topical reading:
Unmasking the fiber barons
Lindstrom, Annie
America's Network (Duluth) Vol. 104 Issue 4 Mar 1, 2000
SOURCE TYPE: PERIODICAL
PM_ID: 10138 ISSN: 10755292
They're building a fiber empire to carry voice and data around the world. Who
are the fiber barons and what have they wrought thus far?
About this story
In the fall of 1998, AN profiled a variety of competitive carriers, large and small,
that were deploying fiber in the U.S. (see "Sculpting the light," August 15, 1998;
"Regional CLECs plant fiber stakes in the ground," Sept. 1, 1998; and "The fiber
webmasters," Dec. 1, 1998). Much has changed for these companies. Some of
them have quietly disappeared, while new ones have come onto the radar
screen.
The good news is that most of these companies are thriving. Many have more
than doubled their revenues between 1997 and 1998.
At press time, the majority of the companies profiled in this article were
awaiting 1999 revenue reports. However, most were confident that their reports
would show an even bigger profit between 1998 and 1999. (Readers can go to
www.americasnetwork.com to see those 1999 revenues.)
In our April 1 issue, we'll profile Time Warner Telecom, CapRock
Communications Corp., e.spire Communications Inc., Intermedia
Communications Inc., GST Telecommunications Inc., Electric Lightwave Inc.
and Nextlink Communications Inc. If the 1900s was the century of Copper for
the telephone network, it seems clear that the next century, or at least the first
half of it, will be known as the Century of Fiber Optics. This is the time of the
fiber barons, who are building a high-speed network across the globe to carry
ever-expanding, converged voice and data services.
Spending in the fiber optics market more than tripled from 1990 to 1999 - from a
"mere" $4.1 billion to $14.6 billion - according to the 2000 MultiMedia
Telecommunications Market Review and Forecast, recently published by the
Telecommunications Industry Association (TIA) and MultiMedia
Telecommunications Association (MMTA). The world's seemingly insatiable
demand for broadband servies, as well as bandwidth, will only boost those
numbers as we splice our way in to the next millennium in 2003. The report
says that spending on fiber optics gear is expected to increase from $12.2
billion in 1999 to $28 bil
The TIA/MMTA report also notes that interexchange carriers (IXCs) increased
their fiber deployment to 4.5 million miles in 1999, which is 15 times the
amount of fiber they deployed in 1995. Factors driving growth include demand
for Internet access, IXC entry into local markets and new carriers that are
building high-capacity networks.
Fiber deployment has also gotten a boost from convergence. Cable companies
installed nearly 2.6 million fiber miles last year, which accounted for 22% of the
total amount of fiber deployed last year, the report says.
Long distance carriers have deployed fiber between urban areas when the
distance between cities has justified the expense. Local exchange carriers
(LECs), which have primarily used fiber to connect their interoffice facilities,
have been laying the groundwork to increase fiber's penetration in the residential
access area. LECs installed 322,000 miles of fiber in 1999. TIA/MMTA expects
a whopping 2.2 million miles to be deployed in the residential area in 2003.
Last but not least, the fast-growing competitive access providers (CAPs, a.k.a
nonincumbents) are deploying a fair share of fiber optic cable as well. Deploying
1.2 million fiber miles in 1998, the CAPs bumped that number up to 3 million
fiber miles in 1999.
THE FIBER BARONS
To produce this story, AN's Senior Technology Editor, Annie Lindstrom, talked
with senior executives at 15 carriers. The two-part fiber barons series describes
how these carriers are positioning and differentiating themselves in an
increasingly competitive marketplace.
This segment, Part 1, covers the following companies: Metromedia Fiber
Network Inc., Williams Communications, NorthEast Optic Network Inc., Qwest
Communications International Inc., Global Crossing Ltd., Teleglobe
Communications Corp., Level 3 Communications Inc. and Broadwing. See the
sidebar, "About this story," for details on Part 11, which will be coming in the
April 1 issue.
METROMEDIA FIBER NETWORK
Metromedia Fiber Network (MMFN) is the name, and dark fiber's the game.
With its focus on dark fiber, MMFN takes a unique approach to today's
wholesale market. The company primarily sells raw fiber to its carrier and
high-end business customers rather than services. However, according to
Howard Finkelstein, vice chairman at MMFN, the company will also provide its
customers with network integration services that help them put that fiber to use.
MMFN is currently selling fiber in five cities and has plans to ultimately extend
its reach to 67 cities in North America and Europe. To that end, the company is
building intracity networks throughout Europe. Those networks will be
connected via intercity dark fiber, which will carry traffic generated by AboveNet,
the Internet service provider (ISP) that MMFN acquired in August 1999, says
Finkelstein.
