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British Telecommunications

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British Telecommunications

BT Group plc
Public limited company
Traded as Template:Lse
BT
Industry Telecommunications
Predecessor(s) Electric Telegraph Company
General Post Office
Post Office Telecommunications
Founded 1980 (1980)
Headquarters BT Centre,
London, United Kingdom
Area served Worldwide
Key people Sir Michael Rake
(Chairman)
Gavin Patterson
(Chief Executive)
Products Fixedline telephony
Mobile telephony
Broadband internet
Fibre-optic communication
Digital television
IT services
Revenue £18.897 billion (2011/12)[1]
Operating income £2.919 billion (2011/12)[1]
Profit £2.003 billion (2011/12)[1]
Employees 87,900 (2013)[2]
Website btplc.com

BT Group plc, trading as BT, is a British multinational telecommunications services company[3] headquartered in London, United Kingdom. It is one of the largest telecommunications services companies in the world and has operations in over 170 countries.[4] Through its BT Global Services division it is a major supplier of telecoms services to corporate and government customers worldwide.[5] Its BT Retail division one of the largest suppliers of telephony, broadband and subscription television services in the UK, with over 18 million customers.[6]

BT's origins date back to the founding of the Electric Telegraph Company in 1846, the first company in the world to develop a nationwide communications network. In 1912, the General Post Office, a government department, became the monopoly telecoms supplier in the UK. The Post Office Act of 1969 led to the GPO becoming a public corporation. British Telecom was formed in 1980, and became independent of the Post Office in 1981. British Telecom was privatised in 1984, with more than 50 per cent of its shares sold to investors. The Government sold its remaining stake in further share sales in 1991 and 1993.

BT has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately £29 billion as of 11th November 2013 the 19th-largest of any company with a primary listing on the London Stock Exchange.[7] It has a secondary listing on the New York Stock Exchange.

History

BT is the world’s oldest telecommunications company. The company's origins date back to the establishment of the first telecommunications companies in the United Kingdom. Among them was the first commercial telegraph service, the Electric Telegraph Company, established in 1846. As these companies amalgamated and were taken over or collapsed, the remaining companies were transferred to state control under the Post Office. These companies were merged and rebranded as British Telecommunications.[8]

1878 to 1969

In January 1878 Alexander Graham Bell demonstrated his recently developed telephone to Queen Victoria at Osborne House on the Isle of Wight.[9] A few days later the first telephone in the United Kingdom was installed, under licence from the General Post Office, by engineers from David Moseley and Sons, to connect the Dantzic Street premises of Manchester hardware merchant, Mr. John Hudson, with his other premises in nearby Shudehill.[9] As the number of installed telephones across the country grew it became sensible to consider constructing telephone exchanges to allow all the telephones in each city to be connected together. The first exchange was opened in London in August 1879, closely followed by the Lancashire Telephonic Exchange in Manchester.[9] From 1878, the telephone service in the United Kingdom was provided by private sector companies such as the National Telephone Company, and later by the General Post Office. In 1896, the National Telephone Company was taken over by the General Post Office. In 1912 it became the primary supplier of telecommunications services, after the Post Office took over the private sector telephone service in the UK, except for a few local authority services. Those services all folded within a few years, the sole exception being Kingston upon Hull, where the telephone department became present day KCOM Group.[8] Telegraph and Telephone services became the exclusive responsibility of the Post Office Engineering department.

Converting the Post Office into a nationalised industry, as opposed to a governmental department, was first discussed in 1932 by Lord Wolmer. His ideas were recorded in the book Post Office Reform. In 1932 the Bridgeman Committee was formed "to enquire and report as to whether any changes to the constitution, status or system of organisation of the Post Office would be in the public interest". The Committee's report was rejected. In 1961, the subject received further attention but the proposals were ignored. The Post Office remained a department of central government, with the Postmaster General sitting in Cabinet as a Secretary of State.[8]

In March 1965, Tony Benn, the acting Postmaster General, wrote to Harold Wilson, the Prime Minister, proposing that studies be undertaken aimed at converting the Post Office into a nationalised industry. A committee was set up to look into the advantages and disadvantages of the proposal, and its findings were found to be favourable enough for the Government to re-establish a Steering Group on the Organisation of the Post Office. After some initial deliberations that the business should be divided into five divisions; Post, Telecommunications, Savings, Giro and National Data Processing Services, it was decided that there should be two: Post and Telecommunications. These events finally resulted in the introduction of the Post Office Act, 1969.[8]

