Worldcom: Analysts advise WorldCom customers to look for
alternative suppliers. Antony Adshead reports.
Analysts have urged World- Com users to seek alternative suppliers
for telecoms services immediately. The company is in trouble
following the exposure last week of a $4bn (£2.6bn) accounting
fraud. It is the second major network carrier to face collapse in a
matter of weeks.
WorldCom, which is estimated to have up to 25 million users and
carry between 40% and 60% of the world's Internet traffic, faces
bankruptcy and the possible break-up of its networks.
Last month European fibre optic network provider KPNQwest, which
owns about 30% of Europe's backbone, went bankrupt and is likely to
have its network sold off.
Users should look for alternatives to WorldCom services. Larry
Velez, an analyst at Meta, said, "Customers should transition
managed services away from WorldCom now - especially in Europe -
because we expect the company to contract there first." He warned
that customers buying managed services from WorldCom could be most
at risk because it will be more difficult for them to find a
qualified provider than firms seeking only basic network
services.
Maureen Coulter, an analyst at Gartner, said that while business
users must be prepared for the worst there is no need to change
supplier immediately. "At the moment the network is up and running
and there is no sign of it going down. Customers should not make a
quick exit but should have contingency plans in place," she
said.
Coulter added that, given the geographical extent of KPNQwest and
WorldCom's networks, businesses seeking alternatives may have to
look at more than one supplier to get the same reach. But with so
many telecos in financial trouble, finding a stable alternative to
WorldCom could be difficult. She suggested users should seek
"second carriers" - companies that entered the telecoms market
immediately after deregulation.
Meta Group said WorldCom customers with US contracts should use
exit clauses before Chapter 11 bankruptcy protection is declared
because it will be almost impossible to do so once it is in place.
For those with contracts with WorldCom business units globally it
recommended get-out clauses be inserted into contracts allowing
them to exit should any unit go bankrupt.
Meta Group advised users without an exit clause to "immediately
examine their contractual commitments and plan to migrate
business-critical traffic immediately to other carriers to mitigate
against catastrophic failure".
Velez advised WorldCom customers in Europe to look at switching to
Equant, Infonet, BT Ignite or T-Systems. He does not believe
WorldCom's networks face imminent collapse but fears that service
quality will be hit by the 17,000 redundancies and general
uncertainty surrounding the company.
A Worldcom spokesman said, "The company's chief executive has
stated that its commitment to customers is unwavering and the
latest events have no bearing on the delivery of services."
CMA advice for UK WorldCom customers
Mike Mikkelsen,
head of the Communication Management Association's Risk and
Continuity Special Interest Group, said UK blue-chip companies are
seriously exposed to WorldCom's networks. "UK PLC's top 100 has a
huge dependency on WorldCom because they are the least-cost routed
option in the UK. This means many other carriers use them as a
backbone along which to route long-distance voice traffic," he
said.
Mikkelsen recommended the following measures for businesses exposed
to Worldcom's problems.
- Create a management team to control and monitor the situation
and represent the financial director, the IT director and the
person responsible for voice communications
- Generate a report establishing your business's voice and data
requirements - know the full picture
- Open a dialogue with the service provider to establish terms
should it have to re-route traffic from WorldCom's backbone
- Initiate a comprehensive voice services contingency/exit plan
and talk to potential suppliers.