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C&W USA halts orders till November

A recent freeze on bandwidth is just the most recent add on to the credibility crisis of C&W US, whose long term woes include an inability to hold down a chief executive for more than 18 months.
Written by Max Smetannikov, Contributor

If a high-speed Internet access line is what you want and you are a small business or even a carrier, don't bother calling Cable & Wireless USA until Nov. 17. Effective Sept. 7, the U.S. division of British telephone company Cable & Wireless instituted a freeze on bandwidth sales for the entire U.S. market, turning down new business in order to maintain the quality of connections sold to existing customers. "We have gotten into a situation where the demand is greater than our current capabilities, and we have to stop provisioning existing orders and all new business," said Rob Ayers, vice president of marketing at Cable & Wireless USA.

The reason for the move, according to Ayers, is to maintain the quality of connectivity sold to existing customers. C&W USA, based in Vienna, Va., operates a backbone consisting of a mesh of OC-12 (622-megabit-per-second) and OC-48 (2.5-gigabit-per-second) connections.

On Nov. 17, Cable & Wireless USA plans to turn on more OC-48 routes, effectively increasing the bandwidth available to customers fivefold. The upgrade will pave the way for an even bigger backbone capacity increase in 2001, when most of the network will be upgraded to OC-192 (10 Gbps), company officials said.

The company decided against leasing bandwidth from another carrier in the interim, as provisioning these circuits would take about as much time as its own upgrade.

The bandwidth freeze, highly unusual for an Internet service provider (ISP) of any size, has rattled the company's customer base and could result in damaged consumer confidence. One Seattle-based small-business owner was set to receive a T1 (1.5-Mbps) line from C&W USA, only to get a phone call one day before the installation asking him to wait three months.

"Waiting kills me - I have got customers that I have been promising hosting to, and it totally screwed us up," said Tom Bardeen, president of U.S. Techs, a 25-employee Web hosting and Microsoft solutions outsourcing company.

Buying a leased line is not a simple process. U.S. Techs signed up to get its T1 line eight weeks in advance, the time it takes a regional Bell operating company to install the copper, and ISPs such as C&W USA to install equipment and turn up the service. The setup, when all the bills and time dedicated to the project are added up, is not cheap; Bardeen estimated it cost his company roughly $10,000 to get ready for Cable & Wireless USA to flip the switch. Which, of course, never happened.

"Between Nov. 17 and I think Dec. 3, they said, they are going to turn everybody on, and the saleswoman was willing to offer a bunch of free months of service if we are willing to wait," Bardeen said.

Cable & Wireless USA executives alleged that at the height of his frustration, Bardeen promised bodily damage to the company's Seattle sales office personnel, an allegation the entrepreneur denies.

"Their home page is full of how they are suited for small business, and when you get right down to it, they could care less," Bardeen said.

Last year, C&W USA made $1.24 billion, most of it from data services. Adding new business during only one month in the fourth quarter implies that the company's quarterly results could be flat, a loss of millions of dollars in future business.

The mishap adds to a general credibility crisis at the company. The unit has been unable to hold down a chief executive for more than 18 months, and is now on its sixth leader. Its market share, calculated by the number of ISP connections to its backbone, is not tracking the overall industry's astronomic growth. It's been stuck at 1,300 ISPs for more than 12 months, according to numbers the company made public earlier this year.

Cable & Wireless' problems in the U.S. started with a disastrous purchase of the MCI backbone as a part of WorldCom's merger with MCI. Cable & Wireless has said WorldCom didn't play fair and severely undercut the growth potential of C&W's backbone business.

The latest CEO to take the helm at the company, Alan Gibbs, told Inter@ctive Week in an earlier interview that he would concentrate on solving the last-mile riddle, since it takes too long for customers to get provisioned.

"For global networking, we have a good plan, and we are in the process of installing and upgrading our global network - which I guess will be a lifetime project for all of us," Gibbs said.

Cox Communications' decision earlier in the year to limit downloads by its users and now Cable & Wireless USA's bandwidth freeze are further evidence that rumors of bandwidth glut have been greatly exaggerated.

According to Tim Burke, an analyst at investment firm Edward Jones, the freeze is not expected to make a dent in Cable & Wireless' revenue for the year, because the U.S. unit contributes only 10 percent of the company's total revenue.

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