BT shows off its shiny new Nokia silicon

UK telco BT is one of the first customers for Nokia’s catchily-named 7750 SR-14s IP routing platform, which features its special FP4 chip.

Nokia first announced all this shiny new core gear a couple of years ago, but it looks like the sales cycle for this sort of thing is fairly protracted. So this is an important deal win for Nokia, but perhaps even more so for BT as it’s a clear statement of intent when it comes to investing in its core network. Apparently traffic through the BT network is growing by 40% annually so it needs to show it can handle it.

“BT’s FTTP footprint is growing on a daily basis, and we are launching 5G this year in the busiest parts of 16 of the UK’s busiest cities,” said Howard Watson, BT Group CTIO. “These technologies create an amazing customer experience, and drive people to watch more, play more and share more. We have to stay ahead of the massive traffic growth that this will bring, and Nokia are a key part of that, giving us the capacity and automation that we need.”

“Nokia’s 7750 SR-s platform, based on our FP4 silicon, will offer BT’s network the enhanced capabilities and automation needed to address continuously mounting capacity demands as it moves toward 5G,” said Sri Reddy, Co-President of IP/Optical Networks at Nokia. “Our exclusive partnership will allow BT’s converged core network to grow, and move to a programmable, insight-driven network architecture, creating a platform for BT’s growth to continue as demand for its services in FTTP and 5G expands.”

As you can see there’s a fair bit of buzzword-dropping in the canned quotes. The significance of FTTP and 5G in this context essentially amounts to the fact that network traffic is likely to keep growing rapidly for quite a while. For Nokia this is a juicy deal win in a core network market that, admittedly, is largely denied to one of its biggest competitors.

BT’s rural position is nothing more than defensive strategy

BT has unveiled its own proposals to bridge the rural divide, but this strategy is just as much about protecting its own attractive position as it is connecting the unconnected.

In a letter to the Daily Telegraph earlier this week, BT’s consumer CEO Marc Allera outlined the vision for a digital society where everyone reaps the benefits. BT is proposing infrastructure tit-for-tat in the regions where there is coverage from at least one of the UK MNOs, and a more simplistic infrastructure sharing proposal in the genuine not-spots.

Both ideas are completely reasonable, and both are geared towards protecting a competitive edge for BT, created through years of mobile infrastructure expansion.

Although there are arguments that rural roaming or network sharing propositions would slow down investment and the rollout of mobile infrastructure, following the money is perhaps a better means to understand BT’s underlying strategy. With every change made in the telco landscape, there is financial gain and loss. When BT proposes an idea, you must question what the financial gain or loss is.

The reason Allera is making noise through the mainstream press right now is due to the negative PR the company attracted a couple of weeks back. O2, Vodafone and Three proposed an infrastructure sharing initiative, which was promptly rejected by BT, painting the picture of a spoilt child having a hissy fit because he has been told to share his favourite toy train. However, when you delve into the details, you see BT’s rejection was a sound commercial decision.

In short, the trio of competitors proposed opening-up current mobile infrastructure, forcing any mast owners to allow competitors to place radio equipment on the structure in areas which have been deemed underserved. This sounds fantastic for the consumer and the Government’s ambition of 95% geographical 4G coverage by 2022, but it effectively erodes the position BT/EE has spent years attempting to craft.

BT/EE has the best mobile coverage throughout the UK. This is not only average speed, but geographical spread. Some might dispute this point, but year after year test from the likes of Opensignal and Ookla crown EE the champion. This has allowed it to tell customers they will be able to get fantastic signal almost everywhere in the UK, an advantage over rival MNOs.

The cost when it comes to expanding 4G coverage is not necessarily anything to do with the radio equipment, but everything else. Acquiring the land, negotiating local planning laws, constructing the site, wiring it up with fibre and electricity, the raw materials and the man power, all add up to make an expensive proposition. It’s no wonder telcos want to open competitor’s masts as opposed to building it themselves. It’s much faster and significantly cheaper to simply pay an engineer to fix radio equipment to an existing mast.

Should the trio’s proposal of collaboration be accepted, this would effectively kill this advantage and completely undermine a long-term commercial strategy. No competent business person would agree to such an initiative, especially considering how much it would have cost.

Now take into consideration the BT alternative.