"What we are doing, basically, is putting the oil of the 21st century into the
ground," says MMFN's President and COO, Nick Tanzi (according to
Finkelstein).
"Everybody agrees that fiber is the fundamental infrastructure of all
telecommunications, " Finkelstein adds. "We are creating a distribution
business that literally goes to every floor of every building. As the applications
catch up - as they are starting to do rapidly - people are going to need that
bandwidth from everywhere."
Currently, MMFN is focusing its efforts on building out its network - and, says
Finkelstein - "continuing to create the market for dark fiber and integrated
applications that can ride on it." He adds that the company differentiates itself
from its competitors by providing "seamless fiber optic distribution."
"Everything we do goes wall-to-wall. By splicing fibers together in our network,
MMFN is able to provide each customer with their very own fiber path through
our network."
Like many of the providers interviewed for this article, MMFN has been
surprised by the demand for fiber and fiber-based services.
"Once they have the fiber, we are amazed at the amount of bandwidth and
applications they use on it. One customer, which started with an OC-12 (622
Mbps) network, now is using multiple OC-192s (10 Gbps). A great percentage
of our commercial customers add more fiber in their first year with us."
WILLIAMS COMMUNICATIONS
Williams Communications' Network Division (see box, page 31) is on track to
complete its 33,000 route-mile, MultiService Broadband Network by the end of
2000, rather than 2001 as originally planned. The carrier compressed its fiber
deployment schedule by one year to "improve its time to market," says Frank
Semple, president at Williams Network.
"If you look at the economics of these large networks, it's important for us to
get everything on net as quickly as possible. That's kind of a mantra around
here - on-net construction, on-net sales, onnet provisioning," he notes.
Currently serving more than 100 customers in 100 cities, the "carriers' carrier"
has also launched an effort to move its network as close to the customer as
possible.
"We are moving quickly on executing on our access services strategy that
takes advantage of the dark fiber, which we have acquired from Multimedia Fiber
Networks, and the local broadband wireless capacity we have acquired from
Winstar, to extend our transport capability further into the metro area. During
2000 and beyond, we will have a huge focus on extending our backbone
network further into the metro area at the transport layer."
As the network is deployed, Williams Network is relying heavily on its
60member lab staff to supply it with technology that offers competitive
advantages from both a service delivery and efficiency and cost standpoint, he
adds. The carrier has announced many trials of equipment offered by startups in
recent months.
"In this exploding market and its demand for bandwidth, there are going to be a
lot of service providers out there selling bandwidth products. It's critical for us to
be able to maintain quality of service and to provide multiservice platforms for
our customers who need a full suite of service capabilities, including frame
relay, ATM, data products, IP over Sonet, IP wavelengths or even dark fiber."
NORTHEAST OPTIC NETWORK (NEON)
This "noncertificated" carriers' carrier serves in 100 cities in the Northeast
corridor between Portland, Maine and Washington, D.C. (see box, page 33).
NEON has 29 customers and big plans for its OC-192 (10 Gbps) backbone
network that picks up and drops off traffic in those 100 cities, according to Vin
Visceglia, CEO and chairman of NEON.
NEON sells lit services at rates of OC-3 and above. The company leases dark
fiber, as well as collocation space in its 60,000-square foot space available from
its East Coast points of presence (POPs), according to Visceglia.
While carriers battle among themselves for end user customers, NEON
"supplies the blood that makes the body work, which in this case is called
bandwidth," Visceglia says. "They all need what we have. We win no matter
who wins and loses on their battlegrounds."
NEON's 1,000 miles of deployed fiber may seem paltry now, but the carrier
aims to enhance its footprint in a major way in the first half of next year.
"We signed a very large strategic alliance with two utilities, Con Edison of New
York and Philadelphia Electric in the mid-Atlantic space - the number one and
two largest electric utilities in the country. Over the next two quarters, we plan
to build out that portion of our network, which will include a significant
deployment of Nortel Networks' 32-channel Optera DWDM systems," Visceglia
explains. "We are also looking into end-to-end optical provisioning in the
mid-year time frame, so we can begin providing wholesale lambda-- based
services."
QWEST COMMUNICATIONS
Qwest (see box, page 35) is making itself known as a broadband Internet
Protocol (IP) communications services company, according to David Boast,
executive vice president of network engineering and operations for the global
carrier. Qwest currently offers services to business, consumer and wholesale
customers in more than 160 cities worldwide.
