Surprising UUNET acquisition could lead to more reliable Internet service offerings.
The bar for Internet reliability was raised dramatically last week when competitive access provider MFS Communications Company, Inc. inked a $2 billion merger agreement with Internet service provider UUNET Technologies, Inc.
The combination of the UUNET and MFS networks will eventually enable the company to provide wide-ranging, end-toend Internet services and offer service-level agreements, unheard of in today's rough-andtumble Internet environment.
In fact, Alan Taffel, UUNET vice president of sales and marketing, said the company will offer guaranteed service levels to intranet customers - those creating secure, virtual private networks that use the Internet as the backbone - as early as next quarter
Rick Weidinger, vice president of mergers for MFS, agreed that 'Net guarantees were one objective of the merged entity. "The quality of the Internet is now `best effort,' whereas telephony standards are `best quality,' " Weidinger said. "We're going to try to marry the two."
Users are supportive of such a union. "This bodes well for bringing stability to the 'Net," said Jim Fey, director of technology planning at PMI Mortgage Insurance Co. in San Francisco, who expects to see the ISP market shake out to about a halfdozen Internet providers.
"There are so many people dumping into the 'Net now, it is difficult to do metering and statistical analysis on traffic," he said.
Michael Zivich, telecommunications manager at Spiegel, Inc. in Chicago, agreed. "It takes big players to provide the reliability needed before large companies will count on the Internet the way they would a leased-line network," he said. The concept of getting the 'Net to begin approaching quality-of-service levels akin to those of the phone network is not lost on UUNET's competitors: Apex Global Information Services (AGIS), PSINet, Inc. and possibly AT&T are expected to soon announce service guarantees, too (see story, this page).
And ISP BBN Planet, which carries the traffic of AT&T's dedicated-access customers, is expanding its own T-3 backbone domestically and stretching to other parts of the world through a recent partnership with international carrier Scitor (NW April 1, page 14). "We're carry ing traffic as far as we can on our own network to keep service levels up," said BBN Planet Chairman George Conrades.
MFS runs an allfiber WAN backbone, as well as metropolitanarea redundant rings in 49 cities worldwide. For the short term, only the local-loop portion of MFS' network-which passes about 70% of the U.S. business population's doorways - will combine with UUNET's long-haul net.
"This should alleviate congestion on the access portion of an Internet connection," said Ullas Naik, vice president of technology research at First Albany Corp., a financial analysis firm in Boston.
It should also cut down on access prices. UUNET will be able to get local-loop access at cost instead of at retail rates. UUNET's Taffel said he is committed to passing the savings to customers. He added that localloop costs account for 40% of the total Internet access cost and that UUNET customers will likely save half that through the combined company.
Match made In heaven UUNET and MFS have many things in common: They both target corporate customers and run redundant networks. Each already has a global presence with lofty aspirations to expand into more countries. And neither has ever turned a profit, although MFS reportedly has $800 million in the bank and UUNET is headed in the right direction. Last week, UUNET reported net income of $233,000 for the first quarter compared to a net loss of $263,000 in the same quarter last year.
Despite MFS' rich coffers, "both companies still need other sources of capital to continue rolling out transoceanic fiber," warned Steve Franco, senior analyst at The Yankee Group in Boston. That issue, and how to eventually blend UUNET's frame relay backbone with MFS' long-haul Asynchronous Transfer Mode net, will be among the merged company's challenges, he said.
UUNET - along with many of its competitors -already purchases large volumes of local access services from MFS. UUNET currently buys MFS access for users of its 10Plus offering, a IOM bit/sec Ethernet service. For T-1 and other speed connections, however, UUNET resells local Bell services, though Taffel said those services will eventually jump on the MFS network, as well.
He added that voice and video services will run over the combined network within two years.
Other ISPs said they are not worried that MFS will discriminate against them in terms of interconnections and service because they represent too large a volume of business for the carrier.
Copyright Network World Inc. May 6, 1996
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