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VoIP is no threat, says British telecom giant

Voice over IP is no longer a flea on BT's elephantine hide; the telco says it is now taking the technology seriously.

The emergence of usable voice over IP services, which let individuals and companies make phone calls over the Internet--in many cases for free--is not a threat to BT but an opportunity, the British telecommunications giant said Monday.

Speaking at the Voice over IP Forum in London's Le Meridien Hotel, John Blake, head of hosted IP services at BT Global Services, said that although there is a "dichotomy" for BT, which will involve some cannibalization of existing services, the company has an aggressive VoIP plan.

BT, like other telecom firms, faces a loss of revenue if free VoIP services such as Skype take off. According to James Enck, European Telecom analyst/global telecom strategist at Daiwa Securities Investment Bank, Skype has an annual growth rate of 500 percent in terms of on-Net minutes, and 5 percent of broadband connections in the United Kingdom are using the service. "It's practically a household name," Enck said.

BT seems to have learned its lesson from the late 1990s, when it was widely accused of holding back broadband rollout to protect its ISDN business.

"BT is the incumbent operator, and as such we have to defend our traditional market, but we can do that by aggressive and creative pricing," Blake said. BT, he said, has reduced prices, and is establishing longer-term relationships with its partners and customers. "We will have to sacrifice some higher-volume services," he said, "and there will be some cannibalization, but we're about ready."

BT offers two distinct VoIP services: the year-old Broadband Voice, which mimics a regular phone, and BT Communicator which was launched this year with Yahoo Messenger and works with a PC.

Enck said incumbent operators across Europe are beginning to realize they have to work with VoIP. "VoIP is out of the closet in Europe," he said. "We have seen a lot of activity from incumbents" who, he said, used to talk about VoIP as being a flea on an elephant. "Now they talk about how it will impact their revenues."

"We are not afraid of the technology," Blake told the audience at the Forum. "Voice over IP is an application, and if you can get that working right, then other applications on the network become easier to deliver. Once you have broadband infrastructure the technology becomes easier to deliver. Internet telephony has been around for four years, but we were doing it over dial-up connections, and you just can't get the quality on a 56kbps call."

BT plans to deploy VoIP across its own organization, with 30,000 IP phones. It recently completed a 10,000 IP phone roll-out at Abbey Group, as part of a hosted IP contract. "We rolled this service out across 850 branches in five months," said Blake. "We had to do 25 sites a night, with a two-hour window to upgrade each site."

The Isle of Man government says it is planning to install VoIP across the public sector there, with the help of Cisco, Dimension Data and Manx Telecom.

Matt Loney of ZDNet UK reported from London.