By midyear, Qwest's KPN fiber network in Europe will connect 46 cities in 14
countries. Qwest also is part of a consortium that is building a 13,215 route--
mile cable from California to Japan.
According to a company spokesman, Qwest's mission remains to deliver the
power of Internet-based multimedia convergence to its customers and make it
all as easy as making a phone call.
In addition to making life easier for customers, Qwest recently adopted a
technology deployment policy that takes advantage of the large amount of fiber
in the ground and helps the company organize its network for convergence,
Boast explains.
"We are lighting up more of the fiber in parallel to the core network for multiple
purposes. We are working with a lot of the emerging technologies offered by
some of the startups, such as Corvis and Qtera," Boast explains. "One of the
advantages we have with all that fiber in the ground is that we don't have to wait
until emerging technology is mature and then forklift the current technology. We
are actually starting to deploy an emerging technology infrastructure, not in the
lab, but in the field."
As the new technology matures, Qwest plans to put a hold on services going
onto the old network and move everything onto the emerging technology
network. Then, it will light up the next set of fibers for the new bleeding edge
gear, he adds.
In addition to trying out new technology on separate fibers, the carrier is
segmenting its fiber plant by market.
"We actually have a network that we deployed for use by big bandwidth
wholesale customers and one that supports retail customers, so one doesn't
impact the other," Boast adds. "The biggest challenge in the future is going to
be the organizational structure, so we decided to take all the network planning,
engineering, operation and provisioning pieces and put them together now so
that as new technology comes out, all we have to do is deploy it."
This tactic enables Qwest's emerging technology group to look for new
technology across all services, all products and all types of infrastructure, he
notes.
LEVEL 3 COMMUNICATIONS
Level 3 (see box, page 36) sees itself as a "telecommunications enabler," says
Kevin O'Hara, executive vice president and chief operating officer for the carrier.
"We sell a complete and unique set of services to companies, which in turn add
their value to those services and deliver the combined product to their
customers, " O'Hara explains. "To date, 90% of our sales have come from this
profile customer."
More than 75% of Level 3's sales are made to "Web-centric" companies, such
as ISPs, application service providers (ASPs) and Web-hosting companies. The
carrier also offers its customers 3.4 million square feet of collocation space.
Level 3 recently announced plans to accelerate the buildout of its U.S. and
European networks, and to complete its U.S. network by year's end. The
company currently has networks in service in 27 U.S. cities and four European
cities.
In addition to building IP-based networks, which the carrier brags are devoid of
traditional circuit switches, Level 3 is also planning trans-Pacific and
transAtlantic cables and undersea network connections to Tokyo and other
Asian cities. A 1.28 Tbps trans-Atlantic cable is under construction.
Currently, the company's goal is to dominate the horizontal segment of the
industry by providing very high bandwidth solutions at unit prices that drop by
20%, 30% or even 50% per year, O'Hara says. Because the telecommunication
industry is realigning itself along horizontal segments, rather than vertically,
companies that "focus and specialize will materially outperform companies that
try to be all things to all people and provide all solutions themselves," O'Hara
says.
Because price performance improvement in a variety of network technologies is
accelerating even faster than Level Ts leaders thought it would two years ago,
the carrier has gotten "religious" about taking cost performance opportunities,
he adds.
"Also, the horizontal business model is occurring faster than most industry
experts thought possible," O'Hara says. The realignment has caused Level 3 to
further refine where it spends its capital and focuses its sales force. For
example, much more has been spent on collocation facilities, and the sales
force is focused on Web-centric companies, he notes.
GLOBAL CROSSING
"What Global Crossing is trying to do is connect the planet," says Joe Clayton,
vice chairman of Global Crossing and president of the carrier's Americas group
(see box, page 38).
"If you remember four words, I think you'll understand what we are trying to do,"
says Clayton, formerly president and chief executive officer at Frontier, which
was acquired by Global Crossing last year. "The words are local, national and
global connectivity. I think you'll find that no one company has the type of
footprint or plant that we do either currently deployed or planned in the world."
It's Global Crossing's breadth that makes it the company to watch going into
the new millennium, he notes. Global Crossing, which is building multiple
undersea fiber routes, is focusing its efforts on selling wholesale capacity to
large carriers around the world, and selling retail business services to
multinational corporations that need global connectivity. The carrier also offers
midsize customers local and long distance on the same bill, Clayton explains.
The carrier's Global Center division currently hosts 300 of the top 500 Web
companies, or the "Web 500," as Clayton calls them.
Telling Global Crossing apart from the rest of the fiber barons is easy, be adds.
