Enabling a broadband society: Enabling a broadband society Pierre Danon Member of the BT Board and CEO, BT Retail


The UK broadband market: The UK broadband market Low penetration to date, but growing: UK's 1 millionth connection at broadband speed achieved last month Current UK penetration according to OFTEL: DSL - 39%, Cable Modem - 61% 2nd Quarter Growth 2002, Net Broadband Additions per 100 Inhabitants 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Japan Korea Canada United States United Kingdom OECD EU France Germany Italy Source : OECD Current UK penetration - 4% of all households (source: Broadband Stakeholders Group)


BT’s broadband strategy: BT’s broadband strategy Putting broadband at the heart of BT Ensuring the price is right Making broadband available Improving customer satisfaction from acceptable to exceptional Developing awareness through marketing Increasing the power of the channels Developing broadband services and content Building on initial success equipping small businesses The growth of broadband volumes No. of DSL installations Jan-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Feb-02 0 100000 200000 300000 400000 500000 Nov-02


Our success with small businesses: Our success with small businesses Market leader BT Openworld connects a UK business to broadband every 5 minutes Currently 80,000 business broadband customers Expected to rise to 150,000 by year end (March 03) Moving towards a 15+% customer penetration rate On target to be in the leading league in Europe


The challenges - availability: Currently not enough demand to enable every exchange The vicious circle The challenges - availability DSL currently available to: 66% of UK population 73% of internet users Without enabling more exchanges demand does not achieve critical mass


The challenges – pricing: The challenges – pricing Is the current retail price of around £30 the right price for DSL? This price does not vary significantly around the world According to Jupiter Media, the cost of DSL broadband access will stabilise at £30 in the world 0 20 40 60 80 100 France Germany Italy Netherlands Spain Switzerland UK Average Euros (CSFB Research, June 02) Broadband DSL Pricing Across Europe Incumbent retail DSL pricing: 512-768kbps, flat-rate access, including email and portal, installation or activation fees not included


The challenges - regulation: Most high penetration broadband markets have government assistance either explicitly (Korea) or implicitly (Germany) UK markets regulated in a pro-competitive way Vibrant ISP market place in the UK BT Openworld has built a strong ADSL market share Regulation has constrained BT Retail’s active involvement in broadband The challenges - regulation


BT Wholesale - growing the whole market: BT Wholesale - growing the whole market Stimulating the market and supporting all ISPs through marketing, channels, productivity, pricing and networks £2m marketing awards made across more than 50 customers - Centrica, Easynet, Albion National and regional advertising promoting the registration scheme and service providers Literature and campaigns to encourage customers to choose broadband


The opportunity: separating access and content makes sense: The opportunity: separating access and content makes sense


The Internet model before BT Broadband: CUSTOMERS INTERNET ISP The Internet model before BT Broadband 54% of customers change their homepage Some Internet businesses held back due to control of the access relationship by service/content providers Difficult to deliver a ‘one-stop’ customer service experience


After BT Broadband: Integrated customer experience CUSTOMER INTERNET CONTENT 3 CONTENT 2 CONTENT 1 After BT Broadband To keep the phone line free The web was too slow with dial up I wanted an ‘always-on’ connection To download games/music/videos To work effectively from home To give my children better internet access My employer paid for it 64% 58% 49% 38% 21% 16% 3% Why did you get broadband? (Forrester)


Creating a virtuous loop with BT Broadband: Content and service providers win Better business opportunities Helps smaller content providers reach a broader customer base Market presence facilitated by micro-payment Creating a virtuous loop with BT Broadband BT wins Improved customer satisfaction Leader in broadband access Cost savings from online versus offline transactions Consumer wins Fast, constant, quality service The only product that can really be personalised and tailored BT Group goal: 5 million broadband customers by 2006 Other telecom companies win Advertising helps everyone More exchanges enabled


Creating consumer value: improving the customer experience: Creating consumer value: improving the customer experience Call answering now consistently above target “Outstanding faults tail” reduced from c. 2500 to c. 800 - confident of achieving target of 500 Fault clearance times improved from 11 to 3-4 days - still below acceptable but moving in right direction Consistently meeting customer call back commitment % Dissatisfied with BT Openworld Consumer Broadband 9 7 6 7 7 7 7 8 8 0 10 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Target: under 10% 3 monthly rolling average results 9


Creating consumer value: improving the customer experience: 0800 800 060 (IVR = enquiry, sales, billing, help, repair) www.bt.com/btbroadband (enquiry, sales, billing, help, repair, “call me”) Warm transfer of inbound calls Technical help desk 24 x 7 Newcastle NGCC 08:00-22:00 Sales service and billing (E-contact 24 x 7) 24 x 7 repair Dedicated broadband field engineering team in customer services Creating consumer value: improving the customer experience


Creating consumer value: delivering compelling content: Creating consumer value: delivering compelling content Quality content is driving take-up - Bandwidth-intensive applications - music, video, games Partnership required between access and content providers and media-owners - Drive new service delivery - Compelling consumer content and services UK Online a key content partner


Creating consumer value: digital photography: Creating consumer value: digital photography Get your digital, glossy prints delivered to your door Professional quality, cheaper than digital printing 24p compared to c. 95p per print Print the pictures you like, store the rest in your digital album Uploading 12 prints: Narrowband 15 minutes BT Broadband 1.5 minutes


