Telecoms failures put users at risk

User businesses will be in trouble as telecoms companies and network suppliers go to the wall in a market that is over-supplied...

User businesses will be in trouble as telecoms companies and network suppliers go to the wall in a market that is over-supplied and under intense financial scrutiny.

Industry experts have warned that customers must be ready for more trouble. In February European carriers Storm Telecom and Carrier1 went into administration. In January international carrier Global Crossing applied for bankruptcy protection.

A number of other suppliers could soon be experiencing financial difficulties, according to one analyst.

"Williams Communications is in the most critical condition among long-haul providers, although Qwest Communications and Level 3 Communications still have many challenges of their own," said Rod Woodward, research manager for telecom services at marketing and training consultancy Frost & Sullivan.

Qwest said it is financially sound with 80% of revenues coming from local phone services. Williams also said it is financially secure, pointing to new contracts with Yahoo! and Verizon. Level 3 was unavailable for comment.

Many users have yet to assess the likely impact on their business of losing voice, e-commerce and Internet services should their provider or its provider be the the next to hit the headlines.

"Customers are starting to become aware of the danger to their businesses if their service provider is unreliable, but only after having been bitten," said Michal Halama, senior European telecoms analyst with Gartner.

One of Global Crossing's customers is taking no chances since the supplier's demise. Swift, the interbank network, has put its five-year $300m (£200m) plan to migrate its customers to Global Crossing's backbone on hold. The new IP network is completed and under test but this summer's launch has been delayed "until the situation is clarified".

"We have taken a step back," said Lazaro Campos, head of marketing at Swift. "Swift will extend the life of the [existing IP] network and enhance it until 2003."

While the management of that network has already been outsourced to Global Crossing Swift has "put the necessary vehicles in place to take back the responsibility and has ring-fenced assets," he said.

But Swift is also concerned about the providers used by its customers to access the Swift network. It will ensure that each member has a number of alternative or redundant access routes.

One of the biggest issues is the web of inter-dependency between providers, making it difficult to predict how problems at one carrier will affect the service of another.

"The biggest impact [of one telecoms firm failing] is the knock-on effect [on others]," said Roy Howitt, a regional channel director at network provider Savvis.

What is more, "Most customers have no idea that the typical ISP does not own its own network end to end," he said.

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