Business News

Posted: 05/1999

Business News

Global Crossing Comes Ashore, Snatches Frontier in
Integrated Services Play

By Ken Branson

Most telecommunications companies start out on dry land. Eventually, they get to the
water’s edge and have to get across the pond somehow. As often as not, they buy capacity
on a transoceanic cable owned and operated by Global Crossing Ltd., Hamilton, Bermuda.

Global Crossing has turned this evolution on its head. The company started out four
years ago in the vast deep and has only recently crawled up on the beach. Its strategy:
Lay the cables in the water first, then sell capacity strictly wholesale. Eventually,
Global Crossing intends to build a 35,000-mile fiber optic network linking the Americas,
Asia and Europe. Oh, yes … and Bermuda.

In March, Global Crossing came up on the beach, slithered up South Clinton Avenue in
Rochester, N.Y., and seized Frontier Corp. by its pincers in a deal worth $11.2 billion.
If the merger goes through, the combined companies, which will use the Global Crossing
moniker, will have gained a dry-land fiber optic pipe, an Internet service provider (ISP)
that hosts some of the premiere sites on the World Wide Web, a North American competitive
local exchange carrier (CLEC) and rural incumbent LEC (ILEC) operations in 13 states.

That Global Crossing has made such an acquisition is no surprise to analysts and
competitors. "Basically, what they’ve done has reaffirmed what we’ve always
known," says Glenn Davidson, vice president of corporate communications and external
affairs at Viatel Inc., New York, which is building a Pan-European fiber optic network and
leases capacity on Global Crossing’s AC-1 trans-Atlantic cable. "That is, the real
business is in being an integrated service provider, and not just a carrier’s carrier.
That’s where the revenue is."

"When Bob Annunziata arrived, it clearly signaled that Global Crossing had pretty
broad ambitions and intended to be more than just a bandwidth purveyor," says Mike
Smith, managing director of Stratecast Partners, Mountain View, Calif.

Robert Annunziata, former CEO of Teleport Communications Group Inc., Staten Island,
N.Y., and former head of the business services unit of AT&T Corp., joined Global
Crossing in January. Some analysts believe the decision to turn Global Crossing into a
service provider was made by Global Crossing’s board and management long before he

Whenever the decision was made to be more than just a pipe, the hard part may lie ahead
for Global Crossing. Frontier, while of modest size when compared to its rivals in any one
line of business, is a lot to swallow.

Frontier, for a century as plain a plain old telephone company as it could be, has been
on a buying and restructuring binge in the last two years under the leadership of its CEO,
Joseph Clayton.

Clayton has shaken up the top management, spurred the company into CLEC competition,
acquired Global Center Inc. to give Frontier an Internet presence and focused the
company’s target for all its lines of business: business customers who spend between
$5,000 and $100,000 (revised upward from $50,000 in the last six months) a month on

Under Clayton, Frontier has moved aggressively to put as much of its customer interface
as possible on the web, and given its customers considerable control over ordering and
provisioning through its uCommand online account management software. Frontier employs
under Clayton more than 8,000 people, who have managed to integrate most of what they know
how to do best across all of their lines of business. In 1998, Frontier Corp. made $2.6
billion in revenues, an increase of 9 percent over 1997. Frontier’s stock was trading at
about $52 per share in the weeks after the merger announcement, up from $34 at the end of

While analysts are optimistic about the ability of Global Crossing’s management team to
integrate Frontier into its operations, they expect some bumps in the road. Stratecast’s
Smith sees a number of large decisions looming.

"Just for starters, what does Global Crossing want to do with Frontier’s ILEC
business?" Smith asks. "And how about [its] traditional long distance business,
particularly residential customers? Is that a business they really want to maintain? Does
Frontier have the salespeople to sell Internet and data services, or will Global Crossing
have to augment that sales force? Then there is the question of OSSs (operations support
systems). One of the reasons Global Crossing wanted to acquire Frontier was for their
OSSs. But are those OSSs really capable of supporting next-generation data and Internet

The answers to these questions aren’t here yet, but there are very broad hints at
answers in Frontier’s history, if not in Global Crossing’s. Clayton is the key to those
hints, which he has dropped liberally over the past several months.