Firstly, in the areas where there is only one telco present, BT would allow one of its rivals to use its infrastructure, but only if the competitor opens one of its own masts to BT. This creates the collaborative framework legislators and regulators are keen to see but protects BT’s competitive edge, and prior investments, and allows it to enhance its own coverage footprint. Yes, it does help a rival, but the pros outweigh (or at least equal) the cons, and it doesn’t allow competitors to bypass the process BT/EE would have painfully gone through in the past.

This would be the idea for areas where there is a telco present, but for the genuine not spots, where none of the MNOs can provide service, a more straightforward infrastructure sharing agreement can be created. All four would contribute to a pot and all would be free to put whatever radio equipment on the mast.

This does not necessarily encourage competition, but these not spots offer very little commercial potential to anyone. Extending coverage to these areas is not about providing a service to customers but meeting the coverage expectations of the Government. Sheep don’t pay phone bills after all, but occasionally a rambler might want to Instagram said sheep.

While this might not sound like the ‘we’re all in this together’ rhetoric which has been banded around, realistically this very few people would think contrary to this position. These are commercial businesses which are in place to compete with rivals and make money. BT might be spinning their argument to suggest such collaborative schemes would slow down infrastructure rollout, but 99% of decisions in big business always come down to money.

Why would BT want to help its competitors compete in a market which is incredibly difficult to find profits in the first place?

Trade union slams BT restructuring plans

Trade union Prospect has hit out at BT’s drawn out plans to cut 13,000 staff as part of a restructuring plans to cut £1.5 billion a year from the spreadsheets.

Holding an open ballot to measure the reception of BT’s ‘People Framework’, the proposed organizational structure following the restructure, BT employees represented by Prospect have overwhelmingly rejected the proposal. 96.3% voted against the proposal.

While former CEO Gavin Patterson spent years forking out cash on various schemes, including rights for English Premier League and European Champions League football, his last actions were at the polar opposite end of the scale.

Announced in May 2018, the wide-ranging restructuring plan was to create a new BT business, one which is designed for the digital era. Alongside trimming the workforce by 13,000, the team would also overhaul its supply-chain and relocate from its central London HQ. BT claims many of the cuts would be sourced from back office and middle-management roles, supposedly protecting the workforce which will perform network maintenance and upgrades.

Over the last couple of days, new rumours have emerged out of the BT office suggesting new CEO Philip Jansen and his team are considering 25,000 cuts on top of the aforementioned redundancies. Should the rumours turn out to be true, BT’s workforce would be trimmed down to roughly 75,000.

In reaction to the original cuts, Prospect conducted an open ballot on BT’s ‘People Framework’, the new internal pay and grading structures. This framework is designed to create fewer management roles, each with more accountability, and de-layering the management organization.

“The rejection of the ballot by BT members gives a clear message to CEO Philip Jansen that he is not bringing his staff along with him in his future vision for BT,” said Prospect National Secretary Noel McClean.

“Good companies are built from the inside and organisational change on this scale is rarely successful when it is imposed on people. These changes will not just see the knowledge, skills and legacy of BT vastly reduced, but will severely impact local jobs and grassroots technology industries supporting local economies.”

While redundancies are certainly far from an ideal situation, BT does need to do something. The telco is currently bloated, representing one of the worst revenue returns per employee across Europe. These are the figures which shareholders would have been looking at when Jansen entered as CEO and you can guarantee he was given a mandate to improve this aspect of the business.

BT currently generates £254,200 per employee per annum, and though this compares to £275,900 at Orange, £327,100 at Telecom Italia, £350,800 at Deutsche Telekom and £405,300 at Telefonica. When you look at the value of assets per employee, the numbers are equally as unattractive. BT clearly needs to do something to alter these numbers.

Prospect has suggested the new system would create a less transparent pay review system to workers across all levels and divisions. It has also questioned whether the telco would be fit to serve the wider digital ambitions of the UK as a result.

Jansen might have been able to keep himself out of the media spotlight so far into his reign, but with his first earnings call only a couple of weeks away, the new CEO might well be called into the limelight to address this conflict. The initial announcement certainly attracted political attention, and we suspect this ballot might well do the same.

BT mulls redundancies for a quarter of staff – report

BT is considering further redundancies to increase profitability at the firm, with 25,000 jobs, a quarter of its employees, reportedly under threat.

According to Bloomberg, the battle-weary telco is mulling over the plans as new CEO Phillip Jensen prepares for his first meaningful earnings call in May. The telco has not confirmed or denied the reports thus far.

Having taken over the business from Gavin Patterson in February, Jensen is currently in the unenviable position of turning the supertanker. BT has been under pressure in recent years, not only due to an industry where profitability is decreasing rapidly, but with increased competition and CAPEX demands from the government, none of the trends seem to be favouring BT.

