Divide and conquer

Divide and conquerFact 1: The world wants high bandwidth links. Fact 2: BT could adopt new technologies to provide 2Mbit/s links but chooses instead to offer a paltry 128kbit/s. Not good enough, says David Manners
The time has come to split up BT. One part would be the side which maintains the network, the other part would be the side which operates the services.
The reason for splitting BT is because, in its present, unified form, BT has no incentive to adopt new technologies.
Indeed it is in its commercial interest to delay and procrastinate the adoption of new technologies.
Any organisation faced with a technology change which would deliver to customers for ?20 a month a service which currently costs upwards of ?1,500 a month would do what BT is doing – dig in its heels and resist change.
This is now the situation with BT. Faced with a proven, commercially available technology which could deliver a 70 times improvement in its basic service it is apparently reluctant to adopt it.
BT’s dilemma is simple. It now charges businesses tens of thousands of pounds a year to have a superior service. Instead of domestic subscribers’ bog standard 28kbit/s data transfer rate, business subscribers get a 2Mbit/s transfer rate (called an E1 line) for their ?20,000 plus a year.
The snag for BT is that practically every large microelectronics company is offering ?25 xDSL chipsets which can upgrade a domestic subscriber’s 28kbit/s line to 2Mbit/s.
Where these xDSL chipsets are being sold to domestic subscribers, mainly in the US and Singapore, domestic subscribers get their 2Mbit/s for about ?20 a month.
No wonder BT doesn’t want to adopt these xDSL chips! They don’t want to kiss goodbye to the ?20,000 plus a year E1 subscriber.
By contrast, what BT is offering its UK domestic customers is the ‘Home Highway’ service which delivers 128kbit/s – a mere four times the present 28kbit/s performance compared to the 70 increase in performance delivered by xDSL.
And look what BT charges for this meagre increase in performance: ?116 conversion charge + ?233 connection charge + ?27 per month rental or, under the Call Inclusive Plan ?57.58 conversion charge, ?175 connection charge and ?40 a month rental.
The only explanation for the introduction of Home Highway is that BT’s strategy is to protect its E1 revenues but make a token concession to subscriber demand for upgraded performance.
Which is why BT needs to be split because, in its present format, it is forced to act against the national interest. No one can expect a commercial organisation to behave in the national interest to the detriment of its shareholders’ interests.
BT management is not to blame for its reluctance to adopt new technology – it is the fault of those in the Thatcher government who master-minded the privatisation of the company in the mid-80s and failed to split out the network maintenance side of the business.
Imagine how the rail privatisation would have turned out if BR had been allowed to keep the network maintenance side of the business as well as the train operating side of the business.
With BR controlling the rail network imagine how many spanners it could throw into the works of anyone trying to compete against it in running train services!
Yet the absurdity of bundling together both BT’s telephone operating service side and its network maintenance side was allowed to happen on telecoms privatisation.
It is this bad decision which has produced the situation where, if our largest network operator invests in new technology it hurts the interests of its shareholders, and if it doesn’t invest it hurts the interest of its customers.
If the network maintenance side of BT was spun off as a separate company, however, and if more licences given to operate telephone services over the network, then competition could be induced among the operators to provide upgraded services at competitive prices.
The person best placed to engineer this is Lord George Simpson of GEC – now struggling to transform the company into a modern telecommunications equipment supplier.
Via his US acquisition Reltec, Simpson has the fibre optic and xDSL technologies needed to transform subscribers’ links into the UK’s telephone network. If Simpson’s $4bn offer to buy Fore Systems succeeds, he will also acquire a leading position in ATM broadband switching technology which will give GEC the core technologies required for upgrading both cable TV and telecommunications networks.
If the UK adopted a telecommunications business model which made it in the operators’ best interest to upgrade their lines, then GEC would be in pole position to provide the upgrade equipment.
Furthermore. it is not inconceivable that GEC could be given a licence to operate telephone services. If it did, it would have a direct interest in offering subscribers its own more powerful links into the network.
With one operator providing upgraded links, all other operators would be forced to follow suit if they wanted to keep their customers.
A virtuous circle would be created in which it would be in the network operators’ best interests to provide the most advanced technology service to their customers at the cheapest prices – the exact opposite of the situation prevailing today where it is in the commercial interest of the operators to provide the minimum technological level of service at the highest cost.
If this virtuous circle were to materialise, the UK might quite quickly – and at no public expense – acquire the best telecommunications network in the world.
That could give a powerful boost to the UK economy by providing a Rolls-Royce network to handle the expected boom in Internet-based e-commerce.
The catalyst in all this could be Lord George’s relationship with Tony Blair. Simpson was one of the first people to be ennobled by the Prime Minister after the Labour election victory.
If Lord George could get the PM to get the all-important split of BT on the roll then GEC, and the rest of us, could benefit enormously.
With network operators clamouring to upgrade their lines, GEC’s new telecommunications strategy would pay off handsomely.
What c ould be a more juicy market than the UK into which to sell GEC’s fancy new network links? Once tried, proved, tested and shown to work – think how success in transforming the UK telecoms network would parley into success in foreign markets.
The world is begging for high bandwidth links. The UK could lead in providing them just as it led the world in providing rail links in the last century. The only thing standing in the way is the absurd, outdated, unified BT structure.


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