re: ARC on BT's WLAN Move
>> BT to Dominate UK Public WLAN market
12 Apr 2002
ARCChart
Having quit the wireless market last year when it spun off mmO2, BT wants back in. Following a deliberately mundane strategy presentation last week, the UK fixed-line incumbent has announced it is to become a mobile virtual network operator (MVNO) reselling airtime on the mmO2 network under the BT brand as part of an enterprise mobility solution. This is not news, BT already has about 20 percent of the corporate mobile market. The real spice is that BT is to establish a public network of high-speed wireless local area network (WLAN) hotspots using 802.11 technology, totalling 4000 by 2005. Suddenly, BT looks sexy again.
A running theme of the BluePrint has been the increasing reliance European incumbents have on their cellular offspring to inject growth onto their balance sheets as their domestic fixed-line business becomes stagnant. Having spun off its wireless unit last year, BT has been desperate to shake its guise of a low growth utility. Returning to wireless is as much about increasing the attractiveness of its stock as it is a bold move into a new market.
Becoming an MVNO is a smart play. Companies such as Virgin Mobile have been able to leverage the power of their brand to build a healthy subscriber base and enjoy the concomitant increases in average revenue per user (ARPU) without the inherent risk of network ownership. BT does face some restrictions since it will have to bundle its mobile offering with its fixed line services as part of the co-operation covenant between itself and mmO2. However, this plays to its strength since BT has every intention of leveraging its existing fixed line enterprise customer base to sell its wireless services. A single integrated telecommunications operation and billing solution is an attractive proposition. BT is targeting MVNO revenues of $215 million by 2004/2005 and a 12 to 15 percent share of the total enterprise mobility market buy 2006/2007.
But an MVNO service alongside a national WLAN hotspot operation puts BT in a very powerful position. As it name suggests, a WLAN is simply a wireless version of the ubiquitous Ethernet LANs which form part of the core IT infrastructure in most companies and institutions. Instead of using copper wires to transmit data, in the wireless Ethernet information is sent over the air on a radio wave.
The main hardware component of a WLAN is the wireless network card (NIC) which plugs into a laptop and communicates with a central access point.
The dominant WLAN standard is 802.11b which operates at a theoretical maximum of 11Mbps, although in practice about 6Mbps is observed and is effective over a range of about 70m.
BT's WLAN service will provide subscribers access at 500kbps. To put this in perspective, at this connection speed it would take just 16 seconds to download a 1Mb email attachment. Over mm02's typical GPRS connection it would take over 3 minutes.
Technology is now on the market which allows the end user to roam between both WLAN and GPRS/GSM data networks. Nokia already has a card that can do this and Broadcom's acquisition of Mobilink Telecom had this market clearly in mind.
A mix of low-speed cellular-based wireless data (e.g. GPRS) while on the move and high-speed WLAN access whilst "on the pause" (BT's expression not ours) is a compelling package - although not necessarily novel.
The three main Scandinavian operators have been offering similar services for the past 18 months, Telia through its HomeRun service, Sonera via its wGate operations and Telenor through its Wireless Internet Zones. But Telia - the largest hotspot operator- runs about 370 hotspots and is still an experimental service, its losses absorbed by its wireless unit.
Likewise, other European operators are dabbling in public WLANs.
Telefonica 51 percent controlled Iobox wireless ISP operates a handful of hotspots in Germany. Connect Austria purchased a local Viennese hotspot operator, eWave, in October last year, but cannot work out what to do with it. France Telecom's problem child, MobilCom in Germany, also announced intentions to offer WLAN services last year.
The most serious WLAN manoeuvre up until now by an incumbent was made by Deutsche Telekom when last November its US mobile business, Voicestream, acquired the assets of failed US public WLAN hotspot operator Mobilestar, including a nation-wide chain of hotspots installed in Starbucks coffee shops. VoiceStream has only just announced that it will be begin to offer an integrated GPRS/WLAN service and an expansion into 70 percent of all North American Starbucks over the "next few years."
However, BT is the first major European incumbent to announce such a commitment to providing public WLAN services and, with a goal of 4000 hotspots by 2005, it will have one of the most aggressive role-out schedules in the world. This is rivalled only by Hanaro Telecom and KT Corp in South Korea. The company is targeting WLAN revenues of $43 million in 2004/2005 but sees its WLAN and corporate mobile package generating over $700 million with five years.
For BT, public WLANs for the enterprise market will introduce a new growth dynamic into its balance sheet. It now has a pitched-out first mover advantage and is best positioned to offer the holy grail of an integrated WLAN/cellular service. If any WLAN operator was considering trying to set up in the UK, they now will be having second thoughts.
This is not however just going to be a walk in the park. The laptop is the primary WLAN access device and penetration is lower in the UK than it is in the US.
BT also needs to find the right location partners to position its service to the right demographic. Here however BT is already making some of the right moves.
In the US, independent WLAN operators, such as Wayport, have established hotspots in premium hotels and consequently have targeted only the very top of the business executive market.
Early indications are that BT is cutting a deal with the Welcome Break chain, the UK operator of motorway service complexes, and this will access a much larger demographic midway up the corporate hierarchy. BT must still however balance an aggressive network rollout against subscriber acquisition rates.
Mobilestar signed its marquee deal with Starbucks, rolled out aggressively, but failed to temper this against modest subscriber growth. The shadow of this debacle hangs over any WLAN hotspot venture.
If BT does expand as aggressively as it has promised, it still may face competition from one angle. Location hosts such as hotel chains, coffee shops or even roadside service complexes can install and run WLANs very cheaply and offer them as an amenity to attract customers to the purchase of higher margin items. To reduce the cost, the broadband connection into the AP would have to be ADSL and hence overall available bandwidth would be lower, but the client may be willing to forego quality of service guarantees for a free service.
Finally BT is also making one key assumption. It is all but a fait accompli that the UK radio spectrum licensing agency will permit the operation of commercial services on the 2.4Ghz spectrum in which 802.11b operates, but the deal is not yet signed and sealed.
Certainly, this announcement is partially about showboating a spicy new technology as a foil to the bland dish served up on its corporate strategy day, but its new mobility strategy is also a credible future source of revenue and one that it is well positioned to exploit. <<
- Eric - |
