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BT's Learning From Google

Ray Le Maistre
3/28/2006

LONDON -- 21C Communications World Forum -- BT Group plc (NYSE: BT; London: BTA) is taking a lead from Internet-based competitors like Google (Nasdaq: GOOG) and Skype Ltd. as it gears up for next-generation service trials.

Speaking at the 21C event here in London, Paul Reynolds, CEO of BT's Wholesale division, which is responsible for the company's £10 billion (US$17.5 billion) 21CN next-generation network project, said the carrier was learning from its new competitors.

"Companies such as Google, Skype, and others are coming to the market with radically different propositions and very different business models," Reynolds says. "Google has fewer IT people than BT, and has a market capitalization of more than $100 billion. That shows the power of the business models these guys have. Personally I believe that all of us in established telcos can learn a lot from these guys, and we at BT are already doing so." BT's market cap is currently $34 billion.

That learning process is feeding into the carrier's software-enabled service development program called Web21C, which Reynolds says will be unveiled in the coming months. He adds: "We will absolutely sell services independent of network access, as well as be a network operator. If you're only [delivering services] in software then that frees you in many respects."

In the meantime, BT is building out the new infrastructure, with Reynolds keen to address the 21CN project's doubters. (See BT Takes 21CN 'Baby Step'.)

"Some were skeptical about 21CN when we first announced our plans, but the manufacturing lines and software development labs are buzzing," and there are "3,000 people working to receive and deploy the 21CN technology. It's real and happening."

Much of that skepticism is linked to the aggressive timeline BT has adopted, to switch off its PSTN by 2010, giving the whole project a lifetime of just five years. "Some said it couldn't be done. Many of my own people would prefer it if we were taking 10 or 15 years to complete the transformation."

But Reynolds said the business case doesn't stack up over that sort of time period, and that he's "starting to think that maybe five years is too slow. We're already examining ways we can accelerate parts of our implementation."

Industry skepticism wasn't the only topic Reynolds felt compelled to address: Many in the industry have been asking why BT has been shouting so loudly about its plans.

"We have been very open about what we're doing, and this commitment to openness is a radical departure for us, and sometimes we at BT struggle with the concept… This open approach is partly about de-risking our 21CN strategy and implementation."

But the BT man admitted later to Light Reading that building a high-profile marketing campaign around the project has also had direct financial benefits. Reynolds confirmed that 21CN has become a shop window for the vendors involved, and that each of the lead suppliers had experienced a positive knock-on effect from being named as 21CN suppliers, and that "has enabled us to achieve lower prices." (See BT Closes 21CN Deals, Touts IPTV and Vendors Sign BT 21CN Contracts.)

He described the process of bargaining the vendors down to rock-bottom prices as engaging in "the most non-sympathetic vendor procurement process" in the industry.

The way BT is paying the vendors is different, too. "They get paid when we get paid" from delivering services, said Reynolds. In the past, suppliers have been paid when the technology was delivered to the operators' door. With that model, "all the risks were with the carriers. Not any more."

And while BT has named its eight main vendor partners, Reynolds revealed that those core suppliers have behind them a network of more than 150 technology partners that are part of the process. He also extended a lifeline to those vendors not yet involved by saying that innovative new firms could still be included, either through the current lead partners or as new suppliers. (See Infinera Numerates Its Numbers.)

— Ray Le Maistre, International News Editor, Light Reading

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krbabu
krbabu
12/5/2012 | 3:59:48 AM
re: BT's Learning From Google
All:
It is refreshing to see such candor from telco operators.
-
Ramesh
oemarket_com
oemarket_com
12/5/2012 | 3:59:44 AM
re: BT's Learning From Google
BT runs a physical network. Its customer base is limited by the physical reach of that network. Google is running a virtual "network" and provides an unrivaled search engin. It has the reach to almost everyone on this planet.
These two are in totally different industries and hence can hardly be compared.
ozip
ozip
12/5/2012 | 3:59:38 AM
re: BT's Learning From Google
I was at a presentation at the British Consulate last week where Paul Excell spoke about the same topic. They are cleary on the road selling how their network can be used by those wishing to offer new, converged services.

As for the naysayers who keep bringing up that they will be unable to turn off the old voice network, I say, who cares.......

What matters is that the new one is available......


OZIP
ruready
ruready
12/5/2012 | 3:59:32 AM
re: BT's Learning From Google
The way BT is paying the vendors is different, too. "They get paid when we get paid" from delivering services, said Reynolds. In the past, suppliers have been paid when the technology was delivered to the operators' door. With that model, "all the risks were with the carriers. Not any more."

If this is indeed the case, DSO (days sales outstanding) and vendor cash flow can really stink. This is just another way of saying vendor financing and only the largest of vendors can play in the game.

The end result is that innovation in the service provider market will stagnate since only the largest companies can fund it and wait years for returns.
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