First, while Annunziata denies point-blank that Global Crossing intends to get rid of
the ILECs, it’s good to remember the consumer business never has been Clayton’s favorite.
"High cost, bad debt, lots of churn," is the way Clayton described the consumer
business to PHONE+ late last year. The ILEC properties long have presented Clayton with a
dilemma. On the one hand, he always has made it clear that he wanted to separate
Frontier’s telephonic past from its integrated future–"to be more like Sunnyvale
[Calif.] (Global Center’s headquarters city) and less like Rochester." Asked recently
whether he might consider spinning off the ILECs, he replied, "It’s a distinct
possibility." But the ILECs provide Frontier with steady revenue–about $700 million
per year, Clayton says–and also with a pool of local telecommunications expertise.

As for the OSSs, Clayton thinks Frontier is almost there, after a long struggle. The
billing systems, numbering six when Clayton arrived in 1997, are nearly down to one.
"We’re gonna force-feed this thing," he says. "We’re gonna push this
bowling ball through that garden hose."

However, given that Frontier and Global Crossing have completely different businesses,
there are observers who believe integration may not be that difficult.

"If you look at Global Crossing, it’s just a big pipe," says John S. Baring,
managing director and co-head of the communications and media investment banking group at
PricewaterhouseCoopers LLC, New York. "Maybe what’s happened here is that Frontier
has just bought itself an international pipe."

Analysts believe Frontier won’t be the last acquisition Global Crossing makes in the
United States. If Global Crossing wants more capacity on dry land in North America, there
are interexchange carriers (IXCs) such as IXC Communications Inc., Austin, Texas, that
might be available. IXC issued a formal statement after Global Crossing’s announcement
saying its management thought its stock was undervalued and would consider various ways to
raise it, including "sales, swaps of fiber, joint ventures and the combination of the
company with another company."

Star Forms Retail Subsidiary
By Khali Henderson

Separating its wholesale and retail operations in the United States, STAR
Telecommunications Inc., Santa Barbara, Calif., announced the launch of ALLSTAR Telecom, a
subsidiary offering local, long distance, toll-free and calling card services to
multinational corporations. The parent company will offer only wholesale global
telecommunications services.

STAR’s overseas operations will continue to offer both wholesale and retail services.

"We have been building the pieces for some time and are now becoming an active
player in the commercial long distance business," says Ken Hilden, chief operating
officer of the new division. Hilden also will retain responsibilities with STAR as its
senior vice president of client services.

ALLSTAR combines STAR’s organic business-to-business group as well as its acquisition
of United Digital Network, which began in November 1997 and closed March 25, says Ben
Helvey, STAR’s director of investor relations.

STAR also acquired two other retail telecommunications companies, including PT-1
Communications Inc., which was finalized Feb. 4, and L.D. Services Inc., which marked the
company’s entrance into the retail telecom business in September 1997. Neither company
will be folded into the ALLSTAR subsidiary, Helvey says. L.D. Services, now called CEO
Telecom, offers residential long distance services to ethnic communities, and PT-1 offers
residential prepaid calling cards.

ALLSTAR has a sales force of 105 account executives as well as offices in Atlanta;
Dallas; Flushing, N.Y.; Fort Lauderdale, Fla.; Houston; Los Angeles; Miami; New York;
Phoenix; Seattle; Washington; and Woodbridge, N.J.

Delta Three Launches Web-based Agent Program

New York-based Delta Three Inc., a wholly owned subsidiary of Hamilton, Bermuda-based
RSL Communications Ltd., introduced in March a real-time automated web-based program for
agents selling its personal computer (PC)-to-phone and phone-to-phone Internet protocol
(IP) telephony services.

"No other affiliate program offers real-time commission reports and click-through
tracking. We took a simple web concept, proven through our Online Interactive Center, and
used it to create the industry’s first real-time, web-based agent reporting system,"
says CEO Elie Wurtman.

Delta Three’s Online Interactive Center allows the company’s retail customers to access
their own account information via the web. This technology has been extended to agents,
enabling them to download prepared web advertisements, choose pricing plans, track results
and monitor commissions.

