice Solutions, 24
Tech Mahindra, 16, 17
– Mahindra Satyam, 16, 17
Technology
– ADSL, 22, 51
– ADSL2+, 9, 20, 22, 26, 27
– ATM, 33
– Broadband, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 22, 23, 26, 27, 28, 29, 30, 31, 32, 33, 36, 50, 51
– DSL, 5
– Ethernet, 19
– Fibre, 6, 7, 10, 12, 19, 22, 23, 26, 49, 50
– FTTH, 6, 23
– HD, 34
– ICT, 35
– IP, 22, 25, 29, 31, 37, 44, 50
– IPTV, 8, 29, 31, 32
– LTE, 10
– MPLS, 34
– NITS, 39
– Private circuits, 9
– Project Canvas (BBC, BT, ITV), 8, 28, 29, 31, 32
– SIP, 50
– Unified Communications, 39
– VDSL, 50
– Video-on-demand, 12, 31
– VoD, 31
– VoIP, 37, 50
– Wi-Fi, 33
Telefónica, 33, 36
– Telefónica Europe (O2), 33, 36
– UK, 33, 36
Teleglobe, 24
Tellabs, Inc., 24
Thus, 32
Timico, 27
Tiscali SpA, 50
Trimedia, 8
Twitter, 36, 41
U
Ubiquisys, 4
UKSIF, 6
UPC Communications, 35
Uswitch, 28
V
Verizon Communications, 42
Virgin Media, 5, 6, 9, 11, 30, 50
Vivendi, 35
Vodafone, 12
W
Wales Council for Deaf People, 32
Which?, 34
Wieden & Kennedy, 7
Wind Telecomunicazioni SpA, 6
WPP
– OgilvyOne, 7

37 Appointments