A telecom shootout

Telecommunications carriers' latest efforts to begin offering Internet-based

data services could threaten territory typically dominated by systems integrators,

according to a telecom analyst.

Carriers such as WorldCom Inc., Sprint and AT&T traditionally have

ended their service at the demarcation line of a building's walls. Integrators

then pick up there by integrating those telecom services with voice and

data applications inside the buildings, bringing the services all the way

to the desktop.

However, falling profits from residential long-distance

service have prompted the three major long-distance carriers to go after

Wall Street investments by shifting and splitting off separate business

lines devoted to areas of high growth, such as data centers, Web hosting

and other Internet services.

"What's happened is that the real gravy, the real value-added [business]

is moving to the other side of the [demarcation line]," said Warren Suss,

president of Suss Consulting Inc., a consulting firm specializing in the

federal technology market. "I see this movement toward e-business, Web [and]

data centers putting them on a collision course with the integrators, and

I'm not sure who's going to win."

Carriers say the business moves will speed development of new technologies

and improve service to customers, including those at government agencies.

The latest change occurred at Sprint. The company launched an electronic

solutions business unit last month, which joins Sprint Internet Services

with Sprint Enterprise Network Services, the company's consulting arm. Called

Sprint e-Solutions, the unit will offer business and government customers

end-to-end solutions that bundle transport, co-located hosting, virtual

private networks (VPNs), applications management and database management,

said Mike Ligas, director of business development for Sprint's government

systems.

The inclusion of Sprint's Enterprise Network Services group in the

e-Solutions business enables the company to offer its consulting services

to design and integrate networks, he said. Sprint has 2,300 e-Solutions

employees.

"We're typically known as a transport provider to the wide-area network,"

Ligas said. "This extends that from managed services beyond the WAN to the

desktop."

WorldCom's realignment into two separate business lines offers a similar

model to that of Sprint. Both provide telecommunications circuits and services

to all federal agencies under the $1.5 billion FTS 2001 contract.

As a result of the realignment at WorldCom, the company is investing

resources in Web centers, said Ron McMurtrie, vice president of business

product marketing at WorldCom. Web centers are multimedia customer-care

centers that go beyond call centers to include Web chats and e-mail, he

said. WorldCom also plans to expand into global VPNs, which McMurtrie expects

will be attractive to government customers.

AT&T, which recently created a family of four companies, had the

biggest problem because its whole end-to-end strategy was at risk, Suss

said. Separating the companies will enable AT&T to respond to customer

demand with new services more quickly, said C. Michael Armstrong, AT&T's

chairman and chief executive officer. AT&T will create new consumer

offerings around its residential long-distance and WorldNet Internet access

businesses, such as Digital Subscriber Line broadband services.

Mary Bradshaw, president

of the MultiMedia Telecommunications Association, a subsidiary of the Telecommunications

Industry Association, said integrators should not worry about losing business.

The high level of integration needed to marry legacy networks to new Internet-based

networks will keep integrators busy, she said.

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