BT may shift money into global networks
The telecoms giant is well placed to become a service provider, says Charles Arthur
Sunday 28 May 1995
Industry observers say that BT is well placed to use its commercial clout to break into the burgeoning markets, especially as a "service provider" - providing the software through which customers can use computers to access on-line shopping, or download films to watch at home, for example.
"BT brings an awful lot to any negotiating table, whoever it is talking to," says Bryan Van Dussen, principal European research analyst at Yankee Group, the consultancy company. "And it's doing an awful lot already."
It is not thought that BT would want to buy into "content" companies, such as film studios, television programme makers or computer games producers. It would, however, like to play an intermediary role. There is a close analogy with a shopping mall operator: it would own the shops, but would not provide the products. CompuServe, the global on-line service owned by H&R Block in the United States, is an example. It is believed to generate revenues of more than $1m each day, and its subscriber base increases exponentially. Its principal rivals in the US are American OnLine and Prodigy - the latter jointly owned by IBM and Sears. But in Europe, CompuServe has little competition.
The advantage of being a service provider is that one can charge twice over: the subscribers pay for access to data on the service and companies pay for space in the "mall" to sell to subscribers. The service provider's main cost is capital, to buy computer equipment, and the running costs are comparatively low.
This is widely seen as the reasoning behind Microsoft's decision to set up the Microsoft Network. The company's new computer operating system, Windows 95, will include software allowing simple access to the Microsoft Network. This is likely to trigger a bloody battle with the other on-line services: many in the industry believe automatic access to the Microsoft Network will give Bill Gates's company a huge and possibly unfair advantage.
The Internet, the worldwide information and communication network that can be accessed by anyone with a computer and a phone line, is also seen as fertile ground. "BT is definitely going for a place on the Internet," says Eddie Hold, editor of Communicate! magazine, which follows the industry. "I would be very surprised if they don't follow MCI by offering some sort of virtual shopfront. BT took a long time to get into the Internet - in the UK, companies like Pipex [owned by Unipalm] got a couple of years' lead on them. But BT is a safer bet than smaller companies."
BT would benefit from its strength as a brand, says Mr Van Dussen. "I've talked to BT people on its video-on-demand trial [near Martlesham in Suffolk] and there's this feeling that the way the tide of business is going, you just have to be a service provider. It's not good enough to just offer telecoms. You have to buy the rights to Hollywood films or some local TV or films and be able to offer those."
Not every large telecoms company is following this path, though. AT&T, the US long-distance telecoms provider, has determined to apply itself to providing phone services only. "That's not enough for BT," says Mr Hold. "BT wants to be everywhere."
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