Sources claim internal discussions have been taking place, setting a target headcount of 75,000. The redundancies will allow for greater automation of back-office roles, while the team is also considering business disposals and streamlining the management functions. The plan is reportedly to trim headcount down by 25,000 by 2023.

This is of course not the first time BT has discussed redundancies, with the team also announcing 13,000 cuts back in May. The first round of cuts accompanied efforts to overhaul BT’s supply chain as part of a wider restructuring process to make the business more agile and fit for the digital era. These cuts, should the rumours turn out to be true, would be seen as a continuation of this strategy.

As you can see from the graph below, BT is not in the healthiest position and could be viewed as bloated in comparison to other telcos throughout Europe.

Bloomberg Intelligence

Source: Bloomberg Intelligence

Jensen now has the unenviable role of ensuring BT is fit for purpose, both from a business and network perspective, as the demands of the digital era start to weigh heavy. Not only has BT got to fuel 5G deployment, fibre connectivity is being demanded by customers and the government. BT has seemingly been able to ignore some of these demands in by-gone years, but the emergence, and initial success, of alt-nets are providing stern competition.

Although investors are seemingly happy with the rumours, share price increased by 1.6% following the report, we’ll have to wait until May to get the full details. It is believed Jensen will unveil the next stage of BT’s transformation during the earnings call.

Which pans UK broadband leaders for woeful service

Consumer publication Which has slammed the UK broadband scene, pointing towards the unacceptable and consistently poor performance of market share leaders for customer service and performance.

According to its latest broadband satisfaction survey, BT, Sky, TalkTalk and Virgin Media supply broadband services to almost nine in ten of UK broadband customers, but these are the worst performers when it comes to meeting customer expectations. The satisfaction score has been built on whether customers are satisfied with their current service, and whether they would recommend it to anyone else.

The satisfaction score for TalkTalk and Sky stood at 50%, while BT was only marginally better at 51% and Virgin Media collected 54%. Year after year the heavy-hitters of the broadband segment have shown customer satisfaction is a low priority, with these results just emphasising the point.

At the top of the list, Zen Internet collected the plaudits while Utility Warehouse sat in second place. The challenger brands clearly recognise there is an opportunity to secure customers through customer service and experience, as opposed to competing in the dangerous race to the bottom or over-promising on speeds.

“It’s outrageous that the biggest providers are still letting their customers down with shoddy broadband, especially when we know that longstanding customers are the most likely to be overpaying,” said Natalie Hitchins, Head of Home Products and Services at Which.

“Anyone who is unhappy with their current provider should take back control and switch to a better deal – you could get better service and save hundreds of pounds a year.”

This is perhaps what is most frustrating about the status quo. With the telco industry geared towards aggressive customer acquisition as opposed to building a successful business through retention, profits must come from somewhere. Customers are lured into the traps with the promise of under-cutting current providers on price, but it is the loyal customers who are getting punished with price hikes.

Looking at performance, 27% of TalkTalk customers said they experienced slow speeds, below the telco’s promise, while this number was 22% for Sky customers and 20% for BT. 20% of BT customers also said they experienced network drop-offs, while 17% of Virgin Media customers said they had been left without a connection for hours or days at a time.

While the tendency to favour new over existing customers is unlikely to change at any point in the future, Ofcom is currently working on new rules which will force telcos to be more communicative with their customers when it comes to contract expiration and is also considering pricing practises. Both of these factors could have a big impact on the business with many customers already stating they will switch providers.

The other factor to consider is the emergence of alt-nets around the country. In days gone, customers dissatisfied with a poor performing provider would only have the option of other poor performing telcos, though there is increased competition emerging. The likes of Vodafone, making use of CityFibre’s fibre networks, Hyperoptic and Gigaclear are growing quickly, providing alternatives with satisfied customers.

“Unfortunately, the UK broadband industry is notorious for awful customer service, mid-contract price hikes, and poor value for money,” said Richard Tang, founder of Zen Internet. “Too many providers in this industry put short-term profit ahead of the customer, but at Zen we continually work to ensure that consumer happiness comes first and to reward the loyalty of our existing customers.”

The market leaders are seemingly happy in their current position. Many will state customer service is a critical aspect of their business, but year after year customers are dissatisfied. These numbers suggest no-where near enough is being done to evolve the profit-centric organisations or there is a level of incompetence present when devising new strategies.

