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Does BT Lag European Peers on All-IP?

Iain Morris
7/8/2015
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When BT began work on its all-IP transformation, under the auspices of the 21st Century Network (or 21CN) program, it was clearly ahead of the game. Launched in the summer of 2004, that project aimed to equip the UK fixed-line incumbent with a single IP-based network infrastructure by 2010.

Even when the deadline slipped to 2011, BT Group plc (NYSE: BT; London: BTA) could still be regarded as something of an all-IP pioneer. (See BT Aims to Finish 21CN in Late 2011.)

But more than a decade since work on 21CN first began, BT is still operating a lot of PSTN infrastructure. Although 21CN appears to have achieved its goal of giving the operator a single IP core network, the connections that run into customer premises depend heavily on legacy technology and may continue to use PSTN elements for another ten years to come.

"Our goal is that by 2025 all our voice customers will be served using an IP-to-the-premises solution and will migrate off the traditional telephony platform," said Gavin Patterson, BT's current CEO, as recently as May. "Building on our existing investment, our future network will ultimately simplify our estate, replacing legacy networks and platforms, and saving us costs in the longer term."

This clearly puts BT a long way behind some of its European counterparts on targets for completing the migration to all-IP, and also raises questions about the difficulties of executing this move. (See Telekom Austria to Announce All-IP Milestone and Orange to Be All-IP by 2020, Says AMEA Boss.)

Germany's Deutsche Telekom AG (NYSE: DT), which is largely building its strategy around having all-IP capabilities across its European footprint, plans to have migrated every one of its customers off legacy platforms by 2018. It already claims to operate all-IP networks in the smaller markets of Macedonia and Slovakia and says its Croatian business will join the all-IP ranks by the end of this year. (See Deutsche Telekom Turns On Pan-European IP.)

But Deutsche Telekom still has a long way to go in its domestic market, where fewer than 30% of fixed access connections were IP-based in March this year. According to Goldman Sachs & Co. , Dutch incumbent KPN Telecom NV (NYSE: KPN) has already moved more than 60% of customers on to all-IP networks. Swisscom AG (NYSE: SCM), which aims to complete its all-IP transformation by 2017, has told Light Reading that more than a third of subscribers and a quarter of connections are now making use of all-IP technology.

Table 1: All-IP Progress in Europe

Operator All-IP deadlines Progress to date Publicly stated goals/benefits Notes
BT 2025 All-IP core network already built Simplifying estate; replacing legacy networks; saving costs Operator claims 21CN project achieved all-IP-to-exchanges target and that current initiative will take all-IP to premises
Deutsche Telekom 2018 Macedonia and Slovakia are all-IP Service agility; cost savings (€1.2 billion ($1.3 billion) by 2020 from use of cloud-based technology) Croatia is close to completing all-IP move while 29% of lines in Germany were all-IP in March
KPN N/A >60% of connections Optimization for very high data volumes; reduced complexity; faster time to market "To support our best-in-class access services, we continue to move towards an all-IP network," said KPN in 2014 annual report. "Moving towards a single IP core is needed to ensure best-in-class integrated services."
Orange 2020 All broadband services in Mauritius are all-IP Improved user experience; better scalability, security and energy efficiency; enabling development of new services All-IP pilot under way in Mauritius, which was chosen, says Orange, because of its "size, the representativeness of the different markets, such as residential, enterprise and mobile, and the presence of all services and technologies."
Swisscom 2017 >25% of connections; >33% of customers Enabling cost-effective use of new services; offering services irrespective of type of access technology Has migrated data transport network to IP, commissioned IP-based telephony and multimedia platform and been offering IP-based services since 2009
Telecom Italia N/A N/A N/A Migration from PSTN to all-IP under way
Telefónica N/A N/A N/A All-IP forms a part of network transformation Telefónica is carrying out
Telekom Austria N/A All fixed voice customers in Austria on all-IP To overcome the problem of technology obsolescence related to the use of legacy networks Has revealed that another subsidiary will shortly make an announcement on all-IP conversion
Source: Goldman Sachs, operators, Light Reading

Germany and the UK, clearly, are much bigger and probably more complex markets than either the Netherlands or Switzerland. And what some operators consider to be all-IP, others might not. It is possible, for instance, that a service provider claims to be all-IP even though it is still using some old-fashioned signaling protocols, or continues to support existing PSTN customers after it has stopped signing up new ones.

