BTwatch, issue 2008.03-04
15 June 2008
STRATEGY & OPERATIONS: One of Verwaayen’s final acts as Chief Executive — and one that received decidedly less coverage than the tributes from his rivals — was the announcement of a re-think on BT’s approach to 21CN. Long-held ambitions to complete a nationwide rollout, which had appeared bogged down in technical difficulties, were finally abandoned and the roll out will now be based on customer demand. It would appear that only a fraction of the promised £1bn of savings per year will be realised, but BT has at last moved to meet customer demand for new services based on the latest broadband technology, and is now building out 21CN pragmatically rather than ideologically. [pp.4-5.]
Issue: 2008.03-04
Covering: mid-April to mid-June 2008
Published: June 2008
Next issue: July 2008
Mapping the maze of the UK’s largest telco. A unique monthly report for the industry.
SUMMARY
GROUP: Ben Verwaayen signed off as Chief Executive of BT Group, with colleagues and rivals paying tribute to his tenure. Ian Livingston took on the leadership role at the beginning of June 2008. Livingston was placed second in a list of the most influential people in the British technology sector. [pp.2-3.]
STRATEGY & OPERATIONS: One of Verwaayen’s final acts as Chief Executive — and one that received decidedly less coverage than the tributes from his rivals — was the announcement of a re-think on BT’s approach to 21CN. Long-held ambitions to complete a nationwide rollout, which had appeared bogged down in technical difficulties, were finally abandoned and the roll out will now be based on customer demand. It would appear that only a fraction of the promised £1bn of savings per year will be realised, but BT has at last moved to meet customer demand for new services based on the latest broadband technology, and is now building out 21CN pragmatically rather than ideologically. [pp.4-5.]
The role of PBT in the delivery of Ethernet services using 21CN is reportedly the subject of disagreement and a possible re-think within BT, according to reports. [pp.7.]
BT awarded Intelliden, a provider of intelligent networking software, a contract to provide policy-based compliance services for both BT Global Services, and BT Design, which is to use Intelliden solutions for automated network compliance across BT’s internal worldwide IT network. [pp.8.]
BT RETAIL: BT announced the successor to the failed consumer BT Fusion FMC offering, with BT Total Broadband Anywhere, which combines its premium broadband offering with a 2.5G Wi-Fi-enabled smartphone from HTC, called the BT ToGo. The enhanced broadband offering and mobile phone package will cost £29.99 per month, and includes 50 mobile minutes and texts, 10MB of GPRS downloads, and 500 minutes of Wi-Fi access. Many of the features of the Fusion phone appear to have been discarded, or de-emphasised, such as the ability to make wireless calls over the fixed-line within the home, although the device can be used to make VoIP calls. BTwatch considers the idea is potentially a good one, but amounts to a “cheap and cheerful” offering targeted at a premium service audience. [pp.11-13.]
BT Retail re-shuffled its management team, with the combative John Petter, Consumer Chief Operating Officer, being promoted to the role of Managing Director for BT’s Consumer division, filling a vacancy created by Gavin Patterson’s rise to divisional Chief Executive. Another notable move was the appointment of a new Consumer Marketing Director, Matthew Deardon, to consolidate BT’s approach across its consumer product line. [pp.10,11.]
BT reported it had more than doubled its BT Vision subscribers in the quarter, to 214,000, and announced a new content deal with Universal Pictures. The service is now also charging for on-demand content from the BBC. Pace Micro won a contract to provide next-generation set-top boxes for the IPTV service. [pp.18,19.]
BT Business broadband customers are now able to use their BT Business Hub as a public Wi-Fi hotspot and can sell BT Openzone vouchers, in a move that reflects BT’s consumer-shared Wi-Fi network strategy with BT FON. The FON project was said to have more than 100,000 members, and will be opened to non-BT Broadband customers. [pp.20,21.]
BT continued to receive negative publicity regarding its recent tariff changes designed to encourage customers to sign rolling twelve-month contracts, and also for its association with the controversial Phorm, a targeted web-advertising system. [pp.16,14-15.]
