Fool's Eye View

[ April 26, 2000 ]

BT gets broad

By Stuart Watson (TMFTiger)

Great Titchfield Street, London -- This morning British Telecom's (LSE: BT.A) followed up its recent re-organisation announcement by outlining its plans for broadband Internet access under its Btopenworld banner. The key detail that everyone is interested in is the cost. It will set you back £40 a month to have access to BT's high-speed service. Installation is free if you order before June 30, after which it will cost £160. A multi-user small business service is also being offered that will cost £100 a month and £260 to install.

The new service will begin in July and use asymmetric digital subscriber line (ADSL) technology. That means it will always be on and there will be no more painful dialing up process. Although the service will use your existing telephone line you will still be able to make and receive calls at the same time. You can sign up now through the BTopenworld web site.

Initially it will offer access speeds of 512 kilobits per second (kbps), roughly ten times faster than current modem access that is 56 kbps. In the autumn access speeds will be increased to 1 or 2 megabits per second (mbps). Finally sometime in 2001 BTopenworld will launch its Personal openworld Portal. As the name suggests this will be a personalised portal that you will be able to access from a variety of platforms, such WAP phones, PC, TV and phone.

BT said that its ADSL network currently covers just over a quarter of the UK population and by the middle of the year a third of all UK households will be within its grasp. These households account for more than half of the UK's current Internet users. This is no piecemeal rollout. It makes Freeserve's (LSE: FRE) plans look a little insignificant by comparison. Back in February Freeserve announced that it was launching an ADSL trial in London and Manchester that would cost £50 per month.

BT said that their rate was comparable to those being charged internationally. £40 does seem to be the opening gambit for a lot of these 'new media' services. I'm currently paying that for my recently installed digital cable service provided by Cable & Wireless Communications (LSE: CWZ). However, as they are yet to switch on the e-mail and Internet access part of this service it's difficult to tell how this will compare to a broadband offering like BT's.

The residential part of Cable & Wireless Communications is about to be acquired by the highly ambitious NTL (Nasdaq: NTLI). NTL has already announced plans to introduce totally free Internet access, as long as you spend £10 a month on traditional calls. The enlarged firm is likely to be a big threat on the broadband field as well. When BT's local loop is unbundled in 2001 this will also give numerous other competitors the opportunity to offer similar services using BT's network.

But BT looks to have beaten everyone to the punch. It definitely has first-mover advantage, something it has lacked before. Now it has to prove it can execute this advantage before other players come into the market. Broadband services look like they will generate significantly more revenue for their participants. For the providers there is the benefit of a regular monthly fee. For content providers it is also much more attractive. BT pointed to recent research showing that broadband customers spend four times as much time on line and three times as much on e-commerce. BT has signed up 50 providers to offer broadband services initially, presumably in addition to their current content offerings. No doubt more will follow once the new service gathers some momentum. At last BT is starting to deliver.

Related Links

• BTopenworld web site