BT is presently engaged in upgrading and rationalising its network infrastructure, particularly in the UK, through its ‘21st Century Network’ program.

Matthew Bross recently moved into the role of Chief Technology Officer with BT, having previously held the same position with Williams Communications, now WilTel Communications Group, in the U.S.

Matthew Bross explained that a legacy of this evolving network is that the technology powering infrastructure upon which the modern higher-level service networks (PSTN, ATM and IP) rely may be outmoded - for example, PDH technology is still utilised to a significant extent within BT’s network. Commenting further, Mr Bross said that the application of technological advances pertaining to the optical and SDH layers of the network allows remaining PDH-based elements to be leveraged effectively - a key focus being the ‘uncorking’ of network bottlenecks arising from the continued use of PDH technology.

Mr. Bross likened the current architecture to ‘spaghetti’, where each component is connected to every other component in the network. This structure is changing to something more akin to a ‘lasagne’ - a far more layered and organised architecture.

Overseas

Discussing BT’s presence outside of the UK, Mr. Bross stated that the company does own infrastructure in other countries and regions worldwide. Indeed, BT can offer network coverage in 120 countries through its global infrastructure. In Europe, BT claims unparalleled reach and deployment based on an owned or controlled fibre network, which extends to more than 46,000 route km in 19 countries and which connects more than 250 cities.

In the U.S., BT has recently announced an extension to its IP infrastructure, which will see the company add a further 14 MPLS nodes, bringing the total to 23.This will enable BT to offer MPLS access in all of the key commercial centres across North America:

“A substantial part of BT’s assets external to the UK were tied up with the Concert venture with AT&T. A result of the unwinding of Concert was a clear and specific rationalisation of the network assets and the customers. In different geographic regions the two partners acquired different elements bound up in Concert. In Asia-Pacific, for example, BT gained the IP MPLS network, while the ATM and Frame Relay networks went to AT&T. Separately, within Europe, BT has followed a policy of buying up the remaining shares of a number of carriers in which it had a minority interest”.

Mr. Bross added that BT has sought to rationalise and consolidate its position in overseas operators in which it holds a share - investing where a company’s activities ally with its own strategic direction, divesting interests where they do not, for example Cegetel of France. Such investments are intended to improve BT’s overall control of the target company, as regards both corporate governance and technological direction. Ultimately, the intention is to align overseas activities closely with the strategic direction and operation of BT in the UK.

Capital expenditure

As a global player, Mr. Bross believes that BT possesses one of the healthiest balance sheets of any carrier, and, as such, holds a strong position facing all-comers.

Mr. Bross estimated total annual capital expenditure for BT at between £2.6 and £3 billion ($4.2-$4.8 billion). This sum encompasses expenditure on network maintenance as well as that allocated to the purchase of equipment, including for the ‘21st Century Network’ (21C) program. Mr. Bross noted that spending on equipment for the transport network specifically is not broken out in the published figures.

Commenting further, Matthew Bross said the proportion of expenditure devoted to particular segments of the network is changing, particularly as the 21C transformation gathers pace. A prime factor driving this network development and reorganisation is reduction in operating expenditure - which will release additional cash for network development.

“To paraphrase Ben Verwaayen, the vision is for a transformation of BT from the ‘schizophrenic, many-headed, behemoth’ of today to a company perceived as a trusted ally in daily life. With a company the size of BT there is massive inertia holding back such a metamorphosis, therefore the biggest problem lies in actually implementing it.”

Corporate sector

In pursuit of this transformation, Mr. Bross is proposing a radical approach, centred on the reconfiguration and reorganisation of the network infrastructure. This shake-up will fundamentally change the way that customers - whether residential, SME or corporate - are addressed.

A particular emphasis is being placed on the UK SME sector, where BT has seen a vigorous challenge to its position in the market. With corporate customers, particularly European multi-national companies, Mr. Bross feels that BT retains an arguably unequalled ability to support their needs.