BT Business heralded partnerships with two business-to-business application vendors, NetSuite and SugarCRM, which will see the unit once again attempt to sell software as a service (SaaS) to the SME sector. BTwatch remains to be convinced the right partners have been chosen. [pp.23-24.]
BT GLOBAL SERVICES: Tim Smart, Chief Executive of BT Global Services in the UK, is leaving the company to take on the same role at King’s College Hospital. [pp.25.]
BT announced a £41.5m contract win with Scottish Water, a £30m IP communications deal with Network Rail, a WAN upgrade with Thomson Reuters, and network deals with Pioneer and E-Net. In the public sector, multi-million pound contracts were agreed with the Northern Ireland Department of Finance and Personnel, and additional work is to be done for The Pension Service. [pp.26,27,28,29.]
There were reports that BT was to re-sell O2 mobile services in the Republic of Ireland. A new IT management service for SMEs was also launched in the Irish Republic. [pp.31,32.]
BT signed another outsourcing deal with Tech Mahindra, but doubts were raised about the value and actual amount of work that the Indian IT outsourcing business is doing for the British telco. [pp.32.]
Reports suggested that BT might sell its data centres to HP in a deal worth around £1.5bn, which would apparently strengthen existing ties between the two companies. BT is working with Siemens on new converged communications solutions for multinational corporations. [pp.33,34.]
BT WHOLESALE: Among the new services announced by BT as it attempts to re-position 21CN as an operational network was the launch of the long-anticipated Wholesale Broadband Connect offering. BT Wholesale also launched BT Wholesale Ethernet, which it described as a carrier-class offering using 21CN. [pp.37,38.]
O2 and BT agreed a five-year managed services agreement that will see O2 as one of the first customers of the new Wholesale Ethernet offering. [pp.36.]
OPENREACH: Openreach announced Ethernet Backhaul Direct (EBD), a new 21CN service to be marketed to communications providers targeting the business sector, which is said to be up to 50% cheaper than legacy systems. Openreach also introduced a new Bulk Transport Link product, as a high-capacity means of delivering EBD. [pp.40.]
REGULATORY: After a lengthy consultation, Ofcom confirmed deregulation of around 70% of the broadband market, which it now deems to be effectively competitive. The regulator is also to examine Openreach pricing and changes in the market for the access service division’s main products, LLU and WLR. [pp.42,44.]
A new voluntary code of practice for broadband services providers was published by Ofcom, with BT among the service providers that have signed up to the commitment to be clearer on connection speeds and usage caps. [pp.43.]
RESULTS: BT published full-year results, which were broadly in-line with expectations, and showed strong cashflow, following an earlier exhortation from Finance Director Hanif Lalani to focus on the matter in the final quarter. [pp.45-57.]
EXTRACT
STRATEGY AND OPERATIONS > 21CN
BT admits re-think on 21CN delivery
Ben Verwaayen, speaking at the BT FY08 results presentation, announced a significant re-think in BT’s approach to the rollout of its 21st Century Network (21CN), finally accepting that the original plan as laid out in 2003 had been overtaken by events and was unattainable.
The emphasis now, according to Verwaayen, is on the delivery of new services prior to the completion of the physical network. The outgoing Chief Executive was quick to stress that there was more to BT’s new approach than enabling it to get ADSL2+ into its network (although BT is embarrassingly behind its competitors in this regard, with unbundled networks already providing up-to24Mbps services to between half and two-thirds of the UK population), and that a range of new simple wholesale services would accompany the change in priorities.
BT also abandoned any existing schedules for national rollout of 21CN, with the claim that 21CN transformation will now be “customer-led” and not involve a nationwide rollout.
Verwaayen outlined the cost savings generated by the programme to date, gliding over the fact that efficiencies of around £600m so far were drastically less than initially predicted — previously, annual savings of £1bn per year had been forecast from the 2008-09 financial year onwards.
