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Fusion flops and folds

Posted By TelecomTV One , 06 February 2008 | 0 Comments | (0)
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After all the early noise and hubbub subsided to a suspicious hush, BT has now quietly given up on its Fusion mobile/fixed broadband phone service to concentrate on what is being described as "a radical new mobile strategy."

Of course, once upon a time BT used to have a proper mobile arm. Remember Cellnet? Well that went the way of all flesh back in 2001 when the business was "spun out" of BT and left to hurtle off into its own independent and successful orbit as it transmogrified into O2.

Then, in 2005, and belatedly admitting that it was missing a trick and then some by not having a mobile strategy, BT launched Fusion.

The media and the public were bombarded with facts and figures. BT said it expected that millions of punters would line up to take advantage of the Fusion technology that would allow users to make cheap or even free phone calls from within and close by to their homes over a BT wireless broadband connection whilst the handset, when transported further than the bottom of the garden, would automatically switch to the Vodafone mobile network or to one of BT's own wi-fi hotspots dotted hither and yon around some parts of the UK. Voila! A home and mobile phone in one!

It sounded like an innovative technology and great consumer idea. The trouble was though that consumers steered clear. Working in the industry as I do and talking to people every day, I hear anecdotal reports on all sorts of services and applications. I have to say that I have never met anyone at all who signed-up for a Fusion phone.

Back in 2005, BT was confidently predicting that by 2010 Fusion's millions of subscribers  would form a mighty revenue stream feeding upwards of £1 billion a year into the company coffers. The reality is rather different. Exact user and financial figures are hard to come by as BT is being coy about them, but rumour has it that no more than 45,000 customers became paying Fusion fans.

BT stopped marketing Fusion to the consumer sector some time ago but had continued to advertise the service to the enterprise sector. Now it has given up on that as well.

Since his unexpected appointment as CEO, left-field candidate Ben Verwaayen has turned out to be an inspired appointment and he has done a fantastic job in revivifying BT and giving it the determined leadership the company so evidently needed, but the fact remains that the telco's share price remains stubbornly in the doldrums.

Yesterday was Shrove Tuesday, and the 40 days of Lent have begun.

BT executives won't be in sackcloth and ashes for all that time but they are sequestered in cloistered silence today as they await tomorrow when the incumbent UK carrier reveals its Q3 results.

There can be no doubt that BT has to address the mobile services that are so conspicuously missing from its portfolio, not least because mobile carriers are targeting BT's fixed line customers with free modems and cheap broadband offers. The fact is that many BT subscribers are keeping their wireline from BT but are opting to use it to carry the broadband services of BT's rivals.

That is why BT has been lobbying Ofcom, the UK telecoms and media regulator, to allow it to be "more flexible" in the prices it charges broadband competitors to use its network to supply their services via the unbundled local loop.

In 2003 BT had a hammerlock on the UK's local loop and was doing everything possible to thwart the ambitions of putative rivals who want ed to co-locate their equipment in BT local exchanges. BT's recalcitrance was so determined and embedded that the regulator came to the conclusion that the development of the UK into a broadband society was under threat and was moving to engineer the break-up of BT into its constituent parts.

In the end, a worried and chastened BT created Openreach, an independent division of the company that has the remit to provide fair and equitable access to its network to all its rivals.

The quid pro quo for this climb-down and self-administered dismemberment was a promise by the regulator that BT would make a 10 per cent return on its network investment. Currently the national carrier is getting nowhere near this amount and it has approached Ofcom in an effort to have that guarantee fulfilled.

In a statement BT says, “It is important that the company has clarity on how we can hit the 10 per cent return. How exactly that is achieved, we need to sit round the table with Ofcom and establish.”

Ofcom has now said that it will consider BT's case and scuttlebutt has it that the regulator is disposed to rule in favour of the incumbent. An Ofcom statement says, "We are aware of BT's concerns with respect to revenue and profit level in the future."

Industry observers say a change in the status quo could result in the price BT charges its competitors for a fully unbundled line rising from the current £6.67 a month up to £10 a month and the possibility of a sympathetic regulatory hearing is causing panic amongst BT's rivals. They will either have to absorb the additional costs that a finding in favour of BT would entail or pass them on to their customers, and any significant price hikes would be sure to cause a huge outcry from the likes of Carphone Warehouse, Tiscali and others.

Indeed, some are already getting their retaliation in early, and are claiming that price rises will significantly impact the availability of inexpensive broadband across the UK and thus hit the entire national economy. But then they would say that, wouldn't they?

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