With reference to a reconsidered globalisation strategy, Matthew Bross emphasised that support of such customers does not necessitate ownership of the networks. To a great extent, advances in technology have obviated the need for a policy of infrastructure acquisition. In the past, control of network equipment was deeply embedded within each platform on a route - making provision of homogenous services over a heterogeneous network impossible.

Via a variety of vendors, operators now have the ability to control heterogeneous network infrastructure, including that which they do not actually own, to deliver services with the same ‘look, taste and feel’. Mr. Bross noted that the control-planes, for example soft-switch technology and directory services, allow provision of continuous, common, ‘branded’ services to a customer’s offices worldwide, although the range of services offered may not be as extensive as can be provided over the operators own network.

Matthew Bross cited Unilever as a good example of a multinational company that has outsourced its global communications services to BT. In this case BT was required to demonstrate the ability to support the diverse communications needs of Unilever on a worldwide basis, and against very strong competition. This it did successfully. Mr. Bross explained that key factors aiding this win were access to approximately 10,000 support staff and the recent consolidation of control and operations of Ignite in Europe, following the break up of the Concert venture. Work to upgrade the network infrastructure of BT Global Services is ongoing.

UK market

Regarding the present image of BT in the UK market, Matthew Bross said that the company is seen as a trusted provider of fixed-line services - “basically, a subscriber picks up the telephone and gets dialtone” - as demonstrated by the healthy state of this business, which has remained flat or growing, as against a general 2% to 3% decline seen by competitors.

Mobility

The reliability of fixed-line service contrasts markedly with that of mobile services, where coverage is patchy, calls are dropped, and batteries run out. However, despite these service quality issues, users like the flexibility offered with mobility. In describing BT’s approach to ‘mobility’, defined by BT as broadband wireless and cordless, as well as cellular communications, Mr. Bross said there are currently seen to be two opportunities.

The first lies with the intelligence held in mobile devices - both in the applications they are able to run and also the display features; the second lies in tying together fixed and mobile networks, to deliver whatever service is required by the optimum means available.

BT is aiming to act as an intermediary between the mobile operator and the subscriber, by enabling roaming services - for example, broadband service could be provided to a subscriber via a wireless gateway in the office, via a wireless (IEEE 802.11 ‘Wi Fi’) hot-spot out of the office, or via a fixed or wireless DSL connection within the home. Similarly, the subscribers mobile handset could, where possible, connect to the fixed-line network - acting as a cordless telephone in the home and office - with all the inherent advantages in terms of service reliability and quality.

This type of seamless service provision will utilise a range of fixed-line and wireless technologies, including DSL, ‘Wi Fi’, Bluetooth, and second or third generation cellular, to deliver a branded, personalised, package of entertainment services, location-based services and directory assistance. Ultimately, the aim is to provide a ‘total’, simple-to-use, communications service to the subscriber, wherever they may be.

Mr. Bross added that, through this strategy, BT will seek to commoditise mobile service, in the process subjugating the cellular networks to the role of simple ‘bit pipes’ - the fate that cellular operators have predicted for fixed-line networks. This strategy is envisioned in BT’s Broadband Mode of operation (B-mode) program.

The strategy allows BT to offer advanced mobile services without the expense of acquiring mobile licenses or building its own mobile network. Matthew Bross believes the difficulties of operating a fixed-line network, as compared to a cellular network, preclude the cellular operators from following the same path. He added that BT has maintained a strong position in corporate cellular mobile and has recently re-entered the mass consumer mobile market through an MVNO offering across the T-Mobile network.

Payment systems

Beyond the provision of straight telecommunications service, another area stated as being of interest to BT is payment systems - the opportunity to buy and pay for services online. Envisioning the relationship between BT and its customers as it would ideally be by 2006, Mr. Bross said that while discussing the possibilities with colleagues internally, one idea that arose was the ability of a subscriber to not only buy and pay online, but in addition, to first compare competing services online.

