Analysis: BT under pressure to do the right thing. Part II

In part II, Eugene Lacey looks at some of the challenges BT faces and advises not to write off the telco

Recent grumblings from analysts and shareholders over the lack of a coherent Internet strategy from BT have resulted in the finger being pointed at Chairman and CEO, Sir Peter Bonfield. A much-publicised structural reorganisation of BT is now being carried out and it is expected that heads will roll in the process to appease the critics. Another idea is that BT might float off its Internet business, though one effect of this might be to highlight a rather disappointing market value for those assets (particularly in the current climate).

But all of BT's problems in spinning its business strategies in an attractive light for investors are like some PR tea party, when compared to the criticism it faces in its gate-keeper role, as the main wholesaler of Internet access for ISPs -- who then sell on access to the network based on the BT wholesale prices. Just about everyone from the Prime Minister down has said the price of getting online needs to fall to bring a wider constituency online -- so that new economy businesses have the same chance of selling their wares as their US counterparts do.

BT also faces criticism for delaying the rollout of ADSL, the fast access broadband connection to the Internet that will enable a richer, multimedia-like online experience. An ADSL rollout date has now been set, but critics point out that France Telecom and Deutsche Telecom are already offering ADSL. Similarly, BT has been accused of dragging its feet over opening up of the local loop, essentially allowing competitors access to the local exchanges so that they can make 'last mile' connections to households, one method by which it is believed price competition will drive charges down.

So BT faces some enormous challenges. But nobody should write off BT and those that make comparisons with so called 'fleet of foot' Internet players should be particularly careful what they say. While the markets get tougher and tougher in demanding substance from tech investments -- substance in terms of deep engineering expertise, patents, and unique technologies -- as opposed to fluffy, 'portalesque' Internet appeal, there is substance a plenty in BT. Compare the engineering expertise, for example, of a company like BT with a company like Freeserve and you quickly see that this is a no contest.

Another strength, albeit an unfashionable one, that BT takes from its civil service, voice-telco roots is an understanding of 'five nines reliability' (pick up a landline phone and you get a dialtone 99.99.9 percent of the time) and the process, monitoring, and certification that is required to deliver it.

The time probably is right for BT to separate its Internet business from voice telephony, but it should do so in a confident, well-thought out manner that delivers BT customers, both domestic and business, a coherent 'one stop shop' package that suits them. What we don't need is more short-term panic measures, even if, as we have observed, there may be good reason to panic.

Right now BT customers are confused by the various offerings and are uncertain that they are getting value for money. BT must fix that first.

Take me to Part 1

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