Sir Peter Bonfield, the former Chairman of ICL, joined BT as Chief Executive on 2 January. He took up his post after the announcement the previous November that Sir Iain Vallance would be splitting the roles of Chairman and Chief Executive. Sir Iain continued as Chairman of BT. Sir Peter, knighted in the 1996 New Years Honours for services to information technology, promised a "roller coaster ride" for BT people as BT continued its global expansion. Sir Iain subsequently became part time Chairman from 31 July 1998.
During January and February, BT abolished the reconnection charge for residential customers at premises which still had all the phone wiring intact although service had been switched off at the BT exchange. This was a successful promotion which was taken up by over 82,000 households.
From 1 April 1999, BT scrapped the £9.99 reconnection charge for residential customers altogether. Taking over an existing BT residential line was now free, even if there was a break in service, so long as the old wiring was still in place.
Between May and July, BT ran a scheme for business customers which gave them the chance of a second phone line for half the usual price. The special offer applied to the second business line provided to customers at the same address, and covered installations made between 1 May 1 and 31 July this year. During this period customers could have the second line installed for just £49.50 instead of £99.
This offer was repeated for both business and residential customers in 1999. Between 1 April and 30 June 1999, residential customers could have a second exchange line installed for £49.50, instead of £99 incl. VAT. Business customers paid £49.50 excl. VAT, instead of £99 for an additional line.
Over the same period customers could also get connected to BT Highway and ISDN2 at half the usual price. The special offer of £50 (excluding VAT) off connection or conversion on all pricing options meant that customers taking the most popular options with inclusive calls would pay half the normal conversion charge.
BT added its pricing discount schemes with the introduction of the Corporate Choices package, which allowed discounts of up to 22.5 per cent for larger business customers. Corporate Choices benefited companies which operate over several sites with phone bills of more than £400,000 a year.
There was a £6,000 annual fee for Corporate Choices in addition to the relevant quarterly site fee. Corporate Choices replaced and improved upon Tiers 1 to 3 of the Business Choices 2000 Series of discount packages through a combination of bigger discounts and lower entry fees.
BT and its Globetel consortium partners announced in February the formation of a new company in Israel called Newtone - The Israeli Company For International Telecommunications Ltd. Trading as Newtone, the company was a joint venture between BT, MCI, and three Israeli partners; Tadiran Ltd. (Tadiran), Idan Software Industries I.S.I. Ltd. (Idan) and Darcom Ltd. (Darcom). It was to tender for one of two licences for international telecommunications services in Israel. The joint venture shareholding was BT 25 per cent, MCI 15 per cent and the three Israeli partners 20 per cent each.
BT launched its mass market Internet service on 29 March - BT Internet - announced on 26 February. It was aimed at residential and small business customers, as well as users new to the Internet. A full range of Internet services was offered, including world-wide electronic mail, file transfer, and access to vast quantities of information through the World Wide Web and discussion groups. Features included in BT's unlimited monthly service were five free e-mail boxes as standard, 2.5Mb of free Web space, and fast connection through 33.6 Kbps modems at local call rates.
BT Internet was competitively priced with a one off registration of £20 (incl VAT) and a flat monthly subscription fee of £15 giving unlimited use of all BT Internet services and applications. Alternatively, customers could pay an annual subscription fee of £150 giving them a discount of 16 per cent. BT Internet billed customers directly for their subscription only. Calls to service were charged at local rate throughout the UK and billed separately as part of the customer's regular phone bill.
BTnet, the Internet access service aimed and business customers and resellers continued to be available.
On 3 May, BT announced unlimited ISDN access to BT Internet at a monthly subscription of £23.50. This package was aimed at users who wanted faster access to stills, video clips and sounds found on the Web, but who found response times using conventional modems then available too slow. Such users included schools and universities, and teleworkers, and now had access to the Internet at a speed of 64kbps, more than twice the speed of the fastest modem connection then available.
Charges were reduced by over 20 per cent in January 1997; the one off registration charge of £20 was abolished, and the monthly subscription was reduced to £11.75.
The ISDN access option was halved at the same time to £11.75, and the subscription to customers who paid annually reduced to £129.25, equivalent to one month free.