Agents can sign up at
Once on board, each agent is issued a unique tracking code, which makes it possible to
check commissions and click through rates online at the Agent Interactive Center,

"[Delta Three’s] new agent interactive center consolidates all of the information
that an affiliate needs–sales and commission data, click-through data, artwork, special
promotions and more–in a single, easy-to-use, web-based system," says David
Krupinsky, editor of the Hello Direct Information Network, San Jose, Calif., one of Delta
Three’s top agents.

Shasta, Lucent, Ascend, Telia Finland Propose IP VPN

By Peter Lambert

Seeking to standardize the mechanisms service providers use to deliver
"network-based" virtual private networks (VPNs), four equipment vendors proposed
to the Internet Engineering Task Force (IETF) a framework for Internet protocol (IP)-based

Sunnyvale, Calif.-based Shasta Networks Inc. and co-authors Ascend Communications Inc.,
Alameda, Calif.; Lucent Technologies Inc., Murray Hill, N.J.; and Telia Finland Oy,
Vantaa, Finland, made the proposal March 15.

Michael Howard, principal analyst for Infonetics Research Inc., San Jose, Calif.,
suggests that the framework could help overcome the central impediment to widespread
deployment of IP value-added services–"a lack of general agreement on the definition
and scope of VPNs."

In contrast to provisioning VPNs via customer premises equipment (CPE) designed to
encrypt traffic across private "tunnels" through the public Internet, the
framework proposes that VPNs be provisioned by service providers "at the subscriber
edge of new public IP data networks."

According to Shasta Networks president Anthony Alles, the framework envisions migrating
VPN service-enabling technologies from customer sites into public networks. This, he says,
will empower service providers to deliver all manner of "IP Centrex," or
network-based IP services, including mobile-worker access to private corporate networks
and private extranets among companies, partners and customers. In February, Telia Finland
began trials of Shasta’s service-enabling gateways and subscriber policy-management

"Today, a customer buys dumb pipes or virtual circuits and creates his own
firewall, quality of service (QoS) and VPN services, but this requires too much expertise
for the mass market," Alles says. As broadband access technologies "bring Fortune
500 capacity to the mass market, we need to move service provisioning into the
network–so there’s no more buying new customer premises equipment for new
capabilities–and we need to automate service provisioning for scale."

Although focused on IP traffic and applications, including voice, the framework intends
to enable service providers to implement VPNs across any physical medium or cell- or
frame-based switching system.

Siemens Joins the Rush to Next-Generation Networks
By Ken Branson

Following the intent, if not the method, of its major North American rivals, Siemens
AG, the venerable German maker of telecom gear, has leaped into the fight for
next-generation network business by creating a separate company, Unisphere Solutions Inc.,
Burlington, Mass.

Siemens will acquire Argon Networks Inc., Littleton, Mass., and Castle Networks, Inc.,
Westford, Mass. In addition, Siemens announced it had taken an equity stake in Accelerated
Networks Inc., Moorpark, Calif.

Competitor Lucent Technologies Inc., Murray Hill, N.J., recently bought Ascend
Communications Inc., San Jose, Calif., and Nortel Networks, Richardson, Texas, recently
bought Bay Networks Inc., Cambridge, Mass. But Siemens has snapped up two startup
networking companies–neither of the products of which have seen the bright side of
beta–and sunk an equity investment into a third. Siemens has combined these pieces with
its own Internet groups, based in Boca Raton, Fla., to create the new entity.

"We had to do something radical," explains Anthony Maher, board member of
Siemens Information and Communications Group. "We needed an independent unit in the
United States, which is the crucible of change."

Company officials decline to say how much they paid for the two companies, or to
disclose the terms of the deal, nor how much of a stake they will take in Accelerated.

Argon develops service-provider platforms for the core and high-speed access layers of
the public network. Its product, as yet unnamed, is a combination Internet protocol (IP)
router and asynchronous transfer mode (ATM) switch. Castle designs central office
(CO)-based communications technologies to converge circuit-switched voice and
packet-switched data networks. Accelerated Networks makes integrated broadband software.

