Optical/IP Networks

BT Sinks Its Teeth Into IP

LONDON -- Large incumbent fixed line operators have little option but to build next generation converged networks now that the IP "toothpaste is out of the tube," reckons senior BT Group plc (NYSE: BT; London: BTA) executive Paul Reynolds.

Fresh-breathed Reynolds, CEO of the U.K. carrier's wholesale business unit, told the 21st Century Communications World Forum event in London on Monday that the world's major carriers have no choice but to follow BT's lead in building a new, open, standards-based IP network if they are to survive in the telecom business. (See BT Urges IP Love-In, 21CN on Track, Says BT , and BT Moves Ahead With Mega Project.)

One of the drivers behind BT's planned migration from multiple voice and data networks to a single all-IP network is cost, said Reynolds. He told a meeting room packed with hundreds of telecom executives that much needed efficiencies could be attained from a single, converged network.

He said market conditions are getting tougher, and that a lot of value has been eroded from the industry in the past 10 years. He noted that in 1996, WorldCom, now MCI Inc. (Nasdaq: MCIP), acquired the modestly-sized MFS for $14.6 billion. Now MCI is being acquired for less than half that amount (see Verizon Wins Tussle for MCI).

And Reynolds added that BT's traditional revenue base is being cut by £250 million ($474 million) each year because of price reductions and competition. "If you're an equipment vendor in the audience today, you can guess why we're pressing for ever lower prices. We all have to share the financial pressure this industry's under," said Reynolds, who reminded those equipment firms that 21CN hardware frame contracts were due to be awarded in the coming six weeks or so.

Being a large incumbent operator is no longer a guarantee of success, he added. "Some other operators have decided to hunker down, cut back on investments, and wait to see what happens. We considered that approach and decided it wasn't an option -- it's a doomed strategy," said Reynolds. "Those that sit back and wait will be relegated to commodity players," he added, flashing his gleaming smile at the audience.

"We decided that the only way to survive is to be aggressive and innovative, and we have had to commit our strategy and investments" into the 21CN, a new £10 billion ($19 billion) converged IP-based network that is set to replace BT's current public switched telephone network (PSTN) by the end of this decade.

One of the end results of building 21CN will be a much faster turnaround in the development and delivery of new services. Reynolds said the time from inception to market launch will be cut from the current 18 months -- "that's far too slow" -- to just 6 months once the new IP network and its unified back office systems are up and running.

And with that, Reynolds rushed off to fire up his toothbrush and squeeze a bit more minty-fresh paste out of the tube.

— Ray Le Maistre, International News Editor, Light Reading

COMMENTS Add Comment
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testdude 12/5/2012 | 3:25:55 AM
re: BT Sinks Its Teeth Into IP Is this another good news story for Alcatel? Or is there other vendors that have dibs on this project?
gotman 12/5/2012 | 3:25:55 AM
re: BT Sinks Its Teeth Into IP This is good for anyone who supports an IP stack for data!! Its not what the guys who stop at L1-L2 want to hear.. Maybe we'll start seeing a "Today to Tomorrow" networks.. Similar to 2.5G for wireless. Maybe OCP(GMPLS) might find a market.

Good for vendors, who sell to the likes of BT, they will see more revenue, though more discounts as well.. The meals are bigger, no one wants to miss out.
sjenngs 12/5/2012 | 3:25:53 AM
re: BT Sinks Its Teeth Into IP Perhaps BT are asking others to join them as they don't want to be the only ones taking this direction, any comments?
allidia 12/5/2012 | 3:25:52 AM
re: BT Sinks Its Teeth Into IP CSCO lands some business at MCIP which was previously all NT... NT's demise continues. Sonus lands Marcatel. Two companies winning business where they aren't supposed to.
purna 12/5/2012 | 3:25:52 AM
re: BT Sinks Its Teeth Into IP BT is in a much different situation than most incumbents (or former incumbents) in Europe:
- No mobile operations (O2 is a separate company).
- Smallest share of broadband of all incumbents.
- UK started liberalisation well in advance of the rest of Europe and is very competitive.
- UK is traditionally in a different business cycle than the rest of Europe.
Compare this to the other heawyweights of European Telecom (FT, DT, TI and TEF) that enjoy much higher market shares and have re-integrated/bought back mobile and online businesses over the last 12 months. Hence BT has to do something different. Maybe BT will turn out to be a forerunner, maybe not. I think that a lot of carriers are monitoring this with interest without having yet forged an opinion.
On a different note: BT is extraordinarily outspoken on its strategy which, IMHO, explains that LR publishes much more about it...
materialgirl 12/5/2012 | 3:25:51 AM
re: BT Sinks Its Teeth Into IP BT is probably being so vocal because they want to brace their investors for a rough ride. As others have said, with no wireless or hostage consumer last mile business to prop up results, they have to get down to business.

Reality is that the old paradigm (circuit switched voice and pricey T1 data) is dead. Investment is over and LU has shipped the last support functions off to India. The high cost, limited bandwidth, and limited functionality of voice is about to get washed away in a tsunami of data. BIG data. Data that CUSTOMERS can use how ever they want. Its all business buyers want any more. "Phone calls and fax" is a curse word in IT.

So BT is just getting real. The next question is whether they can profit from all of this. Like walking a plank, they have no choice. But one can question whether they are running from something bad rather than to something better.
paolo.franzoi 12/5/2012 | 3:25:50 AM
re: BT Sinks Its Teeth Into IP
Well, given that Verizon is about to own MCI it is not clear to me that a win at MCI means anything. You can not actually believe that the program will progress while the deal is closing can you?

And Marcatel? A Mexican CLEC? That is one big win.

I am not saying NT has a good product, but using the PR spin off of that news is pretty bad.

allidia 12/5/2012 | 3:25:49 AM
re: BT Sinks Its Teeth Into IP Brooks... Here's what you missed...

MCIP was all Nortel which implies strained relations or poor product performance for the loss. MCIP is an account NT shouldn't lose under any circumstances.

The SONS win is big because it is for the enterprise space as well as residential. SONS is a leader in Carrier grade equipment where CSCO/NT are enterprise leaders.

Get my drift. SONS isn't supposed to win in the enterprise space and CSCO isn't supposed to win in MCIP. Both mean bad news for NT in IP.

BTW the ALA/MSFT team up is MAJOR NEWS!!!!
materialgirl 12/5/2012 | 3:25:44 AM
re: BT Sinks Its Teeth Into IP Didn't VZ also use NT gear for a VoIP service, and had rumored echo problems? That would make a loss at the combined company even worse.
treeson147 12/5/2012 | 3:25:37 AM
re: BT Sinks Its Teeth Into IP Marconi just annouced partership with Huawei because Marconi doesn't have good IP products, maybe Huawei will sell more revenue in Euro.
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