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Tentacles of WorldCom scandal could reach to Internet

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 Fed-eral 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.

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WorldCom officers called to hearings
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