Outlook: BT wrestles with its digital future

LET BATTLE commence. About four years too late, British Telecom has woken up to the fact that it is about to have its domestic telephone monopoly poached from under its nose. In an attempt to head off the threat and protect those burgeoning profits, it has belatedly begun to invest in the latest technology.

Now pay attention. The technology in question is known as "asymmetric digital subscriber line" (ADSL) and it allows BT, through digital compression, to use its rickety old co-axial telephone network to deliver what is essentially a broadband service to the home. Got that? Never mind, you will eventually, for this is the future, and BT's chief executive, Sir Peter Bonfield, is having to spend a fortune on being a part of it.

The cable companies have also taken their time in putting their networks to good use, but sometime next year, they should all be in a position to offer a full broadband service to customers, allowing high speed internet access, video and TV programming on demand, and just about anything else you could possibly want to do with a telephone line. Up until now, BT hasn't had to worry too much about the cable guys. They have failed utterly to capitalise on their spanking new broadband networks, and if you believe the TV ads (which you shouldn't), even those who defected to cable are now returning to the bosom of BT in their thousands.

Of late, however, cable has shown distinct signs of getting its act together, and in theory at least, the natural advantage of its new age networks should allow it to provide far superior service to BT at considerably lower cost. For instance, Telewest will be launching its own fully interactive service sometime next year, and given that its fibre optic network is already up and running, it's not going to cost it much to do so.

BT by contrast is having to invest pounds 250m just for the initial phase of its new service. This will only make ADSL available in areas covering 8 million households, mainly London and Manchester. Furthermore, that expenditure will allow for no more than a couple of hundred thousand connections, each extra subscriber costing an unspecified amount more. Even more alarming, if more than about a third of households in these areas subscribe, it would probably collapse the entire network.

Applying ADSL to BT's existing local network is a bit like putting a nuclear reactor inside a nineteenth century steam vessel. It'll make the ship go a lot faster initially but eventually the vessel will sink and need replacing. Meanwhile cable's own nuclear powered super tanker will still be afloat and motoring.

This threat to BT's core domestic customer base is much more potent than generally appreciated. The high margins of domestic voice telephony are already under siege from fast growing mobile telephony. At the present pace of development, it won't be long before cable starts throwing in voice for free alongside the rest of its multi-media package.

Like the high street banks, BT can to some extent rely on customer apathy to safeguard its core domestic revenue stream. Unfortunately for BT, anyone clever enough to know what ADSL stands for is unlikely to have too much difficulty choosing between the pounds 40-pounds 150 a month BT plans to charge for broadband connection, and the much cheaper rates that will be on offer from cable.

BT has defended its monopoly against all comers much better than anyone would have dreamed possible when the telecommunications market was liberalised in the halcyon days of the Thatcher government. That could change very rapidly from here on in. Apart from the consumer, the one clear winner in all this is Microsoft, which having already sewn up the cable companies, has managed to gain key brand positioning on BT's ADSL offering too. Bill Gates isn't worth more than $100bn for nothing.

u

u

Start your day with The Independent, sign up for daily news emails
News
people

Harry Potter actor suffered 'severe flu-like symptoms' on a flight from London to Orlando

Sport
Kim Sears is reported to have directed abuse at Berdych
tennis
News
news

Rap music mogul accused of running two men over in his truck

News
Gywneth Paltrow proposed that women seek out a special herbal steam-treatment service
news
PROMOTED VIDEO
Arts and Entertainment
film
Arts and Entertainment
tv

First full-length look is finally here

Voices
A mother and her child
voices
Life and Style
life
Arts and Entertainment
Film director Martin Scorsese
film
News
news

The party's potential nominations read like a high school race for student body president

Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee