Maureen Coulter, an analyst with Gartner Group, said, "Over the past 18 months the number of ISP and telecoms firms emerging intact from chapter 11 bankruptcy protection [is falling]. We have a depressed telecoms market and businesses have a duty to be pessimistic about the prospects for such companies."
Coulter said the warning signs were visible many months ago at KPNQwest and that the general outlook is bleak. "There were announcements of bad news at the end of last year when [Dutch company] KPN tried to sell its stake in KPNQwest back to [US-based] Qwest.
"It is not totally unlikely we will not see such a situation again. There will definitely be consolidation in the telecoms market via bankruptcies and takeovers in the coming year," she added.
Gartner advised businesses to establish get-out clauses in telecoms firm contracts and back-up network provision in case of similar collapses.
Telecoms firms and ISPs often buy bandwidth from other suppliers to meet needs in certain areas. Businesses often buy network provision unaware that they are actually using the physical network of another supplier, which can put them at risk if that network is put at risk by financial collapse.
Mike Mikkelsen, of risk and business continuity consultancy Redan International and head of the Communications Management Association's risk and continuity special interest group, said businesses needed to conduct a rigorous assessment of their exposure to network collapse.
"Businesses may have written resiliency by dual sourcing into their continuity policy but they need to ask some probing questions to determine whether apparently separate networks are not intertwined," said Mikkelsen.
"Businesses need to apply prudent and proven risk assessment techniques and keep checking the situation," he added.
What to ask a prospective ISP
- How do you ensure through resiliency of network design that you can meet service levels to my company?
- Do any of the services you provide go through the infrastructure of a third party?
- What plans do you have in place to minimise failure of relations with a partner?
- What practical steps do you take to ensure continuity of service?