BT's broadband push encounters severe quality of service problems

With Broadband so high up on BT's agenda, mounting anecdotal evidence that its high-speed internet access products are hard to install must be causing some concern at BT headquarters in London's St Paul's.

With industry experts also questioning whether the demand for broadband is as strong as BT is anticipating and saying BT needs to be broken up for broadband to really take off, the company has clearly got its work cut out.

BT, which is spending £33m on a broadband advertising campaign, has made no secret of the importance of the service to its plans with Ben Verwaayen, the chief executive, stating it is "at the heart" of the operation. The company, which has gone as far as appointing a chief broadband officer, predicts it will have about £681m of broadband-related revenues a year by 2004/05.

But there is plenty of anecdotal evidence suggesting the company is falling at the first hurdle with customers complaining its broadband products are far from easy to install let alone use.

A quick glance at the website www.btopenwoe.co.uk cites numerous examples of horror stories that BT customers have had with its broadband products. "I have had BT ADSL installed now for over 12 months. In that 12-month period I have had an engineer back eight times, and I have reported faults with the line 35 times. In one day alone I lost connection with the exchange 194 times during a 22-hour period," one said.

And it is the installation of the product, according to one technical expert, that generally causes the greatest problems. "If you're trying to do [install] it yourself, you're not too sure whether it's your PC, your internal wiring in the house or whether it's the BT line itself."

"One of the biggest problems people have is the quality of the line going back to the local exchange. If the quality is not there, the signal is degraded which means you don't get the speed," he said.

Indeed, one BT customer said: "We had big problems getting it [broadband] installed because our original line had been split so that we were only getting half the bandwidth to start with ... we had our line out of order for ages and BT fault repair couldn't work out what the matter was."

In its defence, BT is adamant that most of its customers are happy with its broadband service whether provided by its BT Retail arm, which supplies the recently launched no-frills BT Broadband product, or through BT Openworld.

The company claims 95 per cent of its activated BT Broadband customers have reported no problems with their installation and points out that 81 per cent of consumers are satisfied with the service provided through BT Openworld.

And, to be fair, Oftel, the telecoms regulator, says less than 1 per cent of all the complaints it received last year were concerned with the quality of broadband services in general. But relatively few people in the UK – just over 1 million – have bought a broadband service and, as with any new technology, these so-called "early adopters" tend to be more technically savvy and are probably less likely to encounter problems.

While it is true that the take-up of broadband in the UK is accelerating – up 300 per cent in the 12 months since November of last year – it can hardly be described as a rip roaring success so far.

Just 4 per cent of all UK households have a broadband service, according to the Broadband Stakeholder Group, a unit set up in April of last year to advise the Government on the development and implementation of a broadband strategy.

While that represents an opportunity for growth, many analysts question just how great the demand for residential broadband will be in the UK. "There are quite a few people who have their internet connection at home for e-mail and if you're only using it for that there's no need to upgrade to broadband," said one City analyst who did not want to named.

"It [broadband] is for those who have the type of usage that makes it worth their while. If you work at home, if you do gaming or if you use the internet a lot then you're crying out for it but that's not a huge proportion of the population," he said.

The latest figures from Oftel show the UK had about 1.135 million broadband subscribers as at 1 November even though broadband services are technically available to about 67 per cent of the UK's 24 million households. Oftel estimates BT has the biggest share of the broadband market so far with about 461,000 users, followed by the cable companies NTL and Telewest with 432,000 and 235,000 subscribers respectively.

Compared with other countries, both in Europe and further afield, take-up in the UK is pitiful and a far cry from the "Broadband Britain" the Government has long spoken of. Given the progress so far, its dream of getting the UK to a position where it has the most extensive and competitive broadband market in the G7 by 2005 seems ambitious.

By comparison, residential broadband penetration is running at more than 10 per cent in the US and Japan, at about 20 per cent in Sweden and Canada while South Korean penetration is streets ahead at more than 50 per cent.

No doubt that did not go unnoticed by the think-tank Demos, which recently published a report advocating the break-up of BT to promote the take-up of broadband in the UK.

Worryingly, though, some analysts suggest the true market for broadband might be as little as half the current 11.5 million households that have internet access, or about 5.75 million households in the UK.

According to forecasts from the research house Gartner, less than 15 per cent of households in Europe will have broadband internet access by 2005. Susan Richardson, an analyst at Gartner, believes the UK could fall into that camp – something that does not bode well for BT.

For now, though, BT looks to be on track to hit its first target of 1 million broadband users by the middle of next year with orders running at about 16,000 a week. It is the company's targets of 2 million users by 2004 and 5 million by 2006 that look far more demanding.

"I think their [BT's] targets are very ambitious," Ms Richardson said. "They might make that million by the 2003 target. The 5 million [target], I would say is optimistic."

Nevertheless, at least BT is putting its money where its mouth is with respect to its broadband plans and doing its bit to raise awareness – something that will benefit the industry as a whole.

But if BT's battle to increase take-up and win customers does not go to plan, the company will undoubtedly face even more calls to be broken up – a prospect both Mr Verwaayen and Sir Christopher Bland, BT's chairman, reject. Lord Currie of Marylebone, the chairman of the new communications regulator Ofcom, who will soon be in charge of regulating BT and who has previously indicated he favoured a break-up, will, no doubt, be watching developments closely.

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