BT Takes Second Crack At FMC: Goodbye Fusion, Hello Total Broadband Anywhere

| May 9, 2008 | European Consumer Broadband and Wireless | Competitive Intelligence Report

| Analysts: Emma Mohr-McClune, Ben Tudor

Current Perspective: Neutral
Vendor Importance: High
Market Impact: Low/Moderate

Event Summary

May 7, 2008 -- BT launched a mobile element to its Total Broadband DSL service in the form of cheap mobile phones with e-mail and Web access. BT Total Broadband Anywhere offers a choice of two HTC Windows smartphones with bundled minutes, VoIP access over BT Openzone and FON base stations at home and abroad, as well as a range of value-added services such as Digital Vault and Snap and Save, starting from GBP 5 per month. Mobile devices are managed, and applications are tightly integrated with BT Broadband equivalents.

Analytical Summary

• Current Perspective: Neutral on BT’s launch of BT Total Broadband Anywhere, because despite BT’s admirable efforts to make FMC more meaningful than ‘cheap mobile calls at home,’ we believe the operator will struggle to match the marketing and service modelling prowess of mobile operators with simpler and, in some cases, better-priced bundles. On the other hand, a multi-million pound marketing campaign, and some pretty neat mobile value-ads, will do much to help revive BT’s post-Fusion mobile reputation.

• Vendor Importance: High to BT, as the operator is now under pressure to justify its 21st Century Network project with a successful converged service, in the wake of BT Fusion. That said, the raison d’etre of BT Total Broadband Anywhere is broadband loyalty enhancement; a take-up rate, which may be regarded as a middling performance by a mobile phone operator, may be viewed as a success for BT.

• Mobile Consumer Market Impact: Moderate as this new ‘reformed Fusion’ service may be seen as the first sign of an anticipated wave of new competitive challenges in the UK. Operators planning to either extend an existing, under-performing FMC service (such as Orange UK’s Unique), introduce a new one (such as the planned O2 femtocell move) or bundle mobile and broadband services more aggressively (Vodafone and Virgin Mobile) clearly need to ‘think mobile data,’ too.

• Broadband and Bundling Market Impact: Low as few broadband operators are in a position to copy BT’s move. While BT may be the biggest broadband operator in the UK, plenty of consumers are happy to go elsewhere, including to mobile operators that bundle broadband with their core mobile products. Just as most ‘free’ broadband products cannot compete with premium offerings from ISPs, BT will have a tough time selling directly against mobile companies.

Recommended Mobile Consumer Competitor Actions - Highlights

• O2 UK should take heed of the way BT uses mobile data to emphasize the ‘mobility’ aspects of a converged service.

• This is a great opportunity for Vodafone UK to point out that it now includes 500 MB per month of wide-area, UMTS/HSDPA mobile data across its voice and text subscribers, as a matter of course and with no restrictions on mobile device model or operating system.

• All mobile operators should understand that they have a strong retail/sales point advantage over BT and other fixed operators looking to sell mobility.

• Virgin Media needs to ramp up its direct selling campaign to up-sell its cable customers to mobile services, as 2008 will see a set of new challenges in this space.

• All mobile operators should point out that a mobile surfing experience based on snail-paced GPRS is frustrating, and unnecessary; UMTS/HSDPA networks are now prevalent in the UK.

• Mobile operators should point out that BT’s FON international hotspot sales argument for BT Total Broadband Anywhere is largely irrelevant.

Recommended Broadband and Bundling Competitor Actions - Highlights

• Broadband Anywhere is part of a larger portfolio. Broadband competitors should consider offering 3G dongles (sourced through partnership with a mobile operator or on an MVNO basis) at subsidized rates or tariffs to their customers.

• Operators, both wired and wireless, should sign up with (or emphasize deals with) hotspot operators.

• Tiscali should aim to knock BT ToGo for six with its planned re-launch of Toucan, the MVNO it bought last year.

• Carphone Warehouse should market its bundled products heavily, with a mind to drawing potential ToGo customers away from BT broadband.

• O2 should consider offering subsidized combinations of broadband and iPhone bundles.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

Recommended Competitor Actions

Recommended End User/Customer Actions

| Client access - Full report in Wireless Services - Europe | More information
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