Mar 22, 2002 : The webhost industry: week review

📅 March 22, 2002 - It was another tough week for telcos, as a number of providers were forced to defend their accounting practices as investigators continued to look in to the bankruptcy of Global Crossing.
Executives from Cable & Wireless, WorldCom and Qwest Communications all defended the practice of swapping network capacity as lawful before the U.S. House Financial Services subcommittee on investigations and oversight Thursday, which is investigating the bankruptcy of Global Crossing.
The practice of "swapping," which saw telecoms exchange network capacity and account the sale as revenue and the purchase as a capital expense, is currently under fire as an easy way for companies to artificially inflate revenues.
According to Dow Jones, the SEC will also investigate the role of auditing and accounting firm Arthur Andersen LLP in the swaps. On Tuesday, the Wall Street Journal reported that the company had advised Qwest Communications, Global Crossing and other telecom clients on how to structure swaps of network capacity.
Keeping with bankruptcy news for a moment, Exodus Communications said Wednesday it sold an Internet data center in Parsippany, N.J. to Deutsche Bank AG for $45 million. Proceeds from the sale of the IDC, which is no longer in use, will be distributed to creditors under a reorganization plan. The deal is separate from the one that saw most of the company's assets go to Cable & Wireless, which closed in early February.
And Metromedia Fiber Network, which provides fiber-optic Internet connectivity to high-end clients, warned on Monday that it might be forced to file for bankruptcy protection if it cannot restructure its debts.
The company also said it had deferred a $30 million interest payment due March 15 on its $975 million worth of convertible notes issued to telecom Verizon Communications, and also withdrew its guidance for the quarter ended Dec. 31 "as a result of a general downturn in the global communications industry," MFN said. "MFN is unable to provide revised guidance at this time."
Later in the week, Canadian telecommunications firm TELUS said it had reached an agreement to acquire all of MFN's interest in a joint-venture company established to construct a fiber network in Toronto. TELUS said it acquired the firm for "nominal consideration".
BCI Teleglobe, another major Canadian communications firm, said this week it had signed a seven-year outsourcing agreement with IT firm CGI. Under the agreement, CGI will develop and maintain applications that will help manage BCI Teleglobe's IT voice legacy systems, desktop, e-mail, and administrative server solutions as well as back office software support.
Earthlink and Sun also announced a major deal this week that will see the ISP use a multitude of Sun hardware. According to the companies, Earthlink has three purchased new Sun systems configured in a Storage Attached Network (SAN) solution to operate its billing and data warehousing applications.
Going north of the border again, IBM Canada announced the opening of a new disastery recovery center in Quebec on Wednesday in an effort to keep companies running in the event of a breakdown. IBM said its Business Continuity and Recovery Center, the first of its kind in Quebec, includes access to back-up servers, high-speed connections and connection facilities for mobile back-up units.
And finally, if you ever thought the occasional instance of downtime wasn't a big deal, think again. According to a new report from The Yankee Group, Web hosting downtime cost businesses a total of £565 million in the UK alone last year, and expects that number to rise by 26 per cent to £715 million in 2002. The report, which was commissioned by Web services firm Worldport, only takes direct costs like idle infrastructure and lost transactions in to account. Imagine how much companies are losing when indirect effects like reputation, potential market de-capitalization and future sales are factored in. It certainly makes one appreciate the beauty of an SLA.