InformationWeek

June 21, 1999

Telecom's Competitive Culture

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MCI WorldCom includes local service providers MFS Communications Co. and UUnet Technologies Inc., which WorldCom had acquired previously. As a result, MCI WorldCom now offers local service in 81 cities, which include 70% of the businesses in the United States.

MCI WorldCom says its ability to offer service from local U.S. locations to local locations in 15 other countries gives it a strategic advantage. The service, known as On-Net, is "our most successful product launch ever," says Sidgemore. Currently, 90% of all new MCI WorldCom sales are On-Net, and four out of five large global customer deals include On-Net service. In the midsize market, MCI WorldCom says twice as many sales now include local services as they did before the merger.

Sprint, too, is going after the local market with plans to offer high-speed digital subscriber line services to 27 million of the nation's 100 million households by the end of 2000, and high-speed wireless data services to another 13 million households. Sprint is also buying companies that control broadcast licenses that can be used to provide high-speed Internet and data services in several major markets. It has reached an agreement with People's Choice Television to offer wireless broadband access to 24.2 million homes.

Competition is forcing every telecom service provider to move quickly to stake out a position. Small startups are rushing to be first to market with today's hot technologies, including digital subscriber line and IP services. Meanwhile, large, established carriers are developing packages of end-to-end services that include local, long-distance, wireless, Internet, and managed network applications.

"In this market, no one is really able to develop a technology advantage," says Sidgemore. "Companies will differentiate themselves in innovation and packaging of services."

"Who is in a better position varies by the day of the week," says Tom Loane, CIO of Transport International Pool, a Devon, Pa., division of GTE Capital that leases trucks. "Any advantage is fleeting."

Analysts agree. "The concept that technology is a long- or even a short-term differentiator is false," says Lisa Pierce, an analyst with Giga Information Group.

The new competition means customers have more choices than ever. Several hundred new carriers have popped up in the United States alone in the past three years, according to the Yankee Group, and hundreds more have opened for business throughout the world.

Global startups such as Qwest, Level 3 Communications, and Global Crossing are building and operating new worldwide networks that deliver bandwidth at dramatically lower costs. Locally, a host of new data and voice carriers are rolling out new services in weeks instead of months, and offering to guarantee the reliability and response time of those services.

For the larger carriers, the goal is to provide business customers with a full range of communications services. "I'm looking for end-to-end local and national access" to provide a network that is easier to manage, and includes bigger volume discounts, says Loane.