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UUNET

UUNET

22001 Loudoun County Parkway
Ashburn, Virginia 20147
U.S.A.
Telephone: (703) 206-5600
Toll Free: (800) 488-6384
Fax: (703) 206-5601
Web site: http://www.uu.net

Wholly Owned Subsidiary of WorldCom Inc.
Incorporated:
1987 as UUNet Technologies Inc.
Employees: 7,000
Sales: $3.5 billion (1999)
NAIC: 514191 Online Information Services

Founded in 1987, UUNET is recognized not only as the first commercial Internet service provider (ISP), but it is also the worlds leading Internet carrier. The company provides a comprehensive range of Internet services to more than 70,000 business customers worldwide, including Internet access, web hosting, remote access, virtual private networking (VPN), managed security, and multicast services, among others. It owns and operates one of the most widely deployed IP networks in the world, with more than 2,500 POPs (points of presence, or primary Internet connections) providing Internet connectivity in more than 100 countries. UUNETs parent company, WorldCom Inc., is one of the worlds largest telecommunications companies.

A Pioneering Internet Service Provider: 1987-94

UUNet Technologies Inc. (UUNET) was founded in 1987, and in 1988 it sold the first commercial connection to the Internet. For the next several years UUNET would be a pioneering Internet service provider (ISP) and offer innovative services. In 1992 UUNET developed the first commercial applicationlayer firewall services for IP (internet protocol) networks. In 1993 UUNET began offering T-1 connections to the Internet. In 1994 UUNET designed and installed the first virtual private network (VPN) service, the Virtual Private Data Network (VPDN) product family. The company also began offering web hosting services by joining forces with electronic publisher Interse Corporation to provide companies with a turnkey solution for putting their businesses on the Internet. The service included a T-1 connection, offered at two different speeds, from UUNET, and Interses World Wide Web server. Interse would also build the companys home page using HTML (hypertext markup language) and design an interactive, multi-tiered, and graphical presentation. In 1994 John Sidgmore became UUNETs CEO and president. He was formerly president and CEO of CSC Intelicom.

Providing Internet Access and Other Services to Corporate Customers: 1995-97

In early 1995 Microsoft Corporation was busy preparing its Microsoft Network (MSN), which would be offered with the release of Windows 95. UUNET provided Microsoft with a dedicated TCP/IP network that would allow MSN users to have dial-up access to both MSN and the Internet. UUNET would provide MSN users with a variety of high-speed service options, including ISDN and 28.8K bps (bits per second) modem access. Microsoft planned to offer full access to the Internet by the end of 1995. At the time UUNET had 25 points of presence and planned to have 100 connections in place within a few months. According to one analyst, UUNET was a good choice for Microsoft, because it had more expertise than telephone carriers about Internet protocol network management. Microsoft also took a minority interest in UUNET, with the funds to be used to expand UUNETs 25-city dial-up network, and also gained a seat on UUNETs board of directors.

UUNET completed its initial public offering (IPO) in May 1995. The stock was priced at $14 a share and raised more than $50 million. Two other ISPsNetcom On-Line Communications Services Inc. and Performance Systems International (PSINet)also had their IPOs that month, and all were well received by Wall Street. By July UUNETs stock was trading in the $45 range. Although none of the companies had shown a profit, investors were betting on their potential for explosive revenue growth in the coming year. At the time of UUNETs IPO, Microsoft owned about 15 percent of the company. As it turned out, UUNETs revenue for 1995 was $94 million, compared to $12.4 million in the previous year.

While UUNET had a smaller network than competitor Netcom On-Line Communications Services Inc., UUNET was focused on the corporate market, while Netcom was targeting the consumer market. The corporate market for Internet access was expected to grow more quickly, with the consumer market set to explode toward the end of the 1990s. The corporate market gave UUNET higher revenue streams, bigger margins, and a more reliable customer base. UUNET also offered premium services, such as network management and security, for which it could charge more. UUNETs corporate clients included America Online and AT&T as well as Microsoft, for whom it built Internet backbones. UUNET was not ignoring the consumer market, though, and most ISPs were pursuing a hybrid business model for both the corporate and consumer markets. UUNET was in the process of building out its network and adding points of presence.

In May 1995 UUNET introduced its Internet firewall and an encryption system for sending private data over public networks. The package included LanGuardian, a hardware-based encryption system, and Gauntlet, an application gateway firewall. It would allow workgroup users to create a virtual private network (VPN) over the Internet, thus facilitating collaborative development.

Later in the year UUNET introduced T-3 and SMDS (Switched Multimegabit Data Services), with pricing for the T-3 service starting at $5,000 per month. T-3 service was initially available in seven U.S. cities. The SMDS option was a public-switched data offering from the regional Bell operating companies (RBOCs), which allowed users to connect to UUNETs Internet backbone for around $1,500 a month.

