BTwatch Report #230 January-February 2012 Executive Brief
20 February 2012
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- BT Group announced its results for the third quarter of its FY11-12 financial year, with warning signs that aspects of the Livingston transformation of the business may be running out of steam. While there was positive news on profit, and EBITDA targets have been brought forward, BT’s previously endless capacity for cost-cutting may finally be diminishing, although continuing termination rate cuts, and exceptional items outside BT’s control are masking the possible slowdown. [pp.4-10.]
- BT Retail looked for comfort in improving trends, as customer numbers and revenue continue to slide, but rivals continue to gnaw away at the core Consumer business, and BT Business is experiencing difficult times. BT Global Services is still seeing challenges in bringing in new contracts, although Asia-Pacific and Latin America were highlighted as sources of good news. Double-digit percentage increases in revenue for the year so far from these regions, generating low hundreds of millions in annual turnover are helpful, but will take time to have meaningful impact on the division. Financial news from BT Wholesale continues to be gloomy, with migration to Ethernet services a drain on performance after the pain of transitioning managed services contracts is worked through. More hopeful for the future, mobile IP voice products are said to be gathering momentum with operators. Openreach provided most of the results’ positive highlights for BT Group, although it is seeing operating costs rise alongside increasing revenue and improving EBITDA, as earlier cuts are reversed to support growth and business-as-usual operations. [pp.14-17, 26-27, 33-34, 35-39.]
- During BT’s results presentation, Ian Livingston and Olivia Garfield casually acknowledged that FTTP currently only passes around 50, 000 properties — against BT’s target of 2.5 million for summer 2012. While the BT decision to focus almost exclusively on FTTC for its fibre rollout can be seen as pragmatic, if somewhat short-term, it may suggest that taking fibre to the cabinet has been more demanding on resources than anticipated. [p.38.]
- BT looks to have finessed an answer to questions about the lower than anticipated levels of FTTP availability in the UK, with the launch of pilot programmes that will technically make FTTP available “on demand” across its entire fibre footprint. BT is open about the uncertainty of demand for the product, but considers it might be attractive to SMEs looking for cheaper alternatives to private circuits. [pp.41-42.]
- BT Group appeared to make significant headway in winning public funding for rural fibre rollout projects under the UK government’s BDUK scheme, winning the tender with Lancashire County Council, and being left as the only remaining bidder in Wales, following withdrawal of Fujitsu. Prospects of further wins also appear improved, with Fujitsu’s exit from the well-funded Welsh tender implying that alternatives to Openreach’s “industrialised machine” for rolling out fibre may not be financially viable. Cambridgeshire and Peterborough also gave indications that they favour BT’s proposed solutions. [pp.10-12.]
- BT Infinity uptake continues to accelerate, and to prove a unique selling point for the BT Retail business. The division said around half of the 95, 000 new customers that signed for the fibre offering are new to BT Broadband, and 20% had no existing billing relationship with BT at all. The BT Vision pay-TV service is finally beginning to find a market, as consumers appear reluctant to commit to more established mainstream services, but may now face sector disruption from smart TV. The Vision offering is still a distant third in the market however, and newer services, such as BT Vision 2.0 and YouView, are taking their time to materialise. [pp.15-17.]
- Ofcom granted BT Wholesale and Everything Everywhere an extension to their temporary LTE spectrum licence, to allow trials of network cohabiting in Cornwall to continue until June 2012. Although the trials have been proving successful in terms of technical capabilities, BT played down the potential role of LTE-based services within its wider rural roll-out plans, stating that, in most circumstances, fixed-line services provide a better broadband product, and citing “white space” technology as a possible alternative. [pp.35-36.]
- Ofcom’s latest research into the UK broadband market found that broadband speeds across the UK are increasing, as customers trade up to higher-speed packages. BT Retail could be seen holding its own against copper competitors, although cableco Virgin Media still has an edge on next-generation services. Both BT’s Infinity and Virgin Media’s fibre-optic service may get a boost when new advertising restrictions come into effect, which could see most up-to-24Mbps products have their headline boast capped at around 14Mbps. [pp.17-19.]
- BT Retail and rival TalkTalk began a new appeal in their fight for a Judicial Review of the Digital Economy Act 2010. [p.20.]
- BT Retail launched an application for Research In Motion’s BlackBerry devices, which enables users to find the nearest BT FON Wi-Fi hotspot. The BT network of wireless network hotspots has expanded to cover more than three million locations. [p.21.]
- BT Conferencing signed an inter-provider agreement with Verizon Enterprise Solutions, to enable their customers to link up for video-conferencing calls using Cisco TelePresence solutions. [p.24.]
- BT Global Services made two senior international appointments, naming Luca Zappia as Country Manager for Switzerland, and Haruno Yoshida as President of BT Japan. [pp.28, 29.]
- BT Global Services signed up for Compuware’s CloudSleuth partner community, which will see its On-Demand Compute cloud hosting services monitored by CloudSleuth for service quality. The telco will also collaborate on best practices and strategies for applications in the cloud. [pp.30.]
- Telefónica’s Be Broadband indicated it is to use BT Wholesale fibre offerings to support a fibre broadband service where its network will not be able to deliver Openreach services. [p.35.]
- Within the wider fibre roll-out, Openreach provided details of the next 178 exchanges across the UK to be upgraded for fibre services. This phase will cover around 1.8 million homes and businesses, and the majority of exchanges will be enabled by the end of 2012. [p.41.]
- Openreach reported on several developments on FTTP, even though availability is scarce. The access services division promoted an expansion of its urban pilot in East London, adding more apartment buildings to its existing trial. Pricing and availability details were also provided for Openreach’s Fibre Voice Access product, which will enable communications providers to offer voice services over FTTP lines, dispensing entirely with the need for legacy copper connections for voice services. [pp.42, 43.]
- In preparation for the planned increase in maximum speeds for its FTTC products from 40Mbps to 80Mbps, Openreach announced an upgrade to its Enhanced Managed Line Checker, to reflect the higher potential speeds. It also confirmed that the faster FTTC variant would be made available by spring 2012. [p.42.]
- Ofcom submitted a new set of proposed charge controls for Openreach’s LLU and WLR services to the European Commission, outlining its proposed glide path for price reductions over the next two years. BT predictably objected to the proposals, questioning Ofcom’s methodology and claiming that price restrictions limit its incentives to invest. [pp.45, 46.]
- Openreach and ADVA officially launched their previously-announced Optical Spectrum Access service, as part of Openreach’s Optical Spectrum Service portfolio, significantly extending range and capacity over its previous OSA offerings. [p.47.]
- Openreach said that it would give communications providers greater access to performance and stability data on fibre lines, in order to allow them to evaluate the stability of lines to support linear IPTV launches. The move supports suggestions that BT Retail may soon make such a service available, building on its BT Vision on-demand service. Rival and UK new entrant Netflix gave an indication of the level of demand that video content can put on a network. During its first ten days in the UK. 21% of Netflix traffic was over the BT Retail broadband network. [pp.23-24, 44.]
About BTwatch
Report: #230
Covering: January-February 2012
Published: February 2012
Next report: March 2012
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