MCI Inc. last week announced new satellite links and firewall capabilities for its IP virtual private network service and said VPN deals with corporate users blossomed last year -- a claim that was echoed by rivals Sprint Corp. and AT&T Corp.

Those three companies and other network service providers began feverishly marketing IP VPN services two years ago, and 2004 was a big year for customer adoption of the services, according to the carriers and industry analysts. Officials at MCI, Sprint and AT&T said the number of their VPN users tripled or nearly tripled last year, an upswing that they expect to continue this year.

MCI claimed that more than 1,000 companies are using its Private IP service, while Sprint and AT&T both said they have hundreds of customers for their offerings.

Several IT managers said the VPN services have lowered their networking costs and given them the ability to set up quality-of-service capabilities for video or voice traffic that shares a network with data transmissions. In addition, relying on a service provider can reduce network management complexity compared with trying to provision and maintain a VPN internally, the users said.

Easier option

Helsinki, Finland-based Amer Group PLC, which owns sporting goods brands such as Wilson, began using MCI"s VPN service in the U.S. last year after initially adopting it in Europe during 2003, said Jermaine Mason, IT manager at the company"s Amer Sports Services division in Chicago. Amer spent about $250,000 globally for Private IP last year, he said.

The company weighed offers from several carriers and considered trying to develop a comparable network itself, Mason said. But ultimately, Amer chose MCI despite the fact that the vendor had been charged with financial improprieties that forced it to file for bankruptcy protection, from which it emerged last April.

"We felt MCI was coming out stronger after everything they went through, and they were one of the bigger providers," Mason said. "We considered the work we"d need to do to maintain such a network service and decided it is much easier to [rely on] MCI."

Videoconferencing is already supported on some of the VPN links in addition to data transmission, and the use of videoconferencing technology will be expanded in the future, according to Mason. In all, 20 Amer locations in Europe and the U.S. are connected, he said.

Bisys Information Services, which offers hosted financial and banking applications, uses AT&T"s IP-enabled frame-relay service to connect to its customers, said Bob Pojman, senior vice president of technology and network services at the Houston-based unit of The Bisys Group Inc.

The AT&T VPN provides "any-to-any" connectivity instead of requiring bank branches to connect to Bisys through a hub, making it easier for customers to use the company"s applications, said Pojman. By eliminating the hub, network latency dropped by nearly 30 percent, while costs increased by only about 10 percent, he added. Pojman wouldn"t disclose how much Bisys is paying for the VPN service.

Another MCI customer, Euler Hermes American Credit Indemnity in Owings Mills, Md., has used Private IP for more than a year for data traffic and some voice-over-IP trials, and it plans to run a full VoIP system over the VPN.

"It saves us tons of money," said David Kozlowski, vice president of technical services at Euler Hermes ACI. He noted that the credit insurer was able to double the bandwidth of its WAN links to 256Kbit/sec. while dropping its monthly costs from US$10,000 for a previous frame-relay network to $8,000.