The BT Story

30 September 2008

You can download the BT Story as a PDF document

Introduction:

This is a snapshot of BT today. It summarises BT’s strategy, describes some key projects, outlines the company’s view on major policy issues, and includes some useful facts about the company.

BT's Strategy: the transformation story

The recent history of BT is a story of business transformation. It is the story of a company that has grown and prospered through being competitive, customer focused and innovative, that has learned to compete and win against some of the world’s biggest companies to become a truly global operation. 

BT serves customers in more than 170 countries. We have one of the largest IP networks in the world and we are adding one new city to that network every 7 days.

Six years ago BT decided to stake its future on meeting the demand for IT infrastructure and solutions among global organisations and the rapid expansion of broadband in the UK. Our strategy is to grow this business whilst continuing to fight for our more traditional business in the UK. These services are designed to help customers make the most of the convergence of networks and services, mobile and fixed products, media and communications:-

• over 40% of Fortune 500 companies are our customers;
• BT Global Services has signed £8bn worth of new contracts in the past year;
• 95% of the traders on the NY Stock Exchange use BT technology;
• more homes in Britain now have access to broadband than have access to mains water; and
• more that half of British households are now connected to broadband.

BT - the global company

Broadband communications enable organisations to work seamlessly across time zones and borders. We are building the IT infrastructure for globalisation. We are helping businesses reach new markets and customers, and helping them improve their productivity and operational efficiency.

Our target is to be:

• valued by our customers for the excellence of our people and networked IT services;
• respected by all as a world-class services organisation; and
• acknowledged as the experts in helping customers profit from convergence.

We are making real progress:-

• we have won contracts with world class organisations as diverse as Unilever, Reuters, Microsoft, Volkswagen, Volvo, BMW, Fiat, the EU, NATO and the NHS;
• BT has invested £480m in acquisitions completed in 2008; and
• in 2008, BT’s workforce in Asia Pac rose by 464% and in the Americas by 28%.

BT is a vocal champion of open standards and competition. To meet customer needs it is critical that barriers to entry are eliminated and all operators are treated equally. The protection of incumbent operators and national champions inevitably hurts consumers and the wider economy as choice is restricted, and innovation and investment are curtailed.

Broadband and Next Generation Access - Fibre

The UK has made great headway with broadband in terms of availability and take-up, and we must not lose this position of leadership. More than half the homes in the UK are now connected to broadband, and speeds of up to 8Mb are possible at all broadband exchanges today, and those speeds are being further increased, to up to 24Mb, as part of our 21CN programme.

BT has recently announced plans to roll out fibre-based, super-fast broadband to as many as 10 million homes by 2012. The £1.5 billion programme will deliver a range of services with top speeds of up to 100Mb with the potential for speeds of more than 1,000Mb in the future. A supportive and enduring regulatory environment is essential if this investment is to take place. BT will be discussing with Ofcom the conditions necessary to enable this programme to progress. These include allowing those who choose to invest in fibre to earn a fair rate of return for their shareholders.

We will be investing in both Fibre-to-the-premise (FTTP) and Fibre-to-the-cabinet (FTTC). FTTP deployment will be focused primarily on new build sites. FTTP will deliver headline speeds of up to 100Mb and FTTC initially up to 40Mb, though we are investigating technologies that can increase that to more than 60Mb. In addition, copper-based ADSL2+ will deliver nationwide speeds of up to 24Mb. Recent tests show the majority of ADSL2+ customers should enjoy speeds of around 10Mb or above with many substantially higher.

BT is supporting the Government’s review of the path to next generation broadband, announced on 22 February 2008. This will complement the recent Ofcom consultation on Next Generation Access (NGA) policy. As Ofcom’s consultation explains, there are major differences between the UK broadband market and those overseas, e.g. extent of government funding; of cable TV or satellite penetration; availability of cheaper dig options (Paris sewers). Simple comparisons can be very misleading.