Slide17: Creating consumer value: MSN 8 MSN will soon launch MSN 8 Subscription Service - Including parental control, learning and communication - ‘Bring your own access' service model A true example of synergy between BT and Microsoft Currently working with Microsoft to market BT Broadband


Creating consumer value: bringing the digital home: Creating consumer value: bringing the digital home Home computing - just launched Hardware, installation plus software and complete support Share internet connections between PCs and game consoles all around the home Store digital media for later viewing / listening Home security - from early December Comprehensive internet based security for the home Home networking - from early December


Generating mass customer interest: enthuse, educate and inform: Generating mass customer interest: enthuse, educate and inform Biggest ever UK advertising campaign Educates and excites about broadband Changes the BT brand forever broadband at the heart of BT, BT at the heart of broadband Demonstrates BT is serious about broadband


The virtuous circle: The virtuous circle Highest Revenue Density Lowest Revenue Density Exchange Rank Population Covered 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0 1120 2000 3000 ADSL Today 1120 exchanges now enabled


Gathering momentum: Gathering momentum Customer registration scheme launched 1 July Cost-based demand levels set between 200 and 750 registrations Todmorden in West Yorkshire already has customers Campaign in Irby led to 400 registrations in 11 weeks to enable the exchange 17 currently in the process of being enabled One a day reaching trigger - 150 active by the end of March 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 08/07/2002 22/07/2002 05/08/2002 19/08/2002 02/09/2002 16/09/2002 30/09/2002 14/10/2002 28/10/2002 No. of registrations Weekly customer registrations of interest non-broadband areas (cumulative) 11/11/2002 200000


Increasing access and availability: broadband partnerships : Increasing access and availability: broadband partnerships Demand side initiatives -actnow BT helped to establish ICT strategy Targeting SMEs - raising competitiveness through actnow Galvanise businesses; branding, marketing, Cornwall Portal Devon :10 Exchanges, 1,056 lines within first 12 months Cornwall : 9 Exchanges, 1,900 lines within the first six months


Increasing access and availability: regional partnerships: Increasing access and availability: regional partnerships Regional initiatives in an additional 8 areas - Expected to enable 100 additional exchanges. Making broadband available to a further 48,000 businesses Different regions have different challenges which are driving demand for broadband: - Improving business competitiveness - Tackling social inclusion - Delivery of government services - Improving education and skills Launching partnership with Kent County Council for an on-line learning environment with compelling content for use in selected schools and home - 20,000 children engaged in a broadband learning environment - 3,000 SMEs being targeted


Increasing access and availability: new technologies: Satellite Broadband satellite available through whole of UK Some technology limitations Searching for cheaper consumer option Potential for 1% of population enablement Point to multipoint Wireless DSL Dependant on national availability of the right radio spectrum, conditions and price Reach Moving noise threshold from 55db to 60db will improve range at enabled exchanges Improving exchange reach within an enabled area from 94.5% to 97.5% Potential for 3% population enablement Increasing access and availability: new technologies BT is pioneering a number of new technologies in parallel and driving broadband innovation and development using visionary approaches such as MIT


Increasing access and availability: new technologies: Increasing access and availability: new technologies Mesh radio UK could be first country in Europe with Mesh radio systems in operation Need for partnership agreements with a good strategic fit to fill gaps in the current broadband footprint Appropriate technology in development and trial -Spring 2003 Potential for 2% of population enablement Exchange activate Mini DSLAM targeted at extremely remote areas Bundled offer to service providers (16 connections for 3 years) – price published March 2003 Will need partnership funding Potential for 1% of population enablement


Enabling broadband to benefit UK citizens: Enabling broadband to benefit UK citizens Example: NHS Wales - a leader in telemedicine New broadband network - 1,000 connections linking 550 GP practices, hospitals and home workers - Improved email and web service performance for clinicians - Easier/faster to share information and access new treatment and research information - Video-conferencing - Imaging applications Potential opportunity for Mesh radio “The new broadband network in Wales is a good thing for patients and healthcare professionals alike. At the end of the day it is a tool that will help to deliver improved quality of care and real benefits to patients.” Ian Millington, GP, Swansea,


In order for BT to deliver we need: In order for BT to deliver we need Government makes wider use of broadband and ensures more government content is available e.g. - education - public services (i.e. health and small business support) Government takes practical action to solve digital rights management issues to make content available - our micro payment services will give value to small content providers and to service providers Government gives clear guidance and encourages the creation of regional partnerships Regulatory bodies ensure appropriate levels of regulation - avoiding regulatory frameworks that apply to mature markets in the immature e-Market and broadband markets A positive policy decision on allocating the appropriate wireless spectrum


A strawman for increasing the broadband footprint: A strawman for increasing the broadband footprint Population Covered 90% 80% 70% 60% 50% 40% 30% 0 1120 2000


Increasing further access and availability: new 128k BT midband product: Increasing further access and availability: new 128k BT midband product ‘Always-on’ e-mail notification Working hard to achieve ‘market price’ using current systems and components Drops back to 64k to allow voice call Pilot launch Spring 2003 128k access to 97% of UK population Deliver fast internet access for non DSL areas


Enabling a broadband society: Enabling a broadband society Putting broadband at the heart of BT has... - delivered momentum and results - enabled customers, content and service providers and other telecom suppliers to share in the growth Making the strong weaker will not lead to success. Success comes from encouraging the strong to play strongly but fairly.


Enabling a broadband society: Enabling a broadband society