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WorldCom’s Backbone Is Safe For Now

Despite WorldCom’s record bankruptcy filing Monday, the company’s Internet backbone business is still in solid shape, industry analysts said, although a protracted restructuring could lead to future instability. WorldCom accounted for 30 percent of the U.S. backbone market last year, more than three times its nearest rival, according to researcher TeleGeography. The company boasts that […]

Written By

Brian Morrissey

Jul 22, 2002

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Despite WorldCom’s record
bankruptcy filing Monday, the company’s Internet backbone business is still in
solid shape, industry analysts said, although a protracted restructuring
could lead to future instability.

WorldCom accounted for 30 percent of the U.S. backbone market last year,
more than three times its nearest rival, according to researcher
TeleGeography. The company boasts that it carries 50 percent of the world’s
Internet traffic, thanks in large part to its UUNet subsidiary. Founded in
1987, Fairfax, Va.-based UUNet was the first commercial Internet service
provider (ISP), subsequently building an Internet backbone network spanning
more than 2,500 PoPs in North America, Europe and Asia, and boasting over
1.6 million modem ports. ISPs of all sizes, including AOL and EarthLink, use
UUNet’s network.

The mere size of WorldCom’s network, and its integral role in the Internet,
makes UUNet too big to collapse, like KPNQwest’s implosion in Europe,
analysts said.

“I think it’s pretty clear that UUNet won’t have any problems,” said Yankee
Group analyst Seth Libby. ” Whether WorldCom emerges or has to spin off
certain parts of the company, I don’t think it will be adversely affected by
this development.”

John Sidgmore, who served as head of UUNet from 1994 to 1997, has downplayed
the nightmare scenario of a UUNet collapse.

“I honestly don’t think that under any of the scenarios under discussion
there’d be a blip in the level of the service,” he said at a press
conference earlier this month. “I don’t see any chance of the UUNet network
going dark, under any circumstances.”

Libby said keeping UUNet functioning is important enough to warrant a
government-or industry-led intervention.

“I don’t think UUNet has that problem,” he said. “I think UUNet has
demonstrated it’s an integral part of the telecommunications
infrastructure.”

Probe Research Chief Operating Officer Allan Tumolillo said WorldCom must
now decide if it can keep the core of the company, including UUNet,
together, or if it will sell off its most valuable pieces to pay off
creditors.

“I don’t think the situation is any clearer,” he said. “WorldCom is trying
pretty hard to keep the company together, and they’ve emphasized how
important UUNet is.”

However, Tumolillo stressed Sidgmore has estimated that WorldCom’s
restructuring could last well into next year, giving already jittery
employees more reason to feel more insecure.

“There’s not going to be a quick resolution to this,” Tumolillo said. “There
are a lot of things that are very complicated.”

One of the complications of the bankruptcy is the role of the bankruptcy
judge approving investments UUNet might need to make in its network, raising
the possibility of service shortfalls.

In the meantime, both Libby and Tumolillo said any number of suitors could
pop up for UUNet, including another telecom or a backbone provider to a Baby
Bell.

“Getting control of UUNet would give [a competitor] an awesome position,”
Tumolillo said.