There are still some customers - fewer than 1% - who live in locations current BT broadband cannot reach. We continue to search for cost effective ways to minimise this problem. Where policy makers decide to use public funds to address this issue BT considers on a case by case basis whether it can craft a solution using the funding available. In some cases, where customers are a long way from their exchange but not too far from the street cabinet serving them, and customer demand attracts super-fast broadband to the area, it may be that we can use our FTTC solution, but our general expectation is that in the majority of cases the most efficient use of public funds would result in local and bespoke solutions based on satellite or radio technologies rather than BT's portfolio.

The UK needs a secure and enduring financial and regulatory framework which recognises that:

• those deploying fibre are not accountable for impacts on the business models of others;
• an appropriate charging mechanism should allow investors to make appropriate returns;
• there should be no obligation to maintain a copper network alongside new fibre; and
• incentives to invest in and use copper and fibre based services need to evolve (BT believes copper products are currently under priced).

In September 2008, the Caio report into Next Generation Access (NGA) in the UK was published. It concluded the UK is well positioned regarding broadband networks, that consumers and businesses are not being disadvantaged relative to other countries, that the market is delivering on NGA and will continue to do so and there is no need for large-scale government intervention at the present time.

Ofcom has also just published its consultation on Superfast broadband and agreed with the need for regulatory certainty and that BT should have pricing freedom for its new NGA products. It also said that product discussions should be left to industry. BT welcomes the recognition of the need for regulatory certainty and will be responding to Ofcom in due course. The consultation does on the face of it look to be a step in the right direction and shows that Ofcom is across the issues that need to be addressed.

The 21st Century Network (21CN) - essential investment for future prosperity

BT is building the world’s first national IP network, recognising the critical part that collaboration and knowledge sharing will play in future wealth generation. Outside the UK the BT Global 21CN platform is now available in around 170 countries worldwide.

We are delivering BT's next generation 21CN products and services to customers today. In April 2008 we introduced our new family of next generation broadband services to communications providers in the UK. Our new wholesale service, Wholesale Broadband Connect (WBC), is available from exchanges serving around one million homes and businesses. Our Wholesale Ethernet service was launched in June 2008 and is now available from 106 sites, scaling up to 600 sites by the end of this year.

Mobility and Convergence - allowing communications wherever you are

Computing and all forms of communication are going wireless and will increasingly be available on the basis of what you want where and when you want it. Examples include:-

• BT Fusion - a world first which offers the flexibility of a mobile, with the quality and price advantage of a landline phone. BT Corporate Fusion, which allows customers to roam between wi-fi and GSM networks, is available in a number of countries;
• BT Openzone - one of the UK and Ireland's leading Wi-Fi service providers is a high-speed wireless broadband (Wi-Fi) internet access service. Today, BT customers have access to over 3,000 'hotspots' across the UK and Ireland and over 35,000 globally. 234m Openzone minutes were used in 2007/08 – an increase of 85%;
• 12 Wireless City networks running across the UK. They offer a range of new services for consumers, businesses and local authority workers. The cities are Sheffield, Nottingham, Portsmouth, Bristol, Glasgow, Birmingham, Edinburgh, Newcastle, Leeds, Liverpool, Cardiff and Westminster. The networks provide wire-free, high-speed broadband coverage which can be used for easy access to information and services in city centre locations;
• the new broadband option Broadband Anywhere lets you take your home broadband experience out of the house with a BT ToGo phone, a mobile phone that also allows emailing and surfing the web on the move; and
• MobileXpress provides remote connectivity for corporate customers anytime, anywhere.

BT as a corporate citizen

• BT is proud of its record as a world class employer and its contribution to Corporate and Social Responsibility projects around the world.
• we support the British Red Cross with funding for essential emergency satellite telephones, IT equipment and GPS systems for vehicles to help them deliver disaster relief worldwide;
• our partnership with UNICEF is bringing education, technology and communications skills to children from poor socio-economic backgrounds in Brazil, South Africa and China;
• we are partnering with Cisco and the charity OneWorld to deliver LifeLines India, a telephone-based information helpline to improve the lives of rural farming communities;
• we are sponsoring schools for disadvantaged children in India to better equip them to succeed in the digital age;
• flexible working has reduced absenteeism to 3.1% (the national average is 8.5%);
• our home working policies have resulted in a 31% increase in productivity, with savings of £69 million each year from reduced accommodation and overhead costs;
• 97% of women return after maternity leave, compared with a UK national average of 40%;
• 22 of our top 100 management positions are held by women;
• we have reduced office paper consumption by 60% over the last 5 years;
• we invest 1% of pre-tax profits back into the community annually - £22.3 million last year;
• we helped set up ChildLine;