In 1998 BT launched a pay-as-you-go service called BT Click for less frequent Internet users, followed by BT ClickFree in February 1999.
BT launched Business Connections on 7 May, a nationwide sales and support team dedicated to helping the UK's growing businesses to get the best out of their phones and to exploit the advantages of new telecoms technology. At the centre of BT Business Connections was a new, universal, free phone helpline - 0800 800 800, replacing "152" for all business customer enquiries. BT Business Connections provided expert advice and assistance for business customers who wanted to know more about any aspect of their telecommunications. Advice covered what was new in the world of computers, telephones, and information technology, to BT's range of price discount schemes that cut their phone bills.
BT acquired Bell Canada's 25 per cent stake in Clear Communications, New Zealand's second largest telecommunications company. BT joined existing shareholders MCI, Television New Zealand and Todd Corporation as an equal 25 per cent shareholder in the company.
BT appointed Global TeleSystems Group (GTS) in May as its distributor of Concert Services in the Czech Republic.
GTS CzechCom was a subsidiary of Global TeleSystems Group Inc. (GTS) of the US. The GTS Group operated in markets throughout Europe and Asia, with 18 businesses worldwide in 1996, and principal offices in Monaco, Brussels, Moscow, Beijing and Budapest. The company at that time operated the largest private VSAT (very small aperture) satellite network in Central and Eastern Europe.
It provided network and service solutions to government, commercial and telecommunications carriers using satellite, microwave, radio and fibre technologies.
BT launched its high-speed CellStream service - the UK's first national ATM (Asynchronous Transfer Mode) service.
ATM was a key technology for future integrated multi-service communications as it was designed to handle, in a flexible, cost effective and scaleable manner, large volumes of Internet (IP) traffic and multimedia applications which were a mix of voice, data and image.
BT announced a programme to provide free conversion to modern plug and socket connections for customers who still rented phones with permanent direct wiring. The normal £29.38 conversion fee was waived during a special six-month offer from 16 September.
This promotion was aimed specifically at customers who still had direct wired phones, and as a consequence could not choose to buy or rent modern phones which provide access to newer services such as Caller Display, Call Waiting and Call Divert. Most telephones and accessories designed to meet the needs of customers with physical disabilities or sight and hearing impairments also require plug and socket connections. They include telephones with large buttons and inductive loop hearing assistance. Modern plug and socket connections also enable customers to join community alarm schemes for the elderly and those with disabilities.
BT already subsidised the price for plug and socket conversions by about £20 before this promotion. It also provides plug and socket connections free when a direct wired phone needs repair. Free conversion continued for vulnerable customers after the end of the special offer period. BT worked with Oftel and other representative consumer organisations to define which customers would be eligible.
Exchange line rentals from July 1 increased to £25.69 per quarter for residential customers, and £41.13 (£35 ex VAT) for businesses. The rental changes amounted to an increase of 3.7 per cent for residential customers and 2.4 per cent for businesses, and were below the 3.9 per cent increase to the Retail Price Index since they were previously last reviewed in February, 1995, when they had risen by 4.6 per cent. The latest increases amounted to less than 1p a day.
BT promised that no customer's bill would l increase by more than the current annual rate of inflation - 2.4 per cent in April 1996 - even with the new rental changes.
BT unveiled a new design for its public phoneboxes in July, following extensive research into customers' opinions. The new phonebox, designated the KX+ range and the first design for more than 10 years, was less angular, with a curved roof, and contained a small seat and a shelf for writing or placing a bag.
Other features were a lower handle on the outside of the door to help customers with disabilities and a new closing mechanism to make the door more robust. Payphone equipment inside took cash, phonecards, credit cards and chargecards, with these payment options clearly written on the outside of the box rather than using red or green colour coding which was the current practice.
Research for BT Payphones revealed widespread appreciation of the availability, maintenance and reliability of the existing payphones and the standards to which
they were maintained. Despite liking certain features of the stainless steel designs introduced from the 1980s, such as the fact that they were lighter, more airy and more accessible for people with disabilities than the traditional style, customers felt that there was still room for improvement. Popular opinion was that the square shape seemed clinical and that something softer and more rounded would be preferable. The colour of the phonebox itself, particularly the roof, had to satisfy a number of requirements, in particular it had to be practical to keep clean and bright enough for customers with visual impairments.
