BT Closes 21CN Deals, Touts IPTV

BT Group plc (NYSE: BT; London: BTA) has finally signed next-generation network contracts with its four remaining lead vendor partners, the carrier announced today. (See BT Signs Remaining 21CN Deals.)

Alcatel (NYSE: ALA; Paris: CGEP:PA), Cisco Systems Inc. (Nasdaq: CSCO), Ericsson AB (Nasdaq: ERIC), and Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) are now in possession of signed deals for BT's £10 billion (US$17.5 billion) 21st Century Network (21CN) project, nearly three months after the other four lead vendors -- Ciena Corp. (NYSE: CIEN), Huawei Technologies Co. Ltd. , Lucent Technologies Inc. (NYSE: LU), and Siemens Communications Group -- inked their contracts. (See BT Awards Cisco 21CN Deal, Alcatel Signs BT 21CN Deal, and Vendors Sign BT 21CN Contracts.)

BT has insisted all along that the contract holdup was down to contractual details caused by the size and breadth of the deals, and not because of any relationship or supply issues. Of the £10 billion network transformation budget, BT is spending about £3.4 billion ($6 billion) with the equipment suppliers.

The operator has also claimed the delay in getting the deals signed has not affected its tight schedule of switching off its PSTN by 2010, and the carrier has been taking delivery and implementing systems during the contract negotiations. (See BT Deploys Ericsson VOIP Gear, BT Nears 21CN Vendor Lockdown, and BT Takes 21CN 'Baby Step').

The British carrier also has all the suppliers it needs for its IPTV service launch, slated for "autumn" this year. Microsoft Corp. (Nasdaq: MSFT) is providing video server, digital rights, and IPTV middleware capabilities, while Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) is delivering the set-top boxes for the service's launch. The carrier says it has already spent tens of millions of pounds on its video systems, and will need to spend tens of millions more. (See Microsoft Wins at BT and BT Picks Philips Set Top Boxes.)

BT has chosen not to compete directly with the U.K.'s incumbent pay TV providers, satellite giant British Sky Broadcasting Group plc and merging cable players ntl group ltd. (Nasdaq: NTLI) and Telewest Global Inc. (Nasdaq: TWSTY), which each provide multiple broadcast channels in bundled paid-for packages. Instead, BT will provide its IPTV customers with the 32 (and growing) free-to-air digital channels, then charge for on-demand and interactive content supplied, in some cases exclusively, by third party specialists.

Andrew Burke, CEO of BT Entertainment, told delegates at the IPTV World Forum in London today that the carrier would be concentrating on signing up the 13 million British homes that don't currently take satellite or cable pay TV services. "That's a market we can play with for a while," reckons Burke.

Since BT's free TV channels will be delivered as terrestrial, over-the-air channels, and decoded by the customer's set-top box, BT won't be broadcasting any TV content across its network, sticking instead with a unicast model for time-delayed TV and video on demand (VOD) that, at present, precludes the need for any headend decoding equipment.

Burke noted that BT will have to learn quickly "to be a very good marketer and upsell the on-demand content. We won't be relying on subscriptions for our [IPTV] revenues, so we're going to have to be very good at marketing our content offer."

The BT man has been busy signing up programming partners, and plans to provide ground-breaking content with the help of Big Brother's creator Endemol , among others. "We've struck a deal with Endemol -- the people there are very good at coming up with formats for interactive TV," noted Burke. (See BT Inks IPTV Content Deal, BT Strikes Cartoon Deal , BT Strikes IPTV Content Deals, and BT Touts Next-Gen Services.)

BT isn't the only one seeking inspiration from Endemol. Dutch incumbent KPN Telecom NV (NYSE: KPN), which is also set to launch its IPTV service this year, is also working with the TV production company famous for its Big Brother format. (See KPN, Endemol in JV Talks and KPN Updates on IPTV.)

— Ray Le Maistre, International News Editor, Light Reading