Cerf the internet: Let's try it in space

By PETER GRIFFIN, telecoms writer

He gave birth to the internet back in the seventies and has devoted his life and career to the burgeoning IT and telecommunications industry he knows so well.

But when Dr Vinton Cerf's employer, WorldCom, among the biggest of the US long-distance phone companies, triggered one of the biggest bankruptcy filings in history, Cerf was as shocked as everyone else.

"I don't recommend bankruptcy as a pastime," says Cerf of the months following WorldCom's move into Chapter 11 protection. "Disneyland is a lot more fun."

As WorldCom's senior vice-president for internet architecture and technology, Cerf has the job of steering the giant telco's technology strategy for its internet business, not the easiest of jobs when a US$3.8 billion ($NZ6.8 billion) hole has opened up in your company's books, and capital expenditure plans are thrown into disarray.

Cerf, who is visiting New Zealand to take part in the Knowledge Wave conference, sums up the sorry saga in a sentence.

"The problem was the accounting misrepresentations led everyone in the company, including myself, to believe we were making a profit when we were not."

Beyond the accounting scandal, Cerf, who in the mid-70s designed the communication protocols that the internet operates on, says other forces - intense competition and falling prices - have forced the big telco operators to change their business models.

The transition has resulted in bankruptcies, layoffs and ballooning debt across the sector.

But increasing competition, says Cerf, has cemented in place the fixed-price model whereby telephone and internet subscribers pay a set monthly fee for their services.

"In the states, for around US$50 a month, you can make all the local and long-distance calls you want with us. You could talk 24 hours a day if you wanted to."

Cerf remains confident WorldCom will emerge out of bankruptcy in good shape. He said the appointment of former Compaq boss Michael Capellas as chief executive had been a "shot in the arm" for the company.

Restructuring in the company had been on a "massive" scale, he said, quoting his new boss' wish to turn around the company with "outrageous urgency".

The thousands of layoffs, cost-cutting measures and opting out of contracts were all a necessary part of that.

"The only good thing about being in Chapter 11 is that you are given enormous amounts of freedom to change your contractual relationships with others without sparking lawsuits," he said.

But while WorldCom's future is still far from certain, Cerf is already deeply involved in the next big technology shift the carrier will make - sending voice calls over the internet on a massive scale.

"It dictates a very different pricing structure ... considering that internet services are basically flat-price services that vary only with the capacity of the access circuit," he says.

Voice over internet protocol (VoIP) calls are already being made around the world, but are largely carried over private IP networks to maintain quality. Cerf said he was growing more confident that technology improvements would soon see high-quality IP calls made over public networks.

The high-speed internet adopted in the US had abandoned the monthly download caps that Telecom New Zealand imposes on Jetstream customers.

"In order to enable an environment where there is a lot of creativity, you've got to encourage experimentation, and putting caps on downloads is inhibiting," he said.

But he stops short of criticising outright Telecom and TelstraClear's telephone and internet pricing policies. With lingering memories of the WorldCom collapse, ambitious businesses with grand plans do not win the immediate backing they once did.

"Whatever business model you have has to make more money than it spends or you don't survive. You have to temper the appetite for competition with reality," warned Cerf.

Reality may not seem to be a major component in Cerf's side-project - to build an interplanetary internet system to send data across the universe.

It's the type of stuff sci-fi scribe Arthur C. Clarke was writing about 30 years ago, but Cerf expects the internet to be operational on Mars by 2010.