After a number of experiments, red proved to be the colour that best met the required criteria, with the added advantage that it reflected something of the character of the traditional red K6 kiosk designed by Sir Giles Gilbert Scott in the 1930s.
The new design resulted from collaboration between GKN, who manufactured the existing style of payphone, and the design agency DCA. It was also extremely cost effective to produce, as it used the same basic carcass as the existing payphone housing.
The first of the new look phoneboxes appeared on the streets in the early autumn, with approximately 5,000 installed over the next year.
BT and News International announced plans in September to launch Springboard Internet Services Ltd. (SISL) – a 50:50 joint venture company between BT and News International Ltd. providing an Internet service designed for the UK mass consumer market. LineOne, the brand name given to the service, delivered entertainment, information, home shopping and education to UK homes via the Internet.
Launched in January 1997, LineOne provided fast and easy access to content drawn from major News International and News Corporation brands, such as The Times, The Sunday Times, The Sun and the News of the World.
A strategic collaboration with Microsoft was announced in August under which customers of BT's mass market dial-up Internet service - BT Internet - would be offered Internet Explorer 3.0, then the latest Internet browser from Microsoft.
BT introduced the International Weekend Rate on 7 September, cutting between five and 23 per cent off international calls made between midnight Friday and midnight Sunday.
BT had reduced its main prices by £1.3 billion over the previous three years and was committed to cutting at least £300 million more off prices over the next 12 months.
International weekend rate savings included:
BT's international Weekend Rate runs from midnight, Friday to midnight, Sunday. International calls made at weekends previously cost the same as those made during weekday evenings and at night-time. The Weekend Rate was not to apply to international calls made from BT public payphones or with BT Chargecards, to international ISDN and 0800 calls, or to INMARSAT and maritime services.
Further international call reductions were introduced to many daytime, evening and weekend calls on some of BT's most popular routes from 8 October.
These new cuts were all in addition to the ones introduced on 7 September when BT introduced the International Weekend Rate, and included:
Combined with BT's new International Weekend rate, these reductions meant that the cost of a call to the USA or Canada on a Saturday or Sunday had fallen by 31 per cent since the beginning of September 1996. Weekend calls to Australia or New Zealand had come down by 24 per cent overall during the same period.
BT cut national evening and night-time call charges by 20 per cent - from 5.9p a minute to 4.7p - from 8 October. At the same time, national daytime calls were cut by 10 per cent. Together with the reductions in international calls introduced at the same time, this resulted in a further £214 savings, bringing total price cuts to more than £1.5 billion in three years.
This was followed by a further 10 per cent cut to national daytime calls and a 3.8 per cent cut to regional daytime calls on 29 May 1997, also simplifying charging by creating a new single rate for all long distance UK daytime calls. In the past 18 months BT had also cut the cost of calls to every country in the world - some by up to 44 per cent.
BT went on to reduce the cost of national calls made during weekday evenings and nights by a further 10 per cent from 1 October 1997; in total a 28 per cent cut in a year. This meant that the cost of these calls came down from 4.7p a minute to just 4.2p.
At the same time, BT reduced the cost of daytime calls made to Cellnet and Vodafone cellular phones by 12 per cent - from 36.5p a minute to 32p - reflecting reductions in payments which BT made to the two mobile operators. BT charged by the second, and there was a 5p minimum charge for all calls.
Overall, BT's price cuts over the four years to 1997 meant that the average residential call bill came down by 32 per cent in real terms, while the average business call bill came down by 35 per cent.
Further cuts were introduced on 17 January 1998 when BT cut 10 per cent off the cost of long distance calls made within the UK at weekends. This reduced the cost of a weekend long distance regional or national call from 3.3p to 3p per minute, incl. VAT. This cost was further reduced with BT discount schemes.
BT and NS (Nederlands Spoorwegen) - the Dutch national railway network operator - celebrated the launch in September of their joint venture company in the Netherlands, formed in March the same year. The new company, called Telfort, B.V. was created to address the Dutch business community, and was jointly owned 50-50 by BT and NS.
Headquartered in Amsterdam, Telfort initially offered data, corporate voice and virtual private networks, as well as international voice and data services from Concert Communications Services. The company also offered management and outsourcing services.