"Our competitors are companies that have developed, or are developing, an
international focus. But I would say none of them has taken as broad and
extensive approach as we have in terms of our global footprint."
Clayton explains that when he was at the helm of Frontier, he was looking to
swap domestic capacity for international capacity. That pursuit led to talks
between Frontier and Global Crossing. What began as a tactical discussion
turned into a strategic one and the merger between the two companies
followed.
"From a Global Crossing point of view, Frontier has filled in a major hole in its
international network with the U.S. crossing," Clayton says. "We brought
network and existing customer bases in from our Global Center,
business-to-business and consumer divisions. We also brought in significant
assets and a significant revenue and margin stream. At Frontier, we made
money, which helps the new company fund additional acquisitions and organic
growth. Our market value two and a half years ago was about $2 billion dollars,
and now we are part of a company that is worth over $40 billion. I'd say that's a
big change."
TELEGLOBE COMMUNICATIONS
Teleglobe is building its GlobeSystem network, which will link 160 cities
worldwide on a broadband service platform supporting voice, video and data. The
network will feature a 60-node backbone that supports switching, as well as
asynchronous transfer mode (ATM), IP and Web-hosting applications brought
onto the network via 100 access nodes. Nearly 30 GlobeCity nodes are
currently operating, and Teleglobe will add another 20 by year's end, according
to Steve Heap, vice president and general manager of transmission services at
Teleglobe.
Five years ago, Teleglobe was Canada's international telecommunications
provider. With the advent of competition in Canada the carrier set out to become
a global broadband service provider that offers cost-effective broadband
connectivity services on a global basis to carriers, ISPs, content providers,
broadcasters and businesses.
"[We deliver] advanced broadband applications to customers in more than 100
countries and we consider ourselves today to have the premier communications
architecture for the digital economy," Heap says.
Currently, the company is putting a lot of effort into building its dark fiber
network and trans-Atlantic cables and other subsea cables. In the meantime,
Teleglobe's sales force is focusing on getting revenue on that network, "so we
can get revenue to match the spending that's going on," Heap adds.
Teleglobe approaches the global market from a long history of global
communications, he says.
"It's very easy to say, 'I'm going to build this and build that,' and assume that
you can run services globally on top of that. Running services globally is
something that you have to live through the pain of, in order to do it really well,"
Heap explains. "The difference between us and our competitors is that we can
get a cost base that is at least as good as anyone else's, but we have all the
global service expertise that it takes countless years to build up."
Teleglobe is one of the world's largest suppliers of IP traffic to South America
and Europe, he adds. The carrier currently has 150 U.S.-based customers.
BROADWING
Broadwing, an integrated communications provider, is the product of a merger
between IXC (which, when profiled in America's Network in August 15, 1998,
was primarily a wholesaler of dark fiber) and Cincinnati Bell, the Ohio town's
local exchange carrier. The new company, which took the name of the feisty
bird of prey late last year, is focused on providing business-to-business services
in the data and Internet space, according to Rick Ellenberger, president and
CEO of Broadwing.
Although Broadwing does provide voice services, most of the company's
revenues reside in the data and Internet space. The aim is to make that even
more the case going forward. "Our next-generation Gemini 2000 IP network just
came online in the fourth quarter of 1999, Ellenberger explains.
Currently, the company is working hard to expand and improve its distribution
capabilities with its own sales force, partners and agents in order to increase its
direct retail-to-retail opportunities. Broadwing now has 700 sales people and
aims to expand to 900 sales people by year's end.
The carrier also plans to add another 4,000 route miles to its network in 2000
and install next-generation optical gear in the network to improve its
cost/performance ratio, he adds.
"We are also going to expand the number of POPs in each city to reduce the
access fees we are charged," Ellenberger says. "And we have just launched a
major effort to brand the company on a national basis."
Broadwing's association with Cincinnati Bell gives it local savvy that its
competitors lack, as well as experience with digital subscriber line (DSL),
Ellenberger says. In addition, the company's size enables it to be much faster,
more aggressive and more innovative in its competitive space, he adds.
"We are faster than our competitors who have acquired much larger residential
customer bases than we have. Our residential base is in a very isolated spot -
one city in the U.S. - and it represents a much smaller portion of our revenue
stream. So we think we have a much different situation than our competitors,"
Ellenberger says.
The biggest difference between IXC and Broadwing is that IXC had a very difficult
time with the leadership team and where they were heading the company,
Ellenberger says.
"We now have a team that Wall Street and Main Street believe lives up to its
promises and does what it says it is going to do," he notes. |
