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VOIP services

BT Takes Swype at Skype

BT Group plc (NYSE: BT; London: BTA) CEO Ben Verwaayen took a shot at Skype Ltd. this morning, saying the number of client downloads says nothing about the viability of a VOIP business.

Verwaayen said he wasn't going to boast about "seven-figure numbers of software downloads," during the carrier's third-quarter results conference call. "I want to talk about people that use our VOIP service and pay for it. That's something quite different from downloads and peer-to-peer."

Skype, now part of eBay Inc. (Nasdaq: EBAY) is renowned for publicizing the number of times its VOIP-enabling software has been downloaded by people wanting to talk for free across peer-to-peer connections. The latest download statistic on its Website is 250,733,273. (See EBay Buys Skype for $2.6B.)

It's clear that the competitive threat from VOIP specialists such as Skype is bugging BT, and has done so for some time: This isn't the first time the carrier's executives have badmouthed the VOIP brigade. And while BT's CEO makes fun of Skype, the numbers show why BT and other traditional voice players have it on their radar. (See BT Disses VOIP Upstarts...)

A quick call to Skype finds that the company is claiming 75 million active users, but it doesn't give out the number of customers using its paid-for services, SkypeOut and SkypeIn. It also declined to comment on BT's observations.

What eBay's latest quarterly results do tell us, though, is that Skype generated $24.8 million in revenues from its paid services in the final quarter of 2005, which means Skype's users aren't just downloading the software and using the free service -- they're being converted into revenue-generating customers. And, according to broadband services research firm Point Topic Ltd. , as long ago as April 2005 more than 1.2 million people had paid to use the SkypeOut service. (See VOIP Subscriber Numbers Soar and Skype Lowers Call Costs.)

BT, meanwhile, has 100,000 residential users of its paid-for VOIP service, which was launched in mid-2004. To use the service, you need have a BT broadband connection, whereas any broadband user in the world can use Skype.

Verwaayen also went on to claim that BT's VOIP billing rates are lower than competitors such as Skype, Vonage Holdings Corp. (NYSE: VG), Wanadoo SA , and supermarket giant Tesco , all of which are pushing consumer VOIP in the U.K. (See BT Launches VOIP With Yahoo, BT Lowers VOIP Rates , and Tesco Offers VOIP.)

BT, by the way, also has 200,000 business customers using IP telephony, according to Verwaayen. (See BT Targets SMEs With VOIP.)

While Verwaayen is excited about VOIP growth, the other side of the story is that the increasing uptake of IP telephony, and the impact of fixed-to-mobile substitution, is eroding BT's traditional fixed voice-line base. BT's share of the fixed-to-fixed residential voice market is now 58 percent, compared with 66 percent when the carrier launched its VOIP service, while the number of residential voice-line connections is now 18.4 million, down from 19.6 million in June 2004. Average revenue per household is also down over that period.

And BT's attempt to capture some of the growing mobile voice market is not going to plan. BT doesn't have its own mobile network, so it resells Vodafone Group plc (NYSE: VOD) connections. In quarterly presentations past, Verwaayen would boast of growing uptake of the service, but now numbers are actually in decline, down to 334,000 from 350,000 in the second quarter. (See 'New Wave' Drives BT.)

Much of the presentation, though, involved the CEO bragging about BT's financial performance, especially the 15 consecutive quarters of earnings-per-share growth (before specific items, though), and eight consecutive quarters of revenue growth. In the third quarter, BT reported revenues of nearly £5 billion (US$8.7 billion), up 8 percent year on year. The numbers were pretty much in line with, or slightly above, expectations, and had little impact on the operator's share price, which edged down by just 2 pence to 210.5 pence ($3.66) on the London Stock Exchange .

All the details are in the carrier's press release. (See BT Reports Q3.) Verwaayen commented on other issues of interest, including:

  • The fixed/mobile convergence service, BT Fusion, is now being used by 13,000 customers, and new connections are running at 2,000 per week. The service is now being targeted at business users, and BT expects a new range of WLAN-enabled phones to become available in the middle of this year. The handsets connect to home wireless points using Bluetooth technology. (See BT Offers New Fusion Phone, BT Revamps Fusion Pricing, and BT Goes Blue.)

  • BT is set to launch its IPTV service in the autumn of 2006. Broadband connections are being upgraded to 8 Mbit/s to deal with the video traffic, and content agreements are being signed. BT's focus is on delivering interactive and alternative video content services, rather than trying to compete with the satellite and cable operators that deliver hundreds of broadcast TV channels. (See BT Strikes IPTV Content Deals, BT Touts Next-Gen Services, BT Finds Gaming Partner, BT Picks Philips Set Top Boxes, and Microsoft Wins at BT.)
  • The carrier is going to "WiFi-enable 10 British cities during 2006," said Verwaayen, though he declined to name the locations. BT has already deployed multiple access hotspots to provide 802.11 fixed-wireless access in Cardiff and the Westminster area of London.
  • BT's CEO describes WiMax as a potentially important technology, one that the carrier is monitoring very closely, but it's not something BT will throw itself into. "There's talk of a 2.5GHz spectrum auction, and if that was technology neutral then we'd look at that. But it's a long-term view, and it's too hard to put a timetable on it."

    In the past week, BT has been linked in the British media with a potential acquisition of broadband service provider Pipex Communications plc , which has been testing WiMax services in the U.K., but BT's CEO said an acquisition isn't necessary to get into the WiMax market.

    — Ray Le Maistre, International News Editor, Light Reading

  • digits 12/5/2012 | 4:06:47 AM
    re: BT Takes Swype at Skype I can't help wondering if, somewhere in the BT fiefdom, its staff are using Skype to place calls...
    telco1158 12/5/2012 | 4:06:45 AM
    re: BT Takes Swype at Skype Interesting question. I think the answer is similar to "Do the brass in Detroit drive Lexus autos?" Oh, yeah, it's the wife's car!

    One thing I have learned about working in telco. We and our competitors may bash each other in the marketplace, but at the end of the day, we still buy, sell and resell a ton of services between ourselves.
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