Level 3: whiner or visionary?

Refusals by MCI and WorldCom to establish Internet peering arrangements with fiber network operator Level 3 Communications constitute monopolistic behavior, said Level 3 Chairman James Crowe last week. Such arrangements, rather than market share, are the appropriate measure of whether the proposed MCI/WorldCom merger would create an Internet monopoly, Crowe argued.

"Peering is another term for what the telcos call interconnect," said Crowe. "We want [Internet protocol] access to have the same force of law that local access has developed over the last two years."

Analysts agree that MCI, Sprint and WorldCom, through its UUNet acquisition, control the majority of domestic Internet traffic. By connecting their backbones at network access points and through peering arrangements, the three exchange traffic destined for one another's customers and for those of some smaller backbone providers. Because this traffic is exchanged for free, backbone carriers have become increasingly unwilling to let smaller Internet service providers peer with them.

Although Level 3 is building an extensive backbone, it does not have many customers. For that reason, the company does not yet meet MCI's peering policy, which is on file with the FCC, an MCI spokesman said.

WorldCom has indicated a willingness to establish a relationship with Level 3, a WorldCom spokeswoman said. Unless Level 3 can peer with all of the Big Three, however, the value of an arrangement with any single player is reduced.

Level 3 is not prevented from exchanging traffic with other carriers, but instead could establish a transit arrangement with one of the backbone carriers, said Joel Maloff, principal of Maloff Group International. That option, often used by smaller ISPs, enables a company to connect to a backbone carrier and exchange traffic through that carrier-at a cost.

Once a service provider's traffic reaches a certain level, however, it would be better for the Internet if that provider was allowed to peer, said Michael Gaddis, executive vice president and chief technical officer for Savvis, a St. Louis-based ISP. Conflicts about traffic levels between networks make carriers reluctant to upgrade their bandwidth, said Gaddis, and that causes latency problems that prevent service providers from offering real-time services such as IP telephony and video.

Savvis and seven other service providers plan to propose guidelines for when a provider should be allowed to peer.

"We have one last chance to resolve this voluntarily," said Gaddis. Companies such as Level 3 have too much money to tolerate potentially anti-competitive behavior, he said.

Motorola announced last week that it will throw the resources dedicated to its own broadband satellite interconnection venture behind the Craig McCaw-led Teledesic effort instead.

Under the terms of a deal valued at $750 million, Motorola will receive a 26% stake in Teledesic in exchange for design and development work that will be redirected from Motorola's Celestri System project, as well as an undisclosed cash sum. The vendor will become the prime contractor for Teledesic.

Motorola also will continue its involvement in Iridium, which is close to launching satellite-based mobile voice services.

"We will take the technological expertise from Iridium and Celestri and blend them together to build the Teledesic system," said Christopher Galvin, CEO of Motorola.

Teledesic is designed to extend the broadband transmission capabilities of landline networks via a mesh of interconnected, non-geostationary low earth orbit satellites. The architecture planned for Celestri was similar, and the venture was expected to be a chief competitor of Teledesic.

Motorola's involvement is not surprising, given the vendor's involvement in McCaw-backed projects such as Nextel and the equipment sales potential the deal creates, said one analyst.

"After all, what Motorola really wants to do is sell hardware and earth stations," said Ira Brodsky, president of Datacomm Research.

The timing of the announcement in relation to last week's Galaxy IV satellite malfunction, which wiped out paging networks and other communications systems, raised questions about the reliability of satellite systems. But McCaw is confident that the diversity of the Teledesic architecture-it will have 12 hot standbys in space and more ready to launch-will prevent a similar occurrence.

"We all recognize that it's hard to send the Maytag repairman into space," McCaw said.

NEW CHIEF FOR FCC BUREAU The FCC's Common Carrier Bureau will get a new chief, Kathryn C. Brown, on June 7 to replace the outgoing A. Richard Metzger Jr. Brown previously was with the New York State Public Service Commission.

CLECs SIGN CARRIER DEALS Intermedia Communications has signed 15-year leases with Metromedia Fiber Network for fiber optic rings in the Chicago, New York, Philadelphia and Washington metropolitan areas. Teligent has chosen Frontier Corp. to provide wholesale long-distance, calling card, toll-free and conference calling services.