” [The21CN] objectives have not changed…We wanted to embrace faster and better and cheaper…we wanted to give power to the customer — not asking BT for permission to run the new services, but being able to do it. What we added to the concept at [the beginning] was that we wanted to do it as fast as possible — a kind of physical rollout of the physical layer of the network to get the cost savings in. That was the concept — run it as soon as possible and we thought at that point in time that by 2010 we could have a nationwide run of the physical layer of the network, and then worry about new services in the software layer on top of that. “
” Now what has changed since then, after the trials, after talking to the market, and after listening to our customer base, is we don’t have until 2010 to look to the new services. It’s now. This is the world of now. We need now to get these new capabilities into the market space — capabilities that do not exist on a single box platform. It’s not simply ADSL2+ — plug it into the network [and] you get high speed. This is not just about high speed; this is about a new generation of capabilities, so we needed to re-think; and from [an emphasis on] a physical layer improvement on cost, we’ve changed [priorities], learning from where we are in a customer-led direction, and that means this: first of all, if people think that we are slow and that nothing is happening, 58% of the core network has been installed, it’s there. It’s in our core activities, or metro nodes…We have 106 metro nodes designed into 21CN; 64 are already there, and by year-end 2008 we’ll be at 80%. We’ll have 1,600 sites cleared…we have 700 exchanges ready for DSLAM [digital subscriber line access multiplexer]; 94 already have a broadband DSLAM in them. By April 2009, that will be 500, and people say this is great; these are numbers I understand, I can do something with. “
” This is the physical layer, allowing new services to come on-board. The real thing is the new services, because it’s not just about costs. Yes, we’ll do the costs, but over and above that, you get new services, which means better service for our wholesale customers who can then sell that to end customers. Better service, not only from a service-perspective, it’s also a better experience that you’ll you get. You’ll get new innovations, and you get as an organisation to make very profitable news services on an ongoing basis. “
” Most important, how are we doing on the finance? We’re doing good on the finance. So far, we’ve got cost savings of around £600m. £400m opex [operating expenditure]and £200m capex [capital expenditure]. You avoid investing in the [20th century network public switched telephone network/PSTN] by the deployment you have in the 21CN, and there’ll be a lot more to come. Because this will be a dynamic process, if you look to the numbers we can tell you three things: first, it will be at least £1bn and I think more. Second, it will be opex first, and capex somewhat later, but there will be capex you can follow; and third, because this will go not on a nationwide rollout but on a customer-led rollout, you will see there will be a tail on it. And I think this is good news, because it will be a project that will keep giving to this company. ” — Ben Verwaayen.
Comment: a wise move, too long in coming
While noting that Verwaayen’s valedictory presentation as Group Chief Executive offered a good cover for an embarrassing climb-down, BTwatch welcomes the BT decision to focus on delivering services to customers, rather than continuing to pursue a strategy for a total replacement of its legacy networks that was beginning to look less like a grand plan and more a major folly.
The initial goal of switching off the PSTN by 2009 was ambitious, but overtaken by events, and the 21CN business plan was built on pre-regulatory settlement assumptions about a market that has since seen competition expand drastically.
The great shame is that it has been evident for some time (and covered in detail here — BTwatch, passim) that the project was proving more complex than anticipated, that delays were happening, and that wholesale customers wanted services from BT that the incumbent could not provide, yet BT spent too long “re-arranging the deckchairs” for a business model that was sinking into obscurity.
[BT, 15 May 2008.]