On 1 October 1969, under the Post Office Act of 1969, the Post Office ceased to be a government department and it became established as a public corporation. The Act gave the Post Office the exclusive privilege of operating telecommunications systems with listed powers to authorise others to run such systems. Effectively, the General Post Office retained its telecommunications monopoly.[8]

1969 to 1982

In 1977, the Carter Committee Report recommended a further division of the two main services and for their relocation under two individual corporations. The findings contained in the report led to the renaming of Post Office Telecommunications as British Telecom in 1980, although it remained part of the Post Office.[8]

The British Telecommunications Act, 1981 transferred the responsibility for telecommunications services from the Post Office, creating two separate corporations, Post Office Ltd. and British Telecom. At this time the first steps were taken to introduce competition into the UK telecommunications industry. In particular, the Act empowered the Secretary of State for Trade and Industry, as well as British Telecom, to license other operators to run public telecommunications systems. Additionally, a framework was established which enabled the Secretary of State to set standards with the British Standards Institution (BSI) for apparatus supplied to the public by third parties, and had the effect of requiring British Telecom to connect approved apparatus to its systems. The Secretary of State made use of these new powers and began the process of opening up the apparatus supply market, where a phased programme of liberalisation was started in 1981. In 1982, a licence was granted to Cable & Wireless to run a public telecommunications network through its subsidiary, Mercury Communications Ltd.[10]

1982 to 1991

On 19 July 1982, the Government formally announced its intention to privatise British Telecom with the sale of up to 51% of the company's shares to private investors. This intention was confirmed by the passing of the Telecommunications Act, 1984, which received Royal Assent on April 12 that year. The transfer to British Telecommunications plc of the business of British Telecom, the statutory corporation, took place on 6 August 1984 and, on 20 November 1984, more than 50 per cent of British Telecom shares were sold to the public. At the time, this was the largest share issue in the world.[11]

The new legislation was intended to enable British Telecom to become more responsive to competition in the UK and to expand its operations globally. Commercial freedom granted to British Telecom allowed it to enter into new joint ventures and, if it so decided, to engage in the manufacture of its own apparatus. The company's transfer into the private sector continued in December 1991 when the Government sold around half its remaining holding of 47.6% of shares, reducing its stake to 21.8%. Substantially all the government's remaining shares were sold in a third flotation in July 1993, raising £5 billion for the Treasury and introducing 750,000 new shareholders to the company.[12]

The 1984 Act also abolished British Telecom’s exclusive privilege of running telecommunications systems and established a framework to safeguard the workings of competition. This meant that British Telecom finally lost its monopoly in running telecommunications systems, which it had technically retained under the 1981 Act despite the Secretary of State's licensing powers. It now required a licence in the same way as any other telecommunications operator. The principal licence granted to British Telecom laid down strict and extensive conditions affecting the range of its activities, including those of manufacture and supply of apparatus.[8]


The next major development for British Telecom, and a move towards a more open market in telecommunications, occurred in 1991. On 5 March, the Government's White Paper, "Competition and Choice: Telecommunications Policy" for the 1990s, was issued. In effect, it ended the duopoly which had been shared by British Telecom and Mercury Communications in the UK since November 1983 and the build up to privatisation. The new policy-enabled customers to acquire telecommunications services from competing providers using a variety of technologies. Independent "retail" companies were permitted to bulk-buy telecommunications capacity and sell it in packages to business and domestic users. The White Paper was endorsed by British Telecom, the new policy enabling the company to compete freely and more effectively by offering flexible pricing packages to meet the needs of different types of customer.[13]

1991 to 2001

On 2 April 1991, the company unveiled a new trading name, BT, a new corporate identity and a new organisational structure. This structure focused on specific market sectors, reflecting the needs of different customers—the individual, the small business or the multinational corporation. The reorganisation was named Project Sovereign to reflect the company’s commitment to meetings customers’ needs—"the customer is King". Together with a succession of strategic alliances with telecommunications companies worldwide, these changes gave BT the means to expand into overseas markets.[8]

In December 2000, following modifications to BT’s licence in April 2000, BT offered local loop unbundling (LLU) to other telecommunications operators, enabling them to use BT’s copper local loops (the connection between the customer’s premises and the exchange) to connect directly with their customers.[14]

