AT&T Moves In for the Kill

With WorldCom Inc. (OTC: WCOEQ) gasping for what some say is its last breath, the vultures are circling ever closer. And the prize for the most persistent carrion cruiser goes to AT&T Corp. (NYSE: T).

AT&T has been on the offensive ever since its giant competitor filed for the largest bankruptcy in history last month: It has stated on several occasions that the potential shutdown of the UUNet network wouldn’t be the Internet tragedy that WorldCom is trying to make it out to be (see WorldCom Files for Bankruptcy). On a conference call with analysts on Tuesday, AT&T once again said that it could easily take over a large chunk of WorldCom’s data customers (see AT&T: WorldCom Shutdown No Problem and AT&T's Dorman Weighs In on WorldCom).

“From a traffic standpoint, the Internet is not dominated by a single carrier,” Mike Jenner, vice president of AT&T Global IP Network Services, tells Light Reading. Contrary to many recent reports and contrary to WorldCom’s own claims that it carries between 30 and 50 percent of the world’s Internet traffic, Jenner says that WorldCom and AT&T carry about the same amount of traffic on their networks. Referring to a recent RHK Inc. report, he says that each company carries about 13 percent of the traffic, and that the eight largest carriers account for about 55 percent of all traffic on the Internet (see RHK: Internet Growth OK and Did WorldCom Puff Up the Internet Too?).

If UUNet were to go dark, Jenner says -- emphasizing that that’s a big if -- AT&T could possibly expect to inherit about 30 percent of the network’s traffic. “[AT&T] has sufficient capacity in its core network to deal with that amount of traffic,” he says, pointing out that AT&T managed to migrate 1 million [email protected] subscribers in five days after that network was shut off (see Whither WorldCom's Network?). “That’s two subscribers per second. We have already demonstrated that we can [migrate customers] on a large scale.”

In fact, Jenner says, AT&T has been growing its network at such a rate (he claims by about 200 percent a year, with traffic tripling every year for the past four years) that the company already has the core capacity necessary to take over a large number of customers probably without expanding its network or hiking its capital spending. The only area that would cause problems, Jenner says, is the last mile. “It’s conceivable that it could take months,” he concedes.

WorldCom of course continues to insist that there’s no danger of it shutting down its network. “We’re not concerned about the network going dark,” says company spokesperson Jennifer Baker. If it ever did go dark, however, she says it would probably cause a lot more havoc than what AT&T is implying. “There are a zillion reports out there,” she says. “They’ve chosen one report to base their numbers on… Most third parties report that WorldCom carries more than 30 percent" of Internet traffic.

Baker points out that Yankee Group analyst Seth Libby, among others, has stated that WorldCom carries between 30 and 50 percent of all Internet traffic; and the Cooperative Association for Internet Data Analysis (CAIDA) stated in April that UUNet had the largest number of directly reachable IP addresses and links, while AT&T was third.

Jenner contends the RHK report is closer to reality than many of the other reports. “Some of those sources are flawed,” he says. “They don’t seem to be consistent with what our customers are telling us.”

Of course, some might point out, RHK isn’t exactly WorldCom’s biggest fan. Yesterday the analyst firm issued a press release stating that the telecom industry would be better off if WorldCom were to shut its doors for good (see RHK: No Bailout for WorldCom).

One of the reports Baker cites, a TeleGeography Inc. report published in July, states that WorldCom operates 30 percent of the bandwidth on the 20 largest U.S. Internet backbone routes, which, according to the report, is more than the next four carriers combined. Alan Mouldin, an analyst with TeleGeography and the author of the report, however, points out that the report is talking about capacity -- not traffic. And that, he says, is an important distinction: “Capacity doesn’t matter. It’s what you use the capacity for that matters.”

But while Mouldin won’t vouch for how important WorldCom is for carrying Internet traffic, he does say the company’s network is very important for connecting networks on the Internet together. “It connects over 3,400 autonomous systems,” he says. “That’s more than twice as many as Sprint Corp. or AT&T.”

The story, here, however, is not that AT&T is going for WorldCom’s jugular, Jenner says, but that it has made a lot of positive changes over the past four years, as it has shifted from being primarily a voice company to being the no. 1 CLEC and a leader in the data/IP space. “We’re certainly not trying to attack WorldCom… They are having enough trouble as it is. [But] there are some myths about the Internet that we’re trying to clarify.”

Mouldin isn’t convinced: “Obviously, I think they can smell some blood here. One of their biggest competitors is hurting.”

— Eugénie Larson, Reporter, Light Reading
RedRhonda 12/4/2012 | 9:55:53 PM
re: AT&T Moves In for the Kill AT&T has been unfairly compared to WorldCom for years - all the analysts wanted to know was "why couldn't AT&T post the numbers that WorldCom posted?" Now WorldCom will probably get bailed out by the Feds; at the very least they won't have to pay their creditors.

AT&T pays their bills and posts honest, if embarrassing, numbers. Honesty is not rewarded - AT&T has split itself apart, laid off thousands, and struggled to stay afloat.

I hope they kick WorldCom's butt!
myoptic 12/4/2012 | 9:54:51 PM
re: AT&T Moves In for the Kill The only way that our industry is going to recover is if the bankruptcy courts allow failed carriers to go under or be consolidated. If every carrier filing for chapter 11 is able to clear their debt, avoid paying their suppliers and re-emerge stronger then there is a perverse incentive for all carriers to go this route. The industry clearly has too many participants who have driven prices to unsustainable levels. A little economic Darwinism is needed if we have any hope of returning to profitable growth.

As for the Worldcom debacle, having the theoretical capacity to absorb UUnetGĒÖs traffic is one thing GĒō actually implementing the migration is something very different. Looking at all of the tier-1 backbone providers, AT&T is probably the only one who could actually pull of such a massive migration. TheyGĒÖve got a relatively stable and experienced operations group and are the only ones with scalable Avici routers in their backbone to accommodate the growth. Let's hope the courts donGĒÖt get in the way.
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