we have been rated number 1 in the telecommunications sector in the Dow Jones Global Sustainability Index for the last eight years;

we are twice winners of the Queen's Award for Enterprise for Sustainable Development;

we fund and manage the UK's largest corporate Education programme in schools; and

• our total tax contribution to UK central and local Government was £3,042 million in 2007/8;

BT in Europe: The ECommunications Framework Review

BT can only compete and give European customers the choice they need if the regulatory environment is right. The European Commission is proposing changes to the EU telecoms rules ensuring competition and consumer protection. BT is campaigning for the ECommunications Directive to remain a force for competition and customer choice.

In the knowledge based economy, the ICT sector makes a major contribution to Europe’s competitiveness, currently accounting for around 42% of overall productivity growth. Competition at the service level must be allowed if this innovation and competitiveness is to flourish. Attempts to restrict such competition will hinder the future success of the European economy and the European customer.

BT believes that investment is driven by competition, but for competition and investment to flourish, there must be consistent implementation and enforcement across the EU.

The key to more effective, and ultimately less intrusive, regulation is the strengthening of non-discrimination and transparency to ensure equivalent access to the incumbents’ networks. BT is currently campaigning on the basis of these principles within the EU.

BT in the Americas

North America is a key market for the company. BT has had continuous presence since 1998, and now employs more than 4,700 people there. BT has recorded 50% revenue growth in the Americas for the past 5 years, and US headquartered companies generate approximately $1.2 billion per year in revenues for BT. BT serves more than 1000 customers in the US and Canada.

BT provides a range of solutions for multinational enterprises covering Convergence, Security, Enterprise Mobility, Contact Centre Solutions and IT Outsourcing and Transformation. Customers include companies such as PepsiCo, BMS, Jacobs Engineering, Microsoft and Continental Airlines.

To support its transformation agenda, BT has made 4 major US based acquisitions (INS, Counterpane, Radianz and Infonet) and acquired Comsat to provide increase coverage in Latin America.

The cost of access continues to be BT’s biggest regulatory issue. Since the major market consolidation in 2005 we have become entirely reliant on the incumbent operators to provide last mile access. The incumbents are enjoying rates of return well over 80%, which make it almost impossible for BT to produce a competitive bid on a US only contract.

BT in Asia Pacific

BT’s presence in the Asia Pacific region dates back to 1985. Currently, there are over 27,000 people directly and indirectly employed (including Global Services, joint ventures, vendors and contact centres) across 17 countries in the region. BT's key focus areas in the region are: to provide communications reach and ICT solutions to global multi-site corporations and to help local customers in Asia Pacific take their business to a global audience, while providing traditional wholesale and next generation 21CN operator services to carriers and communications service providers. BT services over 500 multinational customers in Asia Pacific and has invested over US$100 million over the past three years in network expansion and now has 33 MPLS nodes in the region.

There is a significant diversity in communications regulatory frameworks in the Asia Pacific Region ranging from fully liberalised to closed monopolies. BT's policy focus in the region is to work with governments and regulatory authorities to encourage effective regulatory frameworks which foster competition and enable market access to all players. BT actively encourages Governments to comply with their WTO and trade commitments in the telecoms sector and to remove any existing barriers to international companies entering the market.