Unisphere starts with 500 employees and is funded wholly by Siemens. The new company is
part of a $1 billion Siemens effort to increase its presence in data networking. Maher
says all Siemens’ data and networking capabilities worldwide will be available to

In turn, Maher says, innovation should pour out of the new company and be applied to
Siemens operations around the world. "We’re not just making boxes," says Maher,
whose company has long been one of the world’s premier makers of telecom switches.
"We’re providing solutions."

The CEO of the new company is Martin C. Clague, formerly of IBM Corp., Armonk, N.Y.,
where he was vice president of global industries solutions sales.

Lucent Debuts First Carrier-Class Management System
By Charlotte Wolter

Lucent Technologies Inc., Murray Hill, N.J., has announced general availability of its
management system for network operators, OneVision Management Systems. It also formed
alliances with three software developers–Micromuse Inc., San Francisco; Concord
Communications Inc., Marlborough, Mass.; and Syndesis Ltd., Richmond Hill, Ontario–to add
support for multivendor networks to OneVision, as well as a wide range of network and
service management features.

This is Lucent’s initial network management product for carriers and large service
providers. The company previously had software that managed individual net-0work elements
made by Lucent, but not a complete system. OneVision includes, for the first time, support
for multiple vendors and multiple protocols for asynchronous transfer mode (ATM), frame
relay and Internet protocol (IP) networks.

Lucent spokesman Rich Teplinsky says one driving force for the product was customer
demand for outsourcing of network management. "We met with a lot of [service
provider] customers who said, ‘I can’t manage my network and can’t manage my customers’
networks any more, because there are thousands of switchers and routers.’"

He says the new product also will enhance Lucent’s ability to support the equipment of
its recent acquisition, Ascend Communications Inc., Alameda, Calif.

Another factor in the development of OneVision is the growth of IP networks, Teplinsky
says. "IP networks, especially in terms of the RFPs (request for proposals) [we are
seeing] are very complex. One might have a Cisco [Systems Inc.] (San Jose, Calif.) router
next to an Ascend product. The network elements are very diverse. With Bell Atlantic
[Corp.] (Philadelphia), we had to support Cisco routers, Ascend remote access devices and
other kinds of switches. And with the mix of IP and the traditional voice network, the
interworking and interoperability requirements are extreme."

OneVision was announced in 1998, but had been available only to the initial customer
for the product, Bell Atlantic.

The new product supports both management of individual elements in the
network–routers, switches and servers–but also manages the performance of services, such
as e-mail and virtual private networks (VPNs), and verifies compliance with service level
agreements (SLAs). It includes provisioning of network services and bandwidth, as well as
fault-tolerance functions and alarms.

Payphone Lawsuits Pile Up Against Resellers
By Kim Sunderland

Additional lawsuits have been filed in federal district court in Alexandria, Va.,
against switch-based resellers that allegedly haven’t paid required payphone usage costs.
This brings to seven the number of lawsuits that have been filed against these resellers
as of March 29. Three similar complaints were filed at the same court earlier in March.

Resellers named in these recent lawsuits include STAR Telecommunications Inc., Santa
Barbara, Calif.; Pacific Gateway Exchange Inc., Burlingame, Calif.; Primus
Telecommunications Inc., McLean, Va.; and UniDial Communications Inc., Louisville, Ky.
STAR recently announced it is acquiring PT-1 Communications Inc. of Flushing, N.Y.,
which–along with Business Telecom Inc., Raleigh, N.C., and Paramus, N.J.-based EconoPhone
Inc.–was named in the first batch of nonpayment complaints filed by the same parties.
Because the companies have just received the complaints, they would not comment.

"These resellers have been given every opportunity to meet their compensation
obligations under the Federal Communications Commission (FCC) regulations," says
Vincent R. Sandusky, president of APCC Services Inc. of Fairfax, Va. "They have
flaunted the law by ignoring the regulations as well as invoices and demand letters that
have been sent to them."

APCC and Data Net Systems LLC, which jointly filed the first three lawsuits, are joined
as plaintiffs in these filings by Pacific Telemanagement Services; NSC Telemanagement
Corp.; and Davel Communications Corp. The companies, which are authorized compensation
billing and collection agents for more than 2,000 payphone service providers (PSPs), claim
they have filed these lawsuits against the resellers for their nonpayment to PSPs for the
use of their payphones.

