WorldCom plans fiber rollout

WorldCom plans fiber rollout

By PAUL MORTENSEN

Global telecommunications carrier WorldCom (Jackson, MS) will spend A$113 million over five years to build a broadband fiber network in Sydney, Australia. WorldCom Australia`s initial plan is to install fiber in the central business district of Sydney; the company will also install cable in other Australian capital cities. WorldCom`s strategy, which targets business users, contrasts with the stalled rollouts of fiber into the "neighborhood" market by Australia`s prime carriers, Optus and Telstra.

WorldCom`s presence in Australia was formalized in January 1998. Since that time, WorldCom Australia has made fast headway. It received a carrier license in April--the first for a foreign-owned company in the newly deregulated (A$21 billion) telecommunications market--and submitted a development application to the Planning Committee of the City of Sydney for an underground fiber-optic cable rollout in the central business district.

The industry development plan reveals WorldCom Australia will spend A$40 million in 1998 and average A$18 million over the next four years in Sydney alone. WorldCom Australia`s business plan assumptions include aggressive price competition in its chosen market, with annual rate reductions on switched services of up to 40% over the next two years and 10% to 20% every year thereafter. Meanwhile, the company has also pledged A$100 million to the Southern Cross cable between Australia, New Zealand, and the United States.

According to a WorldCom Australia spokesperson, the company is looking at three strategies for installation of fiber in Sydney: owning and laying all of the cable conduits and pipes, using existing conduits and pipes, and entering a consortium with electric and gas companies. The latter option may involve Down Town Utilities, a joint venture of major electric companies--Sydney`s Energy Australia, Brisbane`s Energex, and Melbourne`s Citipower. The electric companies have access to most business premises via power ducts.

Regardless of which strategy is chosen, the company is confident it will install most of the network by the end of the year. WorldCom Australia`s network plan rests with MK International (mki), a wholly owned WorldCom Inc. subsidiary, which has also established a Sydney office. mki is involved in infrastructure builds for WorldCom and other telecommunications carriers worldwide.

The Sydney infrastructure will add another piece to WorldCom`s global network. This year, WorldCom Inc. will complete Phase One of its pan-European fiber network. With Cable & Wireless, the company is installing twin transatlantic cables connecting the United States and the United Kingdom; the cables also will connect with the pan-European network.

Different paths

WorldCom`s strategy contrasts markedly with that of Optus and Telstra. Both companies made what now appears to be a strategic error in concentrating their rollouts in the neighborhood market. In hindsight, they may have been better served by focusing on the high-volume markets represented by the multistory buildings leased by large companies.

Optus`s rollout of a hybrid fiber/coaxial-cable (hfc) system has now passed 2.1 million homes. However, it came to a halt last year after proving too costly, contributing to the company`s A$83.6 million loss. Optus is not keen to move on any rollout for at least 18 months, as it would take that long for revenue streams to grow from the company`s existing cable infrastructure. As for Telstra, its rollout has passed 2.4 million homes in its joint venture with Foxtel Cable TV. It also came to a stop six months ago after costs became prohibitive.

Finance is not the only problem with these multibillion-dollar dual systems. The hfc rollout by the two carriers has been criticized on technical grounds by a leading research organization, the Australian Photonics Cooperative Research Center (apcrc--Sydney). The apcrc notes that these hfc networks have asymmetrical capacity determined by the use of coaxial-cable links. They have broadband capacity in one direction to the home, which enables consumers to receive one-way broadband services (cable television, video-on-demand, and Internet access to video). However, should the demand for broadband interactive services grow (through point-to-point video telephony), the network will have to be upgraded through replacement of coaxial links to become a full-service network.

These dual networks are increasingly being installed above ground because of costs. Such installation has overloaded telephone poles and fueled the anger of local government and residents. The best solution, says the apcrc (ignoring the government argument that dual networks may promote "competition"), is to roll out one all-optical fiber network that will have the capacity to deliver to households and businesses all conceivable point-to-point communications services. One network would also represent a clear window of opportunity for Australian industry to develop its network technology to the point where it is capable of providing such a broad range of services.

Meanwhile, Optus and Telstra are now shifting their focus from primarily cabling neighborhoods to cabling business centers. There is little doubt that Australia`s substantial business districts in capital cities have room for multiple layers of fiber cabling. q

Paul Mortensen writes on telecommunications issues from Australia.