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(COMTEX) WILLIAMS REINCARNATES CARRIER'S CARRIER BUSINESS
WILLIAMS REINCARNATES CARRIER'S CARRIER BUSINESS
Jan 12, 1998 (FIBER OPTICS NEWS, Vol. 18, No. 2) -- The Williams
Companies' [WMB] launched its re-entry into the wholesale
communications market Jan. 5, announcing some $1 billion worth of
long-term customer agreements - including a nationwide, "anchor tenant"
deal with U S West [USW] and a $260 million dollar deal with InterMedia
Communications Inc. [ICIX].
Williams will offer capacity for half the cost of legacy players for
comparable services, said Howard Janzen, president and chief executive
officer of Williams' communications group. "We're building a network
that operates at the lowest cost point."
Williams also said it will upgrade its network with $150 million worth
of ATM, frame relay, and network management equipment from Ascend
Communications [ASND], as well as an acquisition of a 350-mile fiber
cable linking Jacksonville and Miami, Fla. from MediaOne [UMG].
The announcements coincide with the expiration of a noncompete
agreement with WorldCom [WCOM], which followed the $2.5 billion sale by
Williams of most of its nationwide fiber optic network to the carrier
in January 1995. Williams kept one fiber on the 11,000-mile network
(currently the nation's 5th largest fiber network), and plans to expand
it to 18,000 miles by the end of the year and ultimately 25,000 miles,
spending some $1 billion Janzen said.
Janzen says Williams can operate its network at lower cost points and
out-price WorldCom because WorldCom is stuck with an antiquated legacy
network, adding that selling the network to WorldCom allowed Williams
to move forward with new technology on the fiber it kept. He also
claims Williams has the edge on Qwest [QWST], because of superior
technology decisions and more network in service today. Williams'
technology choices fuel torrid debate over the best solution for the
core network.
...Marketing Capacity
"Williams has a different marketing strategy than we're seeing from
any of the carriers out there," says Dataquest Chief Analyst Brett
Azuma. Carriers such as Qwest, WorldCom, and the big three long
distance carriers have a wholesale component to their retail business.
The wholesale threat to the retail business of selling competitors
capacity on the network creates an "internal battle full of angst,"
Azuma explains.
Unburdened by angst, Williams intends to remain a carriers carrier,
rather than offer retail services of its own. "It's our very core
strategy," Janzen says. "We don't want to compete with our customers."
"When people start offering to stuff money in their pockets," Azuma
adds, it will be interesting to see whether Williams sticks to its
guns. "They couldn't have picked a better time to re-enter the
wholesale market," he concludes, citing rumors over the holidays that
RBOCs may get into the long distance market in the foreseeable future.
Speaking of data rates, Williams had a bundle of fibers running at 560
Mbps when it started out in the 1980s, points out Ryan Hankin Kent
analyst Joe Savage. "With OC-192 and WDM, they'll have roughly
equivalent capacity just on the fiber they have," he adds. "They'll be
able to re-enter the marketplace quickly."
...The Network
"We want to be a multiservice provider," says Gordon Martin, v.p. of
sales and marketing for Williams Network. "With the configuration of
Nortel optronics and Ascend core switches, there is no exclusivity [in
protocol availability], and we're not blocked from next-generation
upgrades."
Although Williams recently signed up for $300 million worth of Nortel
[NT] transmission equipment in September, the company went with Ascend
for core switches. "We try to deploy the best technology available
today for each piece of our network," Janzen explains.
With acquired Cascade technology, Williams is convinced that Ascend
offers the best core ATM switch available - although not necessarily
the best edge switch, adds Martin, citing throughput, software, network
management, and partitioning as key advantages.
...Big Switches
Ascend will supply its GX 550 ATM core switches, which combine the
scalability and capacity of a core switch with the intelligence,
service capability, and cost-effectiveness of an edge switch, the
company says. The core switch enables a multiservice, multi class
network that handles different protocols with different degrees of
reliability, explains Jeff Kiel, senior manager, product marketing for
Ascend's core switch division.
Along with other ATM and frame relay switches, the platforms will
support more than two million connections, over 10 million cell
buffers, and data rates from less than DS-0 to OC-48 (2.5 Gbps). Ascend
has OC-192-capable ATM switches, Kiel says, but it is not shipping any
product.
Rounding out the network upgrade, Williams acquired fiber from
MediaOne, which follows rights-of-way of the Florida East Coast Railway
along the Atlantic coast. The segment enhances Williams' Southern
build-out from Houston to Washington, D.C., via Atlanta. More
construction is planned from Atlanta to Jacksonville. Williams will
provide capacity back to MediaOne, and sell or exchange dark fiber, and
lease capacity on the route.
Addressing the fact that the Williams network is short on ring
architecture, Martin says "SONET rings in your own network may not be
the Holy Grail. You build a network to perform." For reliability,
Martin says Williams will close up rings with future builds and
exchanges with other carriers, as well as perform 1+1 linear
restoration.
