Jane Wakefield BBC News Online technology staff

BT spent millions on advertising broadband

Getting people to pay for a raft of new services will be the next stage in BT's broadband strategy, as the telecoms giant tries to persuade people to abandon dial-up modems in favour of fast net connections.

In an interview with BBC News Online, head of BT Retail Pierre Danon put content rather than increased bandwidth at the top of the company's agenda.

He acknowledged that the UK net audience is unlikely to increase much beyond 50% of the population.

Instead the real challenge for broadband providers will be in persuading those with dial-up connections to make the switch.

BT is hoping to tempt consumers by offering services such as 24-hour home surveillance and educational content, offering parents access to the curriculum materials in return for a small monthly fee.

Net market

In countries such as Korea, where 60% of its population use broadband, operators have instead opted for more bandwidth, hoping that services will follow.

But it is vital to create such a marketplace on the net, said Mr Danon.

"The real battleground will be over how much people are willing to pay. Most of the internet today is free and the battle of the future will be on what is not free," he said.

Despite seeing content rather than speed as the way forward, BT is determined to distant itself from being a content provider, setting up deals with firms such as Yahoo instead.

Mr Danon is scathing of attempts to lump content and access together.

"AOL Time Warner said access and content needed to be together and it is a failure," he said.

Content dilemma

BT is constantly scotching rumours that it is interested in developing content itself, describing itself as the plumber of the internet, more interested in pipes than Harry Potter.

15 months ago the UK was the last country in the world on broadband, nobody was taking it. BT was going through disaster Pierre Danon, BT

So what is the future for BT Openworld, the ISP which offers both dial-up and broadband access and content?

Mr Danon plays up Openworld's role as a small business ISP, admitting that it is not the consumer business that is the most successful.

"On the consumer side I personally have a view that it will be difficult to really do content because there are companies like Yahoo, MSN and AOL already doing that well," he said.

"BT Openworld will not be a content provider or producer but will put content together for customers," he said.

BT's controversial product, BT Broadband, which offers people a no-frills net connection with no webspace or e-mail address is seen by Mr Danon as the way forward, offering users a launch pad for shopping for various services on the net.

He is convinced that BT will hit its target of having half a million customers to the no-frills service by the middle of the year, although with just 100,000 so far signed up it might have its work cut out.

BT in chaos

Other ISPs have been incensed by the product, which they say offers BT an unfair advantage in the market.

Mr Danon insists BT is breaking no regulatory law with its no-frills product although he admits that Oftel's regulation has been "lighter".

He sees the no frills product as a breakthrough for a company whose broadband strategy was floundering.

"15 months ago the UK was the last country in the world on broadband, nobody was taking it. BT was going through disaster," he admits.

Efforts by the regulator to limit BT's dominance of the market did nothing to help.

"By forbidding BT to enter this market, the only thing that was done was to weaken the UK," he said.

Rather than complain he thinks other ISPs should be grateful for the broadband momentum BT has kick-started.

"Overall other ISPs are benefiting because as soon as we entered the market with an advertising campaign the business for everyone exploded, including AOL and Freeserve," he said.

Vanguard of change

The company was afraid of new technology and ashamed of its legacy Pierre Danon, BT

BT itself looks healthier than in the recent past. The latest quarterly results showed a 37% increase in profits and a further �195m shaved off its infamous debt.

It has been a much publicised struggle to transform BT from out-of-date behemoth, scathing of new technology to a forward-thinking company.

Mr Danon joined the company in October 2000 and feels he, in partnership with chief executive Ben Verwaayen, has been at the vanguard of change.

"Ben and I are movement people. You don't win by conservatism," he said.

By contrast, two years ago BT was between a rock and a hard place, he said.

"The company was afraid of new technology and ashamed of its legacy."

"Ben came along as an outsider and said 'Guys you have it all wrong, broadband is the future and you have to take risks and invest'" he said.

Now Mr Danon says BT is in a more contented place, happier to embrace new net technology while at the same time proud of its voice business.