ISP morphs into ISC: PSINet unveils master plan to own and control its network

Hoping to improve both customer retention and margins, PSINet is slipping out of its ISP cocoon and stretching its wings as an Internet super-carrier.

The company revealed plans last week for 60 e-commerce hosting centers, global distribution, a global brand name, a company-owned fiber network and optronics equipment.

With its own fiber and optronics, PSINet no longer will require another provider for its optical networking needs. The company also will have control over the cost and scale of its bandwidth and quality of service on its frame relay and ATM-based, IP-optimized network.

The increase in e-commerce prompted the transformation. "Companies expect their Internet presence to be more dynamic, take on more applications and fundamentally reshape their business plan," said William Schrader, chairman and CEO of PSINet. These companies realize that they lack the resources and experience to make changes on their own, he added.

A company-owned and -controlled network positions PSINet against other carriers. "If you don't have cost leadership, you can't compete," said Hilary Mine, executive vice president at Probe Research.

To make the transition, PSINet acquired 16 dark fibers from IXC Communications, which holds a small equity stake in the company. "PSINet is a very aggressive customer who's growing quickly," said Mike Vent, president of network services and IT at IXC. The agreement will help fund IXC's next generation network expansion. Plus, as a minor investor, IXC will gain from PSINet's growth, Vent said.

Initially PSINet will light four of the 16 fibers using Nortel Net-works' dense wave division multiplexing technology. While the four fibers cover 13,900 miles across the U.S., Nortel's equipment gives PSINet "the strength to operate a global optical network," said Serge Melle, director of segment marketing for emerging service providers for Nortel.

In addition to enabling transmission speeds at more than 1 Tb/s, Nortel's equipment can manage PSINet's network across the globe from one location, Melle said.

PSINet also announced that it would offer symmetrical DSL in New York. The company will connect New York, London and Paris through the purchase of two fiber pairs on the FA-1 trans-Atlantic cable system.

As another part of its global scheme, PSINet purchased satellite transponder and earth station equipment from Loral Orion for its Latin American facilities. PSINet plans to link Hong Kong and China to Japan with a 320 Gb/s submarine cable system.

As a finale to its master plan, PSINet introduced PSINet Transit, which has global routing characteristics enabling linkage between all countries' IP traffic.

Throwing $6 billion into its network will give SBC Communications a much-needed push into the DSL market. An initial focus on the underserved small business market may prove to be one of the company's most important and profitable DSL strategies if the experiences of other RBOCs are any indication.

RBOCs had overlooked the small business market until recently because they thought small businesses would not spend much on Internet access, given their telephone spending habits, said Rahman Karriem, Bell Atlantic's director of general business product marketing. "But they are willing to pay for increased bandwidth and increased features."

For Bell Atlantic, small businesses have become early adopters of the technology. "They are not looking for someone to give them all the answers, and they are willing to experiment," Karriem said.

After similar experiences, U S West has tweaked its asymmetrical DSL offering to make it more appealing to small businesses. "We've built an offering that is more business-friendly because it is more symmetrical. Businesses need to send as much as they receive," said Mike Rouleau, vice president of marketing at U S West !nterprise Networking.

Besides offering access, RBOCs, like most other carriers, are starting to attack the applications market, hoping to sell small businesses more services. "We are going to see applications evolve, and we will see more partnerships with small businesses," Rouleau said.