...Carriers Sign on for Backbone Capacity
U S West is the first RBOC to sign up with Williams. The five- year
deal is "a virtual acquisition of a dedicated nationwide backbone
network," says Solomon Trujillo, U S West president and chief executive
officer. "It's a key piece of the puzzle for both our data networking
and inter-LATA voice business." The deal is an important step toward U
S West's "data-centric" communications strategy and its impending entry
into long-distance telecommunications, the company says.
Trujillo lauds Williams' ability to build and operate a nationwide
network, and says Williams' offer is very attractive in terms of other
dedicated transport options. Trujillo did not disclose financial terms.
...Intermedia IRU
Intermedia signed up for a 20-year indefeasible right of use of 2.5
Gbps on approximately 14,000 route miles of Williams planned network.
The capacity will create 10 SONET rings in Intermedia's network.
Intermedia plans to expand its ATM network from 22 major OC- 3 nodes to
35 OC-48 nodes by July.
The Williams capacity enables Intermedia to dramatically improve
bandwidth efficiencies and reliability, as well as reduce the cost of
interexchange transport. The company expects the integrated voice and
data services it delivers over the ATM network to be three to four
times as cost-effective as those offered over circuit-switched
networks.
With Williams supplying a backbone fiber network, Intermedia gets
access to high-capacity private line services, collocated equipment
space at Williams facilities, and other carrier-level products. "We
must devote considerable resources to managing relationships with a
half dozen carriers," says David Ruberg, Intermedia chairman,
president, and chief executive officer. "With this new agreement, we
acquire the option to outsource our city-to- city network requirements
to Williams and let them either provide us capacity directly or manage
our overall network."
...Banging out Bandwidth
The Williams activity "is another example that the world appetite
for bandwidth is insatiable - and there's no end in sight," Ryan Hankin
Kent's Savage concludes. (Jim Gipson, Williams, 918/588- 4740; Lucia
Graziano, Ascend, 978/952-1291; Dave Banks, U S West, 303/896-3040;
Tammy Snook, MediaOne, 904/619-3628; Chris Brown, Intermedia,
813/829-2408)
Busting the Backbone
With Williams [WMB] embracing an ATM and SONET strategy to handle
multiple protocols on a national network, industry experts are weighing
in on the fiber Jihad - a veritable holy war over the best strategy to
carry IP, ATM, and SONET traffic on one network.
Qwest [QWST], for instance, is working with Cisco [CSCO] and counting
on Internet protocol (IP) equipment advances to usher in an all-IP
network that carries all multimedia services. "The whole world is
moving toward IP," says Nayel Shafei, Qwest's executive v.p., data
products. Although he acknowledges that IP routers can't keep up with
OC-192 SONET equipment, he predicts major advancements in routing rates
this year.
"The whole world has discovered that ATM is not for the backbone,"
Shafei says. He dismisses ATM as an attempt to resurrect circuit
switching and characterizes major ATM deployments as "the last gasp of
a dinosaur."
"We believe there will be significant movement to IP traffic," says
Gordon Martin, v.p. of sales and marketing for Williams Network. "But
there is also voice, data, and video traffic that can run on high-end
ATM." He concludes that "we would not articulate a pure IP or ATM
strategy," but instead would enable both with the most efficient
technology available.
"For a backbone network, ATM is a pretty logical choice," says
Dataquest Chief Analyst Brett Azuma. "It handles multiple media types
at that scale relatively efficiently." Shying away from the "religious
debate" over how to juggle IP, ATM, and SONET on a network, Azuma
concludes that, "I think what Williams is doing plays more to the
songbook that their clients have," citing RBOC preferences for ATM.
"The revenue generating potential of ATM is better than double that of
IP," claims Tom Nolle, president of consulting firm CIMI. Bucking
astronomical IP traffic projections, he says that as margins on voice
services fall, some 80 percent of carrier profit potential comes from
IP applications, while IP traffic makes up 40 percent of network
traffic. He sees Williams' use of ATM as a validation of ATM's ability
to balance the revenue/traffic equation.
Aggressively discounting the value of an IP backbone, he says that
"the advantage that ATM has is really compelling," despite the fact
that it was over-hyped in the early '90s. He cites ATM's ability to
handle both legacy and new services as key advantages and questions
IP's effectiveness at delivering voice and video.
Although passed by on the ATM side by Williams, Nortel [NT] - which
supplies both Qwest and Williams - is content with either IP or ATM
strategy. "I think what's really clear is that you need a SONET
network to underlie either one," says Greg Mumford, Nortel's general
manager and v.p. for SONET networks.
"We don't get religious on this," says Jeff Kiel, senior manager for
product marketing for the core switch division at Ascend [ASND], a
Cisco rival that also makes IP routers. "We will build products to
meet our customers' needs."
And customer needs may topple SONET's reign on the backbone. As
customers drive ATM quality-of-service improvements, Williams' Martin
makes clear that Williams Network will accommodate them - even if that
means displacing SONET.
A lot of people in the fiber space say high-capacity fiber eliminates
the need for ATM," Nolle concludes. "The Williams buy convincingly
demonstrates that glass is not enough."
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Copyright Phillips Publishing, Inc.
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