MFS founder plots big IP net

Omaha, Neb. - Level 3 Communications, Inc. is betting billions that when it comes to delivering data, voice, and video IP is it.

While the industry at large is still trying to figure out what it will mean long-term, the group of veterans at this start-up says there is just one network for the future - the Internet.

Level 3 promises to offer IP data services in six cities this year, expanding to 60 cities by 2001. Voice and video services, as well as quality-of-service (QOS) guarantees will come in about two years, according to the company's CEO, James Crowe.

Level 3 boasts plans for a 20,000-mile fiber-optic network in the U.S., transoceanic cables and foreign networks, and is blessed with very deep pockets. So the company will be a force to be reckoned with whether its vision is right or wrong.

There is another reason to listen to Level 3, Crowe and Kiewit Diversified Group, with roots in mining and construction,have done it before. They combined to build MFS Communications, Inc. from the ground up as the first major competitive local carrier. Started with $500 million in Kiewitt funding, MFS sold for $14 billion in 1996.

Part of the Level 3 promise: network infrastructure costs so low that it can ignite a price war with the established phone companies, analysts said.

"It's going to be a wonderful free-for-all," said Frank Dzubeck, president of Communications Network Architects, Inc., a Washington, D.C. consultancy.

It is uncertain what Level 3 will charge customers, but "the pricing differential will be so astronomic that the established carriers will have to react," Dzubeck said. "These guys are really going to have an impact."

Dzubeck said it costs an IP service provider a mil _ one one-thousandth of a cent _ to offer a minute of long-distance voice service. The cost for a traditional phone company is more like 2 cents.

MFS II?

Under the Level 3 model, customers will buy not dial tone, but Web-tone access to an IP network. The backbone of that network will be all fiber, guaranteeing ample bandwidth to bear scores of gigabits per second of user traffic.

Traffic among destinations on the Level 3 network could be assured QoSesbecause Level 3 would have control of the entire network being used. Traffic traveling to other carriers' networks for destinations off the Level 3 network might or might not support those QoSes, he said. For some destinations, traffic might use the public Internet, where today no service quality can be guaranteed.

Business-quality voice will probably not be ready until 1999, he said.

A service based on the most inexpensive backbone can still be costly, said Bill Homa, communications director for Hannaford Bros. and Co., a supermarket chain based in Scarborough, Maine, which is looking at ATM to anchor its network.

"The key is who controls the local loop. If you have multiple locations, it's going to be expensive if you have to use the local loop for access," Homa said.

Level 3 will pay those access fees except where Level 3 can run fiber directly to the customer, Crowe said. But he would not say what impact access fees would have on pricing, which is still being worked out.

However, he did say flat rates would be available for users who want it, as well as usage-based billing.

Not your father's Internet

Level 3 is the most well-funded domestic player among new IP carriers, but the boldest is CTR Group, Ltd. CTR has started up Project Oxygen, a plan to circle the globe with nearly 200,000 miles of fiber-optic cable to support a Super Internet that will support all services (NW, Jan. 19, page 12).

Smaller regional carriers that follow the same model are sprouting up, too, including XCOM Technologies, Inc. in Cambridge, Mass. It could affiliate itself with companies such as Level 3 to offer IP QoS over a wider geographic area.