British Telecom (BT) is hurting because the wireline phone business is inevitably declining. Their new hire is one of the world’s most interesting thinkers on possible new businesses for telcos. Martin has been part of the Telco 2.0 group at STL Consultancy, the best small group of European analysts. They concluded that the profitable future of telcos is selling new services and wholesale to non-traditional customers. Telcos don’t just have networks; they have billing platforms, IT experience, customer relations and other advantages they might leverage into profitable businesses. I’m skeptical that telcos can efficiently move into these related businesses other than by controlling access to their customers. My take is that few telcos will succeed in these new and diverse activities.

BT’s most ambitious diversification, Global Services, has recently lost more than a billion. GS was Ben Verwayen’s attempt to recoup the wireline drop and was a natural extension of their capabilities. BT has expertise in massive systems and runs large networks. They are the primary contractor in the $20B contract to create an IT network for British Health, now four years late and having many problems while causing hundreds of millions in writeoffs.

BT has had the most thoughtful management of any Western incumbent, including Paul Reynolds and Ben Verwayen. Their network design is world-leading, and their in-house think tank outclasses everyone. For the last two years, however, they have had some of the worst results on any major telco, and lost 2/3rds of their market cap. The possible explanation is that any telco without wireless is in trouble. Wireless is inexorably replacing wireline.

From about 2002 to 2007, DSL was growing fast enough to make up most of the revenue lost from landlines. Now, DSL has little more room to grow, with 60-80% of homes covered in most developed countries. 3G/4G mobile is beginning to take share from DSL and cable, as some customers find their mobile speeds are sufficient. Net additions in DSL are down almost everywhere but China. Bell Canada and Hawaiian Telecom are seeing absolute drops. Randall Stevenson at AT&T is probably the only telco CEO who has decided to let wireline go (a really important story I need to write.) Amol Sharma WSJ suggests Verizon is considering offering a $5 wired phone lines, incoming and emergency calling only, just to keep the customer.

Martin is joining JP Rangaswami at BT Design, whose blog confusedofcalcutta.com is imaginative. my thoughts on open source were probably more driven by Jerry Garcia than by Raymond or Stallman or Torvalds et al. There’s much more there about understanding our industry. Definitely worth a read. JP and Martin are both headed to California for Lee Dryburgh’s eComm March 3-5, a key event for people trying to understand change.

*** F2C: Freedom to Connect, March 30 & 31, Washington DC, features: Fiber-to-the-Home feasibility studies by the CIOs of San Francisco and Seattle: a panel on what municipal network failures teach us; the current FCC CTO and more. For details, visit http://freedom-to-connect.net (ad) Good event. Experts, not lobbyists. David Isenberg is a crucial thought leader.