Trade name Verizon Enterprise Solutions / Verizon Business

Former type Subsidiary

Industry Telecommunications

Fate Acquired by Verizon Communications in 2006

Founded 1987; 33 years ago

Defunct 2006; 14 years ago

Headquarters Ashburn, Virginia, U.S.

Products Conferencing, Contact Centers, Data and IP Services, Internet access, IT Solutions and Hosting, Managed Networks, Premises Equipment (CPE), Security, Voice, VoIP, Wireless

Parent Verizon Communications(2006–present [2020 as of this capture of the Wikipedia page])

Website www.uu.net (archive.org)

UUNET, founded in 1987, was one of the largest Internet service providers and one of the early Tier 1 networks. It was based in Northern Virginia and was one of the first commercial Internet service providers. Today, UUNET is an internal brand of Verizon Business (formerly MCI).

History[edit]

Background[edit]

Prior to its founding, access to Usenet and e-mail exchange from non-ARPANET sites was accomplished using a cooperative network of systems running the UUCP protocol over POTS lines. During the mid-1980s, growth of this network began to put considerable strain on the resources voluntarily provided by the larger UUCP hubs. This prompted Rick Adams, a system administrator at the Center for Seismic Studies, to explore the possibilities of providing these services commercially as a way to reduce the burden on the existing hubs.

Early existence[edit]

With funding in the form of a loan from Usenix, UUNET Communications Services began operations in 1987 as a non-profit corporation providing Usenet feeds, e-mail exchange and access to a large repository of software source code and related information. The venture proved successful and shed its non-profit status within two years. At the same time, the company changed its name to UUNET Technologies. In 1990, UUNET launched its AlterNet service, which provided access to an IP backbone independent of the constraints of those operated by the government. That network lives on in a much larger form and serves as the core of a set of products which include access at dial-up and broadband speeds as well as web hosting. UUNET raised $6 Million from Accel Partners, Menlo Ventures and New Enterprise Associates in 1993 and $8.2 million in 1996 for expanding its network and hiring new executives with experience in marketing.^[1]

In the mid-1990s, UUNET was the fastest-growing ISP, outpacing MCI and Sprint. At its peak, Internet traffic was briefly doubling every few months, which translates to 10x growth each year. However, the continuing UUNET claims of such growth (long after it had fallen to lower, albeit still substantial levels) artificially fueled the expectations of the dot-com and telecom companies of the late 1990s, leading to the dot-com bubble and crash in 2000/2001.^[2]

Mergers and acquisitions[edit]

In 1996, UUNET was acquired by MFS on April 30, 1996. This was an independent acquisition unrelated to the acquisition of MFS by Worldcom. However, as MFS was a public company and the acquisition made the company a Wall Street darling,^[3] it likely influenced Worldcom's decision to pursue MFS.^[4]

In 1996, UUNET was acquired by WorldCom on August 26, 1996, as part of WorldCom's purchase of MFS Communications Company.^[5]

In 2001, UUNET was fully integrated with WorldCom and the name was dropped from all official documents.

In 2002, the owner of UUNET at that time (WorldCom) filed for what was then the largest Chapter 11 bankruptcy protection in history.

In 2005, its Internet service and infrastructure, assigned AS701, maintained the highest outdegree of any ISP.^{[clarification needed][6][7]}

Verizon[edit]

In 2006, WorldCom was purchased by Verizon Communications and now operates under the Verizon Business name.

Spam[edit]

SpewSpewNet[edit]

After it had been sold and resold during the onset of the dot-com bubble, UUNET acquired the nickname SpewSpewNET. This nickname was given because UUNET had become a home for many distributors of spam, including distributors of both Newsgroup spam and E-mail spam. UUNET also became known for providing bulletproof hosting to many web pages whose chief form of advertisement was spam. Because UUNET started with a loan from Usenix and controlled the e-mail addresses for moderated Usenet groups, it was hard to block email traffic to or from Usenet. In 1997, UUNET had lost so much credit that on 1 August, after finding alternate routes for moderated newsgroups, a Usenet death penalty (UDP) was issued against UUNET.^[8] A week later, the UDP was lifted.^[9] In 1998 UUNET threatened legal action^[10] for hosting a GIF image with "SPAMUNET" on it.^[11]

Timeline[edit]

• 1987 – UUNET Communications Services is founded and passes its first traffic via the CompuServe Network on 12 May using UUCP (Unix to Unix Copy Protocol).