This feature would provide a shopper with details, specifications and costs, for services from BT alongside those of competitors. Such capabilities would increase the convenience of services to the customer, as well as making life easier for BT - currently, the primary benefit to shopping online is to the service provider, through reduced administrative and processing costs. As stated previously, the primary push within BT today, coming from senior management, is to improve the customer’s experience by providing the services they want in the most convenient way possible.

Citing an example of how ‘unfriendly’ BT can sometimes be as a supplier, Matthew Bross described how a current ISDN service subscriber would struggle to upgrade to a broadband (ADSL) service. Because the business units providing the two services are separate, and do not or cannot communicate effectively across the organisation, the subscriber will face numerous hurdles when trying to upgrade, foremost will be issues relating to billing, and the impossibility of transferring debits or credits between accounts for the two services. The subscriber is liable to be left feeling confused and bewildered by the whole experience. Mr Bross concluded:

“The key to our business is the relationship with the customer. At the end of the day, if you are a ‘trusted ally’ for the customer they will usually be prepared to give you a mulligan - a second chance. On the other hand, if you haven’t built that relationship you are likely to simply get a bullet!”

Mr Bross explained that, at the network level, a key aim of this project is the creation of a unified multi-service network - the ‘BT Broadband Services Network’ - targeting the service-specific network layer. BT aims in future to provide any service type in the customer’s native or chosen technology - a fundamental shift from requiring the customer to conform to the technology of the service provider. This strategy will simplify the range of networks that must be operated, dispensing with the need for multiple, dedicated, service-specific networks. An element of the program is upgrade of the PDH network and reorganisation of the SDH network layer - Mr. Bross noted that this does not necessarily mean ‘digging up streets!’

The 21C program also covers BT infrastructure worldwide, notably the Global Solutions and Retail divisions - the ICT strategy of the Retail business, together with network assets globally, will be underpinned by architectures defined in 21C.

Core network

Under the 21C program, the SDH layer of the network will be reorganised to enable overlay of a next-generation packet-based core to allow provision of any service to any point at the network edge, via a multi-service aggregation platform.

Through development of a simplified, homogenous, core network it will be possible to eliminate duplication of an array of activities - including operational engineering, capacity planning and product support functions - associated with support of the service-specific networks. The end result will be a simplified, streamlined, experience for both the customer and for BT. Migration to new services will be easier and faster, as different services will be available on different ports of a single network rather than on entirely different networks.

Regarding availability of the technology to realise this goal, Mr. Bross asserted that he did not foresee problems as equipment capable of powering this vision is known to be currently available on the market.

Decommissioning

Commenting on the challenges facing such a huge transformation in operations, Mr. Bross noted that one disincentive would be a necessary decommissioning of viable network equipment that could potentially be depreciated over the longer term. However, it is believed that such losses will be more than outweighed by operational enhancements gained through reducing network layers and equipment types - a key advantage being faster implementation of innovations into the network.

Today, a majority of the capabilities of BT’s infrastructure can be said to rely on equipment and technology that is between ten and twenty years old. If the current planned network transformation equips the company for the next twenty years, Mr. Bross said he would be very satisfied:

“The useful lifespan of communications equipment, with its underlying technologies, is now probably shorter than was the case twenty years ago, but by streamlining the operation of the network - from the ‘spaghetti’ to the ‘lasagne’ model - utilising today’s technology, will, I believe, enable a more graceful and evolutionary progression to the network of tomorrow.”

Mix-and-match

In today’s environment, Mr. Bross said, an operator must constantly pinpoint the technologies that will deliver to it a ten fold improvement in terms of cost of ownership, deployment cost and/ or service velocity. By successfully implementing this policy, BT believes it will achieve the best possible set of blended economics.

In terms of services offered, the individual network components deployed should be ‘mix-and-match’ in nature - ‘like lego blocks’ in that they may be arranged and rearranged to deliver the services demanded by customers, to the extent that services not planned or envisaged at time of equipment installation may be offered in the future. From the perspective of an individual customer, the result will be a unique, personalised, service portfolio.

