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To: Mazman who wrote (2301)	3/26/1998 12:35:00 AM
From: William Cooper	Read Replies (2) \| Respond to of 11568

Wednesday March 25, 9:39 pm Eastern Time Booming Internet to jolt telephone companies By Neil Winton, Science and Technology Correspondent LONDON, March 26 (Reuters) - The explosive growth of the Internet poses a life-or-death challenge to telephone companies, according to a report published on Thursday. The report, from Cambridge, England-based consultancy Analysys, said the Internet, the worldwide network of personal computers connected by telephone lines, threatens a cull of phone companies which fail to meet the demands of the new technology. Telephone companies which embrace the Internet challenge will thrive. According to Margaret Hopkins, principal consultant at Analysys and one of the report's authors, companies like Telecom Finland (TCFN.CN), and WorldCom Inc (WCOM - news) are front-runners in this race. Telephone companies only recently freed from state-ownership shackles are likely to be the hindmost. The Internet is set to shake-up the business world because the electronic commerce it generates melts traditional boundaries. Supermarkets can offer banking services, banks sell life insurance, and companies like software giant Microsoft Corp (MSFT - news) find themselves involved with companies offering products as disparate as news, entertainment and shopping. Analysys said that by the end of 1997, more than 60 million people around the world and nearly 20 million computers were linked over the Internet. This is growing at about 50 percent a year. ''The Internet creates chaos because it opens the door to new ways of doing things. When the dust settles, lasting competitive advantage will lie with the companies that have managed to find a new way of doing business,'' the report said. ''Telecommunications companies must fundamentally re-invent themselves if they are to exploit the huge commercial potential of the Internet,'' Analysys said. ''Operators need to abandon old prejudices as well as learn new skills, and drag themselves out of the dark ages of the public switched telephone network and into the Internet age,'' Hopkins told Reuters in a telephone interview. Internet use threatens to transform traditional telephony as voice traffic is overwhelmed by data transmission. Imaginative new companies are already using the Internet to sell long-distance calls for the price of a local call, undermining traditional fat profit margins. ''By 2003, over 25 percent of international call minutes are forecast to be carried over the Internet, by which time the IP (Internet provider) telephony market will be worth at least $7 billion. No doubt this explains why we are starting to see AT&T (Corp (T - news)), Deutsche Telekom (AG (DTEG.F)), GTE (Corp (GTE - news)) and MCI (Communications Corp (MCIC - news)) entering the IP telephony market,'' Hopkins said. High-capacity cable networks are bringing increased voice, data and video competition. Technical developments threaten competition from electric utilities which reckon they can transmit data over power lines and deliver services via the home electric power plug. Teledesic, the $9 billion ''Internet-in-the-Sky'' project of Microsoft and telecommunication pioneer Craig McCaw, plans to launch a network of 288 low-earth-orbit satellites in 2002. Other groups like Motorola Inc's (MOT - news) led Iridium have similar plans. Which companies will best handle intensifying competition? ''Telecom Finland has already coped with this. There's real competition there. Worldcom and (recently acquired) MCI are in a very advantageous position, basing their whole ?????into next week.