BT offers free local calls ‘within a year’

Sunday Express splash

BT is to introduce unmetered access for consumers "within a year", according to the Sunday Express. In return for a "relatively small" monthly flat fee, the company will offer what the paper calls "free local calls" for voice and data services. BT expects to recoup revenues lost from charging calls on a metered basis, by attracting more Internet users, the Sunday Express claims. The move will "slash bills for ordinary users and especially pensioners who rely heavily on local daytime calls," according to a tabloid which has a much higher proportion of elderly readers than most. The Sunday Express was confident enough to splash this story as its front-page lead. It is also instructive that the article was written by a political correspondent, Jonathan Oliver. However, his quotes are a little thin on the ground. He cites a "senior BT source", who says: "We are determined not be bullied by Mr. Brown [the Chancellor], the telecommunications market is already a highly competitive on and we are already looking at whether we should cut prices. Prices will definitely come down in the next 12 months." Aside from the swipe at Gordon Brown, this is not exactly earth-shattering stuff. Radical Plans Earlier this month, the Chancellor beat up on BT, by calling for the reduction of Internet costs for British consumers and forecast prices would fall in half by 2002. BT's share price plummeted, following the misreporting of his speech by the FT, which suggested that Brown would actually do something to accelerate the process as opposed to simply giving his tuppence ha'penny worth on Net access prices. Now BT has "decided to pre-empt Mr. Brown with its own radical plans", the Sunday Express says. Following the recent Brown-inspired shenanigans, BT's market cap has fallen to below £70 billion. This makes it vulnerable to takeover. According to the FT, BT thinks it is worth £20 per share, not the £11 or so it's trading at currently. An aggressive move on flat fees will show that BT is determined to not become prey. The company recently completed a five-month strategic review, the fruits of which (including a possible demerger of its mobile phone concern BT Cellnet) should be revealed real soon now. Strike While the Iron's Cold BT must have had plans for unmetered access mouldering in the bottom drawer for months, if not years. To date, the company has delayed the UK introduction of ADSL, an intrinsically unmetered technology -- and it has not been exactly forthcoming over plans to introduce unmetered local calls. This is because it is not its commercial interests to do so. As an effective monopoly supplier for fixed lines to consumers in most regions of the UK, the company would be tearing up its proven, lucrative licence-to-print money revenue model, for an uncertain future. However, this monopoly effectively disappears in July 2001 when the local loop or last mile is opened up to all BT's competitors. This is when the UK see flat fees for all. So why would BT introduce flat fees for consumers "within the year", ie. before this cut-off date? Could it be convinced by the recent reams of reports claiming Internet usage would more than treble, with the move to flat fees? This is possible, but it seems reasonable to infer that BT's economists have run the slide rule over this one, dozens of times, and they still don't think it makes commercial sense. Yet. On the corporate finance level, the move to unmetered access makes a heap of sense -- it shows that BT won't let go of its local call traffic without a big fuss. The City will love it. Oftel, the UK telecoms regulator, and BT's upstart rivals will watch the company closely for any signs of anti-competitive behaviour. ® Related Stories Brown to slash Net charges Brown Net cuts story is false BT shares tumble on false Brown Net cuts story Brown takes heat off BT Durlacher slams metered prices

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