Bell Atlantic Jumps On Internet Bandwagon
It will be the latest in a string of telecom-Internet mergers, partnerships and strategies
Bell Atlantic Corp., a talked about, but so far little-seen Internet services player, is about to turn up the volume by rolling out a new dial-up service it hopes will challenge national telcos AT&T Corp. and MCI Communications.
The Baby Bell's new Internet service has been among the industry's most-anticipated offerings, given Bell Atlantic's dominance inside the Washington-Baltimore area, a market that has become a hotbed of Internet dealmaking.
Earlier this summer, telco MFS Communications helped stir the pot when it announced plans to acquire Internet service provider Uunet Technologies Inc., Fairfax, Va. For its part, Uunet's archrival Psinet, Herndon, Va., has reportedly been in talks with numerous telecom companies, including Bell Atlantic.
Meanwhile, Digex, Beltsville, Md., has formed an alliance with LCI International, a long distance provider, and in May announced a deal with MCI Communications to build a T3 high-speed national network.
The new offering, known as Bell Atlantic.net, is the project of the regional Bell operating company's Internet Solutions division, which formed in January and launched a dedicated Internet service in April.
According to BA executives, the service will come with Netscape Navigator and the option of Cyber Patrol, which lets parents control kids' Internet access. Bell Atlantic plans to add Microsoft's Explorer World Wide Web browser later.
A special search engine will be able to find Washington area information and event schedules as well as national and international data, said Dick Beville, vice president for marketing and access programs at Bell Atlantic Internet Solutions.
"Bell Atlantic subscribers -- those new to the [Internet] as well as veteran cybersurfers -- will find our service provides clear navigation and easy access to this local information, as well as to the other millions of sites on the World Wide Web," said Bob Beran, president of Bell Atlantic Internet Solutions.
Beville said the group will leverage its proximity to the federal government through Bell Atlantic's federal systems division, which will list the Internet offering on the next General Services Administration Schedule.
The service will be available in the Washington-Baltimore area and will be free for one month to new subscribers, minus a provider fee, which is expected to run $2 a month for unlimited access. After that, unlimited access will cost $17.95 a month or $4.95 for five hours, and $1.95 each hour thereafter.
At the end of July, said Beville, Bell Atlantic will give its Internet service a push forward by offering integrated services digital network in Northern Virginia and Roanoke for on-line access.
Bell Atlantic's is the latest in a string of announcements following AT&T's March offering of five hours of free Internet access a month. MCI is matching the deal. The Telecom/Internet business is getting crowded, and some think the Bells won't be able to compete against larger national companies.
"The [regional Bell operating companies] are limited," said John Scarborough, director of Internet marketing at MCI. "They have to rely on someone else to provide a backbone."
MCI, which prides itself on its powerful Internet backbone, claims companies without the network won't be able to keep up. Scarborough's job is to increase what is now a $100 million Internet business at MCI to a $2 billion venture by 2000.
The history of telecom companies banding together with Internet businesses had one of its first successes a year ago when BBN Planet, Cambridge, Mass., formed an alliance with AT&T, Basking Ridge, N.J. That deal has been good for both partners -- AT&T provides the name and BBN supplies the network. However, BBN's name has been conspicuously absent from announcements that clearly involve its technology.
Uunet earlier this month formed a multimillion dollar partnership with telco GTE, Stamford, Conn., to sell GTE Internet Solutions. The nationwide service will cost $19.95 a month for unlimited access.
The string of recent alliances have altered the landscape of the Internet business, especially in the Washington area where most of the important deal makers are based.
"Our whole strategy has changed since MFS-Uunet," said Jeff Parness, spokesman for IDT Corp., Hackensack N.J., which sells phone, Internet and Internet phone service.
IDT reacted to the alliance by launching a new strategy about two months ago. The company is giving away unlimited free Internet access to customers who spend $150 or more a month on long distance from IDT.
"We've figured out how to make a profit on the Internet business," said Parness. "We use Internet as a loss leader to pick up telecom customers."
IDT's revenues in 1995 were $11 million; it reported $18.2 million in the third quarter of this year alone. Parness claims the phone service is 20 to 50 percent lower than any other telco. IDT works with LDDS WorldCom, Jackson, Miss., to provide telecom.
While partnerships are popping up all over, Bell Atlantic's Beville said his company have not yet formed such an alliance.
"This business requires the technological support of a lot of different resources," said MCI's Scarborough. MCI has partnerships in this arena with some heavy hitters: Microsoft, Intel and Digital Equipment Corp. Later this year, MCI plans to introduce a new intranet product with Microsoft, according to MCI spokesman Jim Monroe. "Microsoft doesn't have all the pieces either," said Monroe.
Another MCI alliance -- Concert -- with British Telecommunications gave birth last month to InternetPlus, an international Internet venture that is expected to have 20 hubs around the world within the year. The goal is to have presence in 70 countries. InternetPlus offers dedicated and dial-up access, network bandwidth for multinational company intranets and transport service for Internet service providers.
"This is a significant announcement by MCI and BT that changes the face of the Internet from a primarily North American phenomena to a truly global entity.
The days of unreliable access and equal access to bandwidth are over," according to a report by Zona Research, Redwood City, Calif.
More and more, analysts and others point to the necessity of Internet companies to have a global reach.
That's not good news for the Bells, especially. MCI estimates that international Internet traffic is growing at 100 percent a year, and by 1998 will have surpassed domestic Internet traffic.
The sheer speed of this market has encouraged many of these partnerships. Companies that got into the game late can't afford to build a network, so they must either buy one or form a partnership with someone who already has an infrastructure in place.
"Networks are valuable assets," said Parness. But they aren't everything. In this business, he added, "You have to be nimble and opportunistic."
Some Recent Partnerships and Mergers Between Telecom and Internet Companies
Digex and MCI partner to build a national high-speed T3 network
Capital Area Internet Service announces merger with CGX Telecom
Digex partners with LCI International to offer Internet access
Bell Atlantic forms alliance with cable company Jones Communications
Pacific Bell and America Online band together to offer Internet access to California
MFS Communications announces intent to acquire Uunet Technologies Inc.
GTE partners with Uunet to offer Internet access