Concert

In June 1994, BT and MCI Communication Corporation, the second largest carrier of long distance telecommunications services in the United States, launched Concert Communications Services, a $1 billion joint venture company. This alliance gave BT and MCI a global network for providing end-to-end connectivity for advanced business services. Concert was the first company to provide a single source, broad portfolio of global communications services for multinational customers. On 3 November 1996, BT and MCI announced they had entered into a merger agreement to create a global telecommunications company called Concert plc, to be incorporated in the UK, with headquarters in both London and Washington, D.C. As part of the alliance BT acquired a 20% holding in MCI. Nevertheless, following U.S. carrier WorldCom's rival bid for MCI on 1 October 1997, BT ultimately decided in November, to sell its stake in MCI to WorldCom for $7 billion. The deal with WorldCom resulted in a profit of more than $2 billion on BT's original investment in MCI, with an additional $465 million severance fee for the break-up of the proposed merger.[8]

Cellnet/O2

Main article: O2 (United Kingdom)

In 1985, Cellnet was launched as a subsidiary of Telecom Securicor Cellular Radio Limited, a 60:40 venture between British Telecommunications and Securicor respectively. In 1999, BT purchased Securicor's shares in Cellnet for £3.15 billion, Securicor originally invested £4 million in Cellnet in 1983, the company was later rebranded as BT Cellnet, and it became a part of BT Wireless, a group of subsidiary companies owned by BT.[15]

In October 2001, at a general meeting held in Birmingham, 4.297 billion British Telecommunications shares voted in favour of the demerger, and 0.67 million voted against.[16] In 2001 (2001), BT Cellnet demerged from BT and was relaunched on 18 June 2002 (2002-06-18) as O2. Then in March 2005, the company underwent a corporate reorganisation, that saw mmO2 plc being de-listed from the London Stock Exchange and acquired (via a share swap) by a new company, O2 plc, which was listed on the London Stock Exchange in its place and then ultimately acquired by Telefónica in 2007.[17]

2001 to 2006

Following the dot com crash, the group undertook a major board restructuring and asset sale to address its large debts. In May 2001, BT announced a three-for-ten rights issue to raise £5.9 billion—still the UK's largest ever rights issue—and the sale of Yell Group, the international directories and associated e-commerce business, for £2.14 billion. Both activities were completed in June 2001. The group also sold its property portfolio to Telereal, a property company. In April 2003, BT unveiled its current corporate identity and brand values. Reflecting the aspirations of a technologically innovative future, the connected world is designed to embody BT’s five corporate values: trustworthy, helpful, inspiring, straightforward, heart. The Communications Act, 2003, which came into force on 25 July 2003, introduced a new industry regulator, the Office of Communications (Ofcom), to replace the Office of Telecommunications (Oftel). It also introduced a new regulatory framework. The licensing regime was replaced by a general authorisation for companies to provide telecommunications services subject to general conditions of entitlement and, in some instances, specific conditions. Under a specific condition BT retained its universal service obligation (USO) for the UK, excluding the Hull area. The USO included connecting consumers to the fixed telephone network, schemes for consumers with special social needs, and the provision of call box services.[8]

In the summer of 2004, BT launched Consult 21, an industry consultation for BT’s 21st century network (21CN) programme. 21CN is a next-generation network transformation, that, at one time, was due for completion by the end of 2010. Using internet protocol technology, 21CN will replace the existing networks and communications from any device such as mobile phone, PC, PDA, or home phone, to any other device.[18]

In 2005 BT made a number of important acquisitions. In February 2005, BT acquired Infonet (now re-branded BT Infonet), a large telecoms company based in El Segundo, California, giving BT access to new geographies. It also acquired the second largest telecoms operator in the Italian business market, Albacom. Then in April 2005, it bought Radianz from Reuters (now rebranded as BT Radianz), which expanded BT's coverage and provided BT with more buying power in certain countries.[19]

Openreach

Main article: Openreach

Following the Telecommunications Strategic Review (TSR), in September 2005 BT signed legally binding Undertakings with Ofcom to help create a new regulatory framework for BT and the UK telecoms industry generally. Openreach provides provision and repair in the "last mile" of copper wire and is formed from 25,000 engineers previously employed by BT's Retail and Wholesale divisions. It is designed to ensure that other communications providers (CPs) have exactly the same operational conditions as parts of the BT group. It opened for business on 11 January 2006 and reports directly into the BT chief executive.[20]

2006 to present

In August 2006 BT acquired online electrical retailer Dabs.com for £30.6 million.[21] The BT Home Hub manufactured by Inventel was also launched in June 2006.[22] In October 2006 BT confirmed that it would be investing 75% of its total capital spending, put at £10 billion over five years, in its new Internet Protocol (IP) based 21st century network (21CN). Annual savings of £1 billion per annum were expected when the transition to the new network was to have been completed in 2010, with over 50% of its customers to have been transferred by 2008. (For actual progress see BT 21CN). That month the first customers on to 21CN was successfully tested at Adastral Park in Suffolk.[23]