• 1989 – UUNET becomes a for-profit corporation

• 1990 – UUNET launches AlterNet

• 1991 – UUNET participates in the founding of the Commercial Internet Exchange Association

• 1992 - UUNET with MFS co-creates MAE-East, for a time the world's busiest Internet exchange and "center of the internet"

• 1994 – Microsoft paid $16.4 million for a 15 percent share of the company

• 1995 – In May, UUNET is listed on the NASDAQ stock market in an initial public offering that would become part of the beginning of the dot-com boom.

• 1995 – UUNET Technologies Inc places a takeover bid against Unipalm Pipex.^[12]

• 1996 – UUNET Technologies agreed to a merger with the Microsoft backed MFS Communications Company.^[13]

• 1996 – Metropolitan Fiber Systems (MFS) acquires UUNET for $2 Billion on 12 August 1996. This marked the day UUNET stopped existing as an independent company.

• 1996 – WorldCom acquires MFS on New Year's Eve – 31 Dec. at 11:58 p.m EST for $12.4 billion

• 1997 – Usenet death penalty (UDP) issued against UUNET, and lifted a week later

• 1997 – On 10 November, WorldCom and MCI announced their US$37 billion merger including combining internetMCI & UUNET Internet operations.

• 1998 – The combined MCI WorldCom opens for business on 15 September after being given the go-ahead from the DOJ, subsequent to divesting internet MCI.^[14]

• 1998 – WorldCom acquires CompuServe Network Services from H&R Block and ANS Communications from AOL. Both become part of UUNET in 1999.

• 1999 – On 5 October, MCI Worldcom announces its intentions to buy Sprint for $129 billion.

• 2000 – The European Commission and DOJ denied the MCI WorldCom / Sprint merger on Antitrust Grounds.

• 2001 – The UUNET brand is folded into WorldCom's product line and disappears

• 2002 – WorldCom files for Chapter 11 bankruptcy protection as a result of a massive $11 billion accounting scandal.

• 2003 – The UUNET brand re-emerges as WorldCom's wholesale-only brand.

• 2004 – WorldCom emerges from Chapter 11 bankruptcy and renames itself to MCI, still using the UUNET brand for wholesale business.

• 2005 – MCI again drops the UUNET brand for wholesale business. The name is no longer in use.

• 2006 – Verizon acquires MCI, including its UUNET subsidiary, now known as Verizon Business. AS701 remains the backbone of Verizon Business although its origin dates back to 1990 when it was under the UUNET flag.

Of all the beneficiaries of last week's $2 billion deal for [MFS Communications Company, Incorporated] to take over Internet access provider [UUNET Technologies, Incorporated], one of the biggest will be a Baltimore venture capital firm that stands to make $189 million on a $4 million investment.

New Enterprise Associates controlled 10.1 percent of Fairfax, Va.-based Uunet, having paid $3.9 million for the stake in 1994. NEA endured a wild roller-coaster ride in Uunet's stock price after the company went public last May, and stands to make a killing for its clients when the merger goes through. [...]

The 18-year-old firm has invested in about 320 companies, which [NEA general partner Charles W. Newhall III] said have $18 billion in annual revenues. NEA has capitalized on the historic bull market for new stock issues that has made millionaires out of people who founded NEA-backed companies such as Genetic Therapy Inc. of Gaithersburg and Integrated Health Systems Inc. of Owings Mills.

In most cases, venture capitalists get paid when a company is sold or goes public. NEA's 15 initial public offerings last year topped the venture capital industry for the third time in four years, according to a report by San Francisco-based Venture-One Corp.

"Over the last five years, NEA has averaged one IPO a month -- a remarkable track record for an entrepreneurial money machine," Venture-One said.

Not nearly all the cash from the [UUNET Technologies, Incorporated] takeover will go to NEA's principals, however. The investment was made with part of a $200 million fund the firm raised from pension funds and other investors in the early 1990s, Newhall said. NEA principals put up 1 percent, and otherwise get paid a share of the profits above the $200 million invested. Given the hit on Uunet, almost any return at all on the other $196 million in the pool is pure profit. [...]

[UUNET Technologies, Incorporated] founder Richard Adams was basically an engineer with a vision when he went looking for money in 1994. He met up with NEA, and with two other venture firms, and quickly raised the money he needed to move forward.

But it came with a price. The venture capitalists decided that [UUNET Technologies, Incorporated] needed upgraded management. "They said, basically, we're going to hire a management team and we're going to put some money in," said UUNET President and Chief Executive [John William Sidgmore (born 1951)]. "They brought people in in early '94."

[John William Sidgmore (born 1951)], a colleague of NEA partner Peter Barris when they both worked for General Electric Co., was at the top of the list. He had sold Intelecom Solutions, a Montgomery County software firm, to Computer Sciences Corp. in 1991 and was still running Intelecom for the new owner when Barris approached him.