Plans for Telfort to address the Dutch residential and mobile markets were also developed, with the firm intention of positioning the joint venture as the alternative telecommunications company in the Netherlands.
It was awarded a fixed licence in November 1997, and on 26 February 1998 the Dutch Government also awarded a mobile licence to Telfort. The award was for a national DCS 1800 mobile licence and was the result of a Government-conducted auction. Together with the fixed licence awarded the previous year, the mobile licence now enabled the company to develop integrated communications solutions tailored to the Dutch residential and business markets.
From 23 September, three pricing options were available to customers of ISDN 2 - BT's high speed digital communications service aimed at small to medium sized businesses, or branch offices of larger organisations - which had been launched five years previously.
Start Up was packaged for first-time users who, for a lower connection fee of £199 and higher rental, would receive a yearly call allowance of £90 for two years, and £210 a year thereafter. By spreading the cost over two years, businesses could save up to 14.5 per cent in the first year on previous ISDN 2 prices.
Fast Start was aimed at customers with experience of ISDN and others who were confident of their usage rates. For a connection fee of £680 and rental of £130 per quarter, Fast Start gave them a call allowance of £650 for the first year and £210 a year thereafter. This was a 25 per cent saving on previous ISDN 2 prices in the first year.
Low Start was targeted at low users or customers who used ISDN to provide back up for private circuit services. The connection charge remained unchanged, but rental was increased.
Existing customers could switch to the new Standard rental option comprising a quarterly rental of £130 and an annual call allowance of £210 per annum, saving more than eight per cent on previous ISDN 2 prices.
The introduction of call allowances made it easier for businesses to try out new and innovative applications. They complemented the on-going reduction of BT data call prices which had been reduced by more than 26 per cent in the previous three years and were among the cheapest in the world.
UK ISDN calls were priced at the same rates as normal telephony and all normal discounts applied. Consequently, ISDN users could save up to 31 per cent on BT's basic, regional, national and international call prices with its recently improved range of Business Choices packages. Customers could obtain an additional five per cent saving on 10 direct dialled calls with Key Numbers for an initial subscription charge of £10 (this fee was waived from 1 April 1999).
Customers could also take advantage of long term discounts for both ISDN 2 and ISDN 30 services, which were introduced on 1 January 1995. Companies which opted for three, four or five year contracts benefited from discounts on rental charges ranging from three, seven and ten per cent respectively.
Following concerns expressed by Oftel over potential difficulties to competitors, the pricing structure was amended from 3 October, whilst retaining its innovative features, benefits and customer choice;
The Start Up connection charge was unchanged at £199. The rental charge rose by £15 per year, offset by increases to the inclusive call allowance of £15 for each of the first two years and £20 thereafter.
The Fast Start connection charge fell to £500, the rental rose by £15 and call allowance fell to £355 in the first year and changes to £230 per year thereafter.
The Low Start connection charge remained unchanged, but the rental charge fell to £352 per year.
Eighteen of Europe's network operators formed a consortium to work on further research and development into ATM (Asynchronous Transfer Mode) technology and to continue experiments of advanced high-speed services and applications. Known as 'JAMES' (Joint ATM Experiment on European Services), it built on the success of the European ATM pilot which ran from July 1994 and December 1995.
ATM was the key enabling technology for future integrated broadband communications as it was designed to handle multimedia applications which are a mix of voice, data and image.
BT and New World in October announced that they had reached an agreement that ensured that customers had the benefit of both New World's new red livery phone box and BT's phone boxes throughout the country.
Earlier in the summer, BT had obtained an injunction to stop their competitors, New World Payphones, from using the old-style phone boxes designed by Sir Giles Gilbert Scott, the K2 and K6. New World wanted to put the old style phone boxes up in parts of London where the local planning authorities wanted to compel the installation of old style phone boxes at new sites.
Part of the agreement was that BT woul make available to NWP sites where BT's modern kiosk was already installed, so that planning authorities requirements did not prevent the public taking advantage of New World's service in the key tourist areas. At the same time, BT had the sole right to install the old phone box when appropriate.
