Shannon Henry's The Download:
Live Discussion With Guest John Sidgmore
Thursday, February 18, 1999
John Sidgmore, vice chairman of MCI WorldCom, joined Download columnist Shannon Henry for a live discussion on the rapid evolution of the Internet industry.
Henry's column, The Download, is a look at the latest deals, hires, and business strategies in the region's technology community. Every other week she hosts a discussion featuring guests making waves in the local tech scene.
The man building the infrastructure of the information superhighway – laying the cables and connecting the computers – is John W. Sidgmore. Like (Steve) Case, he was early to see the implications of the Internet, and he turned UUNet Technologies into a billion-dollar company in the space of a few years.
The transcript of this live discussion follows:
Hi, welcome to a conversation with John Sidgmore of UUNet and MCIWorldcom fame. Send along your questions about the wild and crazy telecom and Internet business.
Shannon Henry: Can Internet service providers remain independent without a big telco parent? What are the advantage to merging the two?
John Sidgmore: i think there will be many independent isps ....for a long time-but-there will be very few large, international independents due to the capital requirements and the need to have a worldwide sales capability.
Shannon Henry: You have become known as one of the key dealmakers in the telecom/Internet world. Tell us about how you've seen the competitive environment change. It seems like every telco and Internet company is doing a new partnership deal every day. Is this a new era of coopetition?
John Sidgmore: well...this has been a period of lightning change...unprecedented really. Everyone has been challenged by the sheer scaling requirements in this industry which have never been faced before. All of us have learned that we cant do everything well...and that success requires focus. That means we will have to rely on and partner with others....even competitors.
Fairfax, Va: How much of a loss if any was the requirement for MCI to dispose of their Internet assets to Cable and Wireless?
John Sidgmore: actually, the loss was not that great in terms of revenue ....and it hasd nothing unique in terms of technology....but we would have preferred to keep it. Internet assets are all quite valuable now-we dont want to give up any.
bethesda, maryland: Based on the growth of folks getting on the internet for business and personal use and now the online retailing and ecommerce explosion, is there enough cable, etc to handle all the "traffic"? Will this eventually become a problem? If so, when? Thanks.
John Sidgmore: well....the demand for bandwidth is insatiable for sure. There are new companies deploying new fiber for the first time in asl long time....and new capacity is coming fast. But....we believe that the demand will continue to soak up all the supply and that the major challenge for us wil still be to meet the demand and scale our network rapidly.
Shannon Henry: Getting philosophical a bit, tell us your thoughts on network speed. How fast is MCI's network today and how fast will it be a year from now?
John Sidgmore: our internet network continues to scale at a rate of 2x every 3.5 months, or 1o times per year. Broadband access (which really is coming) will pressurize this further....Our network will have dramatically more bandwidth next year and generally it will offer greater speed for users...and better quality.....but there will be demand for more, faster, etc...
What will EDS do for MCIWorldcom?
John Sidgmore: EDS gives us a world class systems integration partner....and will allow us to bid on more large scale opportunities. It also gives us $8.5b in new revenue over ten years.
Shannon Henry: Business customers and individual consumers have long been thought of as two very separate markets for companies like yours. Is that changing?
John Sidgmore: There will be some blurring.....after all people who are online at work DO go home ....and they have online needs at home too. But there will always be a difference.....on average, business users will spend more and have larger scale requirements. the soho market blurs the lines.
Shannon Henry: What technologies do you personally use - pager, cell phone, laptop? Which could you not live without?
John Sidgmore: I use several mobile phones and laptops. I do not admit to leaving my phone turned on or to having a pager. I could not work without a cell phone.
Shannon Henry: How have you seen the Washington area change as a technology region?
John Sidgmore: As the communications industry exploded over the past few years (especially due to the internet) this area became a technology center because this is where many of the major communications companies are located....and it is where the Internet grew up (AOL,UUNET,PSINET,etc)
Shannon Henry: There's a lot of new wealth being created in the area, especially at AOL and UUNet. How are you seeing that money go back into the region - investments, new companies starting up?