"He basically convinced me this would be an exciting area to work in," Sidgmore said. "It was a little tiny company, much smaller than the one I was running. But Peter convinced me it was a terrific opportunity." [...] Sidgmore said. "No, of course [I didn't know how terrific the opportunity was, ... ] but you have to remember no one knew anything about the Internet two years ago. Now everyone thinks they're an expert."

What happened in between was 1995. [UUNET Technologies, Incorporated] did some big things right, and also rode a wave of interest in the Internet that was mostly beyond its control.

On its own, UUNET decided to focus on the business market, avoiding low-margin competition with the likes of America Online for consumers' business. And it made a key alliance with software titan Microsoft Corp., which took a 13 percent stake in Uunet.

"Microsoft, in essence, financed development of the network," [John William Sidgmore (born 1951)] said.

By then, the media had joined the Internet hype, and so had the stock market. And, Sidgmore says, there was good reason.

"People realized the Internet would become a revolutionary technology," he said. "It enables virtually everyone to communicate with each other, and it was dramatically cheaper than conventional networks. These two things were a sea change."

The wave allowed [UUNET Technologies, Incorporated] to go public at $47 a share last May. From then it was a roller-coaster, with the stock rocketing above $70, then plummeting as low as $24.50 after AT&T; Corp. said it was getting into the Internet access business, then rebounding as optimists comforted themselves with the idea that upstart AT&T; challengers past have grown into companies like MCI Communications Corp.

The takeover price was $61 a share. But the deal attracted negative attention as well, because suspicious trading in Uunet options made it appear news of the deal had leaked prematurely. Sidgmore said the company doesn't know who bought the options before the deal.

"A lot of communications technologies have come and gone, and AT&T; hasn't dominated them," Newhall said. "We felt that if you went into the business end of the Internet backbone, you could add products and services to be competitive."

But Sidgmore said the company made the deal because moves like AT&T;'s entry make the Internet business much more competitive.

The Virginia company simply needed a bigger partner with deeper pockets to make the technology investments Uunet will need to keep up.

"The Internet is getting very serious, and there are going to be a lot of very serious players," he said. "If we want to remain a leader, we were not going to be able to do it on our own."

Newhall said NEA's 16 investment professionals, based on St. Paul Street and in Silicon Valley, live by their ability to spot trends, mostly in health care and information technology industries. "In our business, our success is determined by our ability to participate in things that change the way the world is," he said. "I think we've done that."

"We've basically succeeded in what we dreamed of doing: starting businesses that are important."

In a sign of the rush toward ''one-stop shopping'' in telephone service, [WorldCom Corporation] agreed to buy [MFS Communications Company, Incorporated] yesterday in a stock deal worth approximately $12 billion.

The combination of Worldcom and MFS creates the nation's first fully integrated local and long-distance phone company since the breakup of the Bell System in 1984. And though the companies are hardly household names, together they promise to be a new giant in the lucrative market of providing communications services to business customers.

By combining networks, MFS Worldcom will be able to offer corporate customers a full complement of services: local and long-distance phone, data transmission and access to the Internet. Worldcom, the fourth-largest long-distance carrier, has until now primarily sold its network capacity to other long-distance companies. MFS is the leading provider of alternative local phone services to business customers seeking better prices or services than are available from the local telephone monopolies.

For all its size, however, yesterday's merger is only the third-largest deal of the year in the roiling telecommunications industry, outranked by the $22.1 billion combination of Bell Atlantic and Nynex and the $16 billion merger of SBC Communications and Pacific Telesis.

And unlike those pending mergers, yesterday's deal will have scant impact on residential customers. Worldcom and MFS plan to focus almost exclusively on the business market, where for years big corporate customers have purchased phone service from carriers that lacked such familiar brand names as AT&T or Nynex.

Still, analysts and executives said the merger was another milestone in the redrawing of the communications landscape that began when the Government deregulated the industry in February.

''It's highly significant because it elevates one more player into the ranks of end-to-end service providers,'' said Paul T. Unger, a telecommunications consultant at A. T. Kearney.

Together, MFS and Worldcom will have $5.4 billion in revenues, operations in 45 domestic markets and 500,000 corporate customers. Worldcom will issue 500 million to 550 million shares to acquire MFS.

In Nasdaq trading yesterday, Worldcom's stock dropped $3.625, to $22.75, while MFS jumped $9.94, to $44.81.

MFS Worldcom faces plenty of competition in the business market. AT&T, MCI and Sprint are moving rapidly to offer packages of services to corporate customers. And the Baby Bells intend to be full-service providers as well, though they will cater primarily to businesses in their own regions.

