Specifically excluded from that remit is cellular telephony, however: the Cellnet network operator is a separate venture, jointly owned with Securicor, while BT Mobile is a network Service Provider addressing the business customer and is therefore outside the remit of the Consumer Division.
As a customer-facing marketing organisation, the Division identifies potential requirements for products and services, and makes the business case for these to be developed in BT's specialised development units. Responsible for channelling those consumer demands to the company's 'engine room', Jon Collinson heads the Strategy and Business Development Unit for the Consumer Division. Changes in the way in which consumers employ communications while away from 'base' have to be reflected in the recommendations made by the Unit.
Interest in card-based services has come from two business streams within BT. The Card Services Group has focused extensively on the BT Chargecard which is taken up by both business and residential customers. There are some 15 million Chargecards in use today and BT is now in the process of developing similar services internationally through joint ventures with the company's partners (Albacom in Italy and Viag in Germany, for example).
The other interest in cards comes from Payphones, so far the only commercial foray made by BT into smart cards (apart from the SIM card in the GSM cellular handsets). Having switched from optical cards to the embedded chip on phone cards as the store of value in 1995,
BT has had greater exposure to a smartcard application than virtually any other UK business. The Payphones Group was also responsible for implementing the Mondex electronic cash card on the telephone network for the well-publicised Mondex experiment launched in the UK town of Swindon back in 1995.
Trials involving Mondex at the Universities of York and Exeter have been added and, more recently, BT installed dedicated Payphones in Leeds to support the VisaCash electronic purse trial.
The smartcard expertise which originated within the Payphones Group has now been hived off to handle the broader questions of smartcard development within the company.
Pre-paid telephone cards have certainly made their mark, with an estimated 20 million smartcards being issued every year to some 5 million users. With one or two limited exceptions (the cards can be used in car parking in Clitheroe, in the North West of England, for example), the Phonecard technology in use does not support multiple applications.
Significantly, the BT Phonecard was not designed to be compliant with the Mondex International standard for electronic cash cards. Surely this is a serious limitation on implementing smartcard technology within BT for a broader base of electronic commerce applications - and thereby achieving widespread acceptance of the concept?
Jon Collinson set that question in context. As a development partner of Mondex International (MXI), BT is committed to explore opportunities for the use of multi-application cards. "What we have at present is a much simpler concept. Because we are talking about a disposable card, its 'intelligence' is necessarily limited and is currently a passive EuroChip memory card where value is burnt off in 10 pence units. In this form, though, the card is very fast, very secure, and comparatively cheap to produce."
While the BT Phonecard does not have the same characteristics as the Mondex card, it does conform to international conventions for positioning the chip on the card. Provided that the existing card readers were modified to accept processor-based smartcards, BT Payphones would be in a position to accept cards compatible with Mondex or any other 'intelligent' environment that might subsequently emerge.
Rather more important is the degree of flexibility which the particular choice of card affords. For a smartcard to win the acceptance of the consumer, it must do more than simply pay for telephone calls.
In the ideal world, the consumer needs to be able to use the card anywhere. In practical terms, that means the Web screenphone, the multi-media kiosk, set-top TV boxes and any other application where value has to be debited from the card holder.
The Mondex electronic cash card is more complex to implement as the telephone has to accept value loaded over the telephone network onto the card. There would be other considerations, as the Mondex standard requires that the user interface (in this case the telephone) is equipped with buttons to accept user commands. For the experiments conducted at Swindon, Exeter and York, special telephone sets supporting those facilities had to be developed and supplied.
No less important is that the Mondex approach to electronic cash means that there has to be a method of storing the units of value extracted from the customer's card and accounting for this information centrally.
With the BT card now in use, there is no need to store the financial value in a recoverable form once the call charge has been debited from the remaining value.
On balance, a form of smartcard which can perform on-board processing and handle an array of applications simultaneously would be the preferred option. The experience of BT with the Eurochip smartcard format could provide some valuable pointers to future implementations, however.
For the 5 million people who use the BT Phonecard at present, there are 65,000 telephones in the UK which accept it. The number has risen from 40,000 since the company switched over from the optical card. There has also been an increase in the proportion of telephones which accept cash as well as cards. All of the phones which accept smartcards are also equipped with a magnetic stripe reader for credit and debit cards.
Though phones capable of accepting the smartcard are now more widespread than at any time in the past, acceptance of pre-paid telephony appears not to be complete. "Despite the greater opportunity to use pre-paid telephone cards, we find that the number of people using cash has grown in recent years. At present, around 70% of the traffic through payphones is in cash, 20% is generated from phone card, and the remaining 10% is by credit or debt card.
The reason for the decline is unlikely to be cultural (a factor which would affect all smartcard applications if that were to be the case), as British consumers have accepted other forms of 'token' value without question.
Given the free choice between card and cash where both options are equally available, however, it might well be expected that coin-in-the-slot is preferred. Having to find a shop which sells phonecards is probably more inconvenient to most customers than using coins.
Whatever the other merits of the smartcard might be, BT is keen to encourage its use from an operational point of view. The phone boxes in which they operate encounter far fewer faults (less than one a year on average) than their exclusively coin-operated counterpart (about one breakdown every month) and are therefore less expensive to maintain. Moreover, BT has to arrange the emptying of each cash box and has had to invest heavily in the protection of the facilities against vandals.
