BT Talks Google, IPTV & Collaboration

BT Group plc (NYSE: BT; London: BTA) announced another solid quarter today, reporting revenues of £5 billion (US$10.28 billion) for the three months to June 30, with continued growth in what it calls its "New Wave" products -- networked IT services for corporate customers, broadband, and mobility. (See BT Posts Q1 Results.)

Of greater interest, though, was BT's chat around a few key topics -- Google, IPTV, and next-generation high-speed access.

During his presentation, BT's CEO Ben Verwaayen referred to an unannounced new deal with Google (Nasdaq: GOOG), which caught the attention of analysts at the carrier's earnings presentation in London.

During the question-and-answer session, he revealed that Google is a conferencing services customer, along with other big-name corporates such as Yahoo Inc. (Nasdaq: YHOO), Intel Corp. (Nasdaq: INTC), Coca-Cola, and PepsiCo, though BT declines to provide any further details.

"Competitors are often our customers or partners… That's all part of being a grown-up company," he stated. "Google is going to be all these things."

BT has talked before about Google's potential to be a customer as well as a rival, with senior management hinting in past briefings that Google is the type of company that could be targeted with new wholesale products based around bandwidth and QOS guarantees.

The notion that Google could also be a partner has also been raised before, and Verwaayen stressed today the importance of partnerships and creating an "open culture" at BT that can learn from other non-telecom companies, a topic CTO Matt Bross also touched on this summer when talking about the potential of Web 2.0 application developments. (See Carriers Surf the Web 2.0 Wave.)

Verwaayen said collaboration, and the innovation that comes from working with others, will be vital to transforming BT from an old-style telco into a new services- and customer-driven company. "Innovation is vital -- we need a willingness to learn and to open our minds. BT staff have engaged globally with 625 startup companies" in the past quarter and are bringing back ideas. "That stimulates more debate, which is good. We are creating a good pipe of capabilities so we have enough products for the future."

Collaboration, he added, "needs to be a natural thing to do," and he called out two partners in particular to show the different types of relationships BT is developing. He cited the work with Sony Corp. (NYSE: SNE) -- the two companies are working to add video and voice call capabilities to the electronics giant's PlayStation products -- and Oxford University, home to Britain's brightest young brains (and, conversely, members of the Royal Family). "Oxford is helping us to manage some of our major programs… We're going to build a pipeline of talent" from the University's intellectual treadmill, said BT's CEO.

Other partners afforded a brief mention include Intel, Hewlett-Packard Co. (NYSE: HPQ), Vodafone Group plc (NYSE: VOD), and Microsoft Corp. (Nasdaq: MSFT), which is helping BT develop its Web services strategy and products, and also supplies the technology behind BT Vision.

Verwaayen and Ian Livingston, CEO of BT Retail, waxed lyrical about BT Vision, the carrier's video-over-broadband service, which has had a slow start despite a high-profile marketing campaign in the U.K. -- it currently has just 20,000 subscribers. (See BT Pushes IPTV.)

The good news for BT is that it has a growing base of broadband customers to pitch the service to. It now has more than 3.8 million retail DSL customers, giving it a 40 percent share of the U.K. DSL market.

It also has an enticing lineup of entertainment and, particularly, sporting content, including near-time and real-time Premiership Football (soccer, that is). (See BT Pushes Soccer Service, BT Vision Adds Content, BT Signs Up Universal, and BT Signs Up HBO for IPTV.)

The new British soccer season begins in August, so the uptake of BT Vision subscriptions in the current quarter (July-September) will provide an early indication as to the service's potential in competition with its main rivals, satellite broadcaster BSkyB Ltd. (NYSE, London: BSY) and cable giant Virgin Media Inc. (Nasdaq: VMED), both of which offer voice, broadband, TV, and video-on-demand services. (See BSkyB Updates on Q4, Virgin Media Revises Guidance, and Bell Sounds for British Broadband Brawl.)

Verwaayen also flagged, with just the briefest of mentions, the next major challenge for its BT Vision service (after attracting customers) -- the introduction of interactive services. That would open up all sorts of revenue-generating opportunities, from voting, to gambling, to buying multimedia files, and the creation of user-generated content.

— Ray Le Maistre, International News Editor, Light Reading