BT Gets Aggressive With VOIP

BT Group plc (BT) (NYSE: BTY; London: BTA) is launching a consumer VOIP service -- an astonishing move for an operator best known for its glacial reflexes (see BT Offers Consumer VOIP).

But the service, called Broadband Voice, won't be available to BT customers. Instead, the carrier is targeting the high-speed data access customers of its chief residential service rivals, the cable companies NTL Inc. (Nasdaq Europe: NTLI) and Telewest Communications Networks plc (Nasdaq: TWSTY). These two cable players combined have about 1.5 million broadband customers out of the U.K.'s total of 3 million (see UK Has 3M Broadband Users).

The way Broadband Voice works is reminiscent of the model used by Vonage Holdings Corp. in North America: Customers buy a box that sits between the phone and the broadband connection, and that box routes the voice calls over the Internet connection.

The difference between BT's service and Vonage's is that BT has a low monthly charge of £7.50 (about US$13), then a per-minute charge for peak, international, and calls to mobiles, while weekend and evening calls within the U.K. are free for the first hour. So, as usual for a BT service, working out what you might be spending is not as easy as it could be. With Vonage you can pay a monthly charge that includes all in-country calls at any time of the day.

And the reason for using Broadband Voice? The official line is that BT is trying to win back some of the telephony customers it has lost to its rivals. "This is an aggressive move from BT, and we're not preempting other services coming onto the market. We're coming under pressure from carrier preselection, and we're fighting to protect our market," says BT spokesman Mike Jarvis. "This will be all incremental revenue for us, as it's targeted at customers we don't currently have a relationship with."

Might this not harm the BT brand if the VOIP service is, well, crap? "Pierre Danon, the chief executive of BT Retail [the part of BT offering the service] has tried this for himself, and says the quality is perfect," says Jarvis. "We're very confident about the quality."

Perfect? Perhaps in the right setting, but BT is obviously expecting some gruff grumbling by stating the following in its press release: "The quality of the reception on the phone line may not match a normal landline and may vary depending on Internet traffic."

Analysts at telecom consultancy Ovum Ltd. believe there's every chance that BT's brand might be sullied. In a statement about the service, analysts Jan Dawson and Mark Main note the potential quality issue, and the fact that there are a number of services you cannot get with Broadband Voice, such as premium rate and calls to the emergency services.

BT, however, is being commended for its cleverness in launching the service without cannibalizing its own customer base. Not only that, analysts add that BT will gain invaluable lessons about VOIP in the process.

Naturally, the cable companies have hit back at BT's launch and, amazingly, have even managed to be slightly humorous by taking a swipe at BT's old publicity motto, "It's good to talk." NTL responded by saying: "So it’s good to talk… but not to 999 [the U.K. emergency number], the operator, ISPs, premium rate services and most international numbers! While we’re flattered at how seriously BT is taking the threat from cable, its new service is extremely limited and, as usual, it has cherry-picked figures across the cable sector to try and make its case."

Telewest's response was a bit more pedestrian, saying how great its service was, and that "Beyond BT’s hype, consumers will soon realize the limitations of this offering."

Behind the bravado, though, the cable companies will be fretting. Both have had a tough time financially. NTL came out of Chapter 11 protection earlier this year and is battling towards breakeven (see NTL Emerges From Chapter 11 and NTL Lowers Q3 Loss), while Telewest is currently undergoing a restructuring process due to be completed next spring.

Most industry analysts expect the companies to merge some time in 2004, a move that will save the firms hundreds of millions of dollars in costs and allow them to put up a united front against BT as broadband increasingly becomes the new services battleground. But until they get their finances and setups in order, they are vulnerable to such marketing assaults.

A few more things to note about the Broadband Voice launch. As the Ovum analysts point out, BT has opted for an Ethernet-based service, "which will be well-suited to cable modem users but not so well-suited to DSL broadband users," otherwise known as BT broadband customers.

The Ovum analysts add: "Regulation would have prevented BT from launching a service targeted exclusively at cable modem customers and held back from DSL customers. But by choosing a technology which is more common among cable users, BT cannot be accused of launching a discriminatory service, while at the same time ensuring that the majority of take-up will come from non-BT customers."

BT's Jarvis confirms this, but concedes that at some point BT will have to extend the service to all broadband users, including DSL customers. But there's no timescale for that.

Finally, although BT claims the timing of the service's launch is not "defensive" or "preemptive," it is maybe no coincidence that Vonage is set to launch its voice-over-broadband service in the U.K. in the first quarter of 2004. And Vonage has found the cable companies in the U.S. market to be useful and willing allies.

— Ray Le Maistre, International Editor, Boardwatch

diag_eng 12/4/2012 | 11:10:57 PM
re: BT Gets Aggressive With VOIP There seems to be a VOIP arms race between Carriers & Cable MSOs. Kinda reminds me of the Sox/Yankees arms race currently underway.


Go Sox!
gbennett 12/4/2012 | 11:10:52 PM
re: BT Gets Aggressive With VOIP Comrades,
Reading through this is struck me that there's a real problem in extending this kind of service to ADSL, and I'd like to hear if any of you have an opinion on this.

A friend of mine has been tinkering with the various VoIP services one can use on the Internet today. He is on a UK ADSL link, with downstream bandwidth of 576kbps and upstream of about 128kbps. Both of these are marketing numbers, as in my experience of using ADSL I never got close to 576kbps download performance.

Using a G.711 codec, he clocked the bandwidth used by a single phone conversation at about 100kbps, which sounds about right to me. He pointed out that if the PC accesed the upstream link for any other reason (eg. he has messenger software running, email, etc.) there was a very noticable crackle on the phone. And of course there may be other people in the household using the link on their own PCs.

To me there seem to be four things we could do to deal with this situation:

1. Increase the ADSL performance from 128kbps to something close to a real broadband rate. IMHO it ain't gonna happen in the UK because there's been far too little investment in the access network to support even these "fraudband" speeds. The typical contention ratios at a UK DSLAM are upwards of 50:1, so I'm told, and this is certainly reflected in the performance I experienced using ADSL. Sure, we can all pay more for a "premium" service, but ADSL is already too expensive in the UK, which is why we are lagging so far behind Germany and France in ADSL penetration.

2. Use a more bandwidth-efficient codec, like G.729. As I understand it the problem then becomes codec delay. Delay is the enemy of quality on VoIP, so you trade the occasional crackle for echoes and satellite-like end to end delays.

3. Somebody comes up with a dinky little ADSL router that is "application aware" for VoIP, and is cheap, and easy enough for consumers to use. Anyone know of such a box?

4. When the ADSL link is being used for a VoIP call then there's virtually no bandwidth left for any other traffic. So if carriers insist on rolling out VoIP, why not keep the voice on the "low frequency" part of the local loop connection, and packetise it at the exchange? That way the whole of the "high frequency" band is available for data.

Just a thought.

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