Former MFS execs fulfill vision with level 3

Level 3 Communications has been a back-to-the-future trip for a group of former MFS executives.

Peter Kiewit Sons, which controlled MFS until its sale to WorldCom, liquidated the majority of the assets of Kiewit Diversified Group and handed the cash and remaining assets to former MFS top man James Q. Crowe and a team of former MFS executives. Their mission: Repeat the success of MFS.

Crowe and his cohorts will take a different route this time. Level 3, like Qwest, will offer its services via an Internet protocol-based nationwide fiber network.

Level 3 will represent the culmination of a plan initiated at MFS. Before the company was sold in 1995, its executives had instigated a transition to a full-service IP-based network. The acquisition of Internet service provider UUNet was part of that strategy.

"That was the year that Bill Gates and Microsoft said, 'IP and the Internet are real, and we're going to have to change our business to recognize that,'" Crowe says. "We were coming to the same conclusions."

The crucial element in Level 3's plan is that it will build its own network. Control of a network is crucial for an IP services carrier.

"We looked at the cost [to a carrier] to move a CD-ROM's worth of information cross-country," Crowe says. "It was about $27 on the [public network] and about $2 on an Internet protocol network. And about half the cost of the Internet protocol network is transmission. That explains why anybody who wants to be a commercial Internet protocol-based carrier must own their own network."

Looking to traditional carriers to plug gaps in such a network is not a practical solution, Crowe adds. With the multibillion-dollar investment in a fiber network comes a pressing need to generate revenue. And despite the fact that data traffic is overtaking voice in volume, voice still generates the majority of revenue.

To make voice customers easier to attract, Level 3 is pushing to develop equal-access standards for IP carriers. Equal access would let IP customers just dial the number they wish to call rather than dialing through a gateway. That kind of access was the key element in the success of competitive toll carriers in the early 1980s, and it will be equally crucial for IP telephony companies in the coming years.

"We think the timing is right for that technology," Crowe says. "The whole key is to build an interface to the [public] network that is identical to the interfaces to competing carriers today."