While WorldCom is in no danger of shutting down its
network, analysts warn Internet service providers (ISPs) and other
customers to reduce their dependence on the financially troubled carrier.
WorldCom, one of the largest carrier telecoms in the nation, is under intense
scrutiny from the Securities & Exchange Commission (SEC) and Congress
for overstating $3.8 billion in revenues.
Thursday evening, Rep. James Greenwood (R-PA), House oversight and
investigations chairman, subpoenaed WorldCom to turn over all documents
relating to its finances, opening the door to criminal charges for the carrier.
WorldCom’s admission and subsequent federal inquiry touched off a panic on
Wall Street, as well as the announcement to lay off 17,000 employees, a 28
percent staff reduction, that goes into effect Friday. Analysts at the META
Group expect service and support to suffer as a result of the cuts.
“We believe the WorldCom network will keep operating even if there is a
near-term bankruptcy filing,” said David Willis. “However, service quality
will decrease further, and users should act now to minimize their
dependence on WorldCom services. They should also have contingency plans in
place for the possibility that WorldCom will eventually go out of business.”
New customers should start looking elsewhere immediately, the META Group
suggests, since local exchange carrier’s (LECs) who resell WorldCom data
lines will likely delay circuit installs for fear of not getting paid.
According one WorldCom employee, there’s no danger of the company going out
of business and stranding its customers. The fact the carrier provides
communications services for “about 70 percent” of the U.S. government means
it’s very likely WorldCom would get some sort of bailout to protect those
lines, indirectly helping all customers.
That hasn’t stopped a host of WorldCom competitors from inundating the
inboxes of ISPs, Web hosts, corporations and small to medium enterprises
(SMEs) with offers to transfer service to their company.
Many resemble the one sent by California-based MegaPath Networks, which
didn’t compare its service to WorldCom, but differentiated from the carrier.
“The key difference is that MegaPath doesn’t have any of the massive debt
load or associated network infrastructure costs that WCOM and AT&T do –
debt that both companies are practically drowning in,” the email reads.
Smart businesses have already made plans for WorldCom’s possible demise and
don’t need to worry about finding a new carrier to keep their lines open,
according to Allan Tumolillo, chief operating officer at New Jersey-based
research outfit Probe Research.
While IT managers didn’t have WorldCom in mind, most businesses have back
up and redundancy bandwidth contracts in place to pick up where another
carrier might drop off service, he said.
“The more savvy of these companies have redundant, back up carriers,”
Tumolillo said, “and if they have a back up routing, there’s nothing that
particularly prevents them from diverting traffic to another carrier
Those that don’t have a back up plan in place should, he said.
“I don’t think you can’t just walk way from your contract, absent
verifiable service disruption,” he said. “They’d be well advised to think
about having back up supplier.”