The lawsuits seek the amounts owed for "compensable calls," dating from when
the FCC’s regulations took effect in October 1997, as well as interest, punitive damages
and attorney’s fees, Sandusky says. FCC regulations require long distance carriers to
track and pay per-call compensation at 28 cents per call.

In a Jan. 28 order, the FCC set that rate as what interexchange carriers (IXCs) must
pay for originating dial-around and toll-free calls. The FCC, however, also reaffirmed
"that payphone compensation issues are best addressed in the marketplace by
negotiations between long distance companies and payphone owners."

Sandusky adds that APCC is negotiating with several other resellers in an effort to
avoid further litigation. But more lawsuits can be expected against other resellers and
prepaid calling card companies that don’t meet their payment obligations, he says.
"We are vigorously pursuing these collection actions."

CLEC Offers Agents Stock Options
By Khali Henderson

aeTec Communications Inc., a competitive local exchange carrier (CLEC) and
interexchange carrier (IXC) based in Fairpoint, N.Y., unveiled late April a new equity
program for agents of its local and long distance services.

Unlike equity programs that offer agents buyouts based on the size of their base and
the multiple for which the carrier sells, PaeTec is issuing stock options in advance of a
planned initial public offering (IPO), explains Brad Bono, Eastern region president. The
company plans to issue approximately 800,000 warrants to agents before its IPO, which is
set for the next 12 to 16 months. PaeTec has engaged Merrill Lynch to conduct its private
placement this fall.

"It’s very similar to employee stock options. Practically every employee in our
company has them. Agents are of similar importance in building the company, why should
they not have a piece of the business?" Bono asks.

And while other companies have been criticized for hinging equity programs on an
elusive buyout, Bono says that PaeTec already has a potential suitor in STAR
Telecommunications Inc., Santa Barbara, Calif. STAR owns 19 percent of PaeTec.

Stock options are granted at current stock price on the day agents achieve set
performance thresholds. At $50,000 per month, agents receive 2,500 warrants; at $100,000
per month, an additional 5,000 warrants; at $250,000 per month, an additional 12,000
warrants; and at $500,000 per month, an additional 20,000 warrants.

Agents become vested over four years at 25 percent each year if they maintain the level
of business at which they earned the warrants. So, for example, if an agent earned 2,500
warrants at $50,000-per-month billed revenue, they would need to maintain that revenue

Bono says the stock-based incentive program was inspired by the company’s principals’
prior experiences with IXC ACC Corp. and CLEC Teleport Communications Group, both of which
relied heavily on agents for their success. PaeTec currently has 260 agents in the United
States that sell its local and long distance services, he says.

IDT’s Net2Phone To Be Bundled in Netscape Browser
By Ken Branson

etscape Communications Inc., Mountain View, Calif., has agreed to bundle the Internet
protocol (IP) telephony software of IDT Corp., Hackensack, N.J., in the next version of
its web browser. Neither company will disclose the terms of the deal.

The Net2Phone icon will appear in the "next generation" browser, according to
officials from both companies. A release date for the new browser has not been announced.
The Net2Phone icon also will appear on Netscape’s NetCenter website,

However, Mordy Rothberg, executive vice president of IDT’s Net2Phone Inc. division,
says the agreement is exclusive on Netscape’s side, and that Net2Phone’s IP telephony icon
will be the only such icon appearing on the Netscape browser for the agreement’s two-year
duration of the contract. Net2Phone, however, remains free to conclude similar deals with
other portals, Rothberg says.

Net2Phone’s icon appears on other web portals, but this deal is different, Rothberg
says, because it bundles Net2Phone’s software in the browser itself. In the other portals,
a user must download the software before being able to make a call.

For Netscape, the agreement with IDT signals another step in fulfilling its strategy of
becoming a means of communicating through the World Wide Web, not just navigating around
it. "We want to be the leading provider of communications on the web," says Tom
Tsao, group program manager for Netscape Contact, Netscape’s suite of communications
services. "That’s why we changed the name of the browser from Netscape Navigator to
Netscape Communicator."

