Metromedia, Racal Form Trans-Atlantic Venture

Posted: 05/1998

Metromedia, Racal Form Trans-Atlantic Venture

By Ken Branson

Metromedia Fiber Networks Inc. and Racal Telecom Ltd. have taken the trans-Atlantic
plunge, each hoping to reach new customers on the other’s side of the ocean.

The companies have given birth to International Optical Network LLC (ION), which they
will jointly own. ION will pull fiber across the Atlantic, lease capacity on that fiber to
companies on either side of the ocean, and further the strategies of both parents. The new
company, which will be headquartered in London and New York, is preparing to offer
services over existing submarine cable, beginning May 11.

"By combining the resources of two leading fiber optic infrastructure companies,
ION will be able to connect corporate customers on one side of the Atlantic to their
offices on the other side, with a seamless, point-to-point network, while at the same time
responding to increased carrier demand for international connectivity," says Vincent
Galluccio, senior vice president and member of the board at Metromedia Fiber Networks and
ION’s president.

Metromedia Fiber Networks provides bypass services for businesses and carriers in New
York, Philadelphia, Washington, Boston and other major American cities. The company also
provides intercity communications between New York and Washington.

Racal Telecom is a British provider of managed network services which cut its corporate
teeth by setting up and running Britain’s Government Data Network in 1988. The company has
since branched into similar services for the private sector, and now offers international
private leased services and back-haul services.

IP Telephony Offers Nickel-A-Minute Long Distance

By Peter Meade and Paula Bernier

Internet telephony service providers are giving traditional long distance carriers a
run for their money.

IDT Corp., for example, is now offering phone-to-phone and PC-to-phone Internet
telephony services for 5 cents a minute, according to IDT spokeswoman Sarah Hofstetter.

The company this spring launched a nationwide radio campaign for Net2Phone Direct, its
phone-to-phone Internet telephony service, which is now available in more than 50 U.S.
cities and recently launched in Korea.

IDT also recently cut a deal with the popular Internet search engine Yahoo! Now
customers with the IDT client software can use the Yahoo! site to find phone
numbers and then click on those numbers to initiate a PC-to-phone call over IDT’s Internet
telephony service.

I-Link Inc., meanwhile, now offers a 4.9 cents-per-minute service to customers of its
$4.95-a-month V-Link Access offering, which includes integrated voice, e-mail and fax
services.

The only catch: calls must both originate and terminate in calling areas connected to
I-Link’s IP telephony network.

According to Bob Bryson, vice president of product marketing, V-Link currently is
available in areas surrounding Dallas/Fort Worth, Houston, Los Angeles, Orange County
(Calif.), Phoenix and Salt Lake City.

Callers within the 25 calling areas located in those six regions whose calls terminate
anywhere outside those regions in the continental United States pay 6.9 cents per minute.
Through extended access, which is available to most customers in Arizona, California,
Colorado, Idaho, New Mexico, Texas and Utah, per-minute long distance rates range from 5.9
cents to 7.9 cents.

I-Link has been building out its own IP telephony network over the past year, according
to Bryson. The network currently carries more than 50 percent of the company’s traffic.
I-Link’s network will be accessible to some 85 percent of the U.S. population by the end
of the year, Bryson adds.

By mid-summer, all the V-Link services will be extended to at least 10 more markets
while extended local access coverage will increase by some 80 percent, Bryson says.
I-Link, which is looking to expand into the north and southeast in the fourth quarter,
expects to gain competitive local exchange carrier (CLEC) status by early 1999, he adds.

STAR Telecommunications Buys T-One Corp.

By Ken Branson

Santa Barbara, Calif.-based STAR Telecommunications Inc., which buys excess long
distance minutes from large carriers and sells them to smaller ones, has acquired New
York-based T-One Corp., a wholesale international long distance carrier.

The shareholders of T-One, a privately held company, will receive 660,000 shares of
STAR common stock. T-One will be absorbed into STAR, and the revenues of the two companies
will be pooled.

A spokesman for STAR says the acquisition of T-One will help STAR lower the cost of
terminating calls in the Middle East and Africa.

