NEW YORK — There isn't very much that's sexy about the communications network known as the Internet backbone. It isn't run by twentysomething hipsters, it's rarely the subject of frenzied stock speculations, and its operations are sufficiently arcane as to seem almost unremarkable.
But the backbone, as its name suggests, is critical to everything the Internet does. It's already become a big business. And it's now in the midst of an extraordinary building boom that is transforming what was, until just two years ago, a government-run research network into the world's fastest and most sophisticated communications system.
Already, the U.S. Internet backbone carries 12.75 billion e-mail messages annually, and e-mail represents less than one-tenth of Internet traffic, far less than the graphically rich World Wide Web transmissions, according to Eric Arnum, a contributing editor to the industry newsletter Electronic Mail and Messaging Systems. Increasingly, the Internet will be carrying voice calls and video as well--usurping much of the work once carried out by the traditional long-distance telephone network.
Physically, the backbone is the grid of high-capacity optical fiber lines that carries the bulk of Internet traffic, plus the system of specialized switches and routers that direct the traffic.
Although there are more than 4,000 Internet service providers in the U.S.--companies that link your home or business computer to the Internet--only about a dozen firms form the backbone. These so-called national backbone providers range from two of the biggest and best-known long-distance phone companies--MCI Communications Corp. and Sprint Corp.--to much smaller newcomers such as Digex Inc. of Beltsville, Md., which regard the Internet as their sole business.
The national backbone providers sell hookups to the Internet service providers, which in turn charge access fees to individual users.
AT&T Corp., the 800-pound gorilla of phone companies, is so far the odd one out. AT&T's Worldnet Internet service actually gets its access through the backbone provider BBN Planet, which in turn leases some of its fiber lines from MCI. This puts AT&T in the odd position of indirectly relying on its fiercest rival for one of its fastest-growing services.
"They're lying in the weeds, waiting to see if it becomes a really big business," analyst Ulric Weil of Friedman, Billings, Ramsey & Co. said of AT&T. "Eventually, they'll have to be in this business. It isn't something they can stay aloof from as a fully integrated [telecommunications] company."
Isolating revenue associated with the backbone is tricky because the biggest players are in so many closely related businesses. Weil and other analysts have estimated total backbone revenues for 1996 at about $750 million.
Cambridge, Mass.-based Forrester Research estimates that annual sales of Internet services will hit $30 billion by 2000, from less than $1.5 billion now. Access fees--to both Internet service providers and the national backbone firms--will account for three-quarters of that revenue, according to Forrester.
That doesn't include the money to be made supplying equipment to the backbone firms as their never-ending construction project goes forward. Some of the equipment suppliers rank among the new elite of the stock market's high-tech sector--companies such as Cisco Systems Inc., U.S. Robotics Corp. and Ascend Communications Inc.
With more than a quarter of America's households and a third of its businesses online by 2000, traffic will be growing even faster than revenues. MCI's monthly Internet traffic--now about 330 terabytes (330 trillion bytes)--has been tripling yearly for the last three years and should be well into the petabytes (think of a 1 followed by 15 zeros) when the new millennium arrives.
By comparison, the full Encyclopedia Britannica contains about 1 gigabyte (a billion bytes) of information.
Such growth, while invigorating to investors, makes for a volatile and messy environment. The system is becoming so complex that there is only a general consensus on exactly what constitutes the backbone and who its top players are.
Today's backbone is a commercial descendant of the original Internet framework that the federal government began assembling in the late 1960s to facilitate communication among military and scientific researchers. It evolved into a network linking a handful of university-based supercomputers and began its explosive growth in the mid-1980s when other regional computer networks--most of them university-based--were allowed to connect.
As recently as two years ago, the Internet was still a creature of the federal government, operated under the auspices of the National Science Foundation. But in April 1995, the agency turned over the keys to the private sector.