Pierre Danon and BT: speculation abounds

Pundits having a field day on exec's exit

It was Pierre Danon who launched BT into the Wi-Fi business, with BT OpenZone - which he called "data on the pause" rather than "data on the move." But he was more than just the Wi-Fi boss's boss. He was (still is, for a few more weeks) head of BT Retail. And he's leaving - and boy! everybody is analysing this to death.

One analysis is that of Manek Dubash, Editor of Network Weekly: "Paul Danon has quit to go to a lesser post at Cap Gemini. No manager at that level does that without a very good reason."

Another is that of Gartner's analysts, Bhawani Shankar and Katja Ruud: "BT must find a successor soon, or risk losing ground on local loop unbundling. Danon's quick departure and lack of a successor indicate that BT was caught by surprise. The company's recent marketing has emphasised the strength of its management team and the good relations between business units. The sudden departure of a key executive will tarnish this image of harmony, and fuel speculation about differences within the management team."

When BT actually announces the departure of a major executive, you know something is up. Normally, when you lose someone important, you keep it quiet, you don't comment. So all the analysts who point to this as an indication of friction inside BT have a lot to go on.

The obvious deduction is that Danon wanted to be the next BT boss; and rumours from sources like Telecom TV say that the decision has been made to renew the current CEO's contract. Ben Verwaayen has been making public statements about where the giant comms group is going, which is seen as supporting this.

So, why hasn't BT announced a successor, before announcing Danon's departure?

Cast your mind back to our Open Letter to Ofcom and the recent Ofcom report on broadband and on spectrum, and I think it may become more apparent. "Local loop unbundling" say most analysts, but it's far more than that: it's a question of how BT will be moving forward and what competition it will face, not just at the exchange, but in spectrum.

And me, I see Intel's heavy hand stirring the porridge behind the scenes, here. It has a WiMAX campaign going on in the lobbies of power, and key to this is the need to put a sharp spike into BT's backside, and speed up the supply of true broadband. (That applies in other territories than the UK, of course).

The more competition BT faces in wireless - WiMAX, and all the way up to UWB and down to old TV channels - the more it needs someone who take the central HQ to the battlefield to retain its territory. Someone like Danon wanted more competition for Retail. Perhaps Ofcom would have approved too much of that. Perhaps the rest of BT - Wholesale and infrastructure and all - would have found that a serious threat.

As we said to Ofcom: "You are presiding over the strangling of comms in the UK. Are you doing anything about it?" Well, it would seem, it's trying... and it may have lost an important ally.

A week ago, the Financial Times telecoms correspondent, Robert Budden, compared BT Retail's performance in broadband to the way France Telecom is working: "Unlike its competitors, BT Retail has been hampered by regulations that prevent it from offering loss-leading deals to win customers. As a result, BT is winning less than a third of new broadband customers, well below the half that its counterparts in Europe, such as France Telecom, are gaining in their home markets."

The key difference - and one the British ISP industry feels very keenly - is that in France, rival outfits can do genuine "local loop unbundling" with the infrastructure covering many of the costs that, in the UK, have to be born by the ISP. Equipment goes into the exchange; in the UK, it has to belong to and be paid for by the ISP who wants to see if it works. In France, the incumbent telco has to cover it as part of infrastructure.

Danon was very open about wanting to compete with BT Wholesale, by doing equipment installations like that - rivalling other ISPs, but using BT infrastructure money. It would have been better for the other ISPs, but also, better for BT retail.

What BT will now be looking for, is someone who will walk on the path Verwaayen has marked out, not a scout who wants to go exploring the undergrowth of competition. Ofcom has given BT till February - when Danon leaves - to come up with suggestions as to how to free BT Retail and others, to compete better.

In the absence of a "strong man" to take Retail's side, we can be sure that progress will be reduced, and prices will remain artificially high, and broadband will remain artificially slow. And Ofcom will face obstruction and foot-dragging.

Well, they're used to that...

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