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News: This merger will require backbone (fwd)
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- Subject: News: This merger will require backbone (fwd)
- From: Josef Dietl <email@example.com>
- Date: Wed, 6 Nov 1996 21:43:21 +0100 (MET)
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---------- Weitergeleitete Nachricht ----------
This merger will require backbone
By Rose Aguilar and Alex Lash
November 1, 1996, 6:30 p.m. PT
It will take backbone to put together the proposed $22 billion merger of
British Telecommunications and MCI Communications (MCIC). Literally.
A key inspiration for British Telecom's proposed buyout of MCI is the need to
build a global, privately owned, Internet infrastructure and a desire to become
the world's dominant Internet provider, industry analysts said today. BT is the
monopoly phone carrier for all of Britain, holding a status similar to that of
AT&T in the United States before deregulation. (See related story)
"Backbone" networks are the interstate system of the information superhighway,
carrying the majority of the traffic from coast-to-coast and connecting local
The backbone infrastructure is invisible to Internet users, but its expansion
is crucial in dealing with the congestion that some observers see as a major
threat to the Net. MCI, AT&T, and Sprint all own vast stretches of backbone and
charge smaller Internet service providers a fee to carry data. If BT owned MCI,
it could travel those stretches of backbone without paying any tariffs.
British Telecom needs access to more backbone because overseas subscribers to
online and Internet access services will more than double to 21 million by 2000,
including 13 million in Europe and 5 million in Japan, according to market
research firm Simba Information.
The proposed buyout builds upon a joint venture the two companies launched this
summer. Called Concert InternetPlus, the alliance is a unified and expanded
worldwide network of wires, switches, and other hardware that transmits data
across the globe at hundreds of megabits per second. British Telecom already
owns 20 percent of MCI.
By absorbing MCI, British Telecom will have a powerful reach that could push
Net access prices even lower, since its fees will be lower, analysts said.
"The combined entity would give the MCI and BT guys resources that in some
areas, certainly in Europe, could exceed AT&T," said Rob Enderle, senior
industry analyst at Giga Information Group. Europe is a fast-growing market for
Enderle speculated that another global telco merger on the horizon could unite
Sprint and Japanese giant Nippon Telegraph and Telephone.
The proposed BT-MCI merger is also a coup for Rupert Murdoch's News
Corporation, which recently teamed up with British Telecom to create an ISP in
Europe called "Springboard." Murdoch previously had ties to MCI, and now he has
closed the loop and increased his company's global clout.
Pennsylvania ISPs get break
Phone firms can't spare a dime
Banding together for bandwidth
WorldCom, MFS plan telecom merger
Sprint makes dash into ISP market
MCI announces backbone plans
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