ALL READ INSIDE
New Telco Player Has Strong Hand
By Randy Barrett
January 23, 1998 2:12 PM PST
Inter@ctive Week
Peter Kiewit Sons' Inc. and former MFS
Communications Co. Inc. executives have
teamed up to create an Internet-based
telephone company called Level 3
Communications Inc.
The start-up carries the MFS pedigree right into
the corner office held by Chief Executive Officer
James Crowe, who founded MFS in 1989 with
$500 million in Kiewit backing and ran the
company until it was sold to WorldCom Inc. for
$14.3 billion in 1996. But this time, the game
plan is bigger.
"We want to be a telephone company that is fully
interconnected, but we want to do it within an
Internet Protocol cloud," Crowe told Inter@ctive
Week. "Our goal is to make every fax and phone
a terminal to access our IP [Internet Protocol]
network."
Crowe isn't starting from scratch. Level 3,
pending government approval, will fold together
Kiewit Diversified Group Inc. and PKS
Information Services Inc. The Diversified Group
includes the companies' telecommunications
business, among others; PKS offers
outsourcing and other computer services.
The new company will be 1,200 employees
strong with expertise in computer integration
and telecommunications, Crowe said.
The new company also will benefit from a hefty
$2.5 billion infusion of Kiewit (www.kiewit.com)
capital that Crowe plans to spend building a
new international fiber network over
rights-of-way being negotiated.
Crowe intends for Layer 3 to be every bit as
revolutionary as MFS was in the late '80s when
it pioneered the competitive local access
industry and challenged the regional Bells. The
new company plans to offer end-to-end
IP-based telephone service -- both local and
long-distance -- as well as wholesale and retail
Internet access, all on one bill.
The gambit will put Layer 3 in direct competition
with the country's major telcos, such as AT&T
Corp., MCI Communications Corp., Sprint
Communications Co. and WorldCom.
"We're in the middle of a fundamental change --
the same as the telegraph to the telephone,"
Crowe said. "IP enjoys a 100-to-one cost
advantage" over switched networks.
Future cheap services will depend on advances
in IP technology that Crowe expects will be
achieved in the three years it will take to build
the Layer 3 network. The network will cost
between $8 billion and $10 billion with
additional capital likely coming from public
sources.
The plan is risky, said Internet consultant Joel
Maloff. "It's one heck of a flier. The marketplace
can change very rapidly in three years. You have
to be very good and very lucky," he said.
For the past few weeks, Layer 3 has been
quietly recruiting salespeople and IP technicians
from MCI, Sprint and UUnet Technologies Inc.
More than 150 have been hired to date.
Layer 3's headquarters location has not been
finalized. Denver, Northern Virginia and Silicon
Valley are prime candidates, Crowe said.
The Builder
Peter Kiewit Sons' Inc. At-A-Glance
www.kiewit.com
Founded: 1884, privately held
Headquarters: Omaha, Neb.
Business: Diversified holdings in construction,
coal mining, energy, telecommunications, cable
TV and computer integration services
Revenue: $2.1 billion for the nine months ended
Sept. 30,1997
Divisions: Kiewit Construction Group Inc., Kiewit
Diversified Group Inc.
Plans: The company will spin off its Diversified
Group to create Layer 3 Communications Inc., a
new telephone company that will offer
Internet-based fax, telephony and Internet
services. |
