Ray Van Eng (11/12/96)
British Telecommunications (BT) in a move that shocked much of the world have announced plans to acquire MCI Communications (MCI) to form a conglomerate, Concert Communications Company that would have headquarters in London, UK and Washington, DC. The combined company would have a customer base of 43 million people worldwide and an income of $42 Billion. In contrast, AT&T has 90 million customers and sales of $51 Billion. The $20 Billion buyout/merger will be the biggest of its kind in the telecommunication industry that crosses International borders. It could signify a new era of global competition in such emerging markets as Internet access, Intranet applications, wireless telephony, electronic commerce, interactive television, on-demand entertainment delivery, broadband multimedia services etc. Let's step back a bit to June 1993, when BT took a 20% stake of MCI. The intention of the two companies has always been to build a global network infrastructure and a set of human skills to serve the emerging markets brought on by the convergence of the telecommunication and the information industry which could create a revenue stream of more than $1 trillion annually. In the last few years, commerce is becoming increasingly global in nature. Business users all over the world are demanding end to end communication solutions at low cost. Meanwhile, the Internet exploded onto the scene and it is being widely regarded as a perfect medium to integrate the different kinds of services that a business would require for effective communication: e-mail, world wide web, discussion forums, electronic commerce, fax transmission, audio and video messages, animated presentations, database access, interactive marketing, videoconferencing, virtual reality etc. Of course, much of the Internet technologies are also useful for many consumer applications, such as electronic banking, online shopping, gaming, entertainment, sports, news, education to name just a few. The Internet phenomenon has driven up a user demand for more integrated global networks consisting of inter-connecting backbones and fast data transmission switches capable of delivering guaranteed quality of services. To satisfy this requirement, not only a robust infrastructure is needed, of equal importance is the expertise in management, and sales and marketing skills in order to package the service to a world wide customer base that cuts across different cultures, language barriers and ways of doing business. Taken all these things into consideration, it becomes clear of what MCI and BT are trying to achieve with their merger. Along with other major telecommunication giants such as AT&T, NT&T, Sprint etc. , BT and MCI own vast stretches of Internet backbones. Like the Interstate highway system, backbones serve to aggregate local Internet dail-ups together and provide a virtual connection between hosts that may reside in different continents. By combining the two companies, MCI and BT want to be a dominant player in the nascent Internet market. Recent development of MCI and BT tells an interesting story. In June this year, they have announced the launch of the Concert InternetPlus, a business unit aiming at serving the corporate Internet/Intranet application needs and the consumer Internet access market. Over the last few months, they have also been successfully increased the capacity of their Internet backbone fourfold. Right now they are busy at work in deploying high speed ATM (asynchronous transfer mode) switches to create a trans-Atlantic link that would hook-up the two firms' own ATM networks: MCI's HyperStream ATM and BT's Cellstream. They have plans to expand the service to other countries in 1997. A number of projects have also been planned for next year: -- The launch of an Internet gaming service "Wireplay" that would allow people from different parts of the world to play computer games against each other over the network for a fee. -- A pilot test for XDSL high speed Internet access technology in the U.S. and Europe. -- An increasing effort to pursue the corporate Intranet market with the introduction of personalized broadcast services (similar to Pointcast) to users in the U.S. and Asia. -- A deal with Rupert Murdoch's News Corporation to launch a digital broadcast service in the U.S. for pay-per-view video-on-demand services. Incidentally, NewsCorp also has close business ties with BT. The two companies are working on creating an Internet service provider in Europe named Springboard earlier this year. News Corp is also trying to talk BT into collaborating with them in sharing the cost of the BSkyB project, a satellite digital TV broadcasting service that requires an expensive TV set-top box which carries a price tag of £500 each. In return, BT would get to use the device for home shopping and banking services. So what are the other global telecom players going to do now that BT and MCI has become one? In Europe, AT&T already has a strategic alliance with Unisource, a consortium of four European telecom firms. Sprint had a joint venture with Deutsche Telekom and France Telecom, although some analysis speculate that Sprint and Japan's Nippon Telegraph and Telephone (NT&T) may merge. Well, we don't know until it is being announced. Even the BT & MCI merger could take up to a year before it is being approved by the U.S. Department of Justice and the Federal Communication Commission. The world is certainly getting smaller. At the same time, interactions among nations and between continents are increasing at a rapid pace with advances in telecommunication and information technology. All the signs are pointing towards an exciting period which we would like to call the "Great Global Convergence" where the Internet will play a key role in accelerating the process. Our daily lives and the way we do business will never be the same again when that happens. Concert Communications Company can be found on the Internet at www.concert.com. |