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Gateway Key to BT's Fusion Flop

Michelle Donegan
News Analysis
Michelle Donegan

After 18 months of marketing, BT Group plc (NYSE: BT; London: BTA) has just 40,000 subscribers for its fixed/mobile convergence (FMC) service BT Fusion, launched in 2005 as a dualmode GSM/Bluetooth service. (See BT Goes Blue.)

The disappointing takeup of Fusion, based on unlicensed mobile access (UMA) technology, highlights the struggle operators can have with making fixed/mobile convergence a commercial reality. (See UMA Services Near Reality.)

Across the English Channel in France, though, it's a different story. After little more than five months Orange (NYSE: FTE)'s Orange business already has more than 100,000 customers for its Unik UMA-based service, which was launched in October 2006. (See Orange Launches Unik.)

So why has Fusion flopped while Unik has prospered? Part of the answer lies in a big advantage Orange has over BT: France Telecom's large installed base of home gateways, an essential element in the FMC service chain.

The Orange home gateway, called Livebox, is hooked up to the carrier's DSL service. Livebox provides WiFi broadband connectivity in the home and routes mobile calls from dualmode GSM/WiFi handsets over the fixed broadband connection.

At the end of 2006, France Telecom -- which now has more than 6 million retail DSL subscribers -- reported nearly 3.5 million installed Liveboxes in the country. All of them are ready for the Unik service, which uses technology from Ericsson AB (Nasdaq: ERIC).

The Unik service costs €10 per month (US$13.34) for unlimited calls from a dualmode mobile phone via the Livebox to French fixed-line numbers, or €22 per month ($29.36) for unlimited calls to fixed lines and other Orange mobile subscribers.

BT, though, doesn't have that ready-made installed base. It has 3.4 million retail broadband subscribers, but only 1 million of those have its home gateway, the Home Hub, though that number is rising fast: BT says it's shipping about 30,000 each week. (See BT Gets a Gateway and Thomson Ships BT Home Hub.)

The Fusion service is available only to BT's broadband subscribers who have the Home Hub gateway. The Fusion service costs between £19 ($38) and £35 ($69) per month, depending on how many low-rate voice minutes are included in the package. And, of course, the cost of the BT broadband connection is extra.

The home gateway issue isn't the only factor affecting takeup of BT Fusion. The service has also suffered from restricted handset availability and choice, a situation that has hampered consumer interest and which is only now being rectified as more dualmode devices become available.

France Telecom has another advantage over BT, in that it has its own mobile network and a large base of mobile customers -- more than 23 million -- it can target with its Unik marketing campaigns. (See Carrier Scorecard: Orange.)

BT, meanwhile, doesn't have its own mobile network and depends on Vodafone Group plc (NYSE: VOD) for the GSM part of its Fusion service.

But having your own broadband and mobile businesses isn't an instant recipe for FMC success. Last month, Deutsche Telekom AG (NYSE: DT) cancelled a session initiation protocol (SIP)-based FMC service called T-One after just five months due to poor takeup and a product positioning conflict with some T-Mobile International AG services. The T-One service had only 10,000 subscribers. (See Deutsche Telekom Cancels FMC Service.)

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User Rank: Light Beer
12/5/2012 | 3:10:50 PM
re: Gateway Key to BT's Fusion Flop
Ignore the technology. The flop has nothing to do with technology and everything to do with pricing. When your Fusion line rental is nearly twice the price of the mobile operators, and the call packages tiny, why on earth would you buy it?

Indoor coverage in the UK is pretty good, with at least one of the five networks working in any given house. So you pick your network mainly by coverage, since the price plans and handsets are more or less the same.

After BT sold Cellnet (now O2), it lost the compelling reason to buy mobile service from BT. Openzone hotspots are few and far between.

The new version is equally unattractive, with just three (boring) handsets, expensive line rental, only works with BT Broadband, and expensive call tarrifs.

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