WorldCom's Wish List
sumnet.com
From the Systems pages of Electronic News: June 1, 1998 Issue
But others may not agree with it, especially watchdogs leery of size
By Carolyn Whelan
Jackson, Miss.--"A holistic rethinking of our networks." That's what the telecommunications
industry needs, said John Sidgmore, chief operating officer of WorldCom, who called today's
networks too big, bulky and costly. "We need to place new architectures in the depth of our
networks and deploy different technologies," he said. "We have the opportunity to completely
change the landscape."
Now that regulators are insisting that the company divest some of its Internet operations,
WorldCom may regret disclosing its wish list of its most-desired technologies for the wired world
and its secret to success. Because WorldCom's Internet success is so well-known, the company's
core ideas could be co-opted by potential buyers for its Internet business--as well as competitors.
Mr. Sidgmore is an add-on from Uunet Technologies, the Internet backbone company which
WorldCom acquired in 1996--and which is the main target of anti-monopoly officials. Among the
other 40 or so companies WorldCom has acquired are Compuserve Network Services, the
backbone of the Compuserve on-line service, and ANS communications, formerly the network
services unit of America Online.
Competitors like GTE are contesting the Internet backbone power that the new MCI-WorldCom
would have (EN, May 11). And Karel Van Miert, the European Union's antitrust chief, has
indicated he wants either WorldCom's Uunet Technologies or MCI's Internet business divested
before the EU will approve the merger. Studies commissioned by Bell Atlantic indicate that the
combined entity would control 50 to 60 percent of the U.S. Internet infrastructure.
In a non-Microsoft fashion, MCI plans to placate regulators by selling off bits of its Internet
business. WorldCom may well follow suit. GTE is pushing hard for WorldCom to sell off its Uunet
unit. If it does, civil servants in agencies in Europe and the U.S. will let the deal proceed.
But GTE is also playing there: in April, GTE said it will offer high-speed Internet access up to 50
times faster than conventional modems, subject to regulatory approval. Ironically, when British
Telecom backed out of its deal to acquire MCI, GTE was second in line to buy the company.
However the antitrust action plays out, the Internet will continue to play a role in the combined
entity, once it is born. And topping WorldCom's list of "desperately desired technologies" for the
future, according to Mr. Sidgmore, the company's resident Internet guru, are better fiber, less expensive layers and electronics, optical switches, optical DCS, improvements in DWDM, faster
and cheaper switches, faster routers, and better caching and streaming. Those technologies, said
Mr. Sidgmore, are required to respond to the phenomenal 1,000 percent growth the Internet is
currently seeing. Demand has and should continue to grow ten-fold per year for the foreseeable
future. Historically, voice has only grown at 8-10 percent. Bandwidth demand, on the other hand,
doubles every 3.5 months, according to WorldCom.
Eating up that bandwidth are computer-to-computer communications, "silicon cockroaches"
including fax over the Internet, Internet backbones, web phones, and digital data assistants.
Intelligent agents, like services for researching and shopping over the Internet, will also eat up
bandwidth, as will frame relay circuits, Internet users, on-line subscribers' T-1 lines, wireless
subscribers and fax.
"The networks of the next century are going to be built for computer-to-computer communications--not voice," he said.
Voice over the Internet, an enormous opportunity, is stretching the already strained infrastructure even further. To unleash that opportunity, bandwidth growth is key.
By the year 2000, nearly half of all bandwidth will be Internet-related, with voice making up the
other 50 percent. Fax currently represents 40 to 50 percent of all international voice traffic. By
2003, up to 90 percent of bandwidth will be Internet-related. That number will jump to 99 percent
by 2004, said Mr. Sidgmore, with voice, data and other services so integrated that where voice sits
will be unclear. The future of voice is, therefore, a "niche market," said Mr. Sidgmore.
Mr. Sidgmore, who tops the list of high-flyers who have changed jobs recently (three in 18 months,
all due to mergers and acquisitions), considers the leap to new technologies almost essential to meet
the challenges--and opportunities--in store for the telecommunications industry.
WorldCom is currently the fourth largest carrier in the U.S., with a growth rate of 33 percent. That
growth is largely due to a carefully orchestrated series of mergers and acquisitions that center on
new opportunities, with a big focus on the Internet market.
In 1996 WorldCom acquired Uunet Technology, the company that Mr. Sidgmore founded, the world's largest Internet service provider with 1,110 POPs worldwide.
In September 1997, WorldCom gobbled CompuServe. CompuServe offered the network integration skills that WorldCom lacked, and should generate an additional $1 billion in revenues.
MCI was courted and acquired last year, also for its network integration skills, along with its
international reach and capacity. MCI will help triple WorldCom's revenue and add an enormous
global presence. The addition of MCI, said Mr. Sidgmore, will double WorldCom's fiber network miles to 45,000, to accelerate local deployment in cities by two years. It will also enable
WorldCom to reach more than 70 percent of the business community.
All this adds up to a core ISV attached to a telecommunications provider that controls the network, and one that is highly successful, said Mr. Sidgmore.
Ellen Carney, a telecom analyst at Dataquest agrees. She believes the combination of the two
companies' strengths will be a formidable one, and, in spite of noises industry watchers have been
making about the difficulties of integrating two very different cultures, she predicts mostly smooth
sailing for the months ahead as the combined entities negotiate themselves around the
obstacles--both cultural and political--the companies are currently facing as they pair off.
Cultural differences may not be WorldCom's biggest problem as it swallows MCI. Its marketing
shortcomings may cause more difficulties.
Prior to its acquisitions' feast, WorldCom had made some inroads into the international market.
Because of its small size at the time, PTT's did not feel threatened. "We were considered 'wee little
guys,' and were willing to be used," Mr. Sidgmore recalls.
After 10 years in the business, WorldCom tripled its capacity, doubled its network, and grew its
Internet backbone ten-fold. That strength has competitors and regulators concerned. The company
also took on new wave definition and multiplexing technologies.
Today, Mr. Sidgmore boasts, the company has the largest undersea cable system in the North
Atlantic, the first fiber system of its type in Europe, and the only seamless long-distance system on
the continent, connecting London, Paris, Brussels, Amsterdam and Frankfurt.
Looking ahead, WorldCom's hopes for new technologies including cheaper SONET technology, more capacity multiplexing, and better hardware at the end point.
"New, young, brash start-ups will change the fabric," he said, "Companies that are agile and aggressive." Ms. Carney noted the much more conflicting personalities of BT and MCI, adding that
WorldCom's acquisitions had historically been integrated very quickly. "But," she said, "WorldCom
is calling the shots here, and may take a steamroller approach. WorldCom's CEO doesn't let much
stand in his way."
But WorldCom's CEO also knows he needs to keep key management. One thing MCI clearly has
to offer that WorldCom lacks, she said, is its marketing savvy. WorldCom would be smart, she
said, to learn some good marketing lessons from MCI.
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