NEW YORK -- MCI WorldCom plans to launch its own consumer Internet service, sources said. Four months ago, MCI was forced to sell its Internet business to gain regulatory approval for its acquisition by WorldCom.
The No. 2 US long-distance company is expected to announce the new Internet service in about a week, though the timing could change, sources said. MCI WorldCom (WCOM) declined to comment.
Consumers will be able to buy the Internet service separately or buy a package of services, including Internet access and long-distance service. Details on pricing and brand name were not immediately available.
Last year, to satisfy US and European regulators' concerns that the combined telco would dominate the Internet business, MCI Communications agreed to sell its wholesale and retail Internet businesses to Britain's Cable & Wireless for US$1.75 billion.
WorldCom was allowed to keep its fast-growing UUNet subsidiary, which also provides Internet services, but to businesses rather than consumers. The Jackson, Mississippi-based company completed its $40 billion acquisition of MCI in September.
Since MCI WorldCom developed the new Internet service internally, the company will not face the same kind of regulatory scrutiny that it would if it had bought an outside company, analysts said.
The new Internet service will target consumers and fill in part of the gap created by MCI's divested Internet business. It should be an attractive product for customers who want to get all of their communications services from one company, analysts said.
"It will be tough [for MCI WorldCom] to start over from scratch, but companies need to have a product like that -- a bundle of services -- to compete," said Gary Arlen, president of Arlen Communications, a research company.
A Yankee Group survey of technologically advanced families showed that 81 percent of those households would prefer to get some or all of their communications services from a single company.
MCI WorldCom already offers MCI One, a package of services that includes long-distance, wireless, and calling-card services. The telco's chief rival, AT&T, introduced a new plan that also combines long-distance, wireless, and calling-card services. AT&T also offers packages that include Internet service.
Phone companies, however, remain distant competitors in the Internet business behind industry leader America Online. AOL has 15 million subscribers -- about 10 times the amount of its next closest rival.
Some phone companies, such as Sprint (FON), have been more successful partnering with Internet companies than trying to offer the service on their own. Sprint, the third-largest US long-distance company, and EarthLink Network last year combined their Internet access operations in a joint venture.
AT&T, meanwhile, may sell its Internet business to At Home (ATHM) in exchange for about $1 billion in stock. AT&T would have even greater control of At Home, which provides high-speed Internet access, after it completed its proposed purchase of Tele-Communications Inc., At Home's largest shareholder.
Copyright© 1999 Reuters Limited.