John Sidgmore: There are certainly lots of new start-ups creating jobs...and many of the first wave internet and tech companies are giving back in many ways. CEOs of various companies are not only giving back in traditional ways, but many of us are trying to capitalize new start-ups and to promote the region generally as a haven for new tech companies.
Herndon VA: At what point will we see a real committment to one form of transmission (ATM, ISDN, xDSL, etc.) over the others, instead of the current "flavor of the month" headlines we continue to see in trade publications?
John Sidgmore: The problem with broadband access is that it is controlled and paced today by the rbocs and cable companies. Most people believe it is healthy to have competitive options to challenge these potential blockers, so you will see many platforms emerge including cable modems, DSL in various forms, sattellite services, fixed wireless optins (for business), etc. I think multiple options are a good thing right now.
Fairfax, VA: Why does MCI Worldcom seem to be avoiding the wireless market like the plague?
John Sidgmore: we traditionally viewed wireless as a consumer-only play and not an important part of the business bundle. This is changing now, and as you see more mobile computers attached to the internet, this will become an important part of the business spectrum over the next few years. Our issue is that there is not an easy, financially rational way to acquire wireless capability on the International scale we would need to support our strategy.
Shannon Henry: It's difficult for some of us to imagine what a "vice chairman" at a company so large as MCI Worldcom does on a daily basis...so, what's an average day like for you?
John Sidgmore: i don't think i have average days anymore ....i mean every day is very different. I spend most of my time pursuing strategic initiatives (like the EDS deal) and worrying about the next technology, the next market.....And I also spend time communicating our vision to industry forums, customers, employees,and Investors.
Ellicott City, MD: Do you think the Internet will ever carry phone service or video? Will MCI/WOrldcom follow AT&T's lead and link with a cable company?
John Sidgmore: I think the Internet will carry lots of voice traffic (it does now and will carry a lot more over time), but I do not think the public Internet as we know it now wioll replace the public phone network in the near future. IP technology will eventually be the dominant platform for both voice and data. I never say never, but its unlikely we will follow att's lead. (I thought it was our job to lead)
Tysons Corner, VA: John, who do you feel are you primary competitors over the next several years.
John Sidgmore: One of the interesting trends to emerge over the last few years is the trend toward more competition....and from non-traditional sources. Who woyuld have thought that worldcom would be this strong 5 years ago? Who ever heard of UUNET then, yet now it is the world's largest internet provider. I do think there will be new players who enmerge that will be dangerous competitors and who change the framework of competition.....like amazon.com is doing in the book industry
Reston, VA: Do you think that ISDNs will ever become affordable for home use?
John Sidgmore: isdn may have missed its window.....but i do think that the rbocs will take that lesson to heart and will now deploy dsl service much faster.....spurred on by new players like us, and by the cable modem alternative. Net result wiil be faster access to the home at more affordable rates.
Shannon Henry: If you could look into your crystal ball a bit, how will people be communicating differently a year from now?
John Sidgmore: I think the world is evolving toward faster, simpler modes of communicating.....so things like the palm pilot will not only proliferate, but will become voice and data communicators as well. You can easily see now the dick tracy watches and star trek communicators ...that seemed so far away just a couple of years ago. Computer to computer applications will be growing quickly........overall more people will be online all the time-not just at their comuter on the desk--but also via their pda, their watches, etc.
Washington, DC: Hi, is WorldCom developing a viable strategy for the "last mile" into the consumer market, like AT&T? Or do you plan to cater to mostly businesses and telecommuters in the next few years?
John Sidgmore: We are highly interested in growing our residential business, but frankly it is unlikely we will ever be able to build broadband access out passt the primary suburbs-so last mile access from mciworldcom will mostly be for businesses and consumers that live near major cities.
Leesburg, VA: What are your plans for your new site being built in Ashburn, VA. Will this be the main Headquarters for MCI Worldcom? How many people will be based from that site and how does MCI Worldcom plan to work with Loudoun County in terms of traffic and putting money back into the local community and businesses?