Several analysts said the merger presaged even more deals, and they pointed to another alternative local-access provider, the Teleport Communications Group, as the next potential takeover. Teleport announced a deal with AT&T yesterday to carry long-distance calls by connecting its local networks in large cities to AT&T's nationwide network. Teleport's shares rose $1.375, to $23.625.

Neither MFS nor Worldcom is a stranger to mergers. MFS, which is based in Omaha, acquired a leading Internet access company, [UUNET Technologies, Incorporated], for $2 billion in April. And Worldcom, which is based in Jackson, Miss., was cobbled together from several small long-distance companies, reaching its current configuration through the $2.5 billion joining of LDDS and Wiltel Network Services in January 1995.

Analysts generally praised the latest deal, which was reported yesterday in The Wall Street Journal, though some noted Worldcom was paying a lofty premium. Under the terms of the deal, each share of MFS common stock will be exchanged for 2.5 shares of Worldcom stock. Based on yesterday's closing price, that values MFS shares at $47.80 each -- a 37 percent premium to the market value on Friday.

MFS, which has invested heavily to build fiber optic networks, had revenues of $583.2 million in 1995, but lost $267.9 million. ''You're paying $12 billion for a company with negative net income and negative cash flow,'' said one analyst, who insisted on anonymity.

That prospect apparently does not daunt Bernard J. Ebbers, the president and chief executive of Worldcom, who proposed the merger to the chairman of MFS, [James Quell Crowe (born 1949)], over dinner two weeks ago at Mr. Crowe's home in Omaha. The two men took barely two weeks to hammer out a deal the size of Time Inc.'s 1990 acquisition of Warner Communications.

Mr. Ebbers, whose flowing hair and relaxed manner make him look more like a country-and-western singer than a corporate executive, will be the chief executive of the new company. [James Quell Crowe (born 1949)] will be the chairman.

Worldcom's current chairman is John W. Kluge, the billionaire investor and a major shareholder in the company. Mr. Ebbers said Mr. Kluge would step down when the merger is completed in four to eight months. He said it was not clear whether Mr. Kluge would remain on the board.

Mr. Ebbers said the companies did not plan any layoffs. But the merger will probably claim at least one casualty in the executive suite. Royce W. Holland, the president and chief operating officer of MFS and one of its founders, said he would probably depart in a few months.

''I've been at this for nine years,'' Mr. Holland said yesterday, ''It's probably time for me to take a little time off.''

In a joint interview, Mr. Ebbers and Mr. Crowe said the merger would give them a critical jump over AT&T, MCI and other rivals in offering a bundle of services to business customers.

Worldcom owns a fiber optic backbone that snakes around the country, while MFS has scores of smaller fiber optic rings in local markets. By connecting the companies' combined 25,000 miles of fiber, the two executives said they would be able to carry traffic entirely on their own networks.

''Being first to market is a tremendous advantage, because building these networks is not an overnight proposition,'' Mr. Ebbers said.

AT&T, MCI and Sprint do not own local systems. So as they move into the local phone business they must either lease capacity from the Baby Bells, or construct their own local switches and networks. The Baby Bells, meanwhile, are prevented from entering the long-distance business until they can demonstrate that their local markets are truly competitive.

Combining Worldcom and MFS will also squeeze savings out of both companies. Daniel Reingold, an analyst at Merrill Lynch & Company, estimated that MFS would save about $40 million a year by diverting its long-distance traffic from AT&T and other carriers to Worldcom's network. And Worldcom could save $200 million to $400 million in access charges by using MFS's local networks to connect calls from its long-distance customers.

Worldcom has racked up an impressive annual return to shareholders of 57.3 percent in the last decade -- in part by aggressively acquiring and managing other telephone companies.

''They've shown an ability to integrate acquisitions,'' said Simon Flannery, a telecommunications analyst at J. P. Morgan & Company, ''It's important to look at their track record in analyzing this deal.''

Whatever Mr. Ebbers's talents as a manager, some observers question whether he needed to buy MFS -- particularly given the $12 billion price tag. With fiber optics and digital technology expanding the capacity of telephone wires, some analysts forecast an eventual glut of network circuits that will probably enable long-distance carriers to lease capacity on local networks at increasingly favorable rates.

P. William Bane, a telecommunications consultant at Mercer Management Consulting in Washington, said Worldcom might have been able to get into the local phone business simply by leasing capacity on the local networks of the seven Baby Bells.

Indeed, MCI Communications announced something resembling such a deal yesterday with Nextwave Communications, a company that plans to offer a new type of local cellular service, called personal communications services. MCI will lease capacity on Nextwave's wireless system and sell it under the MCI brand name.

''If they can fill in all the pieces, they'll do very well,'' Mr. Bane said of MCI. ''And they won't have to buy anything.''