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By Philbert Shih, theWHIR.com
December 26, 2005 -- (WEB HOST INDUSTRY REVIEW) -- The telecommunications segment of the Web hosting industry saw a pair of major acquisitions this year that created Internet communications and hosting powerhouses certain to help shape the industry in years to come. However, the deals left one carrier out in the cold and under a mountain of debt. The newly merged entities and their competitors forged ahead with the enhancement and expansion of their growing arsenals of hosting offerings.
In January, SBC Communications (sbc.com) acquired rival AT&T (att.com) in a $16 billion deal that created the largest telecommunications company in the US. The deal also significantly boosted SBC's Web hosting profile. AT&T has a strong presence in the enterprise hosting space, with high-profile enterprise customers such as Kodak and Marriott Corporation, in addition to several agencies of the federal government. The company also owns a large hosting data center footprint, operating 14 facilities in the US and 14 internationally, providing managed hosting services. The merged company decided to drop the SBC moniker and be known as AT&T.
Not long after the announcement of the SBC deal, Verizon (verizon.com) and Qwest Communications (qwest.com) each began courting MCI, which had just emerged form the largest bankruptcy in history.
MCI had been looking for a buyer for several months and, like AT&T, presented an attractive asset because of its extensive national infrastructure and strong corporate customer base. Hosting was another strong suit. MCI built its enterprise hosting with the acquisition of managed hosting specialist Digex. According to research firm Netcraft, MCI is the world's ninth largest host, home to 878,000 hostnames, including high-profile clients such as The Weather Channel and Bloomberg.
After weeks of talks, Verizon announced in mid-February that it had acquired MCI in a deal worth $6.7 billion. But it was only the start of over three months of maneuvering. Before Verizon's deal was finalized, Qwest Communications tabled a sweetened offer worth about $8 billion. A few weeks later, the company raised its offer again and Verizon then countered with a $7.6 billion bid. In April, Qwest upped its offer once more, this time to $8.9 billion. In May, Qwest bowed out of the running and Verizon closed the acquisition for $8.5 billion. Verizon's bid was chosen largely because of its stronger financial position and potential for growth.
Despite its poor financial shape, Qwest, a provider of consumer and enterprise hosting, pushed hard for MCI because it was concerned that with the SBC-AT&T deal, the company would have difficulty staying independent in the face of continued telecommunications industry consolidation. With its failure, Qwest's fears continue to be realized.
Even with all of the merger and acquisition activity surrounding them, MCI and AT&T continued to expand their hosting infrastructure and offerings.
In September, AT&T announced a major expansion to its worldwide data center footprint, adding data centers in San Jose and Shanghai. The San Jose facility will double AT&T's hosting capacity in the San Francisco, Bay Area market and the Shanghai expansion is the first AT&T facility to offer hosting on the Chinese mainland. On top of the infrastructure developments, AT&T upgraded its managed hosting portfolio, adding application and operating system support, and new server virtualization capabilities. It also introduced hosting services on a utility computing, pay-per-use basis and said it would extend SAS 70 audits to its 14 non-US data centers.
MCI was equally busy, making enhancements to its hosting portfolio and acquiring new capabilities through acquisition. In January, it purchased managed security services provider NetSec (netsec.com), expanding the scope of managed security service available to its hosting customers. MCI also added some teeth to its managed network service offerings on the heels of the February release of its Rapid Fault Isolation capabilities, which monitors networks, isolating and finding anomalies or faults in near real time. In April, it expanded the SLAs for WANs, and in July extended them again to include LANs.
In August, MCI bought Totality (totality.com), a provider of remote managed services for business applications and infrastructure. The deal extends MCI's managed hosting capabilities to include application management that can be delivered from outside MCI hosting data centers. In other news, MCI completed SAS Type I certification for its Premium Data Centers in 13 major US cities. And in September, MCI introduced a new storage service for its hosting customers based on a utility, pay-as-you-go framework.
Telecommunications carrier Bellsouth (www.bellsouth.com) moved its shared hosting infrastructure in-house. The company had outsourced its hosting to NTT/Verio, but decided that in order to gain more control over its product roadmap and to integrate hosting with its other communications offerings, it was better off running things itself. Bellsouth enlisted the help of Sphera's (sphera.com) migration technology and built its platform on Sphera's flagship hosting business automation solution HostingBusiness Suite. The migration involved over 100,000 Web sites, email, FTP and e-commerce accounts.
Local carriers were busy as well. XO Communications (xo.com) expanded its managed hosting offerings through a partnership with managed services provider NEXL Systems. XO will handle the data center, network infrastructure and hosting services, while NEXL will design, implement and manage the solutions and deliver the required managed application, security and storage services. And on the consumer side, XO announced a new affiliate and referral program for its Concentric hosting brand, re-launched last year.
With all the transactions and product and service launches that marked the telecom segment of the Web hosting space this year, there was one unmistakable theme - hosting, both of the consumer and enterprise variety, continues to develop as a key component of the services offered by telecommunications carriers.
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