Williams Offers Ramp-Up Pricing for ATM
By Khali Henderson

Institutionalizing an ad-hoc carrier’s carrier practice, Tulsa, Okla.-based Williams
Communications announced the availability of a new pricing option for asynchronous
transfer mode (ATM) service that will allow its wholesale customers the ability to
economically ramp up to increased capacity.

Called the Williams Flex-UNI, the service enables wholesale customers to purchase an
OC-3 or OC-12 port at a reduced rate and provision permanent virtual circuits (PVCs) in
smaller bandwidth increments. Flex-UNI, available to customers under a 12-month contract,
offers savings up to 37 percent on port costs; bandwidth pricing remains the same.

The service is targeted at Internet service providers (ISPs), competitive local
exchange carriers (CLECs) and interexchange carriers (IXCs), says Williams Network’s ATM
Product Manager Travis Kringlen.

Kringlen says while the service was suggested to the company by a large, national ISP,
it has a strong play for CLECs–which now are just beginning to offer data services–by
allowing them to extend their connectivity beyond current boundaries, and for regional
IXCs that want to expand their reach into off-net territories.

Previously, the smallest PVC that could be provisioned on an OC-3 port was 5 megabytes
(MB) and 25MB for an OC-12 port. As a result, carriers with growing bandwidth requirements
had two options. They could purchase a port sized for current capacity and upgrade it as
demand increased, resulting in additional hardware costs and network downtime for
installation. The other option was to purchase a port size and bandwidth in excess of
their current needs.

With Flex-UNI, a wholesale customer can purchase capacity on an OC-3 port in increments
of 1MB, with a minimum of 1MB and up to 19MB. Once they require 20MB, pricing reverts to
Williams’ standard OC-3 port rates.

Similarly, a wholesale customer can purchase capacity on an OC-12 port in increments of
5MB, with a minimum of 5MB and up to 70MB. Once they require 75MB, pricing reverts to
Williams’ standard OC-12 port rates.

Williams’ objective, obviously, is to lock customers into a larger port than they
initially need while offering them the flexibility to grow their connection rate to
substantially faster speeds, says Jilani Zeribi, network services analyst, Current
Analysis Inc., Sterling, Va. At the same time, he says, the advantage to the customer
should not be underestimated.

"Carriers that must expand their network capacity rapidly incur tremendous costs
changing their network equipment when moving from, for example, OC-3 to OC-12,"
Zeribi says. "Although a switch or router may support both speeds, the carrier must
install a separate card [which may cost upwards of $50,000] when upgrading to a faster

Sprint Reorganizes Long Distance Division; Merges
Wholesale Group Into Business Unit

Sprint’s Long Distance Division reorganized in mid-March by consolidating its
international interests into one unit and pulling its wholesale business division under
the Sprint Business banner.

As a result Paget Alves, formerly president of the Sprint Wholesale Services Group, is
now president of sales and sales support for Sprint Business.

Spokesperson Deborah Mazur says the change does not reflect a de-emphasis of the
company’s wholesale business. In fact, she says, it will better serve the carrier’s
wholesale customers by giving them access to Sprint’s fuller retail business product

As part of the reorganization, Sprint has expanded its Long Distance International unit
of its long distance division by consolidating international marketing, product management
and network services in the unit, which already has responsibility for international
alliances and carrier services. Lauren Wright, vice president and general manager of Long
Distance International, will oversee the expanded unit.

Patti Manuel, president and chief operating officer of Sprint’s Long Distance Division,
has resigned for personal reasons and will not be replaced. Instead, the company will have
two separate divisions–consumer and business–that report directly to Sprint’s president
and chief operating officer, Ronald T. LeMay.

Excel Agents To Sell Collect Calling Product

Multilevel marketer Excel Communications Inc., Dallas, entered the U.S. collect-calling
market in March with the introduction of its 1-800-PHONE-ME product available nationwide.
The service will be sold by the company’s national network of independent agents, who will
receive commissions on calls placed to their customers.

Agents will be supported in their sales efforts with collateral as well as a mass
media–TV, radio and direct mail–advertising campaign in selected U.S. markets, which the
company has chosen not to identify.

The service allows U.S. callers to connect to people anywhere in Canada, Puerto Rico,
the United States and the U.S. Virgin Islands at 9 cents per minute every evening. Daytime
calling rates vary by type of call.