UUNETs two principal services were leased-line connections for businesses under its AlterNet program and dial-up access through its AlterDial program. AlterDial was expected to have 130 points of presence by the end of 1995.

In November 1995 UUNET and Premenos Corporation entered into an alliance to build a system for electronic data interchange (EDI) over the Internet. EDI was seen to be a key element in business-to-business electronic commerce. Premenos produced a popular EDI software suite that enabled confidentiality, data integrity, user authentication, and built-in security.

In 1996 UUNET began offering more services related to electronic commerce over the Internet. They included end-to-end security, FTP (File Transport Protocol) hosting, dedicated servers that companies could lease for processor-intensive tasks such as graphics applications or web-based compilation, and improved reporting capabilities. By early 1996 UUNET was refocused on the corporate market, letting other ISPs such as America Online and CompuServe concentrate on consumers. With 1995 revenue of $94 million, UUNET was the largest player in the industry.

New Owners for UUNET: 1996

At the end of April 1996 it was announced that MFS Communications Inc. would acquire UUNET for $2 billion in stock. MFS Communications paid a 37 percent premium over market value for UUNET, making 40 of UUNETs 700 employees who owned UUNET stock millionaires. MFS Communications was based in Omaha, Nebraska, and offered local and long distance telephone service in New York and nationwide. It had built fiber-optic cable connections to 7,400 buildings in key financial districts in the United States and Europe. Together, the two companies would be able to offer end-to-end voice, data, and Internet services. Following the announcement UUNET extended its AlterDial service to 92 international cities.

In mid-1996 UUNET picked up GTE as a corporate customer when GTE introduced GTE Internet Solutions, which used UUNETs existing network to offer Internet access service in 250 cities in 46 states. At the time GTE was the largest local telephone service provider in the United States. Its Internet access service would be offered to consumers for $19.95 a month. At the same time UUNET formed an alliance with USConnect Inc. that would combine UUNETs national network with USConnects systems integration expertise. The partnership would provide businesses with a single source for integrating their LANs with the Internet.

Later in 1996 UUNET became the first major commercial ISP to offer web hosting services for Windows NT 4.0. UUNETs hosting service included a personalized domain name for the customer, servers housed at UUNET with guaranteed power backup, constant web site monitoring, daily tape backups, monthly server traffic reports, and third-party audit services. UUNET priced the service at $3,000 a month, with a $5,000 start-up fee for the dedicated server. If clients required assistance with web site design, UUNET referred them to third-party content developers who were part of the Team UUNET program. UUNET first offered web hosting services in 1994 using the Unix platform and claimed to have more than 800 customers.

Company Perspectives:

UUNETs objective is to be the leading supplier to businesses and professionals of complete communications solutions using Internet-related technologies. To reach that goal, UUNET is constantly expanding its high-performance network infrastructure, developing and enlarging its suite of value-added products and services, building and leveraging relationships with strategic partners, and expanding operations worldwide.

Web hosting was one service that ISPs could offer to distinguish themselves from their numerous competitors. In late 1996 UUNET began offering another service, ExtraLink, a package of extranet services that would enable companies to share information with customers and suppliers over a virtual private network (VPN). A related service, called ExtraLink Remote Access, allowed remote workers to access the corporate network without a large bank of modems.

For 1996 UUNETs revenues were estimated to be $216 million. Before the end of the year WorldCom Inc. acquired MFS Communications for approximately $12 billion in stock. Sidgmore remained CEO of UUNET and became vice-chairman and chief operating officer (COO) of WorldCom.

Prospering Under WorldCom: 1997-2000

With WorldCom as its parent company, UUNET was able to offer a pioneering service guarantee in early 1997. The company guaranteed uptime of more than 99.9 percent for intranet and business-to-business services. The guarantee applied to sites that were connected to one another by the UUNET network. It covered more than 300 locations in the United States and 500 in Europe and Asia.

UUNET also received $300 million from WorldCom to upgrade its Internet backbone in the United States and quadruple its capacity. Company officials estimated that the load on UUNETs backbone doubled every quarter, which meant the company would need to increase its capacity tenfold within a year and a hundredfold within two years. UUNET expected to have to spend about $300 million a year on network expansion for the next four or five years. UUNETs main ISP customers at the time were Microsoft, GTE, and EarthLink, with America Online also leasing a small portion of UUNETs network.

