PSINet gets into frame relay game

Herndon, Va.

PSINet, Inc. soon will announce services that will let business users marry frame relay and IP networks.

Through its recently inked deal with IXC Communications, Inc., PSINet will offer a single package that will let users mix frame relay and IP services between corporate offices. Typically, users must purchase these services from separate vendors.

PSINet earlier this year signed an agreement with IXC to use 10,000 miles of IXC's OC-48 fiber-optic network. In exchange, IXC got a 20% stake in PSINet.

The unnamed service will let customers who are not ready to adopt the Internet as their WAN transport system to use frame relay permanent virtual circuits (PVC) to transmit their data traffic and connect to the Internet, said Harold Wills, executive vice president and chief operating officer at PSINet. To enable the service, PSINet will connect its switches to IXC's network so the two companies will be able to interexchange traffic. PSINet will offer its customers standard frame services using PVCs and committed information rates.

PSINet also is in the early stages of developing a voice-over-IP service that is expected to offer users lower costs than those charged for conventional long-distance and international telephone calls. "Our strategy is to compete in the Fortune 1000 arena by offering users network service packages," Wills said. Many of the larger companies have investments in legacy applications such as SNA. PSINet plans to offer broader services that will let business users migrate to IP at their own pace, Wills said.

While analysts agreed that PSINet's frame relay service has merit, the company may have a hard time selling it to users.

PSINet is seen as an Internet service provider, not as a frame relay service provider, said Rebecca Wetzel, director of Internet services at TeleChoice, Inc., a Verona, N.J.-based consulting firm.

Services that integrate data, voice and Internet access services are particularly useful for business users, but the market has only seen these services from telephone company-based ISPs to date, she said.

For example, WorldCom, Inc. offers Intelenet, an integrated voice, data and Internet access service. It does not include frame relay support, however. PSINet may have the right pieces to put a service like this together, but the company may have a hard time convincing users that it can provide reliable frame relay service, Wetzel said. "Carriers that can offer multiple data networking solutions have an inherent advantage over those that cannot," said Eric Paulak, an analyst at the Gartner Group, Inc., a Stamford, Conn.-based consulting firm. PSINet has been selling the majority of its services to small to mid-size firms that will not be as interested in bundled frame services, Paulak said.

One customer said he would not hold PSINet's ISP status against it when the company starts offering more traditional services. A Midwest securities firm user who asked not to be named said his company has been very satisfied with the security and dedicated Internet access services from PSINet that it has used for the past two years. Instead of being concerned about the source of the service, the user said he would be more interested in PSINet's reliability, redundancy and cost.

The ISP also is developing voice services. "We could deploy a product tomorrow, but we are choosing not to," said William Schrader, president and CEO of PSINet. The company is waiting for a carrier-class product that will support redundancy and toll- quality voice.

PSINet would not reveal which vendor's products it is currently testing to support its planned voice services. PSINet: (703) 904-4100