MFS expands voice services over fiber

June 1, 1996

MFS expands voice services over fiber

ben harrison

Deploying Synchronous Optical Network (Sonet) fiber-optic networks to provide local, facilities-based telephone services in Boston and Rochester, NY, MFS Communications Co. Inc. (Omaha, NE) is structuring a more-competitive telephony market with multiple local-access moves, especially in light of the Telecom munications Act of 1996. As a leading competitive access provider, MFS Communications has deep fiber roots, with 199,726 fiber miles nationwide and 5720 connected buildings.

MFS Network Technologies, an operating unit of MFS Communications, designs, develops and manages the installation of the company`s fiber-optic networks and network expansions. It also provides development, design and engineering, project management, construction and support of networks and systems for third parties. Systems integration services are marketed to the communications industry, toll operators and authorities, cable-TV operators, government agencies and large corporations worldwide.

Boston fiber-optic network

The company is now offering telephony services over its 125-mile fiber-optic network that serves 422 buildings in the greater Boston area. According to President Royce J. Holland, "Our customers are relying on us to be the single point of contact for their telecommunications needs." Telephony services include resale Centrex, long distance, data, private line and special access.

Holland explains that MFS Intelnet Inc., another operating unit, already provides resale-type telephony services to a sizable customer base in Boston. This latest move expands its presence in the Boston market with end-to-end services over its fiber network.

According to Bart Taylor, an industry analyst from Baltimore, MD, local-loop developments in light of the Telecommunications Act of 1996 are significant. He says the Telecom Act encourages competition, and additional service offerings are likely to emerge. "The greatest potential for supplier sales in the near term probably lies in the fleshing out of local telephone systems, as competitors tap into the large revenues that can lead to related service offerings," Taylor says. "Resulting growth won`t happen uniformly or overnight."

Stephen Montgomery, vice president and chief operating officer at Electronicast Corp. (San Mateo, CA), agrees with Taylor. He says competitive access providers such as MFS are continuing to expand their fiber-optic rings within downtown areas. At the same time, they are beginning to expand into the suburbs via larger rings. The intention is to capture businesses, many of which have moved from downtown urban areas to outlying industrial and commercial parks.

Increasing market share

"[Competitive access providers] provide the business sector alternative access to interexchange carriers," Montgomery says. "To increase market share in competition with local telephone services, [competitive access providers] continue to deploy fiber-optic networks."

Ronald O. Brown, a consultant from Melrose, MA, says, "The Telecom munications Act has opened doors of new opportunity for [competitive access providers]. These carriers are expanding into major metropolitan areas, and Boston is a good example because of the compactness of its business area and favorable state-regulatory environment," he says. "[Competitive access providers] are less likely to move into residential towns."

MFS Communications is also providing local, facilities-based telephony services over its fiber-optic network in Rochester. The network, established in 1994 following an acquisition, includes 172.18 route miles and serves 80 buildings. Services include long distance, data, private line and special access.

Nationwide, MFS holds approximately 40% of the $1.2 billion non-telephone company local calling market. Historically, after a city network was built, MFS Telecom (Oak Brook Terrace, IL), another operating company of MFS Communications, provided basic line services that were approximately 50% less expensive than those of local exchange carriers. It then added other services such as local area network interconnection. Switched services were subsequently provided.

Ross Johnson, vice president of marketing for MFS Telecom, further explains the company`s national moves in "Turf Wars in the Local Loop," a paper he presented at the Comnet exposition and conference held in Washington, DC, in January (see Lightwave, March 1996, page 6). Johnson says the company`s Sonet-based backbone network offers high reliability to business customers. "Our Sonet backbone is a state-of-the-art network," he says. "We also have an Asynchronous Transfer Mode [ATM] network to provide data services for our large business customers.

"On the private-line side, the company offers a full range of digital and Sonet services," Johnson says. "We also provide a customer reconfiguration and monitoring service and can interconnect buildings located off our network via local exchange company short-haul facilities." He explains that MFS private line services use a Sonet ring topology to prevent interruptions of service caused by cable cuts and to offer circuit redundancy when desired. Commenting on telecommunications market trends, Johnson says, "As the pipe gets bigger, prices go down and demand goes up."

This MFS business strategy is confirmed in a report from Merrill Lynch (New York), which notes the company`s network construction strategy is to build to the "cream" of the market--high-usage business customers located in densely populated areas. The strategy is to avoid spending capital for networks in less densely populated areas with lower-usage customers.

According to the report, service is provided by a combination of facilities-based (on-net) and resale (off-net) of regional Bell operating company local loops with profitability heavily skewed toward facilities-based business. MFS`s network build-out strategy has put network operations in all of the top metropolitan service areas in U.S. markets. Merrill Lynch estimates MFS`s networks to be worth $9 billion, or approximately 9% of the current $95 billion telephone market, and 15% of the current $57 billion local business telephone market. q