RealTime IT News

AGIS Backbone Buckles

Phillip J. Lawlor's Apex Global Internet Services last week declared bankruptcy when it filed for relief from its creditors while in Chapter 11 reorganization.

Established in 1994, the small backbone operator provided network services to more than 300 regional Bell operating centers, content providers, large corporations and independent Internet service providers.

Although the company had established strategic relationships with successful telecommunications companies like ALLTEL Corp. (AT) and Qwest Corp. (QWST) the financial infusions were not enough to save the oldest Internet backbone from financial decay.

AGIS registered many "firsts" in the history of the Internet. It was reportedly the first backbone provider to build ATM switches into their networks. AGIS was also one of the first providers to utilize switch technology to reduce failure rates.

But most people in the Internet industry remember AGIS as the backbone that opened up its network to spammers. AGIS was the target of a "systematic attack" on its network in 1997 as the result of Lawlor's stance on spam. He believed that Internet service providers were not responsible for the content of the e-mail transported through their networks.

Vigilant hackers and crackers angry at the company's hands-off policy toward spam conducted the assault on AGIS. Lawlor was forced to boot the notorious spammer Sanford Wallace and Cyber Promotions, his former company, from the AGIS network.

The account termination was settled in a lawsuit on September 30, 1997. Cyber Promotions was granted a preliminary injunction against AGIS when a federal judge ruled that the junk e-mailer's termination earlier in the month was an improper breach of contract between the two companies.

The damage to AGIS reputation was done and the backbone provider struggled through several years of unreported earnings. Although it has been reported that free Internet access provider Brent Zimmerman, NetZero (NZRO) spokesperson, said there was no bounced or bad check. But he confirmed that NetZero is feverishly working to settle a billing dispute with AGIS.

There was not a bounced check there was a billing dispute that needs to be resolved.

"There were services we had paid for in advance and those services were not rendered. The issue is under review now," Zimmerman said. "There was no bad check."

Zimmerman pointed out that NetZero's balance sheet points remains healthy, having reported some to have $161 million in cash and short term investments in December.

"Were not having any liquidity issues here," Zimmerman said.

As a result of the billing dispute, NetZero is looking to reduce its reliance on AGIS for Internet Services, although Zimmerman said that the amount of support AGIS provided NetZero was very small.

"About 3 of out total network was dependent on AGIS services," Zimmerman said. "In the last 48-hours we have reduced that number to 1 percent. We're working to replace AGIS service entirely."

Industry analysts remain uncertain as to the long-term feasibility of AGIS remaining in operation, but they agree that the defunct backbone provider is ripe for a buyout at a great price.