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Before the Web · Era 2 · Into the Internet

1987–2006acquired by MFS Communications for ~$2B (1996) → MFS bought…

UUNET

The first commercial internet provider in the United States: it grew out of Rick Adams's nonprofit service for the Usenet community (1987) into a company with an IPO (1995), which in 1996 was absorbed by MFS Communications, while MFS itself was bought that same year by the telecom giant WorldCom, the one that collapsed in the largest US bankruptcy of 2002.

Founders Rick Adams
Domains uu.net
infrastructureisptelecomipo

In brief

UUNET was the first company to sell access to the internet as a commercial service in the United States: in 1987 the system administrator Rick Adams started it as a nonprofit project on a $50,000 loan from USENIX, in order to relieve the overloaded volunteer UUCP hubs through which the Usenet community received its mail and newsgroups. Eight years later the same company held its IPO (1995), a year after that MFS Communications bought it (~$2 billion), and MFS itself was absorbed that same year by the telecom giant WorldCom, whose bet on endless growth of internet traffic and debt-financed build-out of infrastructure ended in the largest US bankruptcy up to that point, in 2002. The UUNET network outlived the collapse of WorldCom and today runs inside Verizon.

How it started (the founders)

By 1987 Usenet, a network of newsgroups on top of the UUCP protocol and modem links, served thousands of nodes around the world (see the dossier history-usenet), but sites outside the university and defense network ARPANET got their feeds and mail through overloaded volunteer UUCP hubs held up by nothing but the enthusiasm of individual system administrators. One of them was Rick Adams, the system administrator of the Center for Seismic Studies in Virginia; a year earlier he had also been among the initiators of the Great Renaming, the reform of the Usenet group hierarchy. Adams proposed to USENIX, the Unix users association he belonged to himself, that it fund a dedicated node to take on the distribution of Usenet feeds and mail for sites without a reliable UUCP hub. On January 29, 1987 the USENIX board announced in comp.org.usenix its support for a new experiment led by Adams and Mike O'Dell, the future UUNET, on a $50,000 loan that was later repaid; the sum is confirmed by USENIX itself in an anniversary article from 2003. Structurally it was a nonprofit corporation, in which subscribers' money went into infrastructure rather than into the founder's profit.

Demand did not have to be created, because the community already existed and badly needed exactly this service. By 1989 the nonprofit status had become too confining: the for-profit UUNET Technologies bought the assets from the nonprofit UUNET Communications Services, paying with a share of future profit. A year later the same team launched AlterNet, no longer mail distribution over UUCP but a commercial TCP/IP backbone. By the mid-1990s UUNET was headed no longer by Adams himself but by a professional manager, John Sidgmore (from June 1994, previously CEO of CSC Intelicom).

Year-by-year timeline

Lesser-known but significant facts

  1. Microsoft was not merely a customer but a co-owner. By the time of the merger with MFS it held 4,164,000 UUNET shares (SEC Schedule 13D, 1996), equity from the deal of 1994–95, plus a seat on the board of directors.
  2. John Sidgmore rode up the whole chain of acquisitions together with the company. CEO of UUNET from June 1994 → president and COO of the combined MFS from August 24, 1996 (the day before the deal with WorldCom was signed) → vice chairman of WorldCom → CEO of WorldCom in 2002, when the $11 billion fraud came to light, and he was the one who handed the materials to federal investigators; he died in December 2003, at 52.
  3. The SEC deregistration form literally shows the moment of the takeover. In form 15-12G of August 12, 1996 the line for the number of holders of record reads 1: a public NASDAQ company became a wholly owned subsidiary instantly.
  4. The WorldCom/MFS deal has no single correct figure in dollars. The press on the day of the announcement gave ~$14 billion, later sources $12–12.4 billion; the MFS 8-K records not a sum but the exchange ratio of 2.1 shares, and the price floated with WorldCom's stock between signing and closing.
  5. A network grown out of free help to a community closed off free access for others a decade later. In 1997, a year after the move to WorldCom, UUNET together with Sprint and AT&T was the first to start charging small providers for peering that had been free estimate.

Legend vs. the record

The first growth lever

UUNET did not have to create demand: from the first day it sold reliability to an already existing, technically literate Usenet/UUCP community, the same pattern that had worked a year earlier for CBBS (see history-cbbs), a service for a ready audience rather than a market from scratch. The second lever was selling infrastructure wholesale: AlterNet (from 1990) and CIX (from 1991) turned UUNET into a supplier of connectivity for other operators, so that the growth of the whole internet ecosystem converted into growth of the company itself. But the real jump came from one deal, the contract with Microsoft to build a dedicated dial-up network for MSN, backed by a direct investment of $16.4 million for ~15% of the company, a credit line of up to $26 million for equipment, and a seat on the board of directors. By the company's own 10-Q, in Q1 1996 revenue from Microsoft grew from $0.2 million to $15.9 million, 36.9% of all revenue for the quarter; revenue for the whole of 1995 was $94 million against $12.4 million a year earlier. One deal with a giant gave more volume than years of organic retail, and it became the showcase for investors at the IPO.

Parallels today (projects from the catalog)

What a builder can take from this in 2026

  1. Start with a community that already has a pain, not with a market you still have to create. UUNET was not selling the idea of the internet; it was fixing a specific overload of specific volunteer UUCP hubs for people who already lived inside Usenet.
  2. Sell infrastructure, and not only the end product. AlterNet and the participation in CIX turned UUNET into a layer on which other people's services were built, so that growth of the ecosystem automatically became growth of the company itself.
  3. A wholesale deal with a giant can be worth more than years of retail, but make sure it is equity and not only a contract. Microsoft did not simply order a network for MSN; it put in money and took a seat on the board of directors, and that strengthened the company ahead of the IPO.
  4. Do not mistake your own macro statistics for a fact. The claim that traffic doubles every 100 days came out of a short real spike and was convenient precisely for those who built a debt pyramid of infrastructure on it, including WorldCom, which that debt eventually killed.
  5. In share deals, insist on terms rather than on a "sum." The document on the WorldCom/MFS deal records not $14 billion but the exchange ratio of 2.1; a single figure in the press is true only on the day it was calculated.

Discrepancies and what we could not verify

Sources (primary first)

Secondary (context, cross-checking):

The same thing, about today

The same breakdowns, but of projects launching right now: what the product is, where the first users came from, how they charge. The card is free, the full dossier is $5 (the dossier itself is written in Russian).

Browse the dossier catalog →