Cable & Wireless launches ISP

The move is the first from Cable & Wireless since it bought MCI's Internet business for $1.75 billion in September. The former MCI Communications was required to sell its Internet business by the Federal Communications Commission before its merger with WorldCom would be approved.

The new Cable & Wireless Internet Xperience service offers customers 150 hours of dial-up access and Web hosting. Additional hours will cost 99 cents, and ISDN access is also available. Consumers also will be offered long distance calls for 7 cents per minute during the week and 5 cents per minute on weekends, a key distinction between the company and other ISPs.

"We are positioning ourselves as an Internet company that offers long distance," said Bruce Gudenberg, director of consumer Internet product marketing for Cable & Wireless USA. "The Internet is our primary product."

The move marks the first for Cable & Wireless into the consumer market. The company has offered long distance services to small and medium-sized businesses for years, but never to the home user, executives said.

Analysts and the company both say the current long distance players are too big and too entrenched to compete head to head. But the addition of long distance services helps to differentiate Cable & Wireless's Internet Xperience service from those provided by America Online and other national Net access providers.

Moreover, data traffic is expected to occupy more space on many networks than voice in just a few years, so Cable & Wireless as an Internet-first, voice-second company may find itself in the sweet spot of the market. Still, others think today's move into the consumer market is just a way to boost the possibility of a buyout.

Cable & Wireless is Britain's second-largest telecommunications company and operates in 70 different countries--yet it is not well-known in the United States, relative to other telecommunications firms.

The consumer Internet service may help increase Cable & Wireless's brand awareness in the United States, Gudenberg said. The company plans to kick off a multimillion-dollar advertising campaign before the end of the year, he added.

"They do like to promote their name in the areas they go into," said Mel Marten, a telecom analyst with investment bank Edward Jones. "I think they're hoping to promote their name."

Other analysts said the company's lack of name recognition could be a good thing, allowing it to establish a unique identity in a foreign market.

"They're kind of unknown," said Abhi Chaki, a senior analyst at Jupiter Communications. "That's a double-edged sword, but they can be whatever they want.

"There's still not that many national ISPs out there," Chaki added. "Most of them are regional players or mom-and-pops."

Chaki was among those who said Cable & Wireless is using long distance service as a lure for buyout offers.

"They're not trying to market long distance," he said. "Instead, they are using the consumer Internet [service] as the Trojan horse to try to sell additional services.

"I think what you're seeing is a glamour makeover of Cable & Wireless as it tries to revamp itself to become a more attractive takeover prospect," Chaki added.

Analysts said they had cautioned Cable & Wireless that it might be wiser to sell the consumer Internet business and concentrate on the more lucrative corporate market. But the firm insists that since it owns one of the premier high-speed networks that make up the backbone of the Internet, it can also successfully provide inexpensive dial-up services.

"If they already have the network, they might as well go ahead and use that for additional revenue," Marten said. "And adding long distance makes it more attractive for consumers."

In addition to MCI's backbone and commercial Internet businesses, Cable & Wireless got about 310,000 dial-up customers in the deal. Analysts speculated the company would lose as much as 30 percent of those subscribers, but Cable & Wireless said that number is much lower.

"We've been very successful at maintaining the customer base we acquired," Gudenberg said.

Cable & Wireless shares fell 2 percent to 31.9375 in midday trading. Shares have traded as high as 42.9375 and as low as 23.25 in the past year.