STAR is a publicly traded company (Nasdaq: STRX), and has gateways in New York, Los
Angeles, Dallas, London, Frankfurt, Dusseldorf and Munich.

Section 271: Bell Atlantic Sees Good Shot at Long Distance Entry in New
York, SBC Loses Oklahoma Appeal

By Carol L. Bowers

Long distance giants AT&T Corp. and MCI Telecommunications Corp. say a New York
Public Service Commission proposal that would ultimately let Bell Atlantic Corp. into the
long distance market in that state needs "refinement."

The comments came in response to a draft proposal the PSC staff put out for comment
that gave Bell Atlantic a "roadmap" to get the agency to give further
consideration to the company’s application to offer long distance service in the state.

Michael Morrissey, AT&T’s vice president for law and government affairs, notes,
however, that "satisfying these conditions is not tantamount to approval. It merely
represents what must be done to be considered by commission staff."

In other Section 271 action, SBC Communications Corp. lost its appeal of the Federal
Communications Commission’s (FCC) decision that refused the company entry into the long
distance market in Oklahoma. The U.S. Court of Appeals for the D.C. Circuit, which hears
appeals of all FCC decisions, ruled that Brooks Fiber Properties Inc.’s local exchange
service to 20 business customers and residential service to four of its employees "is
hardly a commercial alternative." SBC also lost its argument that new entrants could
effectively block the second method of entry for a Bell operating company–in which no
company is seeking to provide local service (see related story, page 32)–by signing up
for interconnection agreements, then refusing to provide service. The court noted most
negotiations are done in good faith, and there are other methods of redress for "bad
faith" negotiations.

Level 3 Cuts Deal with Frontier, Trades on Nasdaq

Level 3 Communications Inc. has agreed to lease capacity on Frontier Corp.’s
13,000-mile synchronous optical network (SONET) fiber optic Internet protocol (IP)-capable
network for a period of up to five years.

Valued at approximately $165 million, the leased network encompasses 8,300 route miles
of OC12 network capacity, initially connecting 15 of the nation’s largest cities. Although
Level 3 is building its own IP-based network, the lease arrangement will give it a network
over which to begin providing service to business customers in several cities during the
third quarter of 1998.

In related news, Level 3 Communications Inc.’s common stock was expected to begin
trading April 1 on the Nasdaq National Market under the symbol "LVLT." The
Nasdaq listing will follow the separation of Level 3 and the construction subsidiary of
Peter Kiewit Sons’ Inc., which was expected to be completed March 31.

Williams Sues WorldCom Over Fiber Strand

Williams Communications has sued WorldCom Inc. in Oklahoma District Court over terms of
the 1994 sales agreement of Williams’ WilTel Network Services business.

In the suit, Williams contends that the contract allowed it to retain the rights to use
a fiber strand in the former WilTel network for multimedia traffic, including Internet
service. Williams honored a three-year no-compete clause in the 1994 contract, but
recently announced its re-entry into the telecommunications market with plans to build a
new national fiber optic network. WorldCom has disputed the intended use of the fiber
strand, prompting Williams to ask the court for a declaratory judgment requiring WorldCom
to live up to the contract.

_{New Value-Added Network Company Drives IP Voice into Mexico}

_{By Paula Bernier}

_{A new company called IPVan Inc. is helping Internet telephony service
providers cross the Mexican border.}

_{"The Internet protocol (IP) voice revolution has reached Mexico,"
says Raul E. Pena, vice president of sales and marketing at IPVan (which stands for IP
value-added network). "We can facilitate the growth of the IP telephony market
between Mexico and the United States."}

_{IPVan’s roll will be akin to that of a web hosting company, explains the
company’s president Rueben G. Gonzalez, who also owns Mexican Internet service provider
(ISP) Icanet and systems integration company Icatel.}

Internet telephony service providers (ITSPs) can place their IP voice gateways at
IPVan’s Tijuana-based network operations center (NOC). IPVan will manage those gateways
for the carrier customer. It also will provide a microwave link between its NOC in Tijuana
and San Diego, through which ITSPs can link their Mexico- and U.S.-based gateways.