BT - in figures 2007/2008 (to 31 March 2008)*

Revenue	£20.7 billion (£5.2 billion)
Profit before tax	£2.5 billion (£0.6 billion)
EBITDA	£5.8 billion (£1.4 billion)
Capital Expenditure	£3.3 billion (£0.8 billion)
Total Exchange lines in UK	26.5 million
Wholesale Broadband connections**	13.0 million approx
Employees	111,000 approx
BT Global Services orders won**	£8.2 billion in last year
Number of countries in which BT operates	170

* these figures are for the last full financial year. Results for the first quarter to 30 June are shown in brackets.
** at 30 June 2008

New CEO

Ian Livingston succeeded Ben Verwaayen as chief executive of BT Group on June 1st 2008. Ian joined BT as group finance director in 2002 and has been chief executive of BT Retail since 2005.

Regulation and Openreach

After more than 20 years of debate around the development of the most competitive communications environment in the world, the new regime agreed between the regulator and industry as a result of Ofcom's Telecoms Strategic Review represented the most significant change in the industry since BT's privatisation in 1984. The key change for the new regime was that BT’s access network became available to BT’s downstream operations and competitors on an equivalent basis and mechanisms were put in place to monitor compliance. The concentration of regulation on the wholesale access bottleneck allowed the rolling back of some unnecessary retail regulation. As BT demonstrates that its retail offers are now replicable by competitors, the remaining retail regulation should be removed. Control of the access network is with Openreach, a new business within BT, specifically set up to provide access network services and products on an equal basis to all the UK communications industry. Openreach is responsible for the bottleneck part of the network which includes the last mile access between the home and the business exchange and backhaul, the network which lies between the local exchange and the point of presence of competitors and BT’s downstream arms. It began operating in January 2006, has assets of £8 billion and employs 20,000 engineers.

Local Loop Unbundling (LLU)

Local loop unbundling has taken off in the UK, with over 4.8 million lines. This offers an alternative route to broadband service if the service provider taking the product so chooses.

We are pleased with this growth and with achieving our voluntarily agreed target of 1.5 million lines. We look forward to the greater freedom to set our wholesale prices for broadband that will follow, to the benefit all those industry players who have chosen not to adopt unbundling as their route to market.

BT Vision

BT Vision is our next generation television service. It uses a single set-top box to deliver to the TV set pay per view and subscription video on demand services, digital terrestrial 'free to air' channels, communications and interactive services - including in due course video telephony and instant messenger. The service is designed to be easy to use, bringing the next generation of TV technology within reach of a mass audience and putting the UK at the forefront of the development of digital TV delivery. There are now over 282,000 customers.

BT Vision's service covers the range of 'traditional' programming such as first run movies, older, classic library movies, high profile UK and US episodic television programming, children's programming, sports and music. The service gives customers the opportunity to watch programming with complete flexibility, not only in terms of when and what they watch, but also how they pay for it.

Vision customers can view programmes from the leading rights owners, including Disney, Dreamworks, BBC Worldwide, NBC Universal, HBO, Paramount, Warner Music Group, and National Geographic. We also offer BT Vision Sports, and have rights to show Premiership football in a three-year deal from 2007/08, providing full matches from 10pm on the day of the game, as well as Setanta Sports - all on a pay per view basis without the need for a television subscription.

Voice over Internet Protocol (VoIP)

VoIP services are being adopted by many companies and offer internet calling at low prices. We were the first in the field in the UK, with our BT Communicator product. BT offers a suite of VoIP products through BT Broadband Talk, including high-definition sound for delivering high quality internet voice and video calls, and free global PC-to-PC chat at any time of the day with BT Broadband Talk Softphone. BT now has a base of more than 1 million residential customers using VoIP services. 

NHS

BT has been working with the NHS for the past 60 years and has played an important part in the evolution of communications and IT in the modern NHS. Since 2003, BT has been delivering three major contracts to provide IT services to the NHS in England as part of the National Programme for IT (NPfIT), the world’s largest civilian IT project.

BT has built and is managing N3 – the state of the art, secure broadband National Network for the NHS – connecting every NHS organisation across England and over a million NHS employees. BT completed the network two months early in January 2007. Today it is one of Europe’s largest Virtual Private Networks with over 30,000 connections throughout England and Scotland. Replacing old and more expensive technology, it provides the foundation for other frontline applications which simply could not function without it. It supports, for example, the complete transfer of a patient’s complete GP record in the fraction of time it used to take. It is also helping the NHS to make efficiency and quality improvements. The N3 network has now been voice-enabled, allowing trusts to converge their voice and data over a single network – slashing the cost of internal phone calls and calls to mobiles.

