BT Essay ⋆ Business Essay Examples ⋆ EssayEmpire

British Telecom (BT) Group plc is the world’s oldest communications company. BT can trace its lineage back to the late 1800s, when, following the Telegraph Act of 1892, the lines of the two private companies that provided the bulk of the then United Kingdom (UK) telephone network were purchased by the government and later in 1912 were run as a government department as part of the General Post Office (GPO) under the Postmaster-General. BT’s age means that it has either created or played witness to all of the major events of the global telecommunications industry. The various phases of its development make it an interesting case for those who study trends of privatization and deregulation of nationalized industries and networked utilities.

Until 1969 UK telephony was treated as a natural, statutory monopoly, until following the Post Office Act it became a nationalized industry, becoming “Post Office Telecommunications” (POT). Finally, on April 1, 1984, POT was privatized under the trading name British Telecom (from 1991 “BT”). Today, BT Group is made up of four principal businesses: BT Openreach, BT Retail, BT Wholesale, and BT Global Services. BT is currently a vertically integrated conglomerate offering a range of communication services to domestic and corporate customers based on the strategic resource of its infrastructure and associated services. Although a private company, BT is still expected to act for the public good, for example, connecting consumers to the fixed-line network and providing public call boxes.

In the UK, the degree to which BT can leverage its ownership of the majority of the telecommunications infrastructure is controlled by the UK Government Office of Communications (Ofcom). In response, BT has sought expansion and new markets through global ventures, experiencing mixed results. For example, a joint venture and proposed merger by acquisition with MCI Communication Corporation and the formation of a 50/50 joint venture with AT&T, both to obtain a foothold in the United States, ultimately failed. However, successful acquisitions included the Italian telecommunications operator Albacom and financial infrastructure provider Radianz from Reuters.

The UK government has been keen to stimulate competition in the deregulated telecommunications market; however, efforts to dislodge BT from its virtual monopoly status have been unsuccessful. A distinct example was the government drive to create “Broadband Britain.” The government forced BT to allow other broadband providers to use BT exchange equipment to provide commercially viable alternatives for consumers, but the rate at which this was done and ensuing problems with the financial sustainability of early competitors in the immature marketplace led to the government turning to BT to provide leadership and accelerate market development. In the domestic arena, BT is doing this by aggressive pricing, leveraging existing technologies, and its tradition of owning the telecommunications access point in the home, providing a “triple-play” product, bundling broadcasting, telephony, and broadband internet access.

This success is a two-edged sword as broadband internet and mobile communications increasingly negate the BT advantage of ownership of fixed lines and therefore its traditional revenue streams. The international technological and commercial convergence of the telecommunications, information technology, and content industries has created many alternative ways to move voice, data, and video communication. In response, BT is currently developing the 21st Century Network (also known as 21CN), a network based on internet protocol technology, which will replace all existing networks to enable seamless voice, data, and video communication between any static or mobile digital device.

To exploit this infrastructure and entrench BT further into the domestic market, it is making preemptive strategic alliances, for example, with Intel to explore wireless working, outsourcing with Accenture, and multimedia entertainment and online gaming with Microsoft. BT’s first-mover advantage in the UK and vast technological, financial, and intellectual resources have become barriers to entry to the UK telecommunications market and a strong platform for global joint ventures and mergers and acquisitions, such that it seems not even the best efforts of the UK government can change this in the short term.

Bibliography:

BT, A Short History of BT’s World (British Telecommunications, 1998);
BT, “BT’s History,” www.btplc.com (cited March 2009);
Massimo Florio, “Does Privatisation Matter? The Long-Term Performance of British Telecom Over 40 Years,” Fiscal Studies (v.24/2, June 2003);
John Harper, Monopoly and Competition in British Telecommunication: The Past, the Present and the Future (Pinter, 1997);
Colin Turner, “Issues in the Mass Market Deployment of Broadband: An Analysis of British Telecommunications’ (BT) Strategy,” Info: the Journal of Policy, Regulation and Strategy for Telecommunications, Information and Media (v.5/2, 2003).

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