05:15 PM

In Retreat, Carriers Find Odd Marching Partners

Faced with business and technology issues, carriers in many cases are being forced into deals and initiatives they would not have considered a few years ago.

The BT Fon Wi-Fi service, announced last week, sounds like a great deal for customers but it could have a drawback for BT -- in what seems to be the latest shift in the telecom market toward non-traditional partnerships.

In return for offering other Web surfers in their vicinity access to the Wi-Fi network over their router, users will have access to more than 190,000 Fon hotspots worldwide and BT's existing network of 7,000 Wi-Fi hotspots, plus new BT Fon connection points to be rolled out in the coming months.

"This is the start of something very exciting for BT," said Gavin Patterson, the managing director of BT Group's Consumer arm, in announcing the deal. "Today we are launching a people's network of Wi-Fi, which could one day cover every street in Britain."

The BT-Fon hookup was hardly surprising, as it has been reported since earlier that year that the British telecom giant had become a strategic investor in the Spanish Wi-Fi startup. But the deal could have significant drawbacks for BT: existing customers with "dual-mode" Wi-Fi-plus-cellular devices can not only get much faster download speeds, but can also make voice-over-IP calls that eat into BT's core calling revenue.

What's more, BT has thrown its lot in with a company that was specifically founded in February 2006 to provide an alternative to pricey existing services from telecoms and wireless carriers. Headed by CEO, Martin Varsavsky, the company calls its Wi-Fi sharing customers "Foneros" and Fon identifies itself as a "movement" rather than a conventional business, spreading Internet access and VoIP in nontraditional and viral ways.

In fact the arrangement is just the latest signal that the incumbent carriers, facing tectonic shifts in their core businesses, are grasping at ways to move beyond being dumb pipes and provide added value in the form of Web services, content, and non-traditional forms of connectivity -- businesses in which they have little experience and must often combine with younger and more nimble rivals.

On retreat on a broad front of business and technological issues, the carriers in many cases are being forced into deals and initiatives they would not have considered a few years ago. In this rapidly changing environment, the established companies are trying to adopt the strategies of up and coming firms -- with mixed results.

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