In London, BT is working with the NHS to modernise IT systems and services at hospitals, clinics and GP surgeries across the capital, to improve the delivery of healthcare. Significant progress has been made, and new systems and services have been put into 85% of trusts across all care settings. In a major milestone, in April BT installed its third Cerner Millennium Acute system at Barts and the London NHS Trust, its largest acute deployment to date.

BT is also building and managing the Spine, the secure database of key information about a patient’s health and care, which forms the core of the NHS Care Records Service. Its messaging capability also enables the delivery of a range of other services being rolled out as part of the NPfIT in England, including the Electronic Transmission of Prescriptions and Choose and Book. The first set of patient Summary Care Records have been created on the Spine, containing potentially life-saving information such as current medications, allergies and previous bad reactions to medicines. BT has a solid track record of delivery success on the Spine and the services it provides are being used more and more every day. Nearly half a million Smartcards have been issued to NHS staff, meaning they have been registered and approved to access the Spine, and will be able to view – subject to appropriate and strictly enforced controls – a patient’s clinical and demographic information electronically.

Good progress is being made on all of BT's NHS contracts. The project is critically important to the health service, and it is now delivering enormous benefits to doctors, nurses and patients. For more information please visit the BT Health website 

Global Sourcing

We live in a global economy. Goods and services are traded across national boundaries. The internet and easy communications are key drivers for this development.

Many service jobs can now be performed remotely from the market in which their output is consumed. Much has been written about the 'outsourcing' of jobs in call centres to other parts of the world. These are just the first wave of jobs that are likely to be located in areas where costs are lower and relevant expertise is readily available. Nevertheless, in the case of call centres, BT's own business is still primarily located in the UK, with 32 out of 34 call centres being located here.

BT and Climate Change

BT has been active on climate change for many years and our strategy for carbon cutting includes:

• reducing our own emissions;
• influencing our suppliers to produce lower carbon-emitting products;
• influencing our customers by proposing lower carbon solutions to their needs; and
• engaging with our workforce, both to reduce their personal carbon footprints and empower them to influence their local communities.

Specifically, we have pledged to:

• build on the 58% reduction in carbon emissions that we have achieved since 1996, by targeting an 80% reduction by 2016;
• review our energy supply, including exploring the further potential of wind; and
• incorporate energy consumption and environmental factors into our procurement processes.

BT supports targets as a means of setting a framework. The UK must use its capabilities in both the public and private sectors and develop new links between the academic communities, public authorities and industry to work to common goals. This should happen on a national, multi national and global basis. The UK should be at the forefront in encouraging appropriate responses globally, which will differ by location and social and economic circumstances. Business must be ready to take a lead – as advocated in a report last year from the CBI Task Force led by Ben Verwaayen, then CEO of BT.

On top of our ‘green energy’ contract, which is saving the equivalent amount of carbon as that resulting from the electricity consumption of over 300,000 households - roughly the population of Liverpool and Cardiff combined - every year, BT has recently announced plans to develop wind farms aimed at generating up to 25 per cent of its existing UK electricity requirements by 2016. The wind farm scheme represents the UK's biggest corporate wind power project outside of the energy sector. The project, costing up to £250m, will bring together third party funding and renewable energy partners to safeguard future supplies of clean, green energy for BT.

BT is one of Britain’s biggest consumers of electricity, with an annual requirement of around 0.7 per cent of the UK’s entire consumption. Subject to planning consent and suitable sites being secured, BT’s wind farms would have a total installed generating capacity of around 100MW by 2012, equivalent to around fifty wind turbines, with a further 150MW targeted by 2016. This would prevent the release of 500,000 tonnes of CO₂ each year compared with coal generation.

