Multinational team attacks European MAN market

By EDWARD HARROFF

The fastest-growing U.K. national Synchronous Digital Hierarchy (sdh) network provider, Energis Communications, has decided to team up with two leading European telecommunications carriers to enter the competitive U.K. metropolitan area network (man) services business. The newly created company, MetroHoldings Ltd., will build new fiber-optic city networks to provide fully integrated local and long-distance sdh-based telecommunications services in key cities in the United Kingdom. London will be the first target, with Manchester and Birmingham expected to follow.

The MetroHoldings announcement represents a major commercial agreement between Energis, Deutsche Telekom (Europe`s largest telecommunications group, with revenues of DM67 billion/ US$43.8 billion), and France Telecom (the world`s fourth-largest carrier, with revenues of Fr156.7 billion/US$30.3 billion). Once MetroHoldings` city networks are completed, Britain-based corporate users will have an alternative to the existing duopoly of British Telecom (BT) and Mercury.

As MetroHoldings` operational management is still firming up, detailed network build plans were not available at press time. If past sdh network deployment success is repeated, Energis`s preferred sdh network suppliers, Nortel and gpt, will probably continue with MetroHoldings` city loops. Energis even signed a "Partners in Telephony" agreement with Nortel last year. As for Energis`s choices for international partners, the MetroHoldings deal builds on last year`s correspondent carrier agreement into France and Germany.

"man investments are a very interesting venture with such a quick return-on-investment pattern [less than two years]," according to James Dodd, senior telecom analyst at Dresnder Bank/Kleinwort & Benson. He points outs that "MetroHoldings` time-to-market capabilities are impressive, as the new sdh network building starts from Energis`s existing network based on the right-of-ways with The National Grid [an electric utility group operating in England, Wales, and Scotland] and The London Underground. Very few mans exist in the United Kingdom--about four serious London competitors: BT, Mercury, colt Telecom, and WorldCom. Other major competitors are FibreNet, London cable-TV operators, and Manchester Electric Utility`s fiber ring."

However, Steve Wallage, Dataquest analyst, notes, "Energis`s share price [one of the hottest newly listed U.K. stocks] surged higher at the initial announcement, with MetroHoldings promising to stretch and leverage the potential Energis infrastructure investment into the city networks. My major doubt about this alliance is the ability of Energis to cooperate closely with two partners that have limited international alliance success. The key issue is how these network expansions will help to give better end-to-end network management to Global One and other existing business users."

Energis, a public telecommunications company formed by The National Grid, has already built one of Europe`s largest sdh networks (see figure); it spans more than 5000 km (3110 mi). The United Kingdom`s telecommunications governmental agency, Oftel, has described this infrastructure as the most resilient and reliable national network, although it carries only a small percentage (less than 5%) of overall national long-distance traffic.

According to Alistair Hendersen, network planning director at Energis, a major 10-year contract awarded in June 1993 by the British Broadcasting Corp. (bbc) was key to establishing the Energis national network. "The contract involved a national network taking 2.5-Gbit/sec sdh onto the customer site to provide video and radio contribution and distribution capabilities. The time scales were tight [live bbc service delivered in January 1995], and the demands of broadcast video technically exacting."

Unlike some of the alternative telecommunications carriers that have been founded by an energy utilities group, Energis Communications has already focused exclusively on the business marketplace and was not given captured business from The National Grid to kick-start network traffic. Hendersen points out that "Energis built up its network expertise from a fresh start without the constraints that [come from] serving the parent utilities group`s specific telecom needs. The network was built to serve the national British business accounts and called for a different network topology. Energis`s performance is a reflection of the inherent resilience of our sdh equipment." This approach appears to have borne fruit, as Energis now services more than 35,000 corporate sites throughout the United Kingdom.

According to John Beaumont, Energis`s director of strategy and business development, "Energis shares a common vision with Deutsche Telekom and France Telecom on how to better service the business customers via higher-quality, higher-reliability, and lower-cost tele com munications services. MetroHoldings will build the new local metropolitan infrastructure that expands Energis`s existing national network and creates direct links with existing customers." MetroHoldings will permit all partners to make their initial capital investments go further with one scheme for mans. Energis will bring its British infrastructure management expertise to help lower operating costs and permit interconnect access for corporate network users. q

Edward Harroff writes on telecommunications topics from Bellevue, Switzerland.