At the Internet World show in March 1997, UUNET announced it would offer global web hosting facilities to help multinational companies overcome the problem of narrow bandwidth between continents. UUNET planned to provide local web hosting through peer web service providers in Canada, Germany, the United Kingdom, and Taiwan. UUNET also announced the availability of IDSL technology, a combination of ISDN and DSL developed with MFS Communications and Ascend Communications Inc., that would provide small and medium-size businesses with direct connections to the Internet at a low cost. IDSL, which offered high-speed Internet access over standard phone lines, would first be deployed by the regional Bell operating companies (RBOCs), starting in California.

With the ISP market evolving and businesses demanding better quality and faster throughput, the large Internet backbone providersincluding UUNET and Sprintannounced they would no longer carry traffic for mid-size ISPs free of charge. In some cases, the traffic-exchange agreements would be terminated, while in other cases the mid-size ISPs would be charged a fee. Costs were expected to be passed along to the consumer.

To further ensure that its Internet traffic reached its destination, UUNET introduced a Shadow Support Program that provided a secondary T-1 or T-3 line to businesses. Network administrators could then redirect traffic if there was a line outage or other problem, thus avoiding an interruption of service. At the time of the announcement, UUNET had been dealing with a growing number of customer complaints after two UUNET hubs in Los Angeles and Tysons Corner, Virginia, failed.

In mid-1997 UUNET announced it would begin offering an Internet fax service by the end of the year. Called UUFax, the service was based on technology developed with software maker Open Port Technology Inc. and remote access hardware provider Ascend Communications Inc. Instead of sending faxes as analog traffic over telephone lines, UUFax would turn faxes into IP packets and deliver them via UUNETs global Internet backbone. By sending faxes over the Internet, companies could save the cost of a long-distance call.

In September 1997 UUNET acquired NLnet, the leading ISP in the Netherlands. NLnets 45 points of presence there provided comprehensive local-dial access throughout the country. At the time the Netherlands was one of the top five countries for Internet usage on a per capita basis. With the acquisition UUNET had nearly 1,000 points of presence in the United States, Canada, Europe, and the Asia-Pacific region.

Also in September UUNET introduced multicast services for mass Internet broadcasting. Called UUCasting, the service allowed content providers to send only one stream of audio, video, or text data to UUNET, which would then deliver the content to large numbers of users. The service utilized 60 Cisco System routers that were dispersed throughout the UUNET network. UUCasting was the first commercially available multicasting service to give Internet content providers a way to reach hundreds of thousands of users without having to invest in their own T-3 lines. UUCasting became available in December 1997.

Later in the year UUNET became the first ISP to offer OC-3 service. The program, called OCDirect, was introduced at the 1997 Networld + Interop trade show. It would provide users with 155 mbps (megabytes per second) direct access to UUNETs Internet backbone, the fastest speed currently available and faster than anything being offered by other ISPs. OCDirect was only offered in the San Francisco Bay area, Washington, D.C., and New York City, mainly to ISP resellers, large web-hosting services, and large corporate users.

Key Dates:

1987:
Company is founded as UUNet Technologies Inc.
1988:
UUNET sells the first commercial connection to the Internet.
1992:
UUNET develops the first commercial applicationlayer firewall services for IP (internet protocol) networks.
1993:
UUNET begins offering T-1 connections to the Internet.
1994:
UUNET begins offering web hosting and virtual private network (VPN) services.
1995:
UUNET completes its initial public offering (IPO).
1996:
UUNET is acquired by telecommunications service provider MFS Communications Company, Inc., which is bought by WorldCom, Inc. later in the year.
1998:
UUNET becomes the first Internet service provider (ISP) to offer commercial DSL (direct subscriber line) services.

In November 1997 UUNET and BellSouth Corporation began offering 56K-bps dial-up services to provide faster access to the Internet and corporate LANs. UUNETs 56K bps access was immediately available through 415 points of presence, to be expanded to 500 POPs by the end of 1997. AT&T was the first to provide 56K bps service, starting in October 1997 and available in 11 U.S. cities. BellSouths 56K bps service would be offered in four Southern cities. Following the adoption of the V.90 standard for 56K bps modems in February 1998, UUNET upgraded 300,000 of its dial-up access ports in more than 700 U.S. points of presence by mid-1998, with an additional 200,000 upgrades planned by the end of the year.

Following the acquisition by WorldCom of three other ISPsANS Communications Inc., CompuServe Network Services, and GridNet InternationalWorldCom announced it would consolidate them with UUNET and reorganize into two main divisions: UUNET WorldCom, which would emphasize packaged services, and WorldCom Advanced Networks, which would provide Web hosting, intranet and extranet, VPN, and data security services. UUNET Worldcom would be headed by Mark Spagnolo, UUNETs president and COO, while WorldCom Advanced Networks would be headed by former CompuServe Network Services president Peter Van Kamp. Both would report to John Sidgmore, WorldComs vice-chairman and UUNETs CEO. The reorganization was necessitated in part by the need to stop providing overlapping Internet services from the different ISPs WorldCom had acquired, and also in part by its pending acquisition of MCI. Following the reorganization UUNET WorldCom would have about 3,000 employees and WorldCom Advanced Networks about 1,700 employees.