The Climate Change Bill, now in committee stage, provides the enabling powers for the government to introduce a cap and trade system for all large energy users. The system will be known as the Carbon Reduction Commitment (CRC). BT supports the underlying concept of the CRC of encouraging investment in energy efficiency. We also believe the principle of mandatory carbon reporting for all large organisations is right. However, the CRC reporting methodology means that companies will not be able to count the green energy they purchase as being zero carbon. Instead, the Government proposes using the grid average to calculate users' emissions, irrespective of the supply source.

This would have a negative impact on the headline carbon reduction figures which forward looking and environmentally concerned companies use and the changes will remove any incentive for companies to invest in on-site renewable energy sources and to purchase renewable energy. By removing this incentive the Government may precipitate the collapse of the UK market for green energy. This cannot be the Government’s intention, but it may be the result of the Government’s actions.

We believe the Government should:-

• adopt full and proper carbon labelling of all electricity sold, with no ‘grid averages’; and
• permit organisations to both trade in Renewable Obligation Certificates for generating on-site renewables and claim the carbon saved.

BT and the 2012 Olympics

BT is the Official Communications Service Provider for the London 2012 Olympic and Paralympic Games. We will be responsible for providing all communications services to the London Organising Committee (LOCOG) and all communications services to the workforce and at venues. We are also a Sustainability Partner and will work with LOCOG to help stage sustainable Games.

Digital Divide

With broadband availability at almost 100% across the UK, there is no digital divide in terms of whether or not people can access the range of opportunities offered by the internet via the broadband network. There is, however, still a divide between those who have access to computers at home and those that do not. BT works with partners across the UK to introduce people to the benefits of the internet and has provided 5,000 diverse community groups with an internet-ready PC and other kit via the BT Community Connections Award Scheme.

Net Neutrality

BT's services are designed around what our customers want. The UK has the most competitive communications market in the world and this fact means that many of the concerns around the net neutrality debate in the US are not relevant to the UK. In order to enable competition and innovation, all upstream network owners should allow any content to be carried on fair and equal terms, including services provided to their own downstream businesses. At the same time, as long as it is on a fair and equitable basis, these network owners can offer and charge for additional capabilities to enable differentiated service levels (such as guaranteed quality of service). Service providers need the flexibility to develop and implement different services and innovative services and charging models.

Some things that you might not know...

• RFID - BT is delivering the largest product tagging project in the world for Marks & Spencer.
• PodShow - BT has entered the "social networking" space with "BT PodShow", allowing aspiring rock stars and movie makers to upload music and video content.
• Sorting out spam - Around 90 per cent of e-mails on the internet are spam. BT introduced the world's first fully-automated 'spam buster' system in October 2006.
• BT Conferencing - is the number one conferencing provider in Europe. With three quarters of the companies in the FTSE using our service. The use of conferencing by BT worldwide has reduced our carbon footprint by 100,000 tonnes of CO2. And we are helping our customers achieve the same sort of result. Our conferencing business has grown by 21% in the past year.
• Keeping your home safe - BT Home security is broadband compatible, can be set/unset from mobile phone or via the internet, and alerts you via email, phone, or text if triggered.
• Crime fighting - BT's satellite technology is being used in the first police mobile forensic lab. It can conduct DNA and blood tests at the crime scene instantly linking into national databases, making the first critical minutes of a serious crime investigation more effective.
• Financial centres across the globe - BT equipment powers 1,400 trading floors across 51 countries with over 60,000 users.
• Broadcast TV - BT Tower is a global media hub, handling an average of 90,000 hours of UK and international broadcast content every day.
• Fair Trade Coffee - A decision to switch suppliers providing more than 3.5 million cups of coffee each year for BT people helps farmers throughout the world survive and improve their standard of living.
• Mental Health - BT has launched a major programme to tackle problems such as anxiety, depression and stress in its workforce. BT has cut the number of employees off work suffering from psychiatric problems by 30 per cent over the last four years.
• Our Home IT support service has provided 10 million minutes worth of advice on problems ranging from wireless connections to storing digital photos since its launch 18 months ago.

A-Z of further useful information - as at 10-09-2008

You can access an A-Z of further information about BT, its products and services, and some of the various community initiatives in which it engages.