Convergence, Channel Key To MCI Strategy

The carrier is converting its backbone to IP, with 25 percent of voice traffic expected to be converted this year and 50 percent next year, said Fred Briggs, MCI's president of operations and technology.

MCI is also steadily recruiting VARs to implement and sell its Advantage offering, which combines local, long-distance and connectivity services. A formal program has yet to be rolled out, but Capellas said MCI is aggressively wooing channel partners.

"We have dedicated people who do nothing but handle the VAR channel," said Capellas. "I have a lot of confidence in [VARs] because I've worked with them before. So clearly our intent is to work with VARs. We know that world; it just makes sense for us to work with them."

On the services front, MCI plans to partner with wireless providers and is planning to double its DSL footprint, executives said. Competitors may be pulling back from Web hosting, but expect MCI to step up its involvement there via its Digex subsidiary, they said. Web hosting won't be a significant revenue generator but more of a decent value-add for high-end customers, Briggs said.

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Challenges remain, however, as competitors are quick to point out. Not all of the company's creditors have approved its reorganization plan, and some competitors, such as Verizon, are asking the Securities & Exchange Commission to support a bid to have MCI liquidated.

Other competitors say they have benefited from MCI's troubles. Keith Olsen, vice president of alternate channels at AT&T, said AT&T's channel has taken a significant amount of business away from MCI.

The drive to convert MCI's backbone to IP also presents a challenge for the carrier. The chief obstacle is all of the PBX systems already in place at customer sites. It may be several years before large numbers of customers replace their PBX systems with IP, said MCI's Briggs, adding that it will be the economics and cost savings of IP-based services that will push customers to do so.

The carrier also may face obstacles on the channel front. Some partners say they're leery of re-engaging with MCI after having their contracts terminated as part of the carrier's reorganization.