WorldCom, Sprint: Focus on Real Needs

FRAMINGHAM (07/24/2000) - One reason carriers merge is they've missed big market opportunities and have to fill serious gaps with a partner. It is so much worse when a merger fails and they've lost that time to address their problems.

Wouldn't it be nice if WorldCom Inc. CEO Bernie Ebbers and Sprint Corp. CEO Bill Esrey resolved to address their major market challenges without the chaos and confusion of megamergers?

Much of the harsh light of the failed merger's aftermath shines on Sprint. It has now gone yet another year without building or buying local networks in major metropolitan areas. Now the prospect of access to WorldCom's extensive local networks is gone.

Much of Sprint's activity has focused around areas that it perceived would help its merger effort by showcasing a consumer alternative to the Bells and AT&T Corp.'s cable network. For example, it touted fixed-wireless local access - a service it has introduced in all of two cities. But Sprint is actually far behind independent fixed-wireless carriers like WinStar, which is raking in government contracts in city after city.

Sprint continues touting its Integrated On-Demand Network (ION) based on an ATM integrated-access device on the premises. But ION is overpriced from a consumer standpoint - about US$150 per month - and use by business telecommuters is losing out to soaring demand for DSL and cable modems.

Sprint's own reports to the Securities & Exchange Commission reflect this problem. In 1999, ION earned not a dime in revenue, against $358 million in expenses. In the first quarter of 2000, ION took in $1 million in revenue against $137 million in expenses.

If you're thinking, "Gee, an ATM-based integrated-access service is not way up there on my to-do list," you're onto something. For example, for such an important Internet carrier, Sprint has an amazingly low percentage of the Web hosting business. Sprint and WorldCom could start addressing the Web acceleration and content delivery field. At least AT&T has taken advantage of the WorldCom/Sprint merger period to step out in front in this area.

To be sure, AT&T's Intelligent Content Delivery Service (ICDS) hasn't set the market on fire. ICDS isn't like the service offered by Akamai, with local servers collocated on multiple IP networks worldwide, feeding content to nearby end users. Instead, ICDS uses Inktomi software and load-balancing switches to optimize content delivery within AT&T's own IP network.

AT&T says its off-net strategy for content distribution will come later this year. Could we hear one from Sprint and WorldCom? Speaking of WorldCom, everyone knows WorldCom's principal need is for a big wireless network. So why doesn't Ebbers just go out and buy one? Lord knows he's good at that.

It's when these needs don't get addressed that carriers wind up asking regulators for favors, such as approval for what the rest of the world saw as an anticompetitive merger.

Rohde is managing editor of The Edge section of Network World. He can be reached at drohde@nww.com.

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