BT declares war on rivals with VoIP move

BT Group on Thursday in effect declared war on Skype and other voice-over-internet protocol (VoIP) telephony providers when it insisted it would undercut the company that put the service on the map.

The incumbent UK telecommunications operator announced plans to launch a revamped VoIP product in February, which will combine the two broadband telephony offerings it has so far kept relatively low profile, and undercut Skype on 50 of the most popular international calling destinations.

Skype, which was acquired this year by eBay for $4.1bn, offers free calls between users who have downloaded its software.

It has long marketed itself as a free call service but it makes its money from charging users who call landlines or mobiles.

BT offers a similar model with free calls between users who have downloaded its software on a PC and rates that undercut its normal tariffs for calls to fixed lines and mobiles.

But it has so far held off from a sustained marketing drive out of fear of eating further into traditional call revenues, which are already in decline.

The UK operator has finally given in to competitive pressures and followed a number of other incumbents around the world in deploying VoIP products in the mainstream.

Speaking at an event unveiling a range of new broadband products and services, Ian Livingston, chief executive of BT’s retail business, signalled that he was willing to cannibalise more of his traditional revenues by using the promise of cheaper calls to attract more people to broadband.

“We will be selling broadband by offering VoIP,” he said, adding that customers are already given the option of signing up to the VoIP telephony products when they buy broadband from BT.

The comments came as Mr Livingston announced BT’s retail business was aiming to derive a third of its consumer revenues from new products and services enabled by broadband and other technologies, such as WiFi, by 2010.

Consumer revenues currently account for about £5bn ($8.8bn) of the retail business total revenue of £8bn but only £200m-£300m comes from new revenue streams – the rest is split almost half and half between call charges and line rental.

BT is planning to launch its broadband TV platform next year, offfering video-on-demand services. It is also close to rolling out its “WiFi” hub, which will sit in the home and connect various devices to the internet.