Oftel's Advisory Committee on Telecommunications for Disabled and Elderly (DIEL) supported the action by the two telephone companies, pointing out that, although the traditional boxes may be pleasing to the eye, they can present problems to customers with disabilties.
BT launched Concert Packet Services in Greece in October and appointed Space Hellas SA as distributor.
This strategic alliance between BT and MCI progressed further with the announcement on 3 November 1996 that they had entered into a merger agreement to create a global telecommunications company called Concert plc, to be incorporated in the UK with headquarters in both London and Washington DC.
The merger with MCI would give BT's shareholders more exposure to the United States, the world's largest and most dynamic marketplace, together with the growth momentum and market expertise of MCI, known for its success in the competitive US long distance market. By combining with BT, MCI would gain access to BT's technical expertise in the provision of local market products and services, and the substantial financial resources and global position of BT.
The merger proposals subsequently met with approval from the European Commission, the US Department of Justice and the US Federal Communications Commission.
Nevertheless, BT ultimately decided on 9 November 1997 to sell its stake in MCI to the US company Worldcom for $7 billion or $51 per share. This followed Worldcom's successful rival bid for MCI on 1 October. Worldcom's offer, which was followed on 15 October by an unsuccessful counter bid from GTE, America's largest US based local telecommunications company, was made after BT and MCI had renegotiated the terms of the planned merger following a profits warning from MCI in July 1997.
Following the completion of the MCI-WorldCom merger on September 15, 1998, BT sold its 20 per cent holding in MCI to WorldCom. The proceeds totalled £4,159 million on which an exceptional pre-tax profit of £1,133 million was realised. In addition, BT had received a further $465 million severance fee on 12 November 1997 for the break up of the proposed merger. The settlement was hailed as an excellent deal, with immediate benefits to customers and investors.
Also following the completion of the Worldcom and MCI merger agreement in September 1998, BT acquired from MCI its 24.9 per cent interest in Concert Communications for £607 million. Now that Concert was wholly owned by BT, work was undertaken to ensure that the group's business would be fully independent of MCI. The costs involved in this work were estimated at £150 million over the next two years to March 2000.
BT was chosen as the prime contractor in November to work with the Ministry of Defence on an advanced national fixed telecommunications network for the UK armed forces.
The Defence Fixed Telecommunications System (DFTS) contract, worth an estimated £1 billion over ten years, was to deliver voice, data, LAN interconnect and other wide area networking services for the Navy, Army and Air Force. The integrated service was to be designed to improve inter-operability, resilience and operational effectiveness while cutting the MoD's ongoing costs.
BT's solution for DFTS harnessed the principles of the Government's Private Finance Initiative (PFI), and applied these for the first time in a telecommunications context. BT would have responsibility for the design, financing, operation and ongoing management of all DFTS services, giving guaranteed levels of performance and ensuring technology updates to let the MoD benefit from new developments.
BT and Tele Danmark were selected in December as the international partners for Newtelco which intended to become Switzerland's second licenced operator.
The Swiss founding companies of Newtelco were Schweizerische Bundesbahnen (the Swiss Federal Railways), Migros-Genossenschafts-Bund (the largest retailer in Switzerland), and Union Bank of Switzerland (the leading Swiss bank). BT and Tele Danmark would hold a significant minority stake, with the Swiss sponsors retaining the majority.
The agreement extended Tele Danmark's relationship with BT. Together with Telenor, the two companies had previously launched a joint venture, Telenordia, in Sweden. Tele Danmark were also distributors of Concert Services in Denmark.
Headquartered in Zürich, Newtelco planned to offer liberalised communications services in voice, data and multimedia services. Newtelco used the rights of way and fibre optic network of the Swiss Federal Railways as the backbone for its telecommunications network.
BT ran a "three for the price of two" twelve day Christmas and New Year phone call sale for its 20.5 million residential customers.
Promoted as the Seasonal Saver, this special offer applied to BT's regional and national longer-distance UK calls which were dialled direct from BT residential phone lines. It ran from Boxing Day until midnight on 6 January 1997.
Every third minute of a qualifying phone call during this period was free; after two minutes under the Seasonal Saver BT gave customers the third minute - or part of a minute - free. There was no time limit on calls, so the sixth minute, ninth minute, twelfth minute, and so forth, were all free.