Moreover, BT's plans for a merger with EE , the UK's biggest mobile operator, and the national regulator's first strategic review of the telecom sector in a decade might also have a bearing on the incumbent's latest technology overhaul. (See BT Locks Down £12.5B EE Takeover Deal, Ofcom Maintains Regulatory Attack on BT and Ofcom Does Not Rule Out BT Carve-Up.)

For Patterson, the all-IP move quite obviously supports BT's ambition to be a converged-services operator following the takeover of EE. "We're building a seamless, converged single platform that's able to serve customers wherever they are," he said in May. "There's no distinction between fixed and mobile -- one common access platform is able to deliver both."

As a result of this merger, Deutsche Telekom may be eager to see BT complete its all-IP transition as soon as possible, and its own expertise in this area might even help BT to get there ahead of schedule. As one of EE's two owners (the other being France's Orange (NYSE: FTE)), Deutsche Telekom will gain a 12% stake in BT through the sale of EE, becoming the UK operator's biggest shareholder in the process.


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What's more, according to a recent report from the UK's Telegraph newspaper, Deutsche Telekom's ultimate goal might be a full takeover of BT. Analysts at Goldman Sachs and Exane BNP Paribas have previously told Light Reading that all-IP conversion could provide a financial justification for cross-border takeover activity of this nature. Deutsche Telekom believes that all-IP technologies will allow it to support services across multiple markets from centralized European facilities. The analysts' thinking is that it could beef up sales and margins by acquiring operators and then ditching systems and staff it would have needed in the PSTN world. (See T-Mobile US Sale Fits DT's All-IP Game Plan and All-IP DT Could Drive Euro M&A, Say Analysts.)

In that case, Deutsche Telekom will be hoping that regulation does not stand in BT's way. Ofcom , the UK's national regulatory authority, has not issued any detailed statements about BT's all-IP plans. Yet, according to another Telegraph report, the operator is seeking permission from Ofcom to pursue its latest scheme.

One concern might be that regulations developed in the PSTN era should not apply after the PSTN has been entirely switched off, although BT would not be drawn on any details. Ofcom was similarly reticent when quizzed about BT's all-IP moves. "We are considering the kind of questions BT raises as part of our current strategic review of the telecom market," was all a spokesperson would say. (See Deutsche Telekom Plotting BT Takeover – Report.)

What's clear is that operators throughout the region are increasingly committed to an all-IP conversion as they try to become much sleeker and more agile outfits, and with over-the-top players snapping at their heels. The question is whether BT remains a trendsetter, or whether commercial, regulatory and technical considerations deal a blow to its plans.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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James_B_Crawshaw
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James_B_Crawshaw,
User Rank: Blogger
7/9/2015 | 5:33:00 AM
Re: New table
Great table Iain!
andrescj
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andrescj,
User Rank: Light Beer
7/9/2015 | 3:42:57 AM
Work in progress for all
As you show it with your table, it's a work in progress for most Tier I carriers. Interesting that the few quoted with shorter term deadlines are setting goals for their subsidiaries in other countries (DT and Orange), and not in their home market.

Another question is if the VoIP move is indeed going to play out for all carriers. Different conditions in different markets may force them to stick to PSTN for voice for more than a decade from now.
iainmorris
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iainmorris,
User Rank: Blogger
7/8/2015 | 11:29:40 AM
New table
The table in this story has been updated, since it was first published, to include data provided by Orange.
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