British Telecom Are Behind On Their Mobile Offering, Want To Get It Right Before Launch

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British Telecom, or BT, is an interesting business. They’re the largest UK local exchange, or fixed line, carrier by a wide margin. The company is obliged to provide fixed line support to any address in the UK, but unlike most markets across the world, BT does not own a mobile network. It’s not the only dominant fixed line provider without a mobile network, but in BT’s case, they did at one time have a majority share in a mobile network: effectively, O2. O2’s history is convoluted as the business was originally called Cellnet. BT became involved and the business was named BT Cellnet, then spun off into a business called MMO2. MMO2 changed their name into O2 and were acquired by the Spanish telecommunications company, Telefonica. BT were put out to the sidelines and could only watch as O2 grew to become the UK’s largest carrier, helped in no small part by their exclusive deal to sell the Apple iPhone.

BT decided that they needed a slice of the mobile business and have a self-set objective to launch a wireless service within the current year. Unfortunately, the company isn’t going to manage this; worse, the launch could slip to the second quarter, 2015. The main reason for BT missing their deadline is because of the technical difficulties the business faces in launching a proficient, WiFi-biased network. The UK mobile market is highly competitive as the country is saturated with mobile network signal and there are high barriers to entry for a new entrant, because building a new mobile network is not a viable, cost effective option. Instead, BT have taken the only sensible option: they’ve become a MNVO, or mobile network virtual operator, for EE. This means that they essentially buy coverage and spectrum from EE (now the UK’s largest network) and sell it on. However, BT are using EE’s network as backup to their extensive WiFi hotspot network: BT’s plans are to carry their voice, text messages and data primarily over their own network and when this isn’t available, seamlessly shift the traffic to EE’s network. The advantage of this is that it will significantly reduce the costs of running the network (after all, BT’s 5,000 or so WiFi hotspots are already up and running) and allow them to undercut the other carriers.

The main technical difficulty is that a connected device cannot simply move between different network types. You see, whilst mobile devices can seamlessly move from a 2G to 3G connection during a call or when handling data traffic, the handover between 2G / 3G and a WiFi network or even a 4G network is far less elegant. Neither WiFi nor 4G networks handle conventional voice calling but instead must use a voice-over-IP system, in other words the handset must convert the voice data into a data stream and transmit this over the network. Ignoring the challenges of VoIP systems (such as the need for carefully matching the upload and download speeds), that networks cannot easily manage the jump from different connection types means dropped calls when customers are moving, which is not a great experience!

Of course, this isn’t a problem that BT alone are facing; other carriers around the world have the same technical challenges. Unfortunately, for BT some other carriers are making real inroads into these technical challenges: As one example, Republic Wireless has improved the hand-off from WiFi to mobile data (and vice-versa) although it is not yet perfect. BT will not launch their service until they have a great customer experience. BT also have something of a secret weapon as they won £185 million worth of 4G LTE spectrum in the UK government’s 2013 spectrum auctions, which they may use to bolster their household broadband connection or reduce their reliance on EE’s network. They also have plans to launch a home based, router that will prioritize VoIP traffic via a short ranged 4G network and possibly unlicensed spectrum. When BT launch their mobile network, I’m confident that they’ll have a competitive product. I’m under no doubt that it will be an uphill challenge for the company, but they’ll be the first WiFi / mobile network hybrid network in the UK market. This may spark off a price war, or at least make the other networks take a long, hard look at their own offerings. This will be a good thing: Vodafone and EE effectively destroyed Phones4U’s business model and removed some of the high street competition and I fear that after a few years of price pressure, the UK networks will take the rapid rollout of 4G and less competition as an excuse to raise prices. It’s a shame that BT’s offering won’t be out until 2015, but it’s looks like next year is going to be an interesting wake-up call for the establishment.