In August 1998 UUNET became the first ISP to offer a service-level agreement (SLA) that guaranteed customers 100 percent end-to-end network availability. To qualify companies had to have at least one-year contracts for frame relay, dedicated 56K-bps, T-1, T-3, or OC-3 Internet access services. UUNET also provided other SLAs covering problems with installation and transmission delays.

In November 1998 WorldCom closed its acquisition of MCI Corporation for $40 billion. John Sidgmore became vice-chairman of MCI WorldCom and remained CEO of UUNET.

In 1999 UUNET increased the capacity of its national network backbone from OC-12 to OC-48, quadrupling network speed from 644Mb/s to 2.4Gb/s. With more than 60,000 miles of OC-48 in its backbone, UUNET was attempting to stay ahead of increasing demand for Internet bandwidth. The company also upgraded its UUCast service by increasing the number of supporting router ports from 500,000 to one million and by offering transmission speeds up to OC-3 (155 mbps).

In 1999 UUNET began offering a managed global VPN service called UUsecure. The service, which would be available in 14 countries by the end of 1999, included network design, construction, management, and monitoring. Managed global VPN services represented a newly developing market, but competing services were already being offered by companies such as IBM, AT&T Corp., GTE Corporation, and Equant Network Services.

A mid-1999 survey of ISPs by Data Communications magazine revealed that UUNET was the largest, serving 178 of the 500 largest domains. UUNET was also ranked the best overall ISP and received the magazines Users Choice Award. In 1999 the company expanded its DSL service, which it introduced in 1998, to include more than 1,000 points of presence in 850 cities. It also reasserted its presence in the web hosting market, expanding its hosting centers in San Jose, California, and Washington, D.C., and announcing plans to build seven others, which would give UUNET a total of 15 UUhost Data Centers. The overall web hosting market was projected to grow from $4.4 billion in 1999 to $14.4 billion in 2003, according to The Yankee Group.

For 2000 UUNET planned to upgrade its U.S. network to OC-192 (ten gbps, or gigabytes per second) using Juniper Networks Inc.s new M160 routers. The company also began targeting small businesses, offering them a turnkey set of Internet services. Dubbed Business Essentials and Business Essentials Plus, the packages included the services and equipment most often needed by small businesses to use the Internet.

Later in 2000 UUNET established a Latin American regional headquarters in Sao Paulo, Brazil. UUNETs parent company, WorldCom, held a controlling interest in Embratel, Brazils former state-owned long distance company. UUNET planned to take advantage of Embratels infrastructure and presence in Brazil to enter the ISP market there, then expand throughout Latin America. At the time UUNET operated in 114 countries and served more than 70,000 businesses around the world.

For the future it was likely that UUNET would continue to expand globally and develop new services to maintain its leadership position as an ISP. For example, the company announced it would offer a bundled group of services called Access Choice, which was aimed at remote users and offered them wired as well as wireless access. While some new services would be developed internally, others might come from acquisitions made by UUNETs parent company, WorldCom. For example, WorldCom acquired Intermedia for $6 billion in 2000, which added Intermedias web hosting subsidiary Digex to its group of companies. Tapping the resources of its parent company, UUNET was also well-positioned to build out its network, to increase the number of data centers it operated for web hosting and co-location services, and generally to invest $2-$3 million a day in its infrastructure.

Principal Competitors

PSINet Inc.; AT&T Corp.; Cable & Wireless plc; Exodus Communications Inc.; Qwest Communications International Inc.; GTE Corporation; Global Crossing Ltd.

Further Reading

Aragon, Lawrence, On the Road, PC Week, March 6, 1995, p. Al.

Balderston, Jim, GTE, UUNET Merge Internet Services, InfoWorld, July 15, 1996, p. 12.

Bucholtz, Chris, Manageable Multicasting, Telephony, September 29, 1997, p. 8.

Davey, Tom, ISPs Are Feeling the Heat, PC Week, December 9, 1996, p. 125.

, Shakeout Online, InformationWeek, June 30, 1997, p. 69.

Davis, Jessica, UUNET Raises the Bar on Net Access Speeds, InfoWorld, October 13, 1997, p. 9.

Dial W for Windfall, Time, September 9, 1996, p. 51.

Dunlap, Charlotte, Internet Service Providers, Computer Reseller News, June 3, 1996, p. 118.