BT pleads for open access to street furniture

BT is attempting to rally the industry in an attempt to convince local authorities to ditch the current exclusive concessions model in UK cities in favour of an ‘Open Access Model’.

As it stands, many local authorities operate a concessions model which grant a single player exclusive access to council-owned street furniture, such as lamp posts, to place mobile network equipment. This might seem attractive to the councils from a revenue perspective, but BT is arguing this will be to the detriment of the digital economy in the long-run.

“While the concessions model made sense in the early 2010’s when it first came into common use, the market and regulatory landscape have changed, and it’s become clear that exclusivity agreements act as a barrier to further 4G and 5G investments,” said Paul Ceely, Director of Network Strategy for BT.

“Government initiatives such as the DCMS Barrier Busting taskforce are showing the way, but we believe that industry needs to act. We are leading the way by handing back exclusivity in nine key areas.”

BT currently operates nine exclusive concessions (Glasgow, Cardiff, Brighton, Plymouth, Carlisle, Newcastle/Gateshead, Nottingham, Gloucester and Leicester) and is proposing to end these contracts should the result be an open access environment. The new model would grant all mobile operators and infrastructure companies access to street furniture, paying the local authorities a flat, consistent rate.

Although it is not a new gripe, the bureaucratic and regulatory environment across the UK has once again been blamed for connectivity problems. Almost all the operators have had a moan at the red-tape wrapped regulatory landscape at one point or another, but an open access model would appear to be a sensible step forward to encourage improved mobile coverage and experience.

However, what should be worth noting is there are authorities who have made progress in this area without prompts from industry.

“One of the reasons why the West Midlands was chosen as the location for the UK’s first region-wide 5G test bed was our commitment as a region to do what it takes to work with operators to get the 5G networks we need built in the fastest, fairest and most cost effective way,” said Henry Kippin, Director of Public Service Reform at the West Midlands Combined Authority.

“The timing and spirit of this Open Access initiative is ideal as we will make faster progress through operators and public services working together to a shared agenda so that 5G can fulfil its full potential in driving economic growth that can benefit all our diverse communities.”

While some small-minded public servants might point to the lost revenue when ending the exclusive concessions, you have to look at the long-term benefits. The West Midlands is now home to numerous 5G test beds, R&D facilities and is home to hubs of excellence for emerging technologies.

Whether the local authorities pay attention to logic is an entirely different matter, but any suggestions to decrease the red-tape complications of UK bureaucracy should be welcomed by all.

BT shared rural network snub is not as it seems

Everyone agrees that there needs to be some sort of collaboration to meet the extra-ordinarily difficult coverage objectives of the Government, but BT is snubbing rivals’ latest plans?

According to The Times, O2, Vodafone and Three have tabled a plan which would see all four of the UK MNOs pool resources to tackle the digital divide. Shared infrastructure would reduce the financial burden of investing in geographical regions which offer little potential for ROI, due to the sparse or non-existent population.

At a breakfast briefing in London, Vodafone UK CTO Scott Petty laid out the concerns in a relatively simple fashion; sheep don’t pay phone bills. This is the challenge the telcos are currently facing; the vast majority of the UK’s population have coverage, but geographical demands of the government are a different kettle of fish (or herd of sheep). When no-one lives somewhere, what is the incentive to invest in infrastructure to provide coverage?

While this might seem like a reasonable approach, BT is reportedly taking issue with the plan, at least according to The Times.

“BT has already invested heavily to create the widest 4G coverage in the UK, and we are keen to collaborate with Government and industry to extend rural coverage into areas where there is none today,” BT said in a statement. “To this end, we have recently proposed a new model for consideration over the coming weeks.”

It has been widely reported BT is snapping the olive branch put on the table from rivals, but BT suggests this is just PR spin.

Reading into this statement, BT is not objecting to the idea of collaboration, the spin which has seemingly been played over the last few days, but suggesting a different approach. And from our perspective, it is a completely reasonable objection to make.

When you look at different coverage surveys and 4G connectivity analysis reports, EE is regularly crowned the best performer overall, and takes top-spot for most of the regional measurements as well. There is a simple reason for this; EE has spent more money improving its geographical coverage than its competitors.

While this is an achievement which should be applauded, the idea of rural roaming and generic shared infrastructure would erode this competitive advantage which it has been building towards. Don’t forget, EE has not been building out this 4G network because it is run by people who are just nice guys and want to help everyone in the UK. This investment has been made to give the team something to shout about and create an advantage when attempting to secure more customers.