In January 2007, BT acquired Sheffield-based ISP, PlusNet plc, adding an additional 200,000 customers. BT stated that PlusNet will continue to operate separately out of its Sheffield head-office.[24] On 1 February 2007, BT announced agreed terms to acquire International Network Services Inc. (INS), an international provider of IT consultancy and software. This increases BT presence in North America enhancing BT's consulting capabilities.[25]

On 20 February 2007, Sir Michael Rake, then chairman of accountancy firm KPMG International, succeeded Sir Christopher Bland, who stepped down in September of that year.[26] On 20 April 2007, BT acquired Comsat International which provides network services to the South American corporate market.[27] On 1 October 2007, BT purchased Chesterfield based Lynx Technology which has been around since 1973.[28]

BT acquired Wire One Communications in June 2008 and folded the company into BT Conferencing, its existing conferencing unit, as a new video business unit[29] In July 2008, BT acquired the online business directory firm Ufindus for £20 million in order to expand its position in the local information market in the UK.[30] On 28 July 2008, BT acquired Ribbit, of Mountain View, California, "Silicon Valley's First Phone Company". Ribbit provides Adobe Flash/Flex APIs, allowing web developers to incorporate telephony features into their software as a service (SaaS) applications.[31]

On 1 April 2009, BT Engage IT was created from the merger of two previous BT acquisitions, Lynx Technology and Basilica. Apart from the name change not much else changed in operations for another 12 months.[32] On 14 May 2009, BT said it was cutting up to 15,000 jobs in the coming year after it announced its results for the year to 31 March 2009.[33] Then in July 2009 BT offered workers a long holiday for an up front sum of 25% of their annual wage or a one-off payment of £1000 if they agree to go part-time.[34]

On 1 August 2013, BT launched its first television channels, BT Sport, to compete with rival broadcaster Sky Sports.[35] Plans for the channels' launch came about when it was announced in June 2012 that BT had been awarded a package of broadcast rights for the Premier League from the 2013–14 to 2015–16 season, broadcasting 38 matches from each season.[36] In February 2013, BT acquired ESPN Inc.'s UK and Ireland TV channels continuing its expansion into sports broadcasting.[37] ESPN America and ESPN Classic were both closed, while ESPN continued to be operated by BT. On 9 November BT announced it had acquired exclusive rights to the Champions League and Europa League for £897m, from the 2015 season, with some free games remaining including both finals.[38]

Operations


British Telecommunications plc (BT) is a wholly owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group.[39] BT Group plc is listed on stock exchanges in London and New York.

BT runs the telephone exchanges, trunk network and local loop connections for the vast majority of British fixed-line telephones. Currently BT is responsible for approximately 28 million telephone lines in the UK. Apart from Kingston Communications, which serves Kingston upon Hull, BT is the only UK telecoms operator to have a Universal Service Obligation (USO) which means it must provide a fixed telephone line to any address in the UK. It is also obliged to provide public call boxes.

BT's businesses are operated under special government regulation by the British telecoms regulator Ofcom (formerly Oftel). BT has been found to have Significant Market Power in some markets following Market Reviews by Ofcom. In these markets, BT is required to comply with additional obligations such as meeting reasonable requests to supply services and not to discriminate.

As well as continuing to provide service in those traditional areas in which BT has an obligation to provide services or is closely regulated, BT has expanded into more profitable products and services where there is less regulation. These are principally, broadband internet service and bespoke solutions in telecommunications and information technology.

Divisions

BT Group is organised into the following divisions:[40]

  • Customer facing:
    • BT Global Services – provides IT and telecoms services to multinationals (formerly BT Ignite and BT Syntegra)
    • BT Retail – provides retail telecoms services to businesses and consumers
    • BT Wholesale – operates BT's networks
    • Openreach – fenced-off wholesale division, responsible for the "last mile" of BT's access network in the UK and tasked with ensuring that rival operators have equality of access to BT's local network
  • Internal service unit:
    • BT Technology, Service & Operations – responsible for the innovation, design, test, build and running of BT’s global networks and systems.[41]

Headquarters

Main article: BT Centre

BT Group's world headquarters and registered office is the BT Centre, a 10-storey office building at 81 Newgate Street in the City of London, opposite St. Paul's tube station.

