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Say goodbye to small ISPs

Which Internet service provider will be next on the menu to sate the voracious merger appetite of the current market?

Which Internet service provider will be next on the menu to sate the voracious merger appetite of the current market? That was the question being kicked around again today by stock traders and industry executives in the wake of WorldCom's $14 billion buyout of MFS Communications.

One of MFS's key assets included UUNet Technologies, a leading ISP. UUNet's customer base is estimated at more than 22,000 accounts, according to a recent regulatory filing. It also is the main Internet dial-up network for Microsoft, including the Microsoft Network.

Today's merger is just one in a long-anticipated shakedown of the ISP market which has been saturated in the past year as new ISPs have popped up like weeds from coast to coast. Now companies are flexing their technical and marketing muscle in a race to establish their dominance in what will be a winner-take-all market.

In the wake of today's MFS-WorldCom planned merger, the stocks of other ISPs rose, some sharply. That occurred despite a downturn in the overall market by midday.

Netcom rose 1 point to 19-1/4, or more than 5 percent, in midday trading; BBN Planet climbed 5/8 to 19-1/8; PSINet jumped 1/2 to 11-1/2.

"Whenever a telecom merger is announced, the ISP stocks go up," said David Locke, an analyst with the San Francisco investment banking firm of Volpe Welte. "It's likely that within a few year, the PSIs and Netcoms of the world may not be independent."

Some possible combinations already are being bandied about by the Wall Street rumor mongers. They include Pacific Bell buying Netcom and NYNEX or Bell Atlantic gobbling up PSINet because both ISPs are strong in their respective telco territory--Netcom in the West and PSI in the East.

None of the companies would comment on the possibility of any such combination.

Further consolidation is not guaranteed, however. Telcos may be able to build their own ISP strongholds without turning to a costly acquisition. Pac Bell, for example, is exceeding many of its own expectations since its launch of dial-up Internet access earlier this year, according to company insiders.

Pac Bell wouldn't comment but the company soon is expected to report robust growth of the start-up service in a public release. Other telecos continue to build their networks. Today, for example, AT&T said America Online is now available on its WorldNet service at 20 percent lower than its standard dial-up access rate.