Calling for change
By Kate Bulkley
Monday August 9, 2004
Andrew Burke wants to turn BT into a new media pioneer. Kate Bulkley reports on an unlikely transformation
It doesn't seem too long ago that the words "BT" and "innovation" would have looked inappropriate in the same sentence. But these days, the once-staid telecoms company is gaining plaudits for its new media alliances, its forward-thinking initiatives and its vision. It now even has outspoken Jeremy Clarkson fronting its marketing campaign, for goodness sake.
Just last week BT and online deals specialist Lastminute.com unveiled a plan to start a broadband booking system in thousands of restaurants throughout London. The scheme means subscribing restaurants will be able to advertise table vacancies the instant they become available.
This deal is just the latest example of how BT has been changing since the appointment of CEO Ben Verwaayen, two and a half years ago. Broadband is now touted as the company's saviour, as BT and its rivals fight against deregulation and new low-cost competitors.
BT tried and failed to reinvent itself as a content company during the dotcom boom, but Verwaayen has vowed to ramp up the services that BT offers rather than fighting other content providers (hence the partnership with Yahoo!) and maximising the power of its phone connections to 19m homes and several million businesses in the UK.
But Verwaayen could not change BT's direction on his own. His key agents for change on the retail side include Pierre Danon, Andrew Burke, and most recently Gavin Patterson, men with plenty of knowledge of other businesses - which will help BT transform itself.
Of the three, Burke is closest to the coalface. This 43-year-old Londoner started his career in IT and cut his teeth at News Corp when he walked through the Wapping picket lines during the 1986 printers' strike.
After three years managing 130 IT staff at Wapping, he joined a News Corp management training course, was a journalist for six months and then launched a new internet publishing division for the Times, the Sunday Times, the News of the World and Today.
In 1996 he became founding CEO of LineOne, a joint venture between News Corp and BT (and eventually United News & Media) that became the second largest internet service provider in the UK before it was sold to Italian ISP Tiscali in 2001. For the next three and a half years Burke made his mark in venture capital, first with News Corp in its eVentures partnership with Softbank of Japan and then by running his own $10m fund, backed by Aegis Group and Warburg Pincus.
His appointment as director of online services for BT Retail sounds fairly low-key, but Burke is leading the company's push towards a new future. His first move after joining in January last year was to close the BT Openworld project, which had proved to be an expensive mistake.
He then started to try and join up the various BT dots. For example, he became chairman of BT Click & Buy, a secure online transaction service that needed more customers. Burke decided to help content providers such as broadcasters make money from putting their programmes online. The vehicle for this was BT Rich Media, a new venture launched four months ago, which now has around a dozen customers ranging from independent TV producers such as Fremantle to the Wimbledon tennis championships.
"Anybody who has what we call rich media - which is audio-visual content - is encouraged to use the platform," says Burke in an accent that betrays both his Chelsea upbringing and the influence of his 15 years working with Australians at News Corp. The Rich Media service gives BT a "double whammy" of revenue because it can charge for use of the new platform and gain fees through BT Click & Buy. But BT will also benefit from creating a business that brings more vibrant content online, which in turn helps drive its broadband numbers towards its target of 5m connections by mid-2006.
Burke's highest profile deal (which ended the costly content-making days of BT Openworld) was with Yahoo! in spring last year, just a few months after his arrival. "When I first got to BT, I sold the games domain and the dot music sites to Yahoo! because what I saw was a very bright company, but not a company that knew how to nurture and create content businesses. After 15 years at News Corp, I could see the culture at BT was totally different," says Burke. "BT has to stick to its knitting - and that's about the infrastructure, access to people, billing and improved customer support. These are the things BT does really well."
Once the content issues had been addressed, Burke was left with a development team that he has re-directed to work on what are now the BT Communicator products, which allow customers access to instant messaging and the ability to make phonecalls via their broadband connection using VoIP (voice over internet protocol) technology. Launched several weeks ago under the BT Yahoo! brand, the VoIP service in particular is a way to attract more users and encourage current users to upgrade to broadband.
Offering customers VoIP services may seem counter-intuitive for a company that still generates the bulk of its revenues from vanilla phone calls, but Burke is looking further ahead: "The net gain from VoIP will be bigger. Those telecoms companies that put their heads in the sand and ignore VoIP will be exposed."
Burke has also had a hand in re-thinking BT's phone directories and home computing businesses, but his next big project involves video on demand (VoD), which he believes will be a huge new driver of broadband connections. The early days of broadband were driven by its qualities of speed and being always on but VoD could be one of the keys to the next phase of broadband take-up.
This strategy for VoD is putting Burke up against not only his former employers, News Corp, but also James Murdoch, CEO of BSkyB, who is desperately chasing new subscribers as the first phase of BSkyB's growth slows down.
BT is expected to launch a VoD service as early as October this year using its telephone lines to connect to customers' TV sets. Burke says that BT will only provide the infrastructure and the support mechanisms, but will find partners for the content. He is already familiar with James Murdoch, who was working for a News Corp online venture called iguide when Burke was at LineOne. The problem is that Murdoch last week said that VoD via phone lines has still not proven itself as a business.
The second son of Rupert Murdoch believes in storage and will increase the capacity of his Sky Plus set-top boxes four-fold in time for Christmas this year. "Storage trumps bandwidth" is his current mantra. "Absolute rubbish" is Burke's reaction. Burke prefers BT's VoD streaming concept to downloading to a hard disk in a set-top box, even one that boasts 160GB of space (enough for 15 Hollywood movies). "For me, choice and convenience trumps storage and you can only get that from broadband," Burke says.
Meanwhile , the Lastminute.com deal is still going ahead, with plans for 50 new broadband-connected kiosks to be constructed throughout the country in the next few months in Lastminute.com's corporate pink. They will act as souped-up phone booths, offering fast broadband access to Lastminute.com along with localised deals for hotel rooms, theatre tickets and family events.
Significantly, these kiosks will have no BT branding.