Feeds

BT & Vodafone: uneasy bedfellows

'Bluephone' converged handset alliance

  • alert
  • submit to reddit

Providing a secure and efficient Helpdesk

BT has stormed back into the wireless business with an MVNO deal with Vodafone and accelerated plans to offer a converged landline/cellular/WLAN handset.

The converged handset, codenamed Bluephone, was first mooted last August but now BT has enlisted Alcatel, Ericsson and Motorola to speed up its development, ready for launch before the end of this year and a major trial this summer. The Sony Ericsson devices work with the cellular network when the user is on the move, but when close to a Wi-Fi or Bluetooth access point, the call will be routed via that connection to the landline network, cutting the costs.

The Vodafone MVNO deal will also be a major plank in BT's fixed/mobile convergence strategy, and BT aims to generate £1bn a year from offering the combination to businesses. The choice of Vodafone to replace MMO2 in BT's business MVNO deal will cost the former BT unit 6 per cent of its annual revenues at current levels. MMO2 previously lost the consumer MVNO deal to T-Mobile.

BT's survival plan:

All this activity shows BT, like its wired-only counterpart in the US, AT&T, accepting that it must have a wireless play or risk death by a thousand blows at the hands of cellular, voice over WLAN and broadband wireless operators. It is already trialling pre-WiMAX equipment as the basis of wireless last mile services to rural areas of the UK and has been aggressive with its Open-zone hotspot business, both retail and wholesale. Now it aims to offer both consumer and corporate markets a fully bundled set of wireline, broadband, VoIP (wired or wireless), cellular and hot-spot services with unified branding and billing.

There is really no alternative for BT but to pursue this route, but it will find the business model very different from those it has been accustomed to, with reliance on third party networks and no incumbent advantage in the wireless world. All at a time when it may be facing break-up itself.

It will also be in competition with its own partners, notably Vodafone, which is also showing signs of softening on its traditional mobile-only stance in order to offer its business customers, at least, a commonly billed set of Wi-Fi, broadband, wirelines and cellular services.

While there has been much talk of Wi-Fi/cellular handsets and networks, convergence of wireline and cellular is even more important to business users struggling with two separate infrastructures and with often excessive mobile bills. BT's aim, with the Bluephone and with the development of its 21st Century Network project, is to create a fixed network that supports mobile network needs, in order to position it as the UK's primary wireline carrier of mobile calls.

It has chosen impressive partners. In the original Bluephone trial it called on Sony Ericsson to help develop the handset, and now has two big names in wireline/mobile platforms, Ericsson and Alcatel, as well as mobile specialist Motorola to bring their knowledge to its developments.

Two-edged deal for Vodafone:

For Vodafone, the deal with BT could be two-edged. The cellco has to embrace convergence of course - gone are the days when it could ignore the threat of VoIP, Wi-Fi and converged handsets to its traditional business model. BT gives it a strong partner in the UK and will attract new customers that might not have gone to the Vodafone brand directly. This is particularly true in the enterprise, where BT has long experience of talking to the CIO but the cellcos are finding it hard to get beyond the telephony manager.

However, just as BT will never have the control it enjoyed in the wireline market in a converged world, Vodafone will never again be able to call the technology and pricing shots in quite the same way. It may act to ensure that it keeps a good chunk of the revenues from Wi-Fi and wireline/mobile services in its own coffers, using its brand, spectrum ownership and market weight to sideline independent challengers, but letting other networks into the cellular garden will mean enabling companies significantly to lower their dependence on the 3G systems that will bring Vodafone its greatest margins.

It will be interesting to see whether BT provides the bluephone to other mobile operators as well as through its own brand, as it hinted last summer that it would. This would give companies like Vodafone a powerful tool for making their own moves to break down the wall between wireless and wireline.

BT's mobile revenue plans:

BT's moves shadow those of some US carriers, including AT&T, which has a new MVNO deal with Sprint and will integrate this with wireline voice and broadband offerings; and Verizon, which plans integrated billing and converged phones for landline and mobile use.

BT is targeting £300m in mobile revenues by 2005. The strategy does beg the question of whether BT made a mistake by spinning off O2 when most of its European peers held on to their mobile arms.

A presence in mobile is critical to it now, with the UK wireless market about equal in value to the landline sector at around £13bn a year, and set to overtake it decisively in 2004. But BT got a good price for O2 and put the nightmare of the 3G licensing auction behind it: although it took some of the cost of buying O2's licenses at the time, at least it is not saddled with its former unit's juggling act between writing down part of the asset and trying to make a return on the rest.

The telco can start with an almost clean sheet in mobile - lacking the brand of the big mobile operators of course, but with its own market weight behind it. However, to succeed as a new entrant in a mature market, it must offer significant differentiation.

So far, it has mainly targeted the family market, as signalled by its new BT Mobile Home Plan scheme, which gives discounts for multiple family members signing up, and offers free calls to home from the mobile phone, a feature clearly geared to anxious parents.

Now it is shifting its attention to the enterprise and the chance to sew up their entire telecoms budgets by undercutting mobile operators via a converged offering. The cellcos themselves will have to respond to this move, though of course, in any converged strategy they will need a wireline partner.

France Telecom/Orange has pursued a dual-platform approach aggressively but neither BT nor Vodafone have the luxury of owning both fixed and mobile infrastructure. Their alliance, which could help keep out newer challengers as voice moves to IP, is one of two giants that have their eyes on similar customer groups, but are unable to target them alone. Whether the uneasy friendship can survive as their growth plans start to converge themselves will be a major question mark hanging over UK telecoms in the coming year or two.

© Copyright 2004 Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

Related stories

BT, Voda confirm mobile link-up
Public Wi-Fi still has look and feel of dead duck
BT flogs bluephones to the masses

Protecting against web application threats using SSL

More from The Register

next story
Brit telcos warn Scots that voting Yes could lead to HEFTY bills
BT and Co: Independence vote likely to mean 'increased costs'
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
New 'Cosmos' browser surfs the net by TXT alone
No data plan? No WiFi? No worries ... except sluggish download speed
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Blockbuster book lays out the first 20 years of the Smartphone Wars
Symbian's David Wood bares all. Not for the faint hearted
Bonking with Apple has POUNDED mobe operators' wallets
... into submission. Weve squeals, ditches payment plans
This flashlight app requires: Your contacts list, identity, access to your camera...
Who us, dodgy? Vast majority of mobile apps fail privacy test
Apple Watch will CONQUER smartwatch world – analysts
After Applelocalypse, other wristputers will get stuck in
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Security and trust: The backbone of doing business over the internet
Explores the current state of website security and the contributions Symantec is making to help organizations protect critical data and build trust with customers.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.