John Sidgmore: this will certainly be the headquarters for UUNET and will house a large number of other MCIWorldcom employees....but our headquarters will remain in Jackson.
Rockville, MD: Will the Internet always be around? It seems like it is headed for sometype of overload? What do you think?
John Sidgmore: People-even some very smart people have predicted overload and death for the internet for years now....WRONG! It's consistently improved in quality over the years even while undergoing tremendous growth. Look at the performance while everyone was downloading the starr report.Its here to stay.
seattle, wa: As the Internet blurs the distinction between software and services, how far along the food chain do you see MCIWorldcom entering into the domain traditionally "owned" by the software companies? Alternatively, how far into your territory do you see companies like Micro$oft entering into your own?
John Sidgmore: I believe we are a communications service business-not a technology co-not a software co-not a content co. This is very important because focus will be the key to success in our world. Time after time you can look back and see how the larger players (in any field) diversified to "add more value" and newer, more focused players came in and ate their lunch. We have so many opportunitie s in our core business now around the world- we dont need to learn content, software, etc. I would argue software cos. dont have time to learn communications technology either.
Arlington, VA: What are your thoughts on Wave Division Multiplexing technology, which allows companies to expand capacity on their existing fiber. Do you find this to be a feasible alternative to constantly upgrading fiber capacity/facilities?
John Sidgmore: We love DWDM....but we dont see it as an alternative to deployment----we see it as a piece of the bandwidth supply solution. we will need more fiber, too.
Washington, D.C.: MCI has always been an employee-friendly firm sensitive to family needs. Will the new MCI-Worldcom megalith be as sensitive? For example, part-time employees no longer have the option of an employee stock purchase plan. Can this policy be reexamined? It would help many of us who believe and invest in the company's mission. Thank you.
John Sidgmore: We think MCIWorldcom will ultimately be seen as employee friendly, just as Worldcom was in its prior form. We intend to remain the fastest growing company in our industry. ultimately that translates for most into more opportunity. We believe that generally Our employees (UUNET, worldcom, etc..) have felt this to be a positive environment. There are always certain policies that change during a merger ....but on balance we feel we have ultimately had the overall support of the employees.
Is EDS good for MCIWORLDCOM?
John Sidgmore: we think EDS wil be a great partner. I believe the deal allows both companies to do what they do best. ....and that should mean that we can jointly deliver world class solutions to our customers.
Rockville, MD: Once MCI Worldcom employees move to EDS is there any chance they will be let go?
John Sidgmore: No business leader today would ever promise that there will be no layoffsk. That being said, i can say that this deal had nothing to do with cost reductions....and one of the reasons EDS was pursuing the deal was to get access to these employees. Believe it or not, most companies (including eds) are in reruit mode-not layoff mode with respect to I.T. professionals.
Rockville,Md: Will all the Data centers be moved to the new site in Ashburn?
John Sidgmore: we have lots of data centers around the country......if you mean the uunet center.....the local datacenter will ultimately move, but we are building new ones as we speak in diverse geographies.
Reston, VA: At the recent ComNet, you made reference to a Forrester report that suggested a breakup of MCI WorldCom into 4 separate entities. You've already taken the first step with Systemhouse. What's next, the consumer markets business?
John Sidgmore: We did not endorse forrester's assessment....and we disagree with pretty much all of the organizational conclusions. We have no intention of changing our consumer markets focus.
Vienna, VA: How has your autonomy changed in running your company since joining forces with WordlCom? What have you enjoyed the least since you become a WorldCom sub?
John Sidgmore: I have thoroughly enjoyed being a part of worldcom-now MCIWorldcom. UUNET has stayed mostly intact- but could not have grown to its current size withoput the Worldcom facilities and capital base. In my opinion this was a dream merger. Bernie Ebbers and I share a very aggressive vision for the company and we have acted on it aggressively. I doubt we wil stop now.
Hey, we're out of time. Thanks for the flood of good questions - a record number so far for The Download Live. Thanks, John too, for your fast typing and thoughtful answers. See you all in 2 weeks. Bye!
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