TABLE OF CONTENTS
2 BT Group
2 Employment;
Executives; Events
4 strategy and operations
4 21CN; 21CN contracts
5 Research 6 Ventures
8 Partners 9 Strategy
10 BT Retail
10 Advertising; Executives
11 Billing; Broadband
12 Conferencing
13 Contact centres
14 Phorm controversy
15 Management
16 Consumer 18 Vision
20 Wireless networks
22 Digital content
23 Business
25 BT Global Services
25 Acquisitions; Awards and accreditations; Benchmarking; Executives
26 Contracts
28 Public sector contracts
29 Africa; Media and broadcast
30 Asia 31 Europe
32 Global financial services; Outsourcing
33 Counterpane; Partnerships
35 Products and services
36 BT Wholesale
36 Contracts 37 21CN
39 Products and services
40 Openreach
40 Products and services; Channels and partners
42 Regulatory
42 Decisions 43 Codes of practice; Termination rates
44 Consultations
45 BT FY08 Results
58 INDEX
INDEX
A
Accenture, 30
Advertising Standards Authority, 10
Alcatel-Lucent, 6
Apple, 36
B
British Broadcasting Corporation, 14, 15, 18, 57
BSkyB, 18, 42, 54
BT Group, 2, 3, 8, 9, 10, 12, 13, 33, 45, 46, 47, 49, 50, 51, 56
Asia
Tech Mahindra, 32, 33
BT Exact
Adastral Park, 5
BT Global Services, 2, 3, 8, 25, 26, 29, 30, 33, 35, 45, 46, 47, 51, 52
BT Asia Pacific, 30
BT Benelux, 25
BT Counterpane, 33
BT Health, 2
BT International, 29, 30, 31
BT Media and Broadcast, 29, 30
BT Radianz, 32, 35
Comsat Mobile Communications, 3
Global Carrier, 47
Spain, 3
BT Retail, 3, 10, 11, 14, 15, 16, 17, 43, 46, 47, 48, 51, 53
BT Broadband, 12, 13, 18, 20, 21
BT Business, 10, 20, 23, 24, 27, 32, 33, 53
BT Conferencing, 12, 53
BT Directories, 53
BT Expedite, 53
BT FON, 21
BT Fusion, 11, 12, 13
BT Ireland, 27, 28, 31, 32
BT Openworld, 10
BT Openzone, 12, 20
BT Payphones, 10
BT PodShow, 22
BT Scotland, 13
BT Snap & Send, 11
BT ToGo, 11, 12, 13
BT Total Broadband, 13, 14
BT Tradespace, 23
BT Vision, 18, 19, 22, 53
BT WebWise, 14
dabs.com, 10
Digital Vault, 11
Direct Debit, 44
Open Orchard, 24
Total Broadband Anywhere, 11, 12, 14
Wireless Cities, 21
BT Wholesale, 3, 28, 36, 37, 38, 46, 47, 51, 54, 55
BT Wholesale Ethernet, 38
Office Anywhere, 12
Wholesale Broadband Connect, 37
Directors
Rake, Sir Michael, 3, 56
Ex-Directors
Bland, Sir Christopher, 2
Executives
Alvarez, Luis, 3
Barrault, François, 3, 26
Beal, Matthew, 3
Bross, Matt, 2, 3, 4, 7, 8, 9
Burger, Bas, 25
Carr, Mike, 2
Chanmugam, Tony, 10
Clark, Chris, 28, 31
Croxford, Ivan, 16
Davis, Sally, 3, 36, 37
Deardon, Matthew, 11
De Coster, Michel, 25
Excell, Paul, 3
Fitzpatrick, Brian, 38
Green, Andy, 3
Hughes, Dave, 20
Ingram, Duncan, 10
Lalani, Hanif, 2, 3, 46, 56
Livingston, Ian, 3, 10, 12, 13, 44, 57
Macia, Joao, 3
Marks, Dan, 18, 19
McCormack, Aaron, 12
McDavid, Joe, 15
Murphy, Bill, 20, 23
Pardee, Maria, 7