GST Enters Joint Build with Level 3, NEXTLINK

GST Telecommunications Inc., Vancouver, Wash., has entered into a joint-build agreement
with Level 3 Communications Inc., Omaha, Neb., and NEXTLINK Communications Inc., Bellevue,
Wash., to participate in the construction of a San Diego metropolitan area network.

Under terms of the agreement, GST will participate in a joint build of approximately 26
route miles of a 62-mile multiple conduit system currently being deployed by Level 3 and
NEXTLINK in the San Diego area.

In related news, GST also has teamed with Level 3 to joint build a long-haul network
connecting San Diego to GST’s West Coast fiber backbone. Upon completion, GST’s West Coast
network will span from San Diego to Seattle.

Hypercom Unveils High-Capacity IP Telephony Gateway

Phoenix-based Hypercom Network Systems’ CompressionPlus module more than doubles
the capacity of voice over Internet protocol (VoIP) gateways, reducing the cost per
port of deploying IP telephony to as little as $330. With the new compression module,
Hypercom gateways support up to 10 T1/E1 circuits per chassis, or as many as 80 per
network node.

Besides the added value in terms of cost performance, the company says its new
configuration achieves the industry’s smallest "footprint," so carriers can grow
considerably without having to allocate more space to housing gateways.

Primus Acquires Canadian Competitor

Primus Canada, a subsidiary of Primus Telecommun-ications Group Inc., McLean, Va., a
global facilities-based telecommunications company, is acquiring the Canadian long
distance operations of privately owned, Toronto-based London Telecom Group Inc. The
acquisition propels Primus Canada into the ranks of the top three largest long distance
providers, behind AT&T Canada and Sprint Canada (Call-Net).

With the acquisition, Primus Canada has 200,000 customers. London Telecom is a pioneer
in flat-rate long distance calling plans in Canada, which it has offered under the
"London Telecom" and "LTN Network" brand names since 1990. London
Telecom also provides per-minute long distance services to residential and small- business
customers under the brand name "WinTel," as well as long distance services to
corporate customers and other telecommunications companies through LTN Data Services, Inc.

PRIMUS Canada will pay C$76 million in cash in connection with purchase of both

Frontier Doubles Internet Capacity

Frontier Corp., Rochester, N.Y., will double capacity for commercial Internet traffic
along its national high-speed native Internet protocol (IP) backbone. The Frontier IP
backbone uses the 12000 Gigabit Switch Router (GSR) from Cisco Systems Inc., San Jose,
Calif., to run IP directly over the optical layer, bypassing traditional synchronous
optical network (SONET) or asynchronous transfer mode (ATM) layers. This architecture
gives the network enhanced capacity efficiency and a significantly lower cost of

Frontier will have two OC-48 circuits linking Los Angeles to New York by the end of the
second quarter of 1999. The company further plans to deploy OC-192, or 10 gigabits per
second (gbps), coast to coast by first-quarter 2000.

Interoute To Buy Telegroup’s U.S., European Assets

Beleaguered callback pioneer Telegroup Inc., Fairfield, Iowa, signed a letter of intent
March 28 to sell its U.S. assets as well as shared capital of certain other non-U.S.
subsidiaries to Interoute Communications Group Ltd., a London-based international
telecommunications company. The sale is expected to be completed by the end of May.

Telegroup, which filed a voluntary petition Feb. 11 under Chapter 11 of the U.S.
Bankruptcy Code to facilitate a financial restructuring, announced earlier this month that
it would sell two of its non-U.S. subsidiaries to Melbourne, Australia-based Primus
Telecommunications Pty. Ltd. for AU$6 million. On March 4, Primus bought Telegroup Network
Services Pty Ltd. and Switch Telecommunications Pty Ltd. The sale of Telegroup Network
Services excluded its subsidiaries Newsnet International Ltd. and Redicall Pty Ltd.

Newsnet and Redicall, as well as other Telegroup subsidiaries in Australia, Hong Kong
and New Zealand, are yet to be sold, says David Walsh, president and chief operating
officer for Telegroup.

