Williams Communications expands fiber network

March 1, 1998

Williams Communications expands fiber network

By GRACE F. MURPHY

Williams Communications, Tulsa, OK, is emerging from a three-year noncompete agreement with WorldCom Inc., Jackson, MS, hoping to top the growing field of carrier`s carriers. Williams helped create the field in 1985 and is now expanding its existing fiber-optic network and making wholesale service agreements with long-distance carriers.

Williams is a $13 billion company with three core businesses: Williams Gas Pipeline, Williams Energy Services, and Williams Communications. The company entered the communications business in 1985 by turning unused pipeline into conduits for fiber-optic cable. It sold the long-distance portion of its telecommunications business in 1995 to WorldCom Inc. As part of the agreement, Williams kept one strand of fiber throughout its 11,000-mi network and agreed to refrain from offering voice and data services for three years.

The noncompete agreement expired on January 6 of this year, and Williams Communications began marketing space and services on its existing network and what it eventually sees as an OC-192 (10-Gbit/sec) network reaching from coast to coast (see figure). The company plans to invest more than $1 billion over the next three years. Williams plans to own and operate a 19,000-mi network by year-end and a 25,000-mi network by the end of 1999.

Gordon Martin, vice president of sales and marketing for Williams Network, part of Williams Communications, says the company is focusing on five audiences as part of its re-entry into the market. They are the incumbent local exchange carriers, with primary emphasis on regional Bell operating companies; the competitive local exchange carriers; interexchange carriers; Internet service providers; and utilities.

Customer services include circuits, frame relay and Asynchronous Transfer Mode (atm) bandwidth, collocation services, and professional services, such as design installation and network management. Frank Semple, president of Williams Network, says new market entrants such as competitive local exchange carriers can take advantage of Williams`s network.

"We want to make sure that we`re clear in stating our market position as a car-rier`s carrier. To us, that`s a key difference. We really intend to fill that niche in the marketplace as a wholesale carrier and absolutely not compete with our customers," he says.

Can you get it wholesale?

Christine Heckart, vice president of the Verona, NJ-based telecommunications management consulting firm TeleChoice, says that other carriers that sell bandwidth sell it both retail and wholesale.

"If I`m in the market and I`m trying to buy wholesale bandwidth, I`d really rather not buy from my neighbor/competitor because all I`m doing is stuffing my competitor`s pocket with money, so it`s kind of a Catch-22 for everybody in the industry right now. When they want to buy capacity, they have to buy capacity from their rivals," she says.

Regional Bells that are launching national expansion and going into new markets are not going to want to buy bandwidth from at&t, Sprint, or WorldCom, Heckart says. "There is a very strong need right now in the industry for a pure wholesale provider that doesn`t have this other side--this Dr. Jeckyl and Mr. Hyde thing going on," she says.

Even if a company does not have a problem buying from other carriers, the increasing demand for high-speed services from commercial customers is causing bandwidth constraints, which reduces the availability of wholesale capacity on networks, Heckart says.

"If I`m a carrier and I know I`ve got this long list of commercial clients who are beating down my door trying to get some high-speed services, or I can turn around and sell that same capacity to a wholesale client, what do you think I`m going to do? With wholesale I`m going to get a lower price and a lower [profit] margin, and my commercial client is more strategically valuable to me. So I`m not going to sell my bandwidth to the wholesale provider; I`m going to reserve it for my commercial customers," she says.

Even if a carrier does sell capacity to a wholesale provider, the commercial customer may get preferential treatment, Heckart says.

"If they have a fiber cut, my circuit is the last to get rerouted. All of their important commercial clients get rerouted first, and after they all get restored, then maybe I get restored if there`s any capacity left," she says. "The companies out there that need capacity would probably be much more attracted to a provider that just specialized in wholesale than they would be to any or all of the existing providers out there, and that`s because they`re going to be treated like a first-class citizen."

Building the network

Williams is working on adding network capacity for wholesale providers through building network extensions or trading capacity with other carriers. Network extensions under construction connect Portland, OR, to Los Angeles, CA; Los Angeles to New York City; and Houston, TX, to Washington, DC. The southern fiber construction is scheduled for completion by mid-1998 and uses the company`s Transco natural gas pipeline right-of-way.