Over-riding these practical considerations is that BT is already operating a national public infrastructure of card-reading terminals which need to be supplemented by access devices in the home office environment.
Consumer acceptance of the smartcard concept will be driven by the availability of card reading devices, the number of applications which are supported by such a card, and the ease of use. It should be no more complex to use a smartcard than it is at present to pay by cash or quote a credit card number over the telephone.
While the acceptance of phonecards for basic telephony is limited to the public arena, the other areas of its business in which BT is likely to implement some form of smartcard would be expected to encounter no such resistance. The company sees a broadening range of applications for the technology which are of immediate relevance to the consumer.
Examples include the introduction in 1998/99 of Web Phones giving customers access to the Internet from their home. Smartcards provide an effective way of controlling and charging for this service: there would be no equivalent cash-based facility.
BT is also involved in the British Interactive Broadcasting consortium, where a decision has been taken to provide the set-top box with two cards slots. One will be for the Sky channel decryption card; the second will support the interactive services planned by BT. The default payment vehicle here will be a Midland Bank Mondex card, but there could be provision for other types of card.
In parallel with the developments at the card level, BT has been looking seriously at the provision of a smartcard 'platform' service which is intended to provide third-party organisations with a ready-made national infrastructure for managing any type of 'smart' applications
Given that BT operates its Business and Consumer Divisions virtually as separate fiefdoms, how far has the company integrated its business-to-business and business-to-consumer eCommerce activities?
"It was clear from the outset that there had to be a common set of objectives with the same intuitive vision of the future. There has been an exchange of staff between the B2B team and our Card Services operation, for example, which has helped instil a common culture. The growth of eCommerce will come alive within BT as senior management appreciates the benefits of the technologies now in the process of being delivered."
There remained unexplored opportunities for increasing the use of smartcards in BT's core services, it would appear. One is the company's Universal Service Obligation to provide telephony to any residential customer able to meet basic credit requirements.
As Mr Collinson noted, BT already provides a low-user scheme which minimises the cost of access for some 3 to 4 million customers, but there is still a significant number of potential customers for whom this would still be a financial burden and are excluded from residential service.
"OFTEL is very keen that we should introduce some form of pay-as-you-go service. The choice would lie between a system where stored value resided on the network - with all the problems that this would have for re-charging - and combining a smart card reader with the telephone handset. This would be a good way of overcoming that particular hurdle as pre-payment cards are already used for purchasing electricity in many of those households."
As these two widely different examples illustrate, BT management is keen to find areas of its operations in which smartcard technology can add real value to the company's product set.
The group which Jon Collinson heads is focusing on the enabler for these services - the card itself, and the infrastructure of terminals and the networking capability needed to deliver the service.
The parallel team in Business Division is heavily orientated around solutions groups which are developing applications for segments of its customer base.
By sharing the costs of solutions development across a broad spectrum of applications and ensuring compatibility between successive 'generations' of applications, BT can leverage in the most effective way from its investment.
"We will achieve the critical mass of interest in smartcard technology because the underlying technology takes on board multiple applications. This contrasts with the early experience of the banking community which tried to implement Mondex as a single application for cash replacement.
"While it reduces the amount of coinage in the hands of the customer, such a card provides much greater benefit when it can support multiple applications. That is totally consistent, of course, with the development of the MULTOS operating system by Mondex as a secure applications environment able to run on the card."
BT is on record that it has no intention of joining the standards fray and developing its own smartcard 'standard'. What it will do is ensure that its platform will provide open access to emerging global standards like EMV, Mondex and VisaCash. The publication of a freely-available BT Applications Programming Interface (API) is the route planned to make that happen.
As Jon Collinson noted, "BT came on the card scene fairly late compared with the banks so we find an array of advanced technologies already in place. There would be no justification for increasing the range of options any further without good cause. We can contribute in other ways. On the Mondex front, for example, we came up with the communications protocol for taking funds data securely from the payphone to the host system."
The route that standards take from this point will have a profound influence on the way that consumer-orientated electronic commerce evolves. It is easy to draw parallels with the adoption of GSM for cellular mobile telephony; that standard emerging as a pan-European initiative endorsed by the governments of the EU and now implemented widely across the world.
There is no similar initiative sponsored by governments for the smartcard movement, and none is likely to emerge in the short term. BT should remain actively involved in the movement towards standardisation, identifying the best features of today's contrasting approaches.
Indeed, the company announced recently that it has joined the Global Chipcard Alliance, an international consortium of global players in the smartcard industry, all of whom are committed to the adoption of genuinely global standards around the card technology.
As a major telecoms service provider, the most effective route for BT to take is that of 'consolidator', working towards a position where it can accept the standards which have been emerging in different parts of the IT industry. In much the same way that VISA and MasterCard have recognised each other's cards in their processing systems, BT could be looking to support Mondex (itself a 'standard' under revision) and the emergent JavaCard.
The most retrograde step that BT could take at this juncture would be to do no more than wait and see what does emerge. With genuine interest from across the company's divisions and operating units for electronic commerce applications linked to smartcards, progress would soon be thwarted.
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