MCI WorldCom: Speeding up the Net
Telecom giant to offer DSL to companies, surfers
By Brenon Daly, CBS MarketWatch
Last Update: 7:48 AM ET Nov 19, 1998
NewsWatch
LAS VEGAS (CBS.MW) -- MCI WorldCom will offer souped-up
Internet access starting next month in what the telecommunications giant is
calling the first broadband deployment in the U.S.
John Sidgmore, chief operating officer at MCI WorldCom (WCOM),
said at the Comdex conference that its Digital Subscriber Line (DSL) will
have 400 points of presence (POPs) by the end of the year. More than
1,000 POPs are expected to be in place by the end of 1999.
The service will be offered in major markets such as San Francisco,
Washington, D.C. and New York. It will have both a small business and
consumer offering.
AOL (AOL) and Earthlink (ELNK) will begin trials
of the DSL service before the end of the year, at
rates of $40 to $60 per month. Web surfers who
opt for the service will also face one-time charge of
$150 to $500 to install modems and splitters to be
able to send and receive information at the faster
rates.
The DSL system will allow individual surfers to
receive information up to 15 times faster than the
speeds at which most Web surfers are now able to
get Web pages. The improvements in the business
offering -- which is scheduled to be available in the
first quarter of next year and will cost $500 per
month plus a $500 set-up fee -- won't be as
pronounced.
1,000 percent growth
At the final keynote of the week-long Comdex
blow-out, Sidgmore said the DSL system is the
latest effort by the MCI WorldCom to satiate the "exploding" demand for
faster access to Internet. Bandwidth demand increases 1,000 percent
every year, he estimated.
Part of the reason for the huge increase in the need for larger Internet
"pipes" that can carry more information is the tremendous amount of audio
and video material now on the Internet. It's clogging the current system,
which was largely designed to transmit text only.
"We've bet the ranch on the Internet," Sidgmore said. "We think that the
winner in the Internet will be the winner in the entire telecommunications
industry for many, many years."
Telecom giant
MCI WorldCom is the world's second largest long-distance carrier, the
largest Internet service provider and the largest local carrier.
Growth rates at MCI WorldCom's different business divisions have varied
widely.
Revenue from voice transmission, which accounts for two-thirds of all
communications services revenue, grew at just 10 percent in the previous
two quarters. Revenue from data transmission is growing three times
faster, while Internet-related revenue is increasing about seven times
faster.
Size matters
BT Alex. Brown analyst Kevin Moore projects MCI WorldCom will earn
66 cents per share on sales of $30 billion in sales this year. That will
increase to $1.97 per share in earnings on sales of $37 billion in 1999,
estimates Moore who rates the stock a "strong buy."
"In our opinion WorldCom is the best positioned large-cap
(telecommunications) firm and the best way for large-cap investors to play
most of the changes in telecommunications. Unlike most big-cap
companies, the firm is small enough to leverage the changes in the industry
to achieve high growth rates," Moore said in a research note on Tuesday.
He sees shares hitting 84; they closed up 1/2 to 55 5/16 on Wednesday
ahead of the announcement.
Brenon Daly is a reporter for CBS MarketWatch. |