There is an inherent advantage to pipeline right-of-way, according to Semple. "To our knowledge, we have yet to have a cut where fiber is either in the cut or on active pipeline right-of-way. We continue to advantage ourselves with the use of active pipeline right-of-way, but you can also recognize that there`s some construction challenge there," he says.

Pirelli Cables and Systems of Lexington, SC, is providing approximately 900 mi of singlemode fiber-optic cable in the 1800-mi portion of network connecting Houston and Washington, DC. Pirelli will link Houston; New Orleans, LA; Jackson, MS; Birmingham, AL; Spartanburg, SC; Charlotte, Greensboro, and Raleigh, NC; Richmond, VA; and Washington, DC.

Williams has partnered with Enron and Montana Power to build the 1600-mi section of network from Portland to Los Angeles through Salt Lake City, UT. Williams has also joined with ixc Communications to build a 4500-mi network section from Los Angeles to New York.

Williams also recently signed an agreement to buy a 350-mi stretch of fiber-optic cable from MediaOne of Boston. The cable links Jacksonville, FL, and suburban Miami. Williams will provide some capacity for MediaOne`s use and will meet dark fiber demand by selling or exchanging capacity on the route to other carriers. According to Williams officials, the Florida market and cities along the Atlantic coast are important to its wholesale market strategy.

All of the new network sections will use transport equipment from Nortel, Brampton, ON, Canada. The company also recently agreed to buy $150 million worth of wide-area networking solutions from Ascend Communications Inc., Alameda, CA. Williams will buy GX 550 atm core switches, cbx 500 multiservice atm and b-stdx 9000 multiservice frame relay switches, as well as Navis network and service-management products from Ascend. Williams officials say they purchased the 550 switches because they combine the features of core and edge switches.

Heckart says Williams comes to the field with the advantage of enough capital to build new network, with existing right-of-way, and with personnel in place who know how to lay fiber. While Qwest Communications International of Denver, CO, ixc Communications Corp. of Austin, TX, and new player Level 3 Communications were able to overcome those barriers to enter the market, most companies cannot, she says.

"The other problem that you face once you`re in the market--now that you`ve got bandwidth--is who are you going to sell it to? Many of these other companies don`t have the luxury or necessarily the desire to be a totally niche player like Williams is planning," she says. "Williams is saying two things: They`re only going to be a carrier provider, and they`re going to have a data backbone. They`re going to have a cell backbone. It`s going to carry data packets, and if you do voice on that network, it`s going to be over the data network. They`re not going to have dms-250 switches in there. They`re not going to have voice switches on the network. It`s going to be a very clean packet network."

Customers call

Telecommunications providers are beginning to line up as tenants. According to a recently signed letter of intent, Williams will supply Intermedia Communications Inc., Tampa, FL, with use of approximately 14,000 route-mi of its existing and planned network. According to the agreement, which is worth approximately $260 million, Intermedia would have a 20-year indefeasible right-of-use for the capacity, access to carrier-level products such as high-capacity private line services, and space for its equipment in Williams`s facilities.

The proposed agreement provides interexchange capacity on Synchronous Optical Network systems at rates up to OC-48 (2.5 Gbits/sec), expandable with wavelength-division multiplexing to OC-192, based on Intermedia`s needs. Intermedia will expand its nationwide atm network from 22 nodes operating at OC-3 (155 Mbits/sec) to 35 nodes operating at up to OC-48 (2.5-Gbit/sec) speeds using capacity from the Williams agreement.

Intermedia also has the option to outsource its city-to-city network requirements and let Williams either provide capacity directly or manage Intermedia`s overall network. According to Intermedia company officials, the purchased capacity will reduce unit costs for interexchange transport.

US West, Englewood, CO, has signed a five-year agreement to become a tenant on Williams`s network as well. The two companies have agreed to work on developing applications that will support US West`s !nterprise Data Networking Services business and its planned entry into the interstate and regional long- distance market. q

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