Reliability

Matthew Bross noted that, even today, much of the technology utilised by the major global carriers is at least one decade old:

“A majority of the technology deployed is vintage 1990s, with the Frame Relay networks generally originating from the 1980s, and voice networks mostly from the early 1970s. This means that many recent innovations have not, so far, been ubiquitously rolled out and leveraged - this offers a huge amount of technological ‘slack’.”

The primary inhibitor for companies such as BT to deploying new technology is the scale on which any roll out must be made. Any shift to a new technology must first be balanced against existing network performance, reliability, service level and overall quality. Matthew Bross noted that reduced operational expenditure alone cannot be an overriding factor. A key concern is always equipment reliability, particularly where the only data available is from bench testing: “Basically, reliability in a laboratory does not compare to a decade of operation in a live network”.

Mr. Bross added that BT applies very stringent criteria when introducing new equipment into its network: “The bottom line is, you cannot afford for a customer to get a busy tone.”

“For example, figures show that during January 2003, BT attained take-up rates for its DSL service of around 25, 000 orders per week, giving a total of 100,000 new subscribers for that month. Continued growth at this rate has seen the ADSL subscriber base reach one million in early June 2003. This proves that we can successfully provision DSL service in volume, to meet customer demand.”

The provision of broadband service in the UK is often compared unfavourably with that seen in other countries - most notably South Korea. Mr. Bross noted that a number of factors have distorted the relative situations in the two countries, primarily the intervention of the government in South Korea - where deployment of DSL service was mandated and subsidised. He added that this scenario was neither appropriate nor desirable for the UK.

BT has made broadband available to 73% of the UK population and this figure will increase to 80% by the end of 2003. Mr. Bross noted that the company has also extended its innovative registration scheme so that broadband is now within potential reach of 90% of UK homes. The company is also working alongside organizations such as regional development agencies to develop solutions for the most remote rural areas. A variety of technologies, including wireless, may be utilised to boost coverage in order to serve areas where DSL is not viable for technological, topographic or economic reasons. Mr. Bross added:

“The challenge for BT now is to augment the ADSL service with alternative technologies to increase geographic coverage. These will include wireless and long-reach DSL solutions, the latter is an area in which I am currently engaged. Once viable technologies are identified we have to assess the practicality, or otherwise, of deploying these commercially into the network.”

The rollout, and accelerating pace in take-up, of broadband service is an additional driver for the 21C program - a shift to the Broadband Network Services environment. Illustrating this, Mr. Bross contrasted a traditional network set-up, where a 2 Mbit/s PDH service would be connected to perhaps hundreds or thousands of corporate and commercial nodes, with the new ‘uncorked’ network, where demand for bandwidth, through wide-scale broadband access, connects potentially millions of multi-megabit connections to the network.

This change requires a fundamental transformation in the way the core network behaves. From the service provider’s perspective, the requirements for supporting broadband users engaging in activities such as web browsing and music downloads are now apparent - the 21C program is tasked with enabling BT to keep pace with current and future usage patterns.

Mr. Bross said at an operational level, this shift in user behaviour translates as for more than simply a question of whether the core network is able to handle the increase in traffic over the network. From the perspective of the subscriber, BT intends to enhance the online experience by increasing what the user is able to achieve with their connectivity. Ultimately, the aim is to change, at a fundamental level, the way the subscriber views the services they receive, by increasing the value of their connection on a day-to-day basis.

Mr Bross expressed the view that the general absence of competition from the utility sector in the UK, is largely due to their focus on the bottom line. Heightening this nervousness with regards to profitability is the massive investment entailed in the construction of a telecommunications network, combined with pricing pressures in the telecommunications services market and the rapid pace of technological change and continually evolving service portfolios.

