Pat, this story talks a lot about calls over the internet. A lot of players are already there and the competition is fierce.
Phone companies' new
calling
By Jeff Pelline
Staff Writer, CNET NEWS.COM
March 10, 1998, 1:05 p.m. PT
Cutting-edge technologies such as Internet and
computer telephony--perhaps more than
deregulation--are proving to be key catalysts in
creating "new" telephone companies that are doing
battle with the likes of AT&T (T), MCI
Communications (MCIC), and Sprint (FON).
The group includes start-ups such as Qwest
(QWST), the Internet Telephony Exchange
Carrier, and Level 3 Communications, and
nontraditional telcos such as WorldCom
(WCOM).
Microsoft (MSFT) is getting into the act too--not
as a telco, per se, but in an effort to make its
dominant Windows operating system part of the
telephone infrastructure.
Many nontraditional telco providers, not just the
AT&Ts and Sprints of the world, are touting
themselves as "one-stop shops" for
communications--offering phone and Net access,
for example. Their claims point to what is one of
the biggest promises of telco reform, but they have
been slow to materialize.
Deregulation was supposed to spur new
competition in the telephony space, but more than
two years after the Telecommunications Act of
1996 was signed into law, telecom carriers and
federal regulators still are fighting over opening new
markets and allowing Baby Bells to get into the
long distance telephone business.
But technology is not standing still, and the
convergence of technologies for carrying voice and
data over the Net already is happening.
Once criticized for their low-quality, voice-over-IP
(Internet protocol) networks are gaining steam. Net
phone calling's chief benefit: lower-cost calls.
Little-known companies now are offering phone
calls via the Net for less than 10 cents per minute.
Other efforts include creating new software
interfaces for telephony. Microsoft, for example, is
demonstrating a technology for Windows-based
computer telephony.
The traditional telcos, notably AT&T spin-off
Lucent Technologies (LU), are not standing on the
sidelines. They also are implementing many of these
new technologies but have been finding that the
competition is getting tougher along the way.
Some examples of the "new" telephone companies
include the following:
Qwest. It took a technology outsider such as
Philip Anschutz, who became a billionaire by
running oil and railroad businesses, to see the
potential of competing against the telcos with a fiber
network that carries voice and data traffic. He used
railroad right-of-ways to help build the network, as
well as money raised from an IPO last year and
talent recruited from AT&T (such as CEO Joseph
Naccio), to help energize the company.
Qwest has been on a rapid expansion binge,
capped by yesterday's buyout of LCI International
(LCI) for about $4.4 billion. (See related story )
According to Qwest, the merger will create the
nation's fourth-largest long distance telephone
company. It gives Qwest access to sales and
marketing expertise, as well as distribution
channels. Combined, the companies had revenue of
$2.3 billion last year and served more than 2 million
business and residential customers.
Wall Street has taken a liking to Qwest. Its stock is
hovering at a 52-week high of about 37, up from
about 13 when it went public last summer. In its
short life, Qwest's market capitalization has come
to stand at $7.5 billion.
Microsoft. The company's mission to meet lofty
profit expectations by expanding into new,
software-dependent businesses is well-known, but
little attention has been paid to its foray into
telephony. Despite his $1 billion investment in cable
giant Comcast (CMCSA), Microsoft CEO Bill
Gates says he has no plans to buy a telco.
But that hasn't stopped the software giant from
getting into the business. Last week, Microsoft
demonstrated features for the first time that will let
companies use the Windows operating system for
both traditional and Net telephony applications.
The features of its upcoming Windows NT 5.0
release will make it easier for data, voice, and
video to coexist across the same network. (See
related story)
In addition, Microsoft has been teaming up with
telcos to promote high-speed Net access over
copper wires, dubbed DSL. It has joined Intel and
Compaq Computer, as well as a consortium of
telcos, for this so-called copper renaissance.
WorldCom, one of the fastest-growing telcos. It
is no start-up, but its recent buyout binge, which
saw it take ownership of the likes of CompuServe's
network and MFS Communications, has catapulted
WorldCom into the ranks of the major leaguers in
long distance.
WorldCom has grown so fast, in fact, that some of
its deals, such one pending with MCI, now are
drawing the close scrutiny of regulators. They
worry that the company may dominate the Internet
backbone. (See related story) WorldCom denies
that, however, and has said that it is confident its
deal with MCI will win regulatory approval by
midyear.
Led by hard-charging CEO Bernard Ebbers,
WorldCom is mapping a highly aggressive growth
strategy. WorldCom, MCI, and Spain's Telefonica
yesterday announced a three-way alliance to offer
telephone service to the Americas. WorldCom's
stock is trading at near a 52-week high of about
38. |
