First Union Corp., in the wake of its recently completed merger with First Fidelity Bancorp, is overhauling its data communications network with a high-speed technology known as frame relay.

The new network, which is initially being installed throughout the bank's Northeast service area, will provide data communications capabilities for branch offices and automated teller machines.

The frame relay technology is expected to reduce data communications costs and improve customer service, said First Union officials.

"Our goal is to provide customers with highly reliable, innovative financial services," said George Mattingly, senior vice president of the Charlotte, N.C.-based bank. First Union would not disclose the amount invested in the new network.

The new network will replace a private line network that Electronic Data Systems Corp. of Plano, Tex., had been providing to First Fidelity, said Mr. Mattingly.

He said First Union considered using both satellite communications and traditional private lines, but decided that, given the bandwidth requirements, frame relay would be the most cost-effective method.

The financial industry in general is one of the largest users of frame relay, because of its need to move vast amounts of data, according to International Data Corp., a Framingham, Mass.-based technology research firm.

Frame relay is well-suited to big distribution networks that require multisite communications, and it is being used in large banks to handle high-bandwidth applications, such as imaging, bulk file transfers, and transaction processing.

Financial companies such as New Jersey's Summit Bancorp use the technology to improve the speed of service at teller windows and ATMs.

In addition, Citicorp uses the technology to consolidate diverse communications networks.

First Union's network will consist of 800 communications devices that will provide access to MCI's frame relay service.

The devices are being installed by Network Equipment Technologies Inc., a Redwood City, Calif.-based supplier of networking technology.

The bank, which has been a customer of Network Equipment since 1985, already uses the company's bandwidth managers and high-speed transmission systems for its private network.

"NET's ability to provide a fully integrated solution on a timely basis met both our technical and financial objectives," said Mr. Mattingly.

First Union has not yet determined if the new network will be expanded to its other service areas.

The network overhaul is just one of the technology projects First Union has undertaken as a result of the merger, which created a company with approximately $132 billion in assets.

In November, the bank signed a multimillion-dollar outsourcing agreement with Electronic Data Systems, replacing the contract the technology company had with First Fidelity.

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