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BT Is Worried Apple and Amazon Will Take Its Customers

Britain's dominant telco BT Broup is warning of a near future where telecom operators like itself lose customer relationships to the likes of Amazon and Google • BT director of regulatory affairs, Cathryn Ross, sounded the alarm at a recent event at the Institute of Directors in London, Bloomberg News reported • Silicon Valley giants, she said, may soon sell connectivity directly to consumers as part of a "wider bundle" • This is while telcos are under pressure from regulators to invest in expensive fiber infrastructure

Thomas Seal (Bloomberg) -- Telecom carriers have long grumbled that they spend a fortune building the world’s data networks only to watch the U.S. tech giants reap most of the benefits.

Now they fear Silicon Valley will take away their customers too.

BT Group Plc is warning of a near future in which telecom operators’ crucial connections to households and businesses are usurped by companies such as Inc., Alphabet Inc.’s Google or Apple Inc., depriving them of the chance to sell them the other services that underpin their profits.

“Telecom services are increasingly integrated into wider competing ecosystems based around platforms,” said Cathryn Ross, director of regulatory affairs at Britain’s dominant telecom company.

“In this world, the end-customer might not have a relationship with the connectivity provider, but might have a relationship instead with, say, Apple or Google or Amazon, who would provide connectivity as part of a wider bundle,” Ross said late on Wednesday in a lecture at the Institute of Directors in London attended by industry figures, regulators, economists and lawyers.

The Silicon Valley giants already offer many of the services once provided by the telecom industry, such as voice communications through Microsoft Corp.’s Skype and texts via Facebook Inc.’s Messenger and WhatsApp.

The tech companies have been looking to develop their own communications systems, with Facebook experimenting with drones and satellites and Alphabet trying to build ultra-fast broadband networks in the U.S. with Google Fiber and even internet in rural areas delivered using balloons.

Ross’s remarks show the telecom companies are anxious that Big Tech could next buy up and resell conventional network access, adding data packages to video subscriptions, music and other content in one bill and breaking the link between telecom companies and their customers.

Some telecom operators have tried to replace lost revenues with a push into media -- investing in sports and other content to sell over their own TV platforms. There, too, the tech firms pose an emerging threat. In the U.K., Amazon is buying into the Premier League soccer market previously carved up exclusively between BT and Sky Plc.

“Part of the interface has definitely been taken over,” said James Barford at Enders Analysis, citing the popularity of Apple’s Facetime video calling. “It’s a subtle issue for the operators, but they want to be able to maintain the contact with the customers, and the identity, and the brand, and some differentiation.”

Barford said he was still skeptical that companies such as Facebook or Google wanted to invest heavily in taking consumer relationships: “How much of an appetite do they have for someone calling them up and wanting to know how to plug their router in?”

Appeal to Regulators

Governments are pressing the telecom industry to move faster to upgrade their networks to fiber optic cable to cope with galloping growth in data consumption, driven in large part by the big U.S. platforms -- Google’s YouTube, Netflix Inc. and Amazon’s Prime Video.

While BT has made fiber commitments, it’s resisted relying solely on the technology because it can boost broadband speeds more quickly and cheaply with its part-copper “G.Fast” service, and it isn’t certain it will see a return on the hefty investment fiber needs.

Ross said at the same event that companies like BT and their consumers would suffer if the U.K. communications regulator Ofcom only prioritized connecting homes by fiber without focusing on what consumers can actually do with their internet.

“I’ve been surprised,” said Ross. “The debate here feels so dominated not by outcomes but by outputs and even inputs, and in particular by the debate about fiber and the amount of investment in it.”

Ofcom’s Group Director of Competition, Jonathan Oxley, said the watchdog is confident in its focus on fiber, pointing to a wave of investors putting their money into it: a Goldman Sachs-led takeover of alternative network CityFibre, TalkTalk Telecom Group Plc’s joint venture with M&G Prudential’s Gigaclear and the George Soros-backed urban network company Hyperoptic.

“We are also aware of several other confidential full-fiber proposals which are at an advanced stage of financing,” said Oxley.

BT and Ofcom’s relationship has often been tense, and contributed to the June ousting of the U.K. incumbent’s Chief Executive Officer Gavin Patterson.

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