BT Retail swallows Openworld, but rules out full merger

BT is to divide BTopenworld in two, placing the Internet Service Provider under the control of BT Retail, the company announced on Monday

Pierre Danon, chief executive of BT Retail, insists the move is not a precursor to a full merger between openworld and Retail, as has been widely rumoured over recent months. He told ZDNet UK News it is part of BT's drive to put broadband at the heart of its operations, and would yield benefits such as improved customer service.

However, rival ISPs have already criticised the move, suggesting that it is proof that BT Broadband -- BT Retail's "no-frills" product -- is flawed.

The move, due to be executed on 1 January 2003, will see openworld's Internet content services -- including sportal.com, GamesDomain and dotmusic -- placed within BT Retail, along with Openworld's customers services and development operations.

Openworld's broadband and narrowband Internet access, together with its portal services, will continue under the openworld name, under the management of Duncan Ingram who had been promoted to managing director.

Ingram however will report to Danon, making openworld just a subdivision of BT Retail. Previously, openworld was a separate operation with its own place on the BT board.

"Openworld is only a £200m business, and I'm not sure it deserves its own seat on the board," Danon said, adding that he believes it is more important to ensure the best possible service to customers of both openworld and Retail.

Alison Ritchie was head of BTopenworld until last month, when she became BT's first chief executive of broadband.

BTopenworld's loss-making past has earned it various nicknames, such as Openwoe, Openwound and Openshut, which have even been used by some within BT.

BT Broadband only gives users a high-speed connection without additional services such as email, Web hosting and security protection -- all of which can be bought from third parties. According to Danon, BT will continue to offer two consumer broadband products even after openworld is moved to within BT Retail.

"A merger is out of the question, for the foreseeable future," Danon said. "It's all about giving people a choice, between a service that includes both content and access, and an access-only service."

"As only as AOL and Freeserve exist, we would be mad not to be in the same market [with openworld]," he added.

According to AOL, though, the reshuffle of BTopenworld is proof that consumers want more than just access.

"To me it shows that they [BT] realise that access alone isn't enough for broadband consumers and that BT Retail was lacking in content. However, it's no good doing an about-face when the content still costs £5 per month for every bit. Most consumers want one easy to use and simply to obtain package," Jonathan Lambeth, head of corporate media relations at AOL, told ZDNet UK News.

"As for BT Openshut this doesn't really answer the question mark over its future or ease customer confusion between BT's different but incomplete offerings," Lambeth added.

Some ISPs have suggested that BT's decision breaks the terms of its licence, but Danon insists this simply isn't true. "This is an internal reorganisation, so Oftel don't need to approve it," he said.

For the three months to the end of September, BTopenworld made a loss of £22m on revenue of £67m. It broke even on narrowband services, and made a profit on business services. Broadband, though, was unprofitable.

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