, UUNET Adds Win NT Web Hosting, Computer Reseller News, September 16, 1996, p. 65.

EDI Software Made Simpler, Industry Week, December 4, 1995, p. 55.

Foley, Mary Jo, Microsoft Adds Internet Components to MSN, PC Week, January 16, 1995, p. 10.

Frazier, Lynne, GTE Unveils Internet Access Service via UUNET, Knight-Ridder/Tribune Business News, July 15, 1996.

Garner, Rochelle, Run for the Roses, PC Week, May 15,1995, p. Al.

Gerwig, Kate, UUNET Extends Global Reach, InternetWeek, September 8, 1997, p. 16.

, UUNET Plants Multicast Flag, InternetWeek, September 29, 1997, p. 18.

, UUNET Widens Pipe, Offers Customers Tiered Access, InternetWeek, October 20, 1997, p. 54.

, WorldComs Plans to Integrate Face Users Scrutiny, InternetWeek, May 11, 1998, p. 9.

Gunn, Angela, AlterDial, PC Magazine, October 10, 1995, p. 140.

Gupta, Udayan, Web Wonders Are Wooing Wall Street, Informa-tionWeek, June 26, 1995, p. 138.

Humphrey, Sara, Theyve Got a Ticket to Ride, PC Week, October 23, 1995, p. Nl.

Johnston, Margaret, UUNET Lays out Big Plans for Colocation Services Market, InfoWorld, November 15, 1999, p. 78C.

Jones, Jennifer, and Cathleen Moore, Juniper Router Speeds Traffic Between Hubs, InfoWorld, April 3, 2000, p. 16.

Kanellos, Michael, UUNET, USConnect Forge Net Alliance, Computer Reseller News, July 15, 1996, p. 45.

Knowles, Anne, UUNET Suite Tightens Security, PC Week, May 29, 1995, p. 14.

Ladley, Eric, and Bruce Sullivan, You Two Better Play Together Nicely!, ISP Business News, September 11, 2000.

LaPolla, Stephanie, New UUNET Service Delivers Net Faxing, PC Week, July 14, 1997, p. 19.

, UUNET and MCI Eye Global Access, PC Week, March 10, 1997, p. 31.

, UUNET Branches Out, PC Week, July 7, 1997, p. 10.

, UUNET Investing $300 Million to Upgrade Internet Backbone, PC Week, March 3, 1997, p. 33.

, UUNET Props up Backbone with New Shadow Support, PC

Week, June 2, 1997, p. 27.

Leon, Mark, Cable Company Makes Deal with Big Implications for Net, InfoWorld, May 6, 1996, p. 10.

Mannes, George, Omahas MFS Communications to Buy D.C. Area Internet Firm UUNET Technologies, Knight-Ridder/Tribune Business News, May 1, 1996.

The Microsoft Factor, Forbes, August 14, 1995, p. 182.

Moeller, Michael, UUNET Extends AlterDial Internet Access, PC Week, May 27, 1996, p. 43.

Moltzen, Edward F., UUNET Going Public, Expects to Reel in $42 Million, Computer Reseller News, April 24, 1995, p. 41.

Moozakis, Chuck, UUNET Adds Speed, Capacity to Its IP Multicast Service, InternetWeek, April 19, 1999, p. 23.

Moran, Susan, Newsmaker, Internet World, June 29, 1998, p. 8.

Niccolai, James, MFS and UUNET Announce xDSL Services, InfoWorld, December 16, 1996, p. 12.

Perez, Juan Carlos, UUNET Eyes Latin American Market, InfoWorld, September 18, 2000, p. 68.

Poole, Jackie, Midrange ISP Prices Climb, InfoWorld, May 5, 1997, p. 10.

Premenos, UUNET in Internet Alliance, American Banker, November 10, 1995, p. 15.

Quinton, Brian, UUNET Adds Muscle to Backbone, Telephony, April 19, 1999.

Rendleman, John, ISPs Roll out Audio, Video Hosting, PC Week, December 15, 1997, p. 10.

, Telecom Providers Move Ahead with 56K, PC Week, November 24, 1997, p. 125.

, UUNET Has the Essentials, eWeek, June 5, 2000, p. 30.

, UUNET Renews Hosting Focus with New Centers, PC Week, August 9, 1999, p. 53.

Rodriguez, Karen, UuNet, Interse Introduce Services to Help Companies Gain Internet Presence, InfoWorld, November 28, 1994, p. 56.

Rodriguez, Karen, and Jason Pontin, Microsoft, UuNet Team up to Give Windows 95 Users Internet Access, InfoWorld, January 16, 1995, p. 6.

Rogers, Amy, John Sidgmore, Computer Reseller News, November 16, 1998, p. 143.

