Big Carriers Race To Extend IP Networks Globally
iw.com
August 10, 1998
By Brian Caulfield
AT&T and British Telecommunications (BT) will invest $1 billion in U.S.
high-tech and communications firms to help build a global IP network over the
next four years. The move represents the largest effort yet to enhance
international access to the Internet--which historically has been
U.S.-centric--and will greatly accelerate the convergence of voice and data
networks.
"The whole world is moving to IP backbones, and AT&T and British Telecom
want to make sure they're not dragging up the rear," said Daniel Briere,
president of telecom research firm TeleChoice.
The new venture proposed by AT&T and BT would result in a massive data
network that would link 100 cities around the world. The IP-based network
will run at 200 Gbps, and carry both voice and data traffic.
The deal is part of a larger $10 billion joint venture by AT&T and BT to
merge some of their international operations in order to cater to the lucrative
multinational business market. The as-yet-unnamed venture will be based in
the United States.
The joint venture comes as global deregulation and new technologies are
lowering barriers to entry in international telecommunications markets, said
Brian Cotton, a research director at market research firm Frost & Sullivan.
"AT&T is big, and they are getting bigger," Cotton said. "It sets them up to
solidify or reinforce their position at the top of the food chain." On the global
level, the most formidable competitor to the AT&T-BT IP network will be
WorldCom, which announced a deal last year to acquire MCI for $37 billion.
Another challenger analysts pointed to was Global One, a partnership
between Sprint, Deutsche Telekom, and France Telecom.
In the domestic market, said Frost & Sullivan's Cotton, new technology and
deregulation are pushing the Baby Bells into deals such as Bell Atlantic's
proposed $52.9 billion acquisition of GTE, announced last month, and SBC
Communications' proposed $62 billion acquisition of Ameritech.
does size matter?
But analysts are undecided about whether bigger will prove to be better, and
there's no guarantee that the traditional carriers have a head start in the global
race to deliver Internet-based services.
Firms such as Qwest Communications, PSINet, and Level 3 Communications [All ASND customers]
are positioning themselves as pure IP infrastructure providers--the so-called
next generation of carriers. PSINet is aggressively expanding abroad, having
recently acquired ISPs in France, Switzerland, Canada, and Germany. Qwest
has already launched voice-over-IP services that compete with long distance
service from the traditional carriers, and Level 3 and PSINet are planning to.
Chuck Davin, PSINet's chief technology officer, argued that pure-play IP
carriers with existing IP infrastructure will be in a good position to compete for
business customers with the AT&T-BT venture and other telcos entering the
data market.
As carriers increase their Internet capabilities, the Internet access industry is
splitting into two categories: large infrastructure players and smaller
Internet-access resellers.
The large infrastructure firms will likely control the IP backbone, as the
MCI-WorldCom merger and the new AT&T-BT venture indicate, said John
Coons, principal analyst for Internet infrastructure at Dataquest. Their base of
customers will give them the economies of scale to be able to invest billions in
international network infrastructure. [Nicer words have never been spoken...]
Meanwhile, the trend among ISPs has been to specialize in high-margin
consulting or value-added services. Consumer ISPs such as EarthLink
Network and America Online already outsource most of their infrastructure.
And while business ISPs like Concentric Network often continue to manage
their own network infrastructure, they typically buy the raw bandwidth from a
carrier.
Concentric, for example, leases its bandwidth, but it manages its network at
the IP level to offer virtual private networking, voice-over-IP, and Internet
videoconferencing services. However, Mark Fisher, senior vice president and
general manager of Concentric's network services division, said he sees a
trend among infrastructure firms toward delivering cheaper and higher-quality
Internet access.
"The trick for Concentric will be to ensure that whenever the carriers get to
that stage, we are well past them in terms of innovative products and
value-added products," Fisher said. "It's a matter of keeping ahead."
Two Global Network Deals
Annual revenue:
$3.5B (projected)
Employees:
5,000 (projected)
Notes:
BT will buy out MCI's stake in Concert, an MCI-BT joint
venture, and merge it with AT&T's global telecom
operations
MCI-Worldcom
1997 annual
revenue:
MCI, $19.65B; WorldCom, $7.35B
Employees:
MCI, 60,409 in 1997; WorldCom, 20,300 in 1997
Notes:
MCI-WorldCom will be AT&T-BT's biggest
competitor in the voice and data services market for
multinational firms
For thumbnail sketches of other telecom players with big Internet
ambitions, see www.iw.com/extra/networkdeals.html. source for data:
company reports
RELATED STORIES:
Keywords: infrastructure
Date: 19980810
Copyright 1998 Mecklermedia Corporation.
All Rights Reserved. Legal Notices.
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