WorldCom already selling Digex services

WorldCom's $6 billion acquisition of Intermedia has not been finalized, but the deal's crown jewel - managed Web hosting services from Intermedia's Digex affiliate - is already bolstering WorldCom's product lineup.

Intermedia is the majority shareholder in Digex, which itself was the main attraction behind WorldCom's Intermedia buy, according to the company.

When the deal is final, WorldCom will be the majority shareholder in Digex, although the second-largest telecommunications company isn't waiting for that approval to start selling services. WorldCom sales representatives are already selling Digex dedicated managed Web hosting services to midsize and large corporate users. The services, which will be sold under WorldCom's brand name, include Unix and Windows NT managed Web hosting, e-commerce and intelligent network services such as load balancing and caching.

WorldCom is looking to grab some Web hosting market revenue, which consulting and research firm IDC predicts will total more than $11 billion by the end of 2002. WorldCom is competing with the likes of Exodus Communication with its managed and complex Web hosting services, and with Verio on the low end with its shared Web hosting offerings.

WorldCom customers will have more choices with its managed Web hosting services, but there is more to WorldCom's pre-emptive Digex integration.

"This is a sneak preview of how it's going to be once the merger goes through," says Melanie Posey, a senior analyst at IDC. "The point of this whole thing is to show that WorldCom is following through on its restructuring announcement. Web hosting is one of the areas WorldCom highlighted for future development, and here they are trying to make good on that promise."

Digex is also making UUNET, WorldCom's ISP subsidiary, its primary network provider. Digex is upgrading five data centers with dual OC-12 connections to UUNET's Internet backbone by year-end. Early next year, Digex will upgrade its data center connectivity to dual OC-48, says Todd Carlson, senior vice president of business operations.

Digex had a few connections to UUNET's network, but those were secondary connections, Carlson says.

When asked if Digex will use Intermedia's network for any of its connectivity needs, Carlson says "that remains to be seen."

Next year, Digex will expand its data center coverage by using some new and expanded WorldCom data centers around the world. WorldCom is investing $1.2 billion to fuel its data center construction. Digex will share space in WorldCom data centers in Atlanta, Boston, Dallas, Denver, Houston, Los Angeles, Miami, New York, northern New Jersey, northern Virginia, San Jose, St. Louis and Washington, D.C.

Digex has one data center in London and will also share space with WorldCom in additional, unspecified international cities next year.

Digex should need the extra space with WorldCom salespeople offering business users Digex services.

Digex only has 130 salespeople, and WorldCom has 5,500 in the U.S. and 2,000 overseas. But after WorldCom sells the service, it's entirely up to Digex to manage and support those customers. Digex says it's equipped to support tens of thousands of servers based on the company's automated systems and setup procedures.

WorldCom will likely sell all Intermedia assets that are not connected with Digex once the deal is final, but WorldCom executives would not comment on exactly what they plan to off-load.

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