Rooney, Paula, UUNET Expands Hosting Services, Adds Security, PC Week, January 22, 1996, p. 60.

, UUNET, Sidgmore Tie up Business on the Internet, PC Week, February 26, 1996, p. 43.

Schroeder, Erica, MFS-UUNET Merger Talks Bode Well for Online Users, PC Week, May 6, 1996, p. 116.

Semilof, Margie, John Sidgmore, Computer Reseller News, November 17, 1997, p. 139.

Spangler, Todd, Two Executives Get New Roles at Revamped UUNET, Internetworld, May 11, 1998, p. 8.

Thyfault, Mary E., UUNET Guarantees Total Network Availability, InformationWeek, August 10, 1998, p. 32.

UUNET Ahead on DSL, InformationWeek, July 19, 1999, p. 20.

UUNET Guarantees Service, Computer-world, August 10, 1998,p. 12.

UUNET Plans $1.2 Billion Build-out, ISP Business News, May 1,2000.

UUNET Pumps up Backbone, InternetWeek, April 3, 2000, p. 10.UUNET Rolls out T-3 Internet Connection, PC Week, September 11, 1995, p. 3.

UUNETs IPO Millionaires, Forbes, October 7, 1996, p. S50.

UUNET Upgrades to 56K Standard, Internet World, June 29, 1998, p. 32.

Wagner, Mitch, UUNET Readies ISDN Hybrid, Computerworld, March 10, 1997, p. 1.

, UUNET to Offer Uptime Guarantee, Computerworld, February 3, 1997, p. 2.

Wallace, Bob, MCI WorldCom Offers Outsourced Global VPNs, Computerworld, May 24, 1999, p. 68.

, UUNETs Bundle Offers Wired and Wireless Services, InformationWeek, October 9, 2000, p. 202.

, UUNET to Build, Expand Data Centers for $100M, Computerworld, August 9, 1999, p. 14.

Walsh, Jeff, ISPs Offer Bevy of Business Network Services, InfoWorld, December 16, 1996, p. 6.

, UUNET Hosts on Windows NT, InfoWorld, September 9, 1996, p. 53.

Weil, Nancy, Owning the Net, InfoWorld, March 20, 2000, p. 36.

Williams, David, Top 25 ISPs, Data Communications, June 7,1999, p. 28.

David P. Bianco

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UUnet

UUNET

UUNET, a subsidiary of telecommunications giant WorldCom, is a leading provider of Internet services and products primarily to business customers worldwide. It offers Internet access, Web hosting, remote access, and other services throughout the world to more than 70,000 businesses. The company also owns and operates a global network in thousands of cities.

UUNET's customers can choose from a range of Internet access options, including dial-up and remote access, dedicated access over DSL, ATM, frame relay, and high-bandwidth dedicated leased line connections. UUNET's Web hosting services include managed Web hosting on shared or dedicated Web servers as well as co-location at its WorldCom Hosting Centers. UUNET also provides businesses with virtual private networks (VPNs), security solutions, and Internet multicasting.

UUNET provides wholesale services to Internet service providers (ISPs), carriers, and others who use UUNET's Internet infrastructure as the basis for the Internet services they offer to their own customers. Among the leading Internet services for which UUNET has provided Internet backbone are America Online, the Microsoft Network (MSN), GTE, EarthLink, and CompuServe.

As of mid-2001, UUNET's IP (Internet protocol) network spanned more than 2,500 points of presence, making it one of the most widely deployed IP networks in the world. UUNET offered connectivity in more than 100 countries.

FIRST COMMERCIAL ISP

Founded in 1987, UUNET is recognized as the first commercial Internet service provider (ISP). In the early 1990s it introduced several innovative services, including the first commercial application-layer firewall services for IP networks in 1992, T-1 connections to the Internet in 1993, the first virtual private network (VPN) service and Web hosting services in 1994. In 1994 John Sidgmore became UUNET's CEO and president. He was formerly president and CEO of CSC Intelicom.

When Microsoft Corp. began preparing its Microsoft Network (MSN) to coincide with the release of Windows 95, UUNET provided the Internet backbone that would allow MSN users to have dial-up access to both MSN and the Internet. At the time UUNET had 25 points of presence and was building out its network. Microsoft also took a minority interest in UUNET, with the funds going toward UUNET's build-out. Microsoft also took a seat on UUNET's board of directors.

UUNET completed its initial public offering (IPO) in May 1995, offering shares at $14 and raising more than $50 million. By July UUNET's stock was trading in the $45 range. Although UUNET had not shown a profit, investors were betting on its potential for explosive revenue growth in the coming year. At the time of UUNET's IPO, Microsoft owned about 15 percent of the company. UUNET's revenue for 1995 was $94 million, compared to $12.4 million in the previous year, making it the leading ISP in the industry.