EE wants to be able to go to potential customers and tell them they won’t only have better signal in all the normal places, but everywhere they could possible think of going. It’s a long-term strategic decision to put it in a stronger position than its rivals. Should there be any surprise EE does not want its rivals to benefit from the hard work, foresight and investments it has been making for its 4G networks?

Reading between the lines, this is what the objection is based around. BT is prepared to have discussions on collaboration to provide coverage in areas where there is none but allowing competitors to piggy back on its investments is a commercially idiotic idea. Why would it give away such a competitive edge in an industry where profits are so difficult to come by? It has made investments in commercially unattractive areas, so its rivals should have to as well.

From BT’s perspective, this is simply an attempt for rivals to increase connectivity coverage, but not having to pay for the achievement. Collaboration should be focused on areas where everyone is facing complications, not those where everyone aside from BT has an issue.

Another point to consider is whether a shared network would actually work from a differentiation perspective? The telcos are fighting for subscriptions, but if they are all using the same network in the rural markets, it becomes nothing more than a race to the bottom, eating away precious profits and marching towards utilitisation.

Finally, does such a broad-brush approach to geographical coverage actually work? Does the discussion about generic rural network sharing detract from the critical point, which should be focus on areas which have zero coverage, instead of those which have partial coverage? This is a six of one, half a dozen of the other argument, as while it sounds reasonable to concentrate on the areas which are complete data black spots, try telling that to Joe Bloggs who is potentially being screwed by only having a single provider to choose from.

This is an incredibly complicated argument, most of which has not been considered by the initial blame game which has been building over the last few days. When you take the nuances into consideration, there is no right answer, and neither are any of the suggestions wrong. In truth, something has to be prioritised, and not everyone is going to be happy with the final decision.

It might be easy to hurl blame towards BT/EE for its objection to a collaboration plan, but to do so without considering the commercial realities of the telco industry is incredibly lazy. BT/EE is objecting to this proposal, not to the idea of collaboration, but so would any other business which had built this position.

EE takes step towards content aggregator model

Content is a tricky topic to discuss around EE and BT, such is the scale of the disaster over the last few years, but a tie up with Amazon Prime and MTV Play is a step in the right direction.

The new content offer will see EE customers receive six-month memberships to both Amazon’s Prime Video service and MTV Play. The news starts to make a more comprehensive content platform for the MNO, with customers already able to access Apple Music and BT Sport, all of which is covered under the EE Video Data Pass, a zero-rating initiative available to all customers.

“It’s our ambition to offer our customers unrivalled choice, with the best content, smartest devices, and the latest technology through working with the world’s best content providers,” said Marc Allera, CEO of BT’s Consumer division.

“In offering all EE pay monthly mobile customers Prime Video and MTV Play access, in addition to BT Sport and Apple Music – we’re providing them with a wealth of great entertainment they can experience in more places thanks to our superfast 4G network, and soon to be launched 5G service. So, if they want music on a Monday, telly on a Tuesday, films on a Friday or sport on a Saturday, we’ve got something for them.”

While the content play over the last couple of years have been pretty dismal this is an approach to content and diversification which we like. It allows the telco to leverage the scale of their customer bases, while also adding value to the existing relationship with said customers.

Content fragmentation is an irk for many customers, not only because of the various apps which need to be installed, but also the number of different bills. EE doesn’t seem to be addressing the first issue but consolidating bills to a single provider might well be of interest to some customers. It also has the advantage of making EE a ‘stickier’ provider, perhaps having a positive impact on churn.

“Content is a key differentiator for telcos,” said Paolo Pescatore of PP Foresight. “However, consumers are now spoilt for choice resulting in too much fragmentation. Telcos are very well placed to aggregate content, integrate billing and provide universal search. Whoever achieves this first will have a significant advantage over their rivals.”

Sky is one of the companies which has had a good crack at addressing the fragmentation challenge, Sky and Netflix content is available on the same platform and through the same universal search function, though EE’s push on the mobile side would certainly attract attention. Consumers no-longer consider entertainment as simply for the living room, new trends show more preference for on-the-go content.

While this is a step in the right direction for EE, this is only one step. The content options need to offer more depth to meet the demands of the user, while streamlining all the content into a single app would be a strong step forward. It would certainly be difficult to convince partners to hand over customer experience to a third-party, Netflix has shown much resistance to this idea making the Sky tie-up all the more impressive, though whoever nails this aspect of the aggregator model would certainly leap to the front.