BT - talking out of its aspirations about digital leadership

Profile picture for user slauchlan By Stuart Lauchlan May 11, 2017
Summary:
An "aspiration" for a digital future for the UK. During this election period, it's fitting BT's CEO is spinning out a 'jam tomorrow' manifesto where we can all watch the football on our dodgy broadband connections.

The New Digital Context: Gavin Patterson
Gavin Patterson - a man with aspirations

It's not a pretty picture. A 14% collapse in public sector revenues. 4000 jobs to be axed. The Global Services business to be overhauled. Oh and BT CEO Gavin Patterson has had to take a £4 million pay cut.

Quite how he’ll cope remains to be seen, but for now the BT boss seems stubbornly committed to an Alice in Wonderland maxim of believing - and trotting out - as many impossible things before breakfast as he can.

It’s perhaps appropriate that during the UK General Election run-up, when uncosted promises of ‘jam tomorrow’ are being thrown out from every direction, that BT’s stance to the future of Digital Britain remains similarly wooly - lots of soundbites, promises of policy consultations and very few actual concrete commitments.

Try this one for size - from the head of the company that has an effective monopoly over the nation’s network infrastructure:

Our aspiration [is] to be the UK’s digital champion.

Aspiration? Really? Aspiration?!?!

Patterson continues to spout the PR party line, like a politician defending a dodgy record:

We're the leading investor in the UK's digital infrastructure, and we take that responsibility very seriously. Last year, we committed to spending £6 billion on U.K. telecoms networks over the coming 3 years. We're on track at around £2 billion in this first year as we continue to invest in both coverage and speed. In mobile, we've now reached 80% of 4G geographic coverage in the U.K. We continue to upgrade, with more than 100 sites being added to our 4G network every week.

Moving on to our fiber network, we passed an additional 1.1 million premises with fiber broadband this year, taking our footprint to more than 26.5 million. We're leaning into the government's universal coverage ambitions, pushing further into the last few percent, going beyond BDUK areas. We're working towards a future where everyone has access to good broadband speeds wherever they live.

Leaning into.

Working towards.

Going beyond.

Jam tomorrow.

Unlimited rice pudding for all.

Vote Patterson for a strong and stable digital future for the many, not the few.

Blah blah blah.

Of course, despite the ‘broadband for all’ nirvana he talks of, he’s quick to limit the need for BT to actually do very much about it when he adds the proviso:

I think we're also seeing that we are reaching a point where we are getting to saturation of the broadband market. It can't continue to grow forever…So we're not chasing broadband market share.

Government pain

Given that the CEO sounds so much like a politician chasing a majority, it’s perhaps fitting that one of BT’s big pain points at the moment is coming from the public sector itself, where an increasing number of cash cow contracts have reached the abbatoir door. Graham Sutherland, BT's CEO of public sector business, admits:

I mean, obviously, it's been a pretty challenging 12 months for Business and Public Sector and we've signaled really for the last few quarters the headwinds that we've seen on a small number of very large public sector contracts.

But he’s also got ‘Wonderland’ syndrome and spins the situation back to the positive:

As businesses move to the cloud and they digitize, we think we're very well positioned to win business and win business at good margins, because most of our customers are buying a number of services together now, and that creates the opportunity for us to grow and to manage our margins within that context. And that's actually what we're doing now.

That's dangerously close to a plan, but again Patterson chips in here to limit expectations of, well, BT actually delivering on too much:

I think what is true in both public sector and Global Services is we're not going to chase deals at any sort of price. I mean, we turned, or stepped back from a couple of major deals, public sector deals in the UK, because we felt the margins were unsustainable. And so we're not chasing revenue at low margin.

Ah, yes, Global Services - the other elephant in the room, now set to have a ‘new model’, a euphemism for a major restructuring to try to fix something that’s badly broken. Or as the Patterson manifesto spin goes:

We should remind ourselves that Global Services has a strong set of products and good relationships with multinational customers and in many areas, its portfolio is unique and world-leading. However, trends in technology are evolving and the market is changing, and this creates an opportunity for us to transform Global Services to be a more digital business, prioritizing innovation of product and service platforms in the cloud to support our customers.

What that means is that BT’s had a long hard look at its services business and come to some conclusions. Patterson pitches:

We have a strong set of customer relationships, particularly with multi-national customers. We've got a market-leading position in terms of the products and services we provide for them.

But we recognize the market is changing. Increasingly, it's moving to cloud-based delivery. Increasingly, it's moving to software-defined networks, and we need to adapt and move with our customers as they make that change. We're well positioned to do that, because the network itself remains very important to it, the global part of the network.

But I think as a consequence of that, the domestic networks that we have around the world, particularly in Europe, become less important to us. We don't rely on them as much to deliver competitive advantage. And so you'll see us de-prioritize those over time.

As for the bit about “simplifying the operating model”, a large part of that will involve Global Services carrying a a hefty chunk of the 4000 jobs that are to be axed or as Patterson prefers:

freed up.

Spoken like a true politician, Mr Patterson.

My take

In all this spin, there’s one good piece of news from our ‘aspiring’ digital leader. Patterson revealed:

We secured and indeed improved our TV rights to the UEFA Champions League and UEFA Europa League until the end of the 2021 season.

Of course, you’re going to need a decent broadband signal to watch it, but still, that’s good to know as we face life after Brexit, isn't it? We can watch the footie if nothing else.

For weasel words, the very use of the word ‘aspiration’ in relation to BT’s leadership role in enabling Digital Britain is a disgrace of national proportions that any self-respecting Digital Minister in the next government would deal with as a top priority.

But he or she won’t. Successive UK governments just haven't had the willpower to face down BT, having handed over the network infrastructure crown jewels all those years ago at privatisation. The next one will be no different.

And Ofcom, despite occasional flurries of boldness, won’t make a difference either.

The very fact that BT execs are currently going out of their way to praise the recent Openreach fudge brokered with Ofcom and the government should make it perfectly clear who’s in the driving seat here.

So post-Brexit Britain will trundle along in the digital slow lane, hostage to the fiscal self-interest of BT. That's no comfort to  anyone concerned about the future of the digital economy or for those of us struggling to get a broadband connection that breaks 2 Mbps in a major city centre.

As for BT's digital vision? That’s what I call talking out of your aspirations.