From the beginning UUNET was focused on the corporate market, which was expected to grow sooner and more quickly than the consumer market for Internet access. The corporate market gave UUNET higher revenue streams, bigger margins, and a more reliable customer base. UUNET also offered premium services, such as network management and security, for which it could charge more. UUNET's corporate clients included America Online and AT&T as well as Microsoft. UUNET's two principal services were leased-line connections for businesses under its Alter-Net program and dial-up access through its AlterDial program. AlterDial was expected to have 130 points of presence by the end of 1995. In 1996 UUNET began offering more services related to electronic commerce, inlcuding end-to-end security, FTP (File Transport Protocol) hosting, and dedicated servers that companies could lease.

NEW OWNERS FOR UUNET, 1996

In 1996 MFS Communications Inc. acquired UUNET for $2 billion in stock, a 37 percent premium over market value. The acquisition made 40 of UUNET's 700 employees who owned UUNET stock millionaires. MFS Communications was based in Omaha, Nebraska, and offered local and long distance telephone service in New York and nationwide. It built fiber-optic cable connections to 7,400 buildings in key financial districts in the United States and Europe. Together, the two companies were able to offer end-to-end voice, data, and Internet services. Following the acquisition UUNET extended its AlterDial service to 92 international cities.

In mid-1996 GTE, then the largest local telephone service provider in the United States, became a UUNET customer when it introduced GTE Internet Solutions. GTE used UUNET's existing network to offer Internet access in 250 cities in 46 states. Later in 1996 UUNET became the first major commercial ISP to offer Web hosting services for Windows NT 4.0. UUNET first offered Web hosting services in 1994 using the Unix platform, and had more than 800 customers.

Web hosting was one service that ISPs could offer to distinguish themselves from their numerous competitors. In late 1996 UUNET began offering another service, ExtraLink, a package of extranet services that enabled companies to share information with customers and suppliers over a virtual private network (VPN). A related service, called ExtraLink Remote Access, allowed remote workers to access the corporate network without having to employ a large bank of modems.

For 1996 UUNET's revenues were estimated to be $216 million. Before the end of the year World-Com Inc. acquired MFS Communications for approximately $12 billion in stock. Sidgmore remained CEO of UUNET and became vice chairman and chief operating officer (COO) of WorldCom.

WORLDCOM INVESTS IN UUNET, 1997-2001

With WorldCom as its parent company, UUNET was able to offer a pioneering service guarantee promising uptime of more than 99.9 percent for intranet and business-to-business services. The guarantee applied to sites that were connected to one another by the UUNET network. It covered more than 300 locations in the United States and 500 in Europe and Asia.

UUNET received $300 million from WorldCom to upgrade its Internet backbone in the United States and quadruple its capacity. Company officials estimated that the load on UUNET's backbone doubled every quarter, which meant the company needed to increase its capacity tenfold within a year and a hundredfold within two years. UUNET expected to have to spend about $300 million a year on network expansion for the next four or five years. UUNET's principal ISP customers were Microsoft, GTE, EarthLink, and America Online.

In 1997 UUNET began offering global Web hosting facilities to help multinational companies overcome the problem of narrow bandwidth between continents. During the year UUNET introduced IDSL connections, which offered high-speed Internet access over standard phone lines. IDSL provided small and medium-size businesses with direct connections to the Internet at a low cost.

Reliability became an issue for UUNET when two UUNET hubsin Los Angeles and Tyson's Corner, Virginiafailed. To ensure the reliability of its customer's Internet connections, UUNET introduced a Shadow Support Program that provided a secondary T-1 or T-3 line to businesses. Network administrators could then redirect traffic if there was a line outage or other problem, thus avoiding an interruption of service.

UUNET expanded its global network to nearly 1,000 points of presence in 1997 with the acquisition of NLnet, the leading ISP in the Netherlands. NLnet's 45 points of presence there provided comprehensive local-dial access throughout the country. At the time the Netherlands was one of the top five countries for Internet usage on a per capita basis.

Other services introduced in 1997 included UU-Casting, the first commercially available multicasting service to give Internet content providers a way to reach hundreds of thousands of users without having to invest in their own T-3 lines. Before the end of 1997 UUNET became the first ISP to offer OC-3 service, which provided users with 155Mbps direct access to UUNET's Internet backbone, the fastest speed then available and faster than anything being offered by other ISPs. OCDirect was only offered in the San Francisco Bay area, Washington, D.C., and New York City, mainly to ISP resellers, large Web-hosting services, and large corporate users.