Assessing this scenario from board level within a utility company raises many difficult questions, foremost of which would be ‘does this market fit with the core competencies of our company?’ Although, from an outsider’s perspective, the answer may appear to be ‘yes’, from the inside, the answer is far from clear-cut - despite the features in common, the dissimilarities of the two sectors are substantial. Matthew Bross added:

“From my experience in the U.S. I can say that the utility companies tended to move into the telecommunications space late in the day, a key factor influencing this reticence being a conservative attitude toward creating value. By the same token, this conservative viewpoint dictates an early exit from the market - at the first sign of a downturn.”

Service innovation

At BT, Mr. Bross’ stated that his prime concern is not currently external competition, but the ability of the company to quickly transform its own internal processes to enable a sharper focus on the customer. Competitors are viewed to be, in general, preoccupied with addressing balance sheet issues - difficulties accentuated by their lack of operational scale in comparison with BT.

As mentioned, BT is currently executing a radical transformation, centred on the operations of the company as a whole, in tandem with a reorganisation of its network infrastructure. Mr. Bross explained that the company is seeking ways to perform internal processes, and operate its network, in a more effective manner - not, however, by simply adopting cheaper ways of carrying out existing processes. The ultimate objective is an enhanced and revitalised relationship with the customer. Mr Bross commented that one facet of this revamp - and one for which he is responsible - is the fostering of an environment in which sustained and speedy service innovation is possible.

In the market of today, Mr. Bross said technological innovation can arise from any one of a vast number of sources - the major research laboratories, such as BTexact Technologies, Bell Labs or Telecom Italia Lab, no longer play such a dominant role:

“Basically, the ‘innovation genie’ is out of the bottle, and no longer monopolised by the major research facilities. Today, advances may arise from almost anywhere, worldwide. The basic ingredients are simply capital investment and entrepreneurial vision that addresses a genuine market need. The funding for sound ideas has, in general, been available.”

A number of factors are believed to influence the adoption by the major carriers of new technology, including the disruptive nature of innovations, the demand from the carriers for ‘10x’ capabilities of any new equipment, and the scale of their networks. The challenge for the largest carriers is seen as one of keeping pace with the technology available - basically, increasing the rate at which their networks evolve. Mr. Bross added that introducing this changing ‘innovation agenda’ to BT is a key concern.

Despite the changing vendor-carrier relationship, Matthew Bross expects that traditional equipments suppliers, such as Marconi, will continue to be important to BT, and key in enabling the company to extract value from new technologies as and when these emerge.

During his time with Williams Communications, Matthew Bross was involved with the ‘Technology Farm’ programme established by that company. At BT, he said, the approach is more conventional, utilising the Martlesham Digital Park laboratory and the BTexact Technologies R&D organisation at Adastral Park. Mr. Bross hopes the best aspects of both research and development models can be pursued at BT.

Commenting on the Technology Farm approach, Mr. Bross said it enabled Williams to assess the most promising products and vendors without the need to take every product through lengthy laboratory testing. This system is viewed to be ideal for selecting best-in-class technology in a specific product sector, while the laboratory-based approach allows a broader industry view and assessment of a wide range of technologies.

At BT, the Adastral Park laboratory’s function is to power innovation, in any guise, into the company. BT recently announced the merging of activities at Adastral Park with those of its partner companies from the computing sector, under the leadership of BTexact chief executive Stewart Davies.

The role of BTexact is to drive all aspects of innovation within BT - including technology, network architecture, systems and services. Certain areas are considered core to the near term future success of BT, for example, management of the company’s disparate network infrastructure - now being ‘blueprinted’ to ensure optimal operational efficiency.

The BTexact organisation also engages in forward looking, ‘blue sky’ research, which may be showcased in its publication the BT Technology Journal. Mr Bross noted that this journal recently highlighted concepts for the future of personalisation in devices and services - previously noted as a key area of interest for BT going forward. It is expected that BTexact will increasingly address issues relating to ease of use of BT’s services by its subscribers - such as network security and authentication - areas that will not usually be apparent to the end-user, but will nonetheless enhance their online experience.

Summing up the role of BTexact, Matthew Bross said that ultimately it is responsible for ensuring that the innovations adopted by BT deliver value to the company, securing its financial future and its position in the market.