GTE Internetworking May Soon Be Flying Solo

FRAMINGHAM (03/20/2000) - While GTE Internetworking's parent company GTE Corp. works out the details of its planned merger with Bell Atlantic, the ISP is considering the advantages of going it alone. GTE Internetworking President Paul Gudonis recently spoke with Senior Editor Denise Pappalardo and Editor in Chief John Dix about the chances of getting spun off and the ISP's role going forward.

NW: Bell Atlantic recently told regulators it would be willing to spin off or sell GTE Internetworking in order to see its planned acquisition of GTE Corp. through. How will that affect GTE Internetworking?

Gudonis: That's the proposal in front of [the Federal Communications Commission] right now. I happen to think it's a very good idea because it will not only enable the GTE and Bell Atlantic merger, but it will also enable us to expand even faster than we have been. We will bring additional capital into the business and be in a position to step up our investments in infrastructure and global expansion.

NW: How will you bring in additional capital?

Gudonis: By issuing a separate stock to be sold to the public.

NW: Will GTE Internetworking be a separate subsidiary of the joint company?

Gudonis: We'll be an independently traded company. Bell Atlantic and GTE Corp. would own 10 percent of GTE Internetworking, which will be getting a new name, and 90 percent of the company will be publicly traded. The joint company will be permitted to further buy into GTE Internetworking as it gets long-distance service approvals in additional states.

NW: Isn't GTE Internetworking's Internet business one of the crown jewels of the deal between Bell Atlantic and GTE? Or is it that Bell Atlantic is more focused on increasing its consumer footprint?

Gudonis: No. I believe that the Internet is a key part of the future of the telecommunications industry, and the joint company will continue to own an equity interest in GTE Internetworking going forward.

NW: GTE Internetworking offers services to business users and other carriers.

How does your customer base break down?

Gudonis: Our customers are about 60 percent service providers and 40 percent enterprise business users.

NW: In October, GTE Internetworking made some voice-over-IP wholesale service announcements. Are you planning a business voice-over-IP service, and if so, what would it look like?

Gudonis: We're evaluating technologies and trying to understand what the market opportunity is. And we're learning from our experience in operating our current voice-over-IP network that's supporting millions of minutes per day now. No product announcements, but we're continuing to work on the technology.

NW: How do you see voice-over-IP services unfolding for business users? Do you think they would be combined with your virtual private network [VPN] offering?

Gudonis: I think it has the most compelling value proposition when it's part of a VPN that companies implement.

We see companies replacing some of their private lines with Internet VPNs or extending their frame relay networks to smaller branch offices or overseas offices by using VPN services on the Internet.

Voice would seem to be a logical extension. That's probably the place you'll see it happen first in the business environment.

NW: What are some of the reasons voice over IP hasn't penetrated the business market yet?

Gudonis: If you look at the chief information officer's Top 10 list, at least in 1999, changing to a new long-distance voice service didn't make the Top 10 list. Other issues such as Year 2000, [enterprise resource planning] applications, e-commerce, the whole Internet, intranet, extranet challenge and keeping those networks secure have been higher priorities.

NW: And you've got continued reduction in business long-distance voice services rates from the big [interexchange carriers], so there really hasn't been this compelling drive by CIOs to get a new solution.

Gudonis: No. GTE Internetworking is working with the other parts of Bell Atlantic and GTE to be the country's largest wireless phone company, especially when the merger with Airtouch Vodafone comes together.

So that puts us in an excellent position to work with that part of GTE/ Bell Atlantic to enable the next big thing, which will be wireless Internet access.

NW: Application service provider offerings are another big area of interest.

Where does GTE Internetworking play in the ASP game?

Gudonis: GTE Internetworking has a high-speed, reliable backbone that supports OC-192. We have 10 data centers and undersea cable connections for additional international connectivity. We have secure VPN services that can be wrapped around an ASP's rental application offering.

NW: So you're not going to be an ASP. You'll provide network and hosting services to other ASPs?

Gudonis: We're actually an ASPI. It's a term I coined meaning we're the ASP infrastructure.

NW: So how is this different from, say, a UUNET or other competitors?

Gudonis: One difference is if you go to some of our competitors, they will sell you pipes or dial-up service or some basic Web site hosting service. We have a much more tightly integrated offer.

So our competitors will basically fax you a one-page proposal, and we will work with a firm like Bank One by asking them how they plan to grow their business.

NW: Are they going to offer financial products online? Are they going to offer mortgages online?

Gudonis: We'll work with them in terms of the architecture, meaning how do you set up back-end systems for the Web site, how much capacity is needed, how do you distribute the traffic load over multiple data centers.

That's a much more complex business solution, rather than just saying, here's the price for a T-1, here's the price for a Unix Web site.

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