In 1998 WorldCom reorganized into two main divisions to consolidate the acquisition of three other ISPs: ANS Communications Inc., CompuServe Network Services, and GridNet International. One division, UUNET WorldCom, emphasized packaged services, while WorldCom Advanced Networks provided Web hosting, intranet and extranet, VPN, and data security services. UUNET Worldcom was headed by Mark Spagnolo, UUNET's president and COO, while WorldCom Advanced Networks was headed by former CompuServe Network Services president Peter Van Kamp. Both reported to John Sidgmore, WorldCom's vice chairman and UUNET's CEO. Following the reorganization UUNET Worldcom had about 3,000 employees and Worldcom Advanced Networks about 1,700 employees. In November 1998 WorldCom completed its acquisition of MCI Corp. for $40 billion. John Sidgmore became vice chairman of MCI Worldcom and remained CEO of UUNET.

A mid-1999 survey of ISPs by Data Communications magazine revealed that UUNET was the largest, serving 178 of the 500 largest domains. UUNET was also ranked the best overall ISP and received the magazine's User's Choice Award. In 1999 UUNET increased the capacity of its national network backbone and quadrupled its network speed to stay ahead of increasing demand for Internet bandwidth. It also expanded its DSL service to include more than 1,000 points of presence in 850 cities. UUNET strengthened its presence in the Web hosting market by expanding Web hosting centers in San Jose, California, and Washington, D.C., and announcing plans to build seven others, giving UUNET a total of 15 data centers. The overall Web hosting market was projected to grow from $4.4 billion in 1999 to $14.4 billion in 2003, according to The Yankee Group. During the year UUNET also began offering a managed global VPN service called UUsecure, which included network design, construction, management, and monitoring.

In 2000 UUNET upgraded traffic between major hubs in its U.S. network to OC-192 (10 Gbps, or 10 billion bits of information per second) using Juniper Networks Inc.'s new M160 routers. The company also introduced turnkey Internet services to small businesses under its Business Essentials program. Under UUNET's ISP Program, a different set of turn-key Internet services was offered to small telecommunications companies and emerging Internet players that wanted to offer Internet access to their customers or expand their ISP offerings.

During 2000 UUNET invested heavily in building data centers, where application, Internet, and Web-hosting service providers could co-locate their services. The first two data centers of the $1.2 billion program were opened on the East Coast to service demand from New York City. UUNET also upgraded its VPN service to offer both dial-up access service for remote workers and dedicated lines for site-to-site networks. The new VPN service also added wider geographic availability, bandwidth prioritization, and improved service-level agreements (SLAs).

Internationally, UUNET expanded into Latin America by establishing a Latin American regional headquarters in Sao Paulo, Brazil. UUNET's parent company, WorldCom, held a controlling interest in Embratel, Brazil's former state-owned long-distance company. UUNET planned to take advantage of Embratel's infrastructure and presence in Brazil to enter the ISP market there, then expand throughout Latin America. At the time UUNET operated in 114 countries and served more than 70,000 businesses around the world.

Backed by the resources of parent company WorldCom, UUNET will likely continue to expand globally, develop new services, and upgrade existing services to maintain its leadership position as an ISP. Some new services may be developed internally, while others could come from acquisitions made by UUNET's parent company. When WorldCom acquired Intermedia for $6 billion in 2000, it added Intermedia's Web hosting subsidiary Digex to its group of companies. The demand for more speed and more bandwidth among Internet customers will put industry-leader UUNET in a strong position in the future.

FURTHER READING:

DeVeaux, Paul. "UUNet Announces ISP Program for Vertical Markets." America's Network, March 1, 2000.

Gerwig, Kate. "Uunet Plants Multicast Flag." InternetWeek, September 29, 1997.

Jones, Jennifer. "UUNET Goes Public with Policy for ISP Peering Agreements." InfoWorld, January 29, 2001.

LaPolla, Stephanie. "UUNet Props up Backbone with New Shadow Support." PC Week, June 2, 1997.

Perez, Juan Carlos. "UUNet Eyes Latin American Market." InfoWorld, September 18, 2000.

Rendleman, John. "UUNet Has the Essentials." eWeek, June 5, 2000.

Spangler, Todd. "Two Executives Get New Roles at Revamped Uunet." InternetWorld, May 11, 1998.

UUNET. "About Us." UUNET, September 19, 2001. Available from www.uu.net.

"UUNET Thinks Small." ISP Business News, May 29, 2000.

"UUNet's IPO Millionaires." Forbes, October 7, 1996.

Williams, David. "Top 25 ISPs." Data Communications, June 7, 1999.

SEE ALSO: Business-to-Business (B2B) E-commerce; Internet Service Provider (ISP)

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