Corporate affairs

Financial performance

BT's financial results have been as follows:[1]

Year ending Turnover (£m) Profit/(loss) before tax (£m) Net profit/(loss) (£m) Basic eps (p)
31 March 2012 19,307 2,421 2,003 23.7
31 March 2011 20,076 1,717 1,504 19.4
31 March 2010 20,911 1,007 1,029 13.3
31 March 2009 21,390 (134) (81) 3.2
31 March 2008 20,704 1,976 1,738 21.5
31 March 2007 20,223 2,484 2,852 34.4
31 March 2006 19,514 2,633 1,644 19.5
31 March 2005 18,429 2,693 1,539 18.1
31 March 2004 18,519 1,945 1,414 16.4
31 March 2003 18,727 3,157 2,702 31.4
31 March 2002 18,447 1,461 1,008 12.1
31 March 2001 17,141 (1,031) (1,875) (25.8)
31 March 2000 18,715 2,942 2,055 31.7
31 March 1999 16,953 4,295 2,983 46.3
31 March 1998 15,640 3,214 1,702 26.6
31 March 1997 14,935 3,203 2,077 32.8
31 March 1996 14,446 3,019 1,986 31.6
31 March 1995 13,893 2,662 1,731 27.8
31 March 1994 13,675 2,756 1,767 28.5
31 March 1993 13,242 1,972 1,220 19.8
31 March 1992 13,337 3,073 2,044 33.2

Pension fund

BT has the largest defined benefit pension plan of any UK public company. The trustees valued the scheme at £36.7 billion at the end of 2010;[42] An actuarial valuation valued the deficit of the scheme at £9.043 billion as of 31 December 2008.[43] However following a change in the regulations governing inflation index linking, the deficit was estimated at £5.2 billion in November 2010.[44] BT and the Trustee have agreed a 17-year recovery plan with the first three years’ payments amounting to £525mm. As of 2013 average annual payments have been estimated at £533M. The next triennial valuation is scheduled for 2014.

BT’s pension obligation is derived from two pension plans: BTPS, the company’s defined-benefit pension scheme which was closed in 2001, and the BT Retirement Saving Scheme (BTRSS), which was set up to replace the BTPS and is a defined-contribution retirement plan.

The current BT corporate logo, "Connected World", was adopted in 2003.[45] The globe device part of the logo was originally designed by the Wolff Olins brand consultancy for BT's Concert joint venture with AT&T, and was subsequently used by BT's internet division, Openworld, prior to being adopted by the company as a whole.[45]

Environmental record

In 2004 the BT Group signed the world's largest renewable energy deal with npower and British Gas, and now all of their exchanges, satellite networks and offices are powered by renewable energy. BT is a member of the Corporate Leaders Group on Climate Change. They signed a letter urging the government to do more to tackle this problem. Janet Blake, head of global corporate social responsibility at BT, says that she would like to see incentives that find ways of rewarding those companies that focus on climate change by making investments in green business models.[46]

BT has made it clear that it has an ambitious plan to reduce carbon dioxide emissions.[47] Its strategy includes steps to reduce the company's carbon footprint as well as those of customers, suppliers and employees. BT has actually pledged to achieve an 80% reduction by the year 2016, which will require further efficiency improvements.[48]

Consumer rating

In 2013 Which? members voted BT the worst supplier of telephone services to the home.[49]

Controversies

World Wide Web hyperlink patent

In 2001, BT discovered it owned a patent (

Behavioural targeting

In early 2008 it was announced that BT had entered into a contract (along with Virgin Media and TalkTalk) with the spyware company Phorm (responsible under their 121Media guise for the Apropos rootkit)[51][52] to intercept and analyse their users' click-stream data and sell the anonymised aggregate information as part of Phorm's OIX advertising service.[53][54] The practice, known as "behavioural targeting" and condemned by critics as "data pimping", came under intense fire from various internet communities and other interested-parties who believe that the interception of data without the consent of users and web site owners is illegal under UK law (RIPA).[55][56][57][58] At a more fundamental level, many have argued that the ISPs and Phorm have no right to sell a commodity (a user's data, and the copyright content of web sites) to which they have no claim of ownership. In response to questions about Phorm and the interception of data by the Webwise system Sir Tim Berners-Lee, credited as the creator of the World Wide Web, indicated his disapproval of the concept and is quoted as saying of his data and web history:

It's mine – you can't have it. If you want to use it for something, then you have to negotiate with me. I have to agree, I have to understand what I'm getting in return. I myself feel that it is very important that my ISP supplies internet to my house like the water company supplies water to my house. It supplies connectivity with no strings attached. My ISP doesn't control which websites I go to, it doesn't monitor which websites I go to.


— Sir Tim Berners-Lee, 2008[59]

References

External links

  • BT Group
  • BBC news story on BT's claimed 'web patent'
  • BT's patent text at USPTO
  • Patent case court judgement against BT

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