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 hubs—in Los Angeles and Tyson's Corner, Virginia—failed. 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)