Capellas: IP Backbone Is WorldComs Future

WorldCom CEO Michael Capellas says his strategy centers on using the IP backbone to offer network-centric services built using Web services and open standards.

SAN DIEGO—The future of beleaguered WorldCom Inc. rests on its IP backbone, said Michael Capellas, CEO and chairman of WorldCom Inc., here Wednesday.

Ten weeks after taking the helm at the bankrupt telecommunications giant, Capellas said his strategy centers on using the IP backbone to offer network-centric services built using Web services and open standards. Capellas, formerly Compaq Computer Corp.s CEO and Hewlett-Packard Co.s president, was speaking to hundreds of IT managers here at the Gartner Symposium IT Expo.

"As I look at the next great wave of whats going to happen—the evolution of commoditization of the data center, and the emergence of Web services—were all trying to figure out how to move to this utility model," Capellas said. "This takes a really open set of standards around an IP backbone, and the one capability I know we have is the worlds best IP backbone."

Capellas said his strategy will ensure WorldCom takes advantage of the $38 billion investment it has made over the last few years on its IP backbone. The company, which recently finished a three-year business projection plan, will one day derive the majority of its revenues from IP-based network services, Capellas said.

As WorldCom moves to exploit these investments, however, the company is being forced to acknowledge the falling value of other parts of its network. Earlier this month, WorldCom, in Clinton, Miss., announced it would write down almost $80 billion in goodwill and assets.

Today, in the monthly operating report which Worldcom is required by the bankruptcy court to issue, the company reported a net profit for January, 2003, of $155 million compared with a net loss of $580 million in December, 2002. However, sales in January fell to $2.16 billion from $2.2 billion the previous month.

Capellas said WorldComs competitive advantage is its understanding of IP networks. In order to cash in on that advantage, the company will work with vendors pushing Web services and XML, Capellas said. In an effort to offer more value on top of the basic voice and data services it currently offers to enterprise customers, Capellas said WorldComs plan is to one day offer universal access to IP connectivity. The integration of applications via Web services along with open standards, he said, will eventually enable plug-and-play over the wide area network.

"At the end of the day, regardless of innovation or cost, its about total cost of ownership," he said. "The blending of computation and communication with networking is inevitable. But the last mile is still a problem. This world of interchangeable IP still has a long way to go."

As companies like Microsoft Corp., IBM and Sun Microsystems Inc. continue to develop Web services software around XML and Voice XML, Capellas said WorldCom would continue to drive the IP backbone and to push voice over IP. He stressed that the company will also focus on helping its customers utilize their existing networking computing resources. The company will partner with other companies that specialize in services such as application integration and software.

"Nobody is going to do it all," he said. "There is huge opportunity to do things like bypass [the] traditional PBX and…helping customers with server consolidation. But the trick of this game is not to be something you cant be. "

Along with network-centric services, Capellas said WorldCom will aggressively compete to provide data services to global accounts. While the company once tried to compete in the European retail market, he said Worldcom will instead focus on servicing global accounts better in an effort to provide services globally for multinational companies.

"Ive watched this company make huge contributions to redefining competition in the telecommunications space," Capellas said. "We are on track and hitting all of our milestones."