WorldCom Scandal Could Reach To Internet - Carries About 70 percent of All Internet Traffic

Taipei Times ^ | 29 June 2002 | Taipei Times

[Asmodeus]

SAN FRANCISCO - The multi-billion dollar scandal at US telecommunications giant WorldCom could hurt Internet users worldwide, Web experts warned Thursday.

In a note to its users, the prestigious US technology consultancy Gartner warned that the WorldCom plight could affect "service quality."

WorldCom carries about 70 percent of all Internet traffic over its network to both corporations and consumers, said former Federal Communications Commission Chairman Reed Hundt, who now works for the consulting firm McKinsey & Co.

The consultancy said the plight of WorldCom network customers is not dire, yet, but is still advising users to start making alternative plans and data safeguarding moves now.

Late Tuesday, the second-largest US long-distance telephone company said officials had improperly put US$3.8 billion dollars worth of expenses in the positive side of the company's ledgers.

The revelation wiped out reported profits for all of last year and the first quarter of this year, and was instantly heralded as a record-setting corporate financial scandal.

Gartner warned that those troubles could affect Internet divisions of the company, including Digex, which handles Web services for corporations. WorldCom also owns UUNet, which operates a so-called Internet backbone, a key infrastructure component of the worldwide computer network.

Gartner is advising clients to back up all important data, sign only short-term contracts with WorldCom and start eyeing alternative Internet service providers.

Meanwhile, other experts said yesterday that if the WorldCom network ran into trouble it would be like closing a motorway: traffic everywhere would grind to a halt.

"Their network is extremely important," said David Cleevely, chair-man of Cambridge, UK-based research house Analysys. "It is the largest single carrier of Internet traffic in the world. If you pressed the button and all their network switched off it would be a disaster -- you would not be able to use the Internet and a lot of other systems would fall over."

"Will that actually ever happen? That is unlikely. Someone would buy it. But we are talking Doomsday scenarios here." If WorldCom's financial woes deepened, the company was likely to be taken over because of its commanding position in the Internet market.

The drive to cut costs and reduce inventory levels in manufacturing means many plants and factories are operating on "just in time" production strategies, with essential parts shipped in at the last minute. Any problems with the world's communications system could play havoc with manufacturing across the globe.

The financial scandal at WorldCom is just the latest setback to an industry that is already reeling from a series of bankruptcies. Large network operators Global Crossing, Carrier1 and KPNQwest have all run aground in recent months.

But these collapses are a necessary step toward creating a more stable and mature communications market, according to Richard Elliott, chairman of Band-X, a trading platform for buying and selling telecom network capacity.

[Libloather]

Gartner is advising clients to back up all important data...

What would be considered important data - my "favorite places"?

[IncPen]

The assets of Worldcom would be greedily snapped up at bargain rates by anyone with means and desire.

This is more Enron-style piling on, IMHO.

y2K, anyone?

[philman_36]

WorldCom carries about 70 percent of all Internet traffic over its network to both corporations and consumers, said former Federal Communications Commission Chairman Reed Hundt, who now works for the consulting firm McKinsey & Co.
Snip..."It is the largest single carrier of Internet traffic in the world. If you pressed the button and all their network switched off it would be a disaster -- you would not be able to use the Internet and a lot of other systems would fall over."
Yep, that would shut down a whole lot of things.
Criticism, activism, alternate news, those annoying e-mails to representatives...
How "neat and convenient".

[Howlin]

My cookies???

[BlackJack]

This is a big story. KPNQwest is bankrupt. Whos next? Who can afford to go into debt to buy Worldcom when the financial reporting
is in question? Nationalization? The internet could slow down?
The last pop in the bubble......and....voila...... darkness. No more
just in time inventory? No more online day trading? I'm sure all will be well........but its interesting to see the very foundation of
the web getting rattled.

[tubebender]

" Who can afford to go into debt to buy Worldcom when the financial reporting "

How about the ChiCom...

[philman_36]

There is DSL and all that fiber optic that has been laid for alternate Internet services.
Worldcom closure forces everyone to go to DSL? I'm just going to watch and see.

[brityank]

ISP MAPS among other cartographic goodies.

[Cacique]

Watch for the Chicoms to take advantage as they have recently and come in to buy up and control US telecommunications.

[philman_36]

Thanks for that link. Pretty neat stuff.
So few centers, so easy to shut it all down.

[folklore]

Testing 123...testing123...

[Semper911]

Thanks for that interesting link. Here is UUNet's map. I'd hate to see this puppy go down.

[dr_who]

Maybe under the circumstances, the government would be nice enough to let Worldcom sell some of its assets to some other outfit like, perhaps, British Telecom?

[TC Rider]

Thanks for that interesting link. Here is UUNet's map. I'd hate to see this puppy go down.

We use them for our office T-1, the USPS is totally dependent on MCI.

I've noticed that Compuserve/AOL tend to use a lot of UUNet POPs too.

If some disgruntled employee pulls the plug, expect lots of whining.

[anymouse]

I hope someone is keeping an eye on the ChiComs acquisitions of US strategic infrastructure including telecom networks.

It would be interesting to see a case study on what lead many of these large US companies to go belly up and who are the vultures waiting to pick up the pieces cheap. Could it be failed joint ventures with China that were so fashionable in recent years (billions of new customers) that bleed these US giants in over-extended capital outlays and unsecured debt?

Looking back on the problems of the "little tigers" Asian market busts, one can see a pattern of China playing a classic confidence game on its victims, but with the patience of a chess master. The ChiComs are playing "Risk" for real.