March 21, 1997 2:30 PM ET
ISPs in danger as phone companies gird for battle
By Stephanie Lapolla

  SERGEANT BLUFF, Iowa—The union of MCI Communications Corp. with Northwest Iowa Telephone, an independent local phone company, and Northwest Iowa Power Cooperative utility company, announced here yesterday, is a stopgap tactic on MCI's part to penetrate the Midwest local market with integrated phone and Internet service before its long distance and Regional Bell Operating Company competitors.

Together, the troika will form Pioneer Holdings LLC, providing integrated communications services to local distributors working with business and residential customers. Deliverables include high-speed network technologies such as ADSL (asymmetric digital subscriber line) with downstream speeds of 7M bps and 640K bps upstream, as well as HDSL (high-bit-rate DSL) transferring data at 768M bps. Both ADSL and HDSL work over installed copper phone lines. Another technology, HFC (hybrid fiber coaxial) provides telephony and television over cable wires at speeds of up to 10M bps.

The formation of Pioneer Holdings will result in Northwest Iowa Power Cooperative supplying the SONET (Synchronous Optical Network) fiber ring, to be completed later this year, providing reliable communications that can be quickly restored in the event of a network outage. The SONET ring will hook into Northwest Iowa Telephone's local network and then into MCI's high-speed backbone. Customers will be able to obtain the services through local distributors including cable companies, power companies, municipal utilities, independent phone companies and private business, MCI officials said.

Sergeant Bluff has been a technology testbed for MCI and its partners over the last year as the Washington company prepares to make integrated offerings of local, long-distance, high-speed Internet access, home security monitoring, video and wireless service available to three Iowa cities this fall. Additional DSL trials are planned for New York City, officials said.

But MCI is not alone in its efforts to deploy faster, less expensive, more integrated service to business and residential customers. Bell Atlantic Corp. is under way with its own technology trials in Philadelphia running both ADSL and a follow-on technology Bell Atlantic is developing with Lucent Technologies Inc., called switched broadband. Switched broadband is a fiber-based network that will deliver 52M-bps speeds, providing ample bandwidth for telephone, interactive video applications and wireless services, said Ray Smith, chairman and CEO of Bell Atlantic.

Although Bell Atlantic is making an innovative move, MCI officials said they are taking the practical approach. "Fiber to the curb is not worth it," said John Gerdelman, president of networkMCI Services. "You don't have to do it when you can get 6M bits to the house with ADSL."

Meanwhile, US West Communications and GTE Corp. have been conducting their own DSL trials in Boulder, Colo., and Dallas, respectively.

All these players are trying to be first to market with reasonably priced, easy-to-manage, integrated services. And although the terminology may be confusing and the enabling technology generally unobtainable at this point, the growing competition means one thing in the long run—customers will experience speed benefits when accessing the Internet and simple service bundles at prices of about $60 per month.

"I have HFC to my home with no drop-off in service," said Richard Caldwell, superintendent of Sergeant Bluff-Luton schools. "The TV is great, the phone is great and Internet is wonderful." In addition, Sergeant Bluff-Luton K-12 classes, with as many as 450 computers, can be connected to the Internet at the same time due to ADSL modems connected to routers in the schools. The benefit is more than access speeds and simultaneous connections.

"It is helping us to achieve our ultimate goal, which is to provide the best education for the students," said Caldwell.

But is there a loser in all of this? Most likely Internet service providers, say industry experts.

"There won't be any ISPs after this is over," said Frank Dzubeck, president of Communications Network Architects Inc., in Washington. "All these [phone companies] going the last mile are not selling transport, they are selling Internet access."

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