Interoute, a privately owned company, will acquire all the assets of the U.S. company
as well as its European subsidiaries, he says. Interoute’s majority shareholder is the
Sandoz Family Foundation.

Telegroup was delisted from NASDAQ on Feb. 18 and trades over the counter (OTC) under
the symbol TGRPQ.


H. Brian Thompson H. Brian Thompson has been named chairman and CEO of Global TeleSystems Group
Inc., McLean, Va. Thompson formerly is chairman and CEO of LCI International, which was
purchased by Qwest Communications International Inc. in June 1998. At that time, Thompson
became vice chairman of Qwest’s board of directors until he resigned at the end of 1998.
Prior to joining LCI in 1991, Thompson served for nine years as a senior member of
management for MCI Communications Corp., now MCI WorldCom Inc. He also is a former
chairman of the Competitive Telecommunications Association (CompTel).
Stephen R. Roberts Cleartel Communications, Wash-ington, has named Stephen R. Roberts as its
president. Roberts has been with Cleartel since 1994. He joined the company as director of
sales. Prior to becoming president, he served as vice president of sales and general

David Garrison, former chairman and CEO of Netcom, has taken a seat on the board
of director’s for GST Telecommunications Inc., Vancouver, Wash. Garrison was with Netcom
until June 1998 when the company was merged with ICG Communications.

Walt Anderson has been appointed the chairman of the board of directors for US
WATS Inc., Bensalem, Pa. Previously one of the company’s directors, Anderson is the
financial advisor for Gold & Appel Transfer S.A., a venture capital company, which
owns more than 50 percent of the outstanding common shares of US WATS.

Irving Goldstein International telecommunications carrier IDT Corp., Hackensack, N.J., has announced
that Irving Goldstein, former CEO and director general of INTELSAT, Washington, and
former chairman and CEO of COMSAT Corp., Bethesda, Md., will join its board of directors.

Philip McGuire has been named director of consumer affairs for the International
Telecard Association (ITA) and the International Telecard Foundation for Consumer
Protection and Education, both in Washington. McGuire comes to ITA from the advertising
and radio industries.

The United States Telephone Association (USTA) has tapped Dale E. Brown as its
new vice president of mid-sized company affairs. Brown comes to USTA from COMSAT Corp.,
Bethesda, Md., where he served as director of congressional relations. In his new role, he
will be the liaison between USTA and its 25 mid-sized member companies.

Jeff Brown IXC Communications Inc., Austin, Texas, has named Mark S. Lefebvre, a veteran
of Internet pioneer Bolt Beranke and Newman (BBN), as its vice president of data services.
The company also has named Jeff Brown (pictured) as vice president of product
management and Christopher Rothlis as vice president of new product development.

Erols Chairman and CEO Takes Helm at TotalTel

Dennis SpinaInternet
veteran Dennis Spina has been tapped as president and chief operating
officer of TotalTel USA Communications Inc., Little Falls, N.J. For 15 years a competitive
long distance carrier, TotalTel will pursue a convergent strategy under its new leader.

Spina is the former chairman and CEO of Erols Internet Inc., Springfield, Va., which
was bought by RCN Corp., Princeton, N.J., in February 1998. Following the acquisition,
Spina was vice chairman and president of Internet services for RCN.

"The Internet and local telephone service markets are logical extensions of
TotalTel’s present strength in long distance products and solid growth areas for the
company. Dennis Spina has the expertise to drive this strategy," says Chairman and
CEO Warren Feldman.

TotalTel is certified as a competitive local exchange carrier (CLEC) in Connecticut,
Maryland, Massachusetts, New Jersey and New York. Spina says the company is negotiating
interconnection agreements with Bell Atlantic Corp., Philadelphia, and with Southern New
England Telecommunications Inc. (SNET), New Haven, Conn., a subsidiary of SBC
Communications Corp., San Antonio. He reaffirms the company’s intention to begin offering
dedicated Internet access to corporate customers by June 1.

TotalTel will target business customers for its CLEC and Internet services, as it has
with long distance. Spina says TotalTel will make use of its existing facilities in Miami,
Newark, N.J.; and New York. The New York facility, at 40 Rector St., also will be the
Internet service hub.

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