Leader of its pack?
PSINet tries to stay independent by leveraging CLEC, foreign permits
By Denise Pappalardo
Network World, 3/9/98
Herndon, Va. - Can PSINet, Inc. go it alone? Industry watchers say the independent IP backbone provider might just succeed.
As its competitors - such as BBN and UUNET - get gobbled up by carriers, PSINet is trying to leverage the benefits of owning its own facilities without becoming a subsidiary of a facilities based carrier.
After establishing its telecom division last month, PSINet started putting pieces in place that will let the ISP buy unbundled local loop network elements and sell data services overseas.
While other ISPs can offer similar benefits to business users, PSINet's approach differs from most if not all of its traditional competitors. UUNET Technologies, Inc., GTE Internetworking and TCG CerfNet can offer integrated Internet access, data and/or voice services, but none could do this before they were purchased by telecommunications service provider.
But that is exactly what PSINet is doing on its own.
PSINet Telecom, PSINet's wholly owned subsidiary, is a regulated business that will require federal, state and even European approval to offer certain services.
For example, PSINet Telecom can go to each state public utilities commission to win granted competitive local exchange carrier (CLEC) status, said Eric Paulak, an analyst at the Gartner Group, a Stamford, Conn.-based consulting firm. This status allows carriers to purchase unbundled local loop elements. And that is what PSINet is planning on doing, Paulak said.
"Establishing a separate regulated telecom division is very clever move on (PSINet's) part," Paulak said. PSINet is going to buy capacity from incumbent LECs and offer business users a local and long distance service package that will save them money, he said. PSINet Telecom will be able to get T-1 local loop access for a lower price than any unregulated ISP because they will get wholesale prices, Paulak said.
PSINet customers will get the benefits of sharing a single dedicated connection for Internet access, frame relay and/or voice calls. Today, only two providers, WorldCom, Inc. and Teleport Communications Group, Inc. offer such a service nationwide.
"This is not PSINet trying to become a phone company, but its PSINet trying to offer customers local, long distance and international services, without dragging its unregulated business into the mess," Paulak said.
The ISP also confirmed that its in the process of buying capacity on a transatlantic cable that will carry what regulators consider "basic data service" services from the U.S. to Europe and the United Kingdom. The "214" license the FCC granted PSINet Telecom last month lets the ISP offer data services overseas, said Pete Wills, chief operating officer at PSINet.
While its not necessary to have a 214 license to offer Internet access services you do need one if you plan on reselling a common carriers voice or data services, which is exactly what PSINet can do through its agreement with IXC Communications.
PSINet recently finalized its deal with IXC that essentially gives the ISP 10,000 route fiber miles of IXC's OC-48 network and IXC has a 20% stake in PSINet. The agreement also stipulates that each provider can resell the other's service offerings.
While PSINet will be, "in the near future, revealing strategies, plans and products (regarding) voice over the Internet, we don't plan on being in the same business as the telephone companies, we are an Internet company," Wills said.
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