BT vs. AOL: telco wins at vital service delivery

As a small (growing fast!) business, we're interested in value-for-money basic IT services. One of these is an online backup storage service. I've been testing AOL's Xdrive service and BT's digital vault. Both are aimed at the domestic/SoHo market.

The outcome is rather interesting, and neatly illustrates where telcos can out-service Internet players.

At first AOL's offering looks very attractive. 5Gb of free space, with a backup utility to download for free. Let's just say that the first real-life test of AOL's service is less than wholly impressive:

4 files out of 185 were successfully uploaded. No additional files or folders can be added to your account because you do not have enough available space. Delete files from your account or upgrade to get more storage space. Error Code: 2162.

Not enough space? 52 Mb of 324 Mb transferred before bombing out, and that should still leave well over 4Gb spare. This is a service you're supposed to be entrusting your data to as your last line of backup. Checking the forums, it seems I'm not alone in having trouble -- and the billing problems seem just as bad as the technical ones.

BT are closer to getting it right. The marketing states clearly up-front what the cost is once you go over the 2Gb limit (AOL's offer has this nowhere in sight). The product actually works (I've tried it). There's no confusing marketing of alternative services like photo sharing. The free product is supported -- just call for help. Cunningly, BT Broadband retail users are given (after the launch period) a bigger free allowance than the general public. Bravo!

BT's service isn't perfect. It's yet another identity silo (AOL uses a common screen name), and you can't trial the backup service before paying. Plus, why not position double free storage as a bonus for BT customers, rather than having a mean asterisk and footnote to disappoint the rest of us? These are easy to fix.

The BT offering has a number of other things going for it. Their costs may be below AOL's, as much of the data transmission will be on-net and they can put more of the storage nearer the users. The brand alignment is good -- dependability, not features or content. They already have a billing relationship with many of the customers, so their acquisition costs and merchant fees are lower. It will help mollify churn in other broadband products, too, as long as they retain some kind of two-tier pricing structure. (This kind of pricing would have been a no-no before a real unbundling regime arrived, but now there's plenty of retail competition, the gloves are off.) BT already have tons of data centre capacity and the incremental cost of managing some commodity storage is limited. Competitors are unlikely to be able to match pricing and margins.

It's a great way to differentiate their broadband offering, particularly if in future the wholesale side supported the capability to have the backup traffic not count against the monthly usage cap.

If you work for a similar large telco, here's the take-away. You need a realistic re-assessment of what your strengths are, and how you are positioned in the market. (Yes, we can help.) You then need to craft a strategy that gets you off the old conveyor belt of waiting for the network equipment vendors to pitch you the next phase of your business model based on some standards process that's been years in gestation. (You know who to call.) They're as worried as you are, and have to change too. Finally, your product and project pipeline management needs to be formalised to ensure that only activities that are aligned with the strategy get through. This probably means abandoning BOGSAT as your approval methodology for something more formal. It's not just that there are too many parts in motion -- it's also that you need a methodology that can get to the right answer without anyone's ego being bruised. People matter as much as process. At the end of the day, the good ideas will shine through -- as clearly they have here for BT.