Speaking at the Voice over IP Forum in London's Le Meridien Hotel, John Blake, head of hosted IP services at BT Global Services, said that although there is a "dichotomy" for BT, which will involve some cannibalisation of existing services, the company has an aggressive VoIP plan.
BT, like other telcos, faces a loss of revenue if free VoIP services such as Skype take off. According to James Enck, European Telecom analyst/global telecom strategist at Daiwa Securities Investment Bank, Skype has an annual growth rate of 500 percent in terms of on-Net minutes, and 5 percent of broadband connections in the UK are using the service. "It's practically a household name," said Enck.
BT seems to have learnt its lesson from the late 1990s when it was widely accused of holding back broadband rollout to protect its ISDN business.
"BT is the incumbent operator and as such we have to defend our traditional market, but we can do that by aggressive and creative pricing," said Blake. BT, he said, has reduced prices, and is establishing longer-term relationships with its partners and customers. "We will have to sacrifice some higher-volume services", he said, "and there will be some cannibalisation, but we're about ready."
BT offers two distinct VoIP services: The year-old Broadband Voice, which mimics a regular phone, and BT Communicator which was launched this year with Yahoo Messenger and which works with a PC.
Enck said incumbent operators across Europe are beginning to realise they have to work with VoIP. "VoIP is out of the closet in Europe," he said. "We have seen a lot of activity from incumbents" who, he said, used to talk about VoIP as being a flea on an elephant. "Now they talk about how it will impact their revenues."
"We are not afraid of the technology," Blake told the audience at the Forum. "VoIP is an application and if you can get that working right then other applications on the network become easier to deliver. Once you have broadband infrastructure the technology becomes easier to deliver. Internet telephony has been around for four years, but we were doing it over dial-up connections, and you just can't get the quality on a 56kbps call."
BT plans to deploy VoIP across its own organisation, with 30,000 IP phones. It recently completed a 10,000 IP phone roll-out at Abbey Group, as part of a £125m hosted IP contract. "We rolled this service out across 850 branches in five months," said Blake. "We had to do 25 sites a night, with a two-hour window to upgrade each site."
The Isle of Man government says it is planning to install VoIP across the public sector there, with the help of Cisco, Dimension Data and Manx Telecom.
Talkback
VoIP no threat to BT? It’s a Train Wreck About To Happen.
I read your article at ZDNet UK today with great interest entitled ‘VoIP is no threat, says BT’. The BT spokesperson makes an incredible statement "We are not afraid of the technology, VoIP is an application”.
As someone who worked in the telecommunications business in the UK for 15 years I understand that VoIP is much more than an application to BT; it poses the single greatest competitive threat to their Residential/Home Office high-call-bill and International calling customers since MCI appeared in the UK in the late 80’s to ‘open up competition’.
Consider these facts:
1. Market Regulation. Regulators both in the United States and England have embraced VoIP as a principal means of increasing competition in the telecommunications arena. Here in the United States Federal Communications Commission (FCC) Chairman Mr. Michael Powell believes that VOIP will irreversibly alter the world of communications. VOIP, he has said, and I quote:
“represents the most significant paradigm shift in the entire history of modern communications since the invention of the telephone”.
Mr. Powell has also been credited with other statements like “I knew it was over when I downloaded Skype”.
2. Customer Attrition. VoIP has the ability to instantly transfer high call bill customers away from higher-cost embedded telco services like BT (where some 40% of their high call residential profit comes from just 2% of the customer base). This not only leaves BT with greatly reduced profits, but at the same time leaves them with a mandatory requirement from Ofcom to continue to provide a basic level of (then unprofitable) telephone service to tens of millions of customers. BT then ends up with a monopoly on unprofitable customers.
3. Competition. VoIP may be out of the closet in Europe but it is already becoming a full-scale war here in the U.S. where over 400 VoIP Service Providers are already battling for market share. AT&T, like BT, has adopted an essentially defensive strategy by offering VoIP service, but is already significantly undercut in pricing by it’s closest competitors, and you can expect the same to happen with BT in the UK.
4. Price. At VoIPAction.com we have created the VoIP North America Directory and we track the Calling Plans already available from over 400 U.S. Service Providers. Some of these plans offer Unlimited Calling within North America, to Western Europe (including the UK), in fact 22 countries in total, all for just $19.95 a month, with a VoIP Telephone Adapter included.
5. Features. Since VoIP is a web-enabled technology it offers many advanced telephone features as standard fare, improved features that you can’t get from your local phone company.
6. International Borders. VoIP crosses international borders in it’s ability to offer service (just look at Skype!), and this works against BT. There really is nothing to stop a Los Angeles company from offering VoIP in the UK, where any calls from a UK Broadband connected customer would travel across the Atlantic onto servers in Los Angeles and then route to destinations anywhere in North America, for free. Go ask BT what percentage of their international calling revenue is UK-to-US and you’ll find out if it’s a competitive threat or not.
One of the few barriers to mass penetration of VoIP is the issue of gateways being able to handle the calling traffic as it scales, but several companies here in the United States have already solved that problem (in fact Skype runs on just such a technology), so BT cannot rest on it’s haunches there either.
When AT&T is forecasting that 75% of long distance calls could travel over VoIP by 2007, then we can all see that the protected world of national telco providers is about to change forever, and whatever BT thinks about VoIP - either as a technology or as ‘no competitive threat’ - the marketplace will decide, and customers who have put up with excessive