It’s a way for ITSPs to enter the Mexican market quickly, without having to wade
through regulatory red tape and without having to hire more support staff or get access to
fiber, explains Pena, noting that telecommunications traffic between the United States and
Mexico is growing dramatically. IntraNet de Mexico, s.a de CV, the Mexican-based sister
company of IPVan, already has received the necessary clearances from the SCT, the Mexican
equivalent of the Federal Communications Commission, he says.

For the first phase of its service, IPVan will offer links from the United States to
Mexico. The second phase, later this year, will provide Mexico-to-United States
connectivity.

The company says its entire network is state-of-the-art, with redundant network links
and Cisco switch routers at its points of presence. IPVan’s NOC is equipped to process
more than 200 million minutes of traffic per month at very low levels of delay.

Pricing for IPVan’s carrier customers will be on a call-per-minute basis, and will vary
depending on contract lengths and volume commitments.

IP Telephony Goes Mass Market

By Paula Bernier

Internet protocol (IP) telephony is coming into the mainstream in a powerful way this
spring as retail giant Computer City begins to sell Ericsson Inc.’s Phone Doubler software
and Internet telephony services from Internet Global Services Inc. (iGlobal).

"It’s brand new, it works and we’re all excited about it," says Jack Ferry,
vice president of New Ventures at Computer City, noting that 20 million to 30 million
people come through the company’s stores annually.

"Ericsson will be a leader in voice over the Internet," says Bo Hedfors,
president of Ericsson Inc. "From the mobile phone market, we know how important it is
to be in this retail space," he adds.

Computer City, a Tandy Corp. subsidiary, will sell Phone Doubler as a stand-alone
product or bundled with Internet telephony services from iGlobal. Pricing had not been
finalized as of press time, but one possible scenario being discussed was a
$9.95-per-month service including 400 minutes of use.

Phone Doubler client software enables individuals to answer telephone calls via their
personal computers (PCs) while they’re connected to the Internet. Users can receive or
send calls to voice mail or otherwise manage incoming calls while online, all over a
standard copper connection.

When paired with an Internet telephony service such as iGlobal’s, Phone Doubler also
can be the client software that allows PC users to make low-cost long distance telephone
calls to standard telephones over IP connections. iGlobal is collocating Internet
telephony gateways, which will convert the incoming binary voice streams from Phone
Doubler clients to analog form before passing them on to the public switched telephone
network, at Computer City stores.

Since iGlobal already has an Internet backbone in Texas, Dallas and Houston will be the
first markets to receive the services, says Michael Gorton, chief executive officer of
iGlobal. Service launches will follow in other metropolitan areas where iGlobal intends to
build its own IP voice backbone in tandem with the opening of new Computer City
"concept stores," which will offer more customer support, says Gorton.

But iGlobal’s Internet telephony service plans are not limited to the United States,
says Gorton.

"We have just shot the gun on the Internet voice," he says. "This
Internet telephony thing is significant."

News Briefs

Qwest Communications International Inc. recently announced it has won
$35 million in new services contracts, two of which are with major long distance
telecommunications providers, which it declined to name. In related news, Qwest announced
plans to buy European Internet service provider EUnet International for
$154 million in cash and stock, which could add to its Internet telephony arsenal.

Comcast Telecommunications Inc. is offering 9 cents-per-minute
residential interstate long distance to Comcast cable TV and cellular customers. The
company claims it is the first to make such a low-cost offer billed in the traditional
paper format, saying other 9-cent offers available today are only available to those who
can receive their bills through the Internet.

Sprint Communications Co. is bumping up its network capacity and
reliability. The company will use CIENA Corp.’s 40-channel MultiWave 4000 dense wavelength
dvision multiplexing system, increasing its network capacity by 250 percent now and
eventually 600 percent. The company also recently turned up its 100th four-fiber,
bi-directional, line-switched synchronous optical transport (SONET) ring.

It appears Tel-Save Holdings Inc. may be having some second thoughts
about its earlier announcement seeking takeover suitors. "I believe there is a strong
probability the company will remain independent, grow quickly and become a larger, more
valuable company," says CEO Dan Borislow, adding that the fair value of Tel-Save
might not be properly represented due to the ongoing discussions.