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BT as Telco 2.0 poster child?

Om Malik has a profile of BT over at Business 2.0 magazine. Although the essence of the story is well known, and BT’s “new wave” products have been gathering pace for a long time, it’s worth a read.

Nobody’s perfect, but BT is one of a handful of operators that have fully embraced the new reality. In BT’s case, this has involved:

  • Isolating itself from voice revenues, which now only make a small part of the business.
  • Building a cost base compatible with a lean access provider, not a bloated former PTT.
  • Re-structuring itself horizontally into retail and access/wholesale. (How voluntary this was is a matter of debate.)
  • Diversifying, in BT’s case into enterprise services.
  • Adopting a “platform” play with all the IT and customer/channel components to build commercial networked applications.
  • Modernising the network to eliminate obsolete equipment, and adopting a consolidated low-cost infrastructure (i.e. 21CN).
  • Playing the regulatory game with just the right level of aggression.

They got out of mobile telephony, and got a good price for Cellnet as it became O2. It remains to be seen how well their “asset-light” approach to wireless will play out. They’ve avoided the worst of the 3G fallout, and have opportunities to skip a generation to very IP-friendly networks, particularly as the analog TV spectrum comes up for sale. In the meantime, strong competition between five UK networks means getting a good wholesale price for your MVNO isn’t that hard.

Not everything is sweetness and light, however. Early experiements in FMC were half-baked. They’ve not quite worked out how best to interact with Internet players, and the seams in products like the BT Yahoo Communicator are all to obvious. The click-to-pay products haven’t really taken off, and without the prepaid wireless market your payment and distribution channels are limited. The amount of mindshare for their platform among IT developers seems small. You don’t detect any buzz among the geek folk. Nobody seems to be thinking: if I build my app on BT’s 21CN, and learn about their APIs, my career will be more secure and my business more profitable. “Build it and they will come” isn’t good enough. BT’s still being slow in opening up their business and technology platforms. This will become more of an issue as the broadband boom slows, and unbundling plus price wars takes some of the easy money off the table.

They’ve got a lot of focus on sweating the copper assets. You have to wonder if they’ll manage the ultimately inevitible move to fibre, particularly if it demands a different asset ownership model than the traditional telco networks. The conundrum is that everyone wants to own some kind of monopoly or differentiated distribution asset. Yet any measure of success in such a capital-intensive business invites regulatory confiscation of those profits, or requires you to win spectrum auctions designed to transfer the profit base to the government before you even start. Networks are almost liabilities, not assets; deploying, servicing and operating them is where the money is. Just like with the roads, nobody makes a profit from the road itself but being a road builder, whilst hard work, can be a lucrative occupation.

Despite these snags, BT remains one of the ones to watch and learn from. They’ve certainly bought themselves a lot of time to consider the economic problems of transport of information goods.

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