By splitting BT Openworld and then handing it to the retail arm, BT hopes to create a more customer-focused business. The separation between Internet access and portal services intends to remove overlaps between the Telecoms operator and its ISP. Yet, the reshuffle of Openworld raises questions as to whether BT’s broadband strategy was flawed in the first place.
British Telecom is to hand control of its ISP, Openworld, to its Retail division.
On January 1, 2003, control of Openworld’s Internet content services will be given to BT Retail, along with Openworld’s customer services and development operations. Contrary to rumors, BT insists this is not a precursor to a full merger between Openworld and Retail.
BT Retail believes it can capture half the UK’s consumer broadband market with new no-frills product, BT Broadband. Users get a fast Internet connection but no additional services such as email, content and security protection. The vision is that customers will use BT Broadband for connectivity and look to other online companies for content.
The telecoms operator hopes to ease customer confusion between different offerings and create a much clearer brand in the market. It also expects that the changes will result in cost savings.
Despite owning the network, BT has been unable to offer consumers broadband access that is significantly cheaper than that of rival ISPs such as AOL and Freeserve even though these rivals offer a more comprehensive package.
According to telecoms watchdog Oftel, BT Openworld is the most complained about Internet service provider in the UK, receiving 1.6 complaints per 1,000 customers compared to an industry average of 0.4.
BT Openworld has not done as well as expected. It broke even on narrowband services, and made profit on business services but broadband was unprofitable. For the three months to the end of September, it made a loss of GBP22 million on revenue of GBP67 million.
The decision to incorporate Openworld with the Retail division could be seen as an admission that its original broadband strategy needs a new direction. BT may be considering that access alone isn’t enough for broadband consumers after all.
A question mark remains over the future of BT Openworld, as the ISP is struggling to make a profit on its Internet businesses. A full merger should not be completely ruled out in the medium term.
Related Research: Datamonitor, Broadband Access Provisioning – Strategies for Europe (BFTC0505)
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