WorldCom, Inc.'s planned acquisition of MCI Communications Corp. "is not about the Internet, it's about the first real competition to the RBOCs," said John Sidgmore, chief operating officer at WorldCom and CEO of the company's UUNET Technologies subsidiary. What else is the mega-deal about? Network World Senior Writer Denise Pappalardo spoke with Sidgmore last week to find out.
Q. Even if this is not all about the Internet, WorldCom is bringing UUNET, internetMCI Security, ANS [Communications Company, Inc.] and CompuServe Network Services all under one roof. How will WorldCom integrate these diverse Internet services and facilities?
A. At the end of the day, ANS and CompuServe are terrific properties, but they don't have the backbone. ANS is almost 100% committed to AOL - AOL represents 90% of ANS's traffic. CompuServe's business is more lower speed services and value-added applications. CompuServe's backbone is thin by most measures. If we did not buy MCI we would have put ANS and CompuServe on UUNET's backbone. Now we'll have two significant backbones that are both permanently out of capacity, but we're building on to them as fast as we can. We will have two major [Internet] hubs in Washington, D.C. We will leave both intact. We will look at ways to more robustly interconnect these networks, but we will probably not take out any hubs or [points of presence].
Q. How will WorldCom take advantage of economies of scale from its Internet facilities?
A. Some economies of scale will be in network monitoring. We [also] hope that we will be able to buy larger pipes and major transit routes together, like from D.C. to NY or D.C. to San Francisco.
Q. Given that MCI lost a significant amount of money trying to establish a presence in the local phone market this year, I'm wondering how much WorldCom will invest in local services.
A. We already have 52 local networks that are roaring from the MFS [Communications Company, Inc.] stage. We acquired 38 more in the form of Brooks [Fiber Properties, Inc.] that are up and running. A lot of what MCI was planning to do, like digging new fiber routes, just doesn't have to get done now. That is the biggest cost factor in a lot of ways. MFS has already incurred that cost early on. That is the source of the synergy in the local market between WorldCom and MCI.
Q. By acquiring WilTel years ago, WorldCom gained an early, strong frame relay market presence. But it seems as if WorldCom has de-emphasized frame relay of late, having even lost market share. Is that an accurate observation?
A. We run multiple data networks and our large Internet network gets slightly more attention than the others. We have large frame relay and ATM networks. We offer the customers the solutions they require, and we will deliver what they need. If you look at our data network sales even without looking at our Internet growth, data network services is the fastest growing part of our business. While we may have lost some market share, our revenues are growing.
Q. High-capacity bandwidth is scarce nationwide. Between the WorldCom and MCI long-distance networks, tell us what can be done to reduce the capacity crunch and the resulting upward pressure on prices?
A. We have seen the obvious bandwidth shortages this year. We have been aggressively deploying fiber and [dense wave division multiplexing (DWDM)]. We don't know of any magic that is going to change the market. Our bandwidth deployment has been more aggressive than MCI's in every dollar spent on DWDM and in terms of raw capacity. We are doubling our capacity every year. I would be very surprised if we do not do the same on the MCI network. The bandwidth demand will continue to escalate.
Q. WorldCom is often a corporate user's second long-distance carrier. Is there concern that when MCI and WorldCom become one company you might actually lose that corporate customer that was looking for diversity? And are there plans to offer those same customers some kind of mega-contract that would include additional savings?
A. The mega-customer and bundled services. We will be talking about this. It's fair to say we have been less successful at getting the large corporate accounts than MCI. We see some marketing advantages with the merger.
We have also talked from time to time about diverse routes even on our own network. The merger will have nothing to do with diversity. Yet most customers will not think that. We will not unplug any of our long distance fiber. But the fact is even if you today buy from MCI and WorldCom or MCI and another carrier, there is nothing that guarantees those are diverse routes. An awful lot of times our fiber and AT&T's fiber run through the same conduit.
