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Wednesday, 2 February, 2000, 12:48 GMT
BT: From telegraphs to the internet

BT tower The BT tower is a London landmark

When Alexander Graham Bell invented the first telephone in 1876, it changed the way people communicated for ever.

Even before the telephone, people were quick to see the chance to make money from electronic communication.

The first UK commercial telegraph services were launched in the early nineteenth century.

These early telecom companies were taken over, merged or collapsed. What was left grew into the global player that is now known as BT.

Post and telecoms

For a long time, old and new forms of communications were managed under the same roof.

The telephone service in the UK was provided by the General Post Office (GPO) service, in competition with private sector companies such as the National Telephone Company.

Telephone box BT had a monopoly for much of the last century

In 1896, the GPO took over the private sector trunk service and in 1912, it became the monopoly supplier of the telecom service.

The nationalisation question

In the first half of the century, many proposals to nationalise the Post Office were made.

It wasn't until a Labour government took office in October 1964 that the issue was seriously considered.

A 1965 study found that the Post Office should be split into two divisions, Post and Telecommunications.

This led to the Post Office Act, which gave the Post Office exclusive powers to run telecom systems and made it a public corporation.

The competition question

It was only in 1981 with the British Telecoms Act that British Telecom came into existence as a separate corporation.

At the same time, the first steps towards introducing competition into the telecoms market were taken.

BT logo British Telecoms enjoyed a monopoly until 1981

Under the Act, the Secretary of State, as well as British Telecom, could licence other operators to run telecom systems.

This brought to an end the British Telecom monopoly, putting in its place a duopoly with Mercury, a Cable & Wireless subsidiary.

The next step on the road to full competition was privatisation.

The government sold more than 50% of BT shares to the public in November 1984, and offloaded most of its remaining shares in two subsequent flotations.

But full competition did not hit the British market until March 1991, when the government issued a white paper on telecoms policy, which effectively brought to an end the duopoly shared by BT and Mercury.

The new policy allowed customers to buy telecoms services from competing providers using different technologies.

BT's response was to revamp its company structure, so that it focused on specific market sectors for different customers.

The change in attitude could best be encapsulated by the new slogan, "The Customer is King".

The global view

Increased competition at home prompted BT to look abroad to keep its revenues buoyant.

In 1994, BT and MCI launched Concert Communications Services, a $1bn joint venture.

BT ultimately decided to sell its stake in MCI to the US company Worldcom.

But the deal with Worldcom resulted in a profit of more than $2bn on BT's original investment in MCI, with an additional $465m for the break-up of the merger.

BT is now still awaiting regulatory approval for a $10bn joint venture with AT&T. This will include their existing international networks, traffic and products for business customers, Concert Communications and some of their multinational accounts.

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