BT's Blind Ambition?

British Telecommunications plc (BT)'s (NYSE: BTY; London: BTA) surprise decision to speed up its rollout of 4,000 hotspots in the U.K. by a year, through a do-it-yourself (DIY) offering for small businesses, has raised concern over the company’s strategy for public wireless LAN deployment (see BT Strengthens Hotspot Rollout).

Some analysts wonder if the crusty old incumbent is focusing too much on rolling out as many hotspots as possible, rather than improving access in key locations and ensuring that users get a good service.

As part of its plan to promote wireless LAN to small businesses such as fitness clubs, bookshops, and golf courses, the company's BT Retail subsidiary has joined forces with Toshiba Corp. to develop an off-the-shelf wireless LAN package, known as "Hotspot in a Box." Toshiba will manufacture the hotspot technology and BT will act as the ISP. Roaming agreements between the two companies are designed to link up the BT Openzone network with Toshiba’s global hotspots.

According to BT Retail spokesman Jonathan Carter, the do-it-yourself box will be available by November 2003 and will cost from £300 (US$492). Carter reveals that BT struggled to come up with a catchy name for the package, stating that at one point it was to be called a "Hotbox" until the business decided this had “pornographic connotations.” [Ed. note: "Bum-Burglar" was killed for similar reasons.]

The hotspot package initiative, combined with the company’s involvement with Inspired Broadcast Networks' Cloud project -- to be officially launched tomorrow (see Cloud Looms Over UK Hotspots) -- will form the crux of chief executive Pierre Danon’s ambitious plan. “The hotspot package and the Cloud network will help us achieve 400 hotspots by this summer and 4,000 by next year,” Carter asserts.

Despite the bold claims, Ovum Ltd.’s research director Richard Dineen believes that BT Retail could be accused of losing sight of its priorities.

“Why, when we have such an underdeveloped market for good locations and services, are people tinkering away on the fringes?” he asks. “These guys can sign up all the cafés they want, but they should be focusing on establishing uniform quality of services, interoperability issues of payment settlement and roaming, and improving access at key venues such as hotels, airports, and conference centers.”

BT’s Carter states that the company’s decision to target small hotspot locations is simply a natural progression of its wireless LAN business model. “It is emulating our previous partnerships with Welcome Break, British Airport Authorities, and Hilton Hotels, but on a smaller scale,” he explains. “We are giving small independent businesses the opportunity to increase their own revenue by rolling out this technology.”

Meanwhile Frost & Sullivan analyst Michael Wall agrees that the hotspot package will bolster wireless LAN usage and ADSL subscriptions for BT Retail, but is also wary of potential obstacles to success. “The key issue will be how many big deals they can negotiate,” he notes. “They have to link up chains of businesses -- it is no good negotiating on an individual location level.”

However, this DIY approach may -- at least -- have a cost benefit for BT, even if it means that most of the hotspots end up being deployed in obscure locations, like the Isle of Man.

The likely amounts that BT is spending on wireless LAN deployment are in stark contrast to its former subsidiary mmO2 plc’s 3G splurge. The cellular business is expected to write off £6 billion ($9.8 billion) in value on its European third-generation interests when it reports its full-year results on Wednesday.

— Justin Springham, Senior Editor, Europe, Unstrung