Home gateway penetration is one reason BT's FMC service, Fusion, has failed to take off in the same way as Orange's Unik

Michelle Donegan

April 4, 2007

5 Min Read
Gateway Key to BT's Fusion Flop

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.)

To Page 2

What's next for BT Fusion?
When BT launched Fusion in June 2005, the technology was immature. The service used a Bluetooth connection between a dualmode handset and the Home Hub wireless router, which had a range of about 10 meters, and there was only one phone available. That meant, effectively, users would be in range of the BT Home Hub only when in the same room as the gateway. (See BT Goes Blue and Fixed/Mobile Handover Vexes Carriers.)

But BT hasn't given up on FMC and hopes to turn its Fusion fortunes around this year. The operator launched the dualmode WiFi/GSM version in January and now provides three handsets from Nokia Corp. (NYSE: NOK), Samsung Corp. , and Motorola Inc. (NYSE: MOT) for free. BT is also spending "many millions of pounds" on advertising to promote the new Fusion, according to a spokesman.

The wireless LAN capability extends the coverage of Fusion from the home to BT Openzone hotspots, as well as the networks in BT's 12 Wireless Cities -- some of which are supplied by Motorola Inc. (NYSE: MOT)'s mesh network infrastructure. (See BT Touts Fusion WiFi, BT Boasts Wireless Cities, and Moto Wins BT Mesh Deal.)

The carrier is also pushing Fusion at business customers, with a service called BT Corporate Fusion, which will be available in eight European countries from the end of this month. (See BT Outlines Global Vision, BT Plans Corporate Fusion, BT Picks NewStep, and BT Starts Spanish MVNO.)

Even though the services share the same name, BT's Corporate Fusion is an entirely different proposition. BT is not positioning it as just cheaper voice calls over wireless LAN. Rather, the proposition is to bring PBX functionality to users' mobile phones.

The SIP-based service comprises four elements: a PBX from Cisco Systems Inc. (Nasdaq: CSCO), a call control server from NewStep Networks Inc. , the wireless LAN access points, and dualmode WiFi/GSM handsets. When calls are made over WiFi, users will have access to PBX functions, such as the corporate directory.

"If you just want cheaper mobile minutes, then [Corporate Fusion] is not what you want," says Rakesh Mahajan, BT's global director of mobility. "But if I can link my mobile to the PBX, then I can be more productive."

But Ovum Ltd. principal analyst Jeremy Green isn't convinced that business users will be that interested in such FMC services either. "I'm not convinced of the pull from the demand side, whether the business case stacks up, or whether any products are up to it," says the Ovum man.

BT plans to update its Fusion subscriber numbers in May, when it reports fourth-quarter and full-year results (to the end of March) for 2006/2007.

— Michelle Donegan, European Editor, Light Reading

About the Author(s)

Michelle Donegan

Michelle Donegan is an independent technology writer who has covered the communications industry for the last 20 years on both sides of the Pond. Her career began in Chicago in 1993 when Telephony magazine launched an international title, aptly named Global Telephony. Since then, she has upped sticks (as they say) to the UK and has written for various publications including Communications Week International, Total Telecom and, most recently, Light Reading.  

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