First the Merger, Then the World

Fresh from the finalization of its long-discussed merger, MCI WorldCom last week announced the first product of its partnership-MCI WorldCom On-Net. The service for business customers proposes to be a single access method for voice, data and Internet calls across local, national and international boundaries, without changing carriers. Incorporating both companies' previous services for business customers, On-Net will have an integrated, on-line billing system that encompasses charges for multiple voice and data services.

"On-Net is not just a brand, it's what we're all about," said Ron McMurtrie, vice president of marketing for MCI WorldCom. "We're breaking down barriers in how pricing is done. We're breaking down geographical borders, and we're combining the best of MCI and the best of WorldCom."

Because the carrier now operates in 65 countries and 81 local markets, a key to the service is that MCI WorldCom no longer will have to pay access charges to many other network owners-allowing large discounts for customers.

On-Net can be called a "super port" for services, McMurtrie explained, because no network-to-network interfaces are involved, and the network works regardless of the technology-asynchronous transfer mode, frame relay or Internet protocol. "This is not an equipment-based solution," he said. "All our customers have to do is buy our dial tone."

Several previous MCI customers have already signed on for the service, including Great-West Life & Annuity. "Our telecom environment is very complex," said Graham McDonald, the company's senior vice president of corporate finance. "We should be able to simplify our network and see substantial overall savings."

The service is a good way for MCI WorldCom to keep traffic on its network, said Frank Dzubeck, president of Communications Network Architects. Once customers are "on-net," the company can offer additional services such as quality of service, intranets and the Internet to keep them on. "It's a matter of capturing someone with a decent hook and then going to a heavier service level," he said.

What is different about On-Net is its international impact, Dzubeck said. "It's going to be a killer on a pan-European basis," because not paying the higher ac cess fees there will enable tremendous discounts-up to 60% in some areas, he said.

But other analysts said the announcement was simply an attempt to re-market existing services. "There are not enough details as to when it will be available to everyone," said Alex Winogradoff, principal analyst at Dataquest. Only a very small percentage of customers will be able to stay "on-net" all the time, he said.

The size and reach of On-Net has drawn comparisons with Sprint's planned Integrated On-demand Network, as well as to plans from AT&T. Both carriers underplayed last week's announcement.

"It's fundamentally different from ION," said a Sprint spokesman.

"There's very little detail in the claims [MCI WorldCom] are making, and frankly we find some of their claims hard to believe," an AT&T spokesman said. AT&T's business strategy-which includes a recent global networking agreement with BT, plus its purchase of Teleport Communications Group and Tele-Communications Inc.-has a wider scope than On-Net, he added.

Dzubeck said that On-Net is much more significant than ION, which still needs hefty infrastructure investment. Both he and Winogradoff said AT&T and BT have a better chance of rivaling MCI WorldCom, but those companies also need more time to develop such a network.

McMurtrie said that On-Net will go unchallenged: "Our competitors will criticize this. They'll lock their doors and decide what to do about this. But there's no one else that has the end-to-end reach that we can deliver today."