Patterson, Gavin, 3, 10, 16, 17
Penaluna, Karl, 6
Petter, John, 10, 11, 17, 43
Ramji, Al-Noor, 3
Rejali, Cameron, 38
Smart, Tim, 3, 25
Stagg, Nigel, 10
Taylor, Kevin, 30
Weir-Jones, Toby, 33
Whatling, Justin, 2
Zamora, Carlos, 3
Ex-executives
Verwaayen, Ben, 2, 3, 4, 5, 18, 45, 46, 57
Openreach, 40, 41, 44, 46, 47, 50, 51, 55
Ethernet Backhaul Direct, 40
WLR3, 41
Strategy and Operations, 4
21CN, 4, 5, 6, 7, 36, 37, 38, 40, 49, 54
BT Design, 3, 6, 7, 8
Chief Technology Office, 7
Web 21C, 6
Web21C, 6
C
Carphone Warehouse, 2, 10, 14, 16, 44, 54
TalkTalk, 14
Ciena, 4
Cisco Systems, Inc., 12
Collins Stewart, 57
Communications Workers Union, 31
CUSP, 27
D
Department for Work and Pensions, 29
E
EDS, 28
E-Net, 28
European Commission, 5, 43
European Union, 42
F
FON, 20, 21
Football Association
Premier League, 18
Forrester, 25
France Télécom
Orange, 13
Freeview, 18
Fresca Limited, 10
Fujitsu, 26
G
Gartner Group, 57
GCHQ, 20
Google, 22
YouTube, 22
H
Hewlett-Packard, 28, 33, 52
Hilton Group, 35
HTC, 11, 12
Huawei Technologies, 4
I
Infinera, 4
Intelliden Corporation, 8
iTunes, 22
ITV, 18, 29
K
KPMG, 52
L
LogicaCMG, 3
M
Microsoft, 19
MIT, 7
Montreux Jazz Festival, 26
Morrison, 57
Motorola, 19
N
Nagravision, 19
National Health Service, 25, 52
N3, 52
NPfIT, 52
Nationwide Building Society, 6
NBC, 19
NetSuite, 23, 24
Nokia, 13
Nomura, 57
Nortel Networks, 7
Northern Ireland Department of Finance and Personnel, 28
Norwich Union, 35
O
Ofcom, 2, 16, 39, 42, 43, 44, 50
LLU, 40, 42, 44, 47, 48, 54, 55
Richards, Ed, 43
Wholesale line rental, 41, 44
Olympic Games, 10
Ovum, 57
P
Pace Micro Technology, 19
Philips, 19
Phorm, 14, 15
Pioneer Europe NV, 27
Point Topic, 43
R
Radianz, 32
Real Time Content, 6
Research In Motion
BlackBerry, 13
S
Schlumberger, 35
Scottish and Southern Energy, 54
Scottish Water, 26
Siemens, 7, 34
SMobile, 14
Splunk, 33
Standard Life, 35
Starcom, 11
STAR Group, 30
SugarCRM, 23
Swarm, 10
Symbian, 13
T
Tech Mahindra, 32, 33
Technologies
3G, 13, 36, 38
ADSL2+, 4, 6, 42
Bluetooth, 12, 14
Broadband, 4, 6, 10, 11, 12, 13, 14, 17, 20, 21, 22, 35, 36, 37, 40, 42, 43, 45, 46, 47, 48, 52, 53, 54, 55
Convergence, 12
DSL, 37, 47, 48
Ethernet, 6, 7, 36, 38, 40, 54
GPRS, 12
ICT, 25, 28
IP, 26, 27, 30, 41
IPTV, 18, 19
ISDN, 37, 41
MPLS, 7, 25, 34, 52
Provider Backbone Transport, 7
PSTN, 5
VoIP, 12
Wi-Fi, 11, 12, 13, 14, 20, 21, 35
Telefónica, 31, 36, 38, 44
O2 Europe, 31, 36, 38, 44
Thomson Reuters, 2, 26, 52
Trimble, 40
U
Universal Pictures, 19, 22
University College London, 2
Uswitch, 17, 44
V
Verint Systems, Inc., 25
Virgin Media, 10, 14, 15, 18
Vodafone, 2, 3, 13, 31, 54
W
Wafa Financial Services, 32
Which?, 16
World Economic Forum, 3
Y
YouGov, 17
Z
Zed Media, 11
Comments
Got something to say?
