Daiwa Eurotelcoblog No 17, Tuesday 9th December, 2003: BT launches Vonage-like VoIP product targeting cable market (original email blast 12:09 PM Tuesday 9th December 2003)

BT launches Vonage-like VoIP product targeting cable market
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Imitation is the sincerest form of flattery, or so it is said. In this case it may be also the sincerest form of aggression. Readers of our research over the past year will have noted the frequency with which we have written about Vonage and similar services and their potential to disrupt the convential telco order, particularly when coupled with a willing cable partner.

Today brings perhaps the first stage in the VoIP backlash from the PTT segment, with the introduction of "Broadband Voice" a Vonage-like service initially targeting subscribers of NTL and Telewest who have broadband connections and subscribe to the Talk Unlimited (NTL) and Talk Evenings & Weekends (Telewest) discounted calling plans (http://www.btbroadbandvoice.com/broadband_voice/brochureware/how_it_works.html).

Available exclusively online, the service costs GBP7.50 per month, and includes an analogue telephony adaptor (from either Cisco or Fujitsu) free of charge for those who sign up before 31st March 2004. This monthly price compares with Telewest's GBP7.50 and NTL's GBP9.00 per month for comparable discounted evening/weekend calling packages. It also offers "unlimited" weekend and evening calls on similar terms to the cablecos' plans and its own Together packages (free for up to 60 minutes, after which a 1p per minute charge kicks in unless the number is redialled), and this applies even to on-net calls. The difference comes principally in dramatically undercutting the other two on fixed-to-mobile calls (the illustration given is 6.93p for evening calls to Vodafone versus 16p for NTL and 12.91p for Telewest), as well as on call set-up charges, and also versus Telewest's daytime charges to fixed lines.

Implications
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The choice of the "Broadband Voice" brand seems somewhat pointed, coming as it does ahead of Vonage's expected entry into the UK market next year (in the US market Vonage refers to itself as "The Broadband Phone Company" and its product is marketed under the "Digital Voice" brand). Such a branding initiative on the part of BT is, in our view, likely to muddy the water considerably from the branding standpoint. Additionally, the (coincidental?) choice of cable subs as the focus market appears to confront Vonage directly in the segment of the market where it has traditionally met with greatest success.

At first glance, the pricing seems to offer little that users of BT Together Option 3 do not already get, and naturally we expect that BT would look to minimise collateral damage in unleashing such a product on the mass market. Nevertheless, we do not expect other players in the market to sit idly by, and we suspect that such moves risk further disrupting the pricing environment in the UK.

However, in terms of broader market issues, BT gets full points for awareness of emerging threats to its core market. We have seen similar announced forays into VoIP from the RBOCs in recent days, but today's move by BT is the first (and most specifically targeted) in Europe aimed at pre-empting the anticipated proliferation of SIP services on this side of the pond. We are curious to see what responses may emerge from players in other markets which we previously (Eurotelcorama No. 2, 9th October, 2003) identified as being relatively "at risk," namely the Netherlands, Switzerland, Belgium, and Austria.