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Story: VoIP is no threat, says BT

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

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