Building up for IP: ICG uses Cisco to expand long-distance network

ICG Netcom last week unveiled plans to enhance its network to provide Internet protocol services by the end of the year.

The Englewood, Colo.-based company is integrating the substantial network presence that came with its acquisition of Netcom earlier this year into its existing public long-distance backbone. Company officials expect IP telephony service to be available in selected cities as early as August, with in-network rates of 5.9 cents a minute and out-of-network rates of 8.9 cents a minute. By the end of the year, ICG expects the service to be available to residential and business customers in 166 cities.

Because traffic will run over a fiber backbone, the transmission quality will be comparable to public switched network services, said David Gandini, president of long-distance operations for ICG Netcom.

The move ups the ante for established carriers to move into the IP telephony market, said Avi Chaki, an analyst with Jupiter Communications. Research shows that the Internet telephony promise of low-cost long-distance service will play very well with consumers, he said, and this puts pressure on long-distance carriers such as AT&T and Sprint to accelerate their IP telephony deployments.

To expand its network, ICG Netcom will use equipment from Cisco Systems. Under the terms of the agreement, ICG will invest several million dollars into new Cisco equipment, including service ports, voice/fax feature cards, routers and asynchronous transfer mode switches. These products should enhance ICG's frame relay, point-to-point protocol and IP connectivity services.

Following more than 10 weeks of negotiations, Canadian carrier Call-Net has completed its offer to buy outstanding shares of one of its competitors, Fonorola Inc. The deal, which began with Call-Net's unsolicited offer to buy the company on April 15 and has had its time limit extended multiple times, is estimated to be worth $1.2 billion.

Montreal-based Fonorola currently owns or has agreed to acquire about 15,000 fiber route miles in Canada and the U.S. Toronto-based Call-Net, which owns Sprint Canada, says the combined company will create more than $400 million in synergies during the first five years.

An example of these synergies is Call-Net's strength in residential service, paired with that of Fonorola in business, said Juri Koor, chairman, president and CEO of Call-Net. "Our strengths complement each other," he said.

Fonorola shareholders will receive $46 in cash or 2.68 Call-Net Class B non-voting shares for each outstanding common and Class A non-voting share.

The size of a business, rather than its financial worth, is strongly tied to credibility for Canadian carriers, so the merger is good for both parties, said Tom Nolle, president of CIMI Corp.