MCI, consumers, and Net telephony
MCI hasn't been as aggressive in going after the consumer
Internet market as AT&T has been. Why?
We have tended to focus on the business community for two reasons.
The business community is better outfitted statistically to take advantage
of Internet products and services than the consumer market. This isn't to
dismiss the consumer market by any means--it's clearly big and growing. The
current stats are that something like 35 to 40 percent of American
households have PCs and maybe a third to more than that have modems. That's
a significant population right there.
We are preparing to handle more of the consumer community as the equipment
and software penetrates the market. Plainly, other companies have shown
that there does exist a market and there clearly exists demand. Whether the
demand is sustainable under reasonable pricing formulas is still an
interesting question to answer. We've already been through the tragedy of
that situation. Others have gone through that, AOL in particular. So we are
conscious of how big and volatile this market can be, and we want to serve
them properly and not go in and advertise things that aren't sustainable.
I think some level of service is sustainable at $19.95, but I don't think
it's unlimited level of service, or alternatively, it may be unlimited
access to nonpremium services. I'm hoping two factors will enter into this
to make things better for our consumers. One of them is simply engineering
The second thing I hope will happen is that people will understand--as they
have with the telephone business--that paying for what you use is often an
attractive arrangement. If it's really flat rate for everyone and the ratio
of the heaviest user to the lightest use is very big, the lightest user is
going to say at some point, "Wait a minute, I pay $19.95 a month and use it
3 hours a month. He pays $19.95 a month and uses it 500 hours a month. I
think I must be paying for his use. This doesn't sound right." At some
point, the market will rationalize, and when that happens you'll see a much
more reasonable pricing structure that's self-sustaining. Let's face it, we
don't want the Net to go away, but it has to sustain itself as a business
or it will go away.
[MCI CEO] Bert Roberts says he doesn't think Internet
telephones will be much of a challenge to regular telephones. Do you agree?
That's right. First of all, the total capacity of the Internet today,
as large as we like to think it is, is quite small compared to the total
telephone network on a global scale. So my back-of-the-envelope estimate,
which is not very scientific, is that if we took every bit of Internet
capacity that the world has now and turned it over to Internet telephony,
we might handle three percent of the world's load. And that's probably
On the other hand, as time goes on we will be able to support more and more
of those kinds of applications--not just telephony, but other real-time
kinds of services. Multiparty gaming, for example, is becoming a very
popular kind of activity that our partner, British Telecom, is introducing.
So we should be able to handle more of it, but there are circumstances when
being able to do real-time service through the Internet is just what you
need. In a hotel room, I have one telephone line. And in the home, I have
one telephone line. I'm on the Net and I want to buy something, but I want
to talk to customer service. Do I want to hang up the phone and kill my
Internet connection to talk to the customer service guy who then wants to
say, "Now, if you look at the page on the screen..."
What do you think of the regional Bell operating companies
complaining to the FCC that Internet traffic is clogging up their networks?
We have detected an anomaly in some of their complaints. One of the
suppliers said that they had to spend an extra $14 million or something to
upgrade their service in order to deal with the longer connect times for
Internet usage. At the same time, they were also advertising that people
should get on the Net and [offering them] free time, and buy a
second phone line, by the way! We said, "Gee, this doesn't seem to match up
too well. Maybe your marketing department and your engineering people
should talk to each other."
What are some of the things you're doing to the MCI
infrastructure to allow it to handle things like streamed audio and video?
We have been increasing the absolute capacity of the network by
increasing the speed of the SONET (synchronous optical networks) interfaces
that we use. Our current backbone runs at 622 mbps. We are going to lay in
an additional ring of OC12 [622-mbps fiber-optic lines] capability
during the remainder of 1997 just to augment the total capacity. We are
pressing all of the router vendors--but most noticeably Cisco because we
use a lot of their equipment--on the packet forwarding rates that we can
expect from their newer engines in order to use that high-capacity fiber
that we have available.
We're also working together with Intel, Cisco, and BT on quality-of-service
measures that we can introduce into the network to distinguish real-time
traffic from other traffic. This is still in the laboratory stage. I
haven't deployed anything in the production network, but we're seeing some
very good results so far in the lab. I would emphasize that if it works in
the lab, that still leaves you some distance away from production
Together, we already have something called Concert Internet Plus, which is
a big global business Internet backbone that is still under construction.
Of course, in the United States, we have the internetMCI backbone that
carries Internet traffic domestically with about 200 international
connections around the world. When we combine all of this, there's an
opportunity to build a common global backbone. I can't tell you how excited
I am about that! For one thing, it makes it possible to offer
uniform services to our businesses and customers that one would not
otherwise be able to offer.
The second thing it does is that the size of the corporation will be such
that our ability to put capital to work is significantly increased. I
anticipate that our Internet efforts will have their fair share of capital
allocations in order to continue to grow and meet all our customer's demands.
NEXT: What we want from the Internet