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Internet Giants Prepare for WorldCom 'Storm' 201

swight1701 writes: "MSNBC has an article about how E-bay and others are enacting contingency plans in case WorldCom goes under and no one steps in to run UUNet right away. Also talks extensively about how this is happening already in Europe with KPNQwest, who is telling their customers, 'During this week you can already expect outages to happen that we cannot solve any more. At the end of this week we expect that larger parts of the network will be down.' Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?"
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Internet Giants Prepare for WorldCom 'Storm'

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  • Redundancy (Score:4, Insightful)

    by southpolesammy ( 150094 ) on Saturday July 20, 2002 @09:23AM (#3922046) Journal
    I can't think of a better example why every business needs redundant networks than this.
    • Re:Redundancy (Score:4, Informative)

      by GigsVT ( 208848 ) on Saturday July 20, 2002 @09:29AM (#3922071) Journal
      Yes, but that's difficult without portable address space. Even if you have redundant links, if you need to push through a DNS change to activate incoming connections on the alternate line, then you are screwed for several days, unless you keep your SOA TTL very low at all times, which is inefficient.
      • Is it? If I have SOA TTL=600 is it THAT bad?
      • Re:Redundancy (Score:2, Informative)

        by keiferb ( 267153 )
        BGP! If our UUNet link goes down, we might drop a couple of packets, but we're instantly flipped over to our backup provider.
        • Re:Redundancy (Score:3, Informative)

          by onepoint ( 301486 )
          That is if all goes well, but the truth get's weird about BGP. Last month, with the Mae-East part of Genuity going down ( for about 3 hours ) our BGP kicked in and had packet loss of about 12% to 20%, Why? Weird peering agreements.

          During those 3 hours I had the joy of running traceroutes all over the nation and watching the interaction of different carriers. it was weird to watch traffic start with one carrier go on then hit genuity then jump off to another carrier and then make it to the web servers. ( sometimes from the other side of the world LOL )

        • Who owns your primary IP range, though?
          UUNet or your backup provider?

        • The trouble with multi-homing using BGP is that it is highly unscalable for the Internet's core routers - every site that has two or more ISP connections can't be summarised under a single ISP's routing (see 'CIDR routing' on Google). And 'smart routing' companies like netVmg only make this worse by making multi-homing more attractive for performance reasons, not just redundancy.

          The IETF is trying to fix this in its ptomaine working group - see .html
      • There are services that will enable you to change DNS records with world-wide propagation in under 5 minutes.
        Take a look at UltraDNS [] for an example.

      • That's why you get your own AS and participate in the global BGP. You then get your own netblock which is simultaneously visible through all your redundant connections.
    • And if your redundant carriers were MCI and UUnet?

      is your CURRENT redundant connection going to buy what is left of Worldcom? (or global crossing, or etc, etc)

      It is easy to talk about redundancy when there are options that you can make use of.

      We are heading towards a world where there just aren't any alternatives to choose from. Try and configure service that DOESN'T go through the local phone company CO.
  • by saphena ( 322272 )

    Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

    So, I provide a service - demand for that service is increasing daily ...

    Looks like I'll go bankrupt then!

    Go figure

    • WorldCom was principally responsibly for the myth that Internet demand was doubling every 100 days when in fact it was doubling every 12 months, from the period 1998-2001.
      Capacity, OTOH, doubled about every 100 days thanks to lots of new cable, and much more efficient use of existing cable (up to 100 times gain).
      As a result, there is massive overcapacity. The result? Lowering prices at a time of incredible debt thanks to stupid 'investments' in things like 3G.
      When companies like WorldCom go bust, the capacity stays in place. Without the burden of servicing their debt (cause they generally go into chapter 11 or somesuch), the 'bankrupt' capacity gets sold at new low prices, forcing the rest of the market down, and so on and on.
      Conclusion a: we can expect a new era of really low prices, as the survivors of this period (probably the Baby Bells in the US, and the old monopoly telcos in Europe) get control of huge amounts of cheap capacity. I predict this will fuel the next boom.
      Conclusion b: whatever the next boom is, do not expect it to come from the telcos. They have failed to predict a single one of the successes (demand for fixed net links, text messaging, etc.) of the past. I predict the next boom will be based on commercialised P2P with links to portable phones for roaming control. E.g. I can rent a game or movie or TV programme during the day, pay with my mobile phone, then my PC will download the stuff through P2P.
      Conclusion c: this is going to be the biggest test of the Internet's strength in tough times. Many of our customers host their e-commerce apps at UUnet. What happens next week if UUnet shuts down? How fast can we get their servers onto another ISP? All interesting questions that will set the tone for the architectures of tomorrow.
      • Damn. It makes me wish that I had patented a method and apparatus for moving your website to a new host when your old host turns out to be a lying sack of shit and goes bankrupt.
      • While you are partly right in saying that the capacity grew faster than demand this was not the reason for the bankrupcy and not due to bad planning. The principal cause of the overcapacity is that when you lay fibre the cost of the fibre itself is pretty much lost in the noise. It costs little more to lay 10 strands than it does one. If you are going to dig up a street etc you might as well lay as much fibre as you think you might need.

        The reason WorldCom is in the crapper is FRAUD. They basically borrowed money on the basis of false accounts. They were charging the amounts they spent renting bandwidth from other companies as a capital expense. At least at Harken and Enron they only deliberately produced misleading accounts, the Worldcom accounts were fraudulent. As a result of the fraud the banks and bondholders have the right to call in their debt immediately.

        The failure of regulation in this case brings to mind George Sorros' book 'The Alchemy of Finance'. Essentially he puts forward a Hegelian theory of government regulation which leads to the prediction of a regulatory cycle. Regulations are gradually relaxed allowing greater and greater productivity until there is a msssive fraud that causes confidence in the markets to be lost and a reintroduction of regulation.

        The US fetish for avoiding regulation is pretty odd to europeans. Most businessmen would much prefer to have EU style government regulation than the arbitrary jury awards that have substituted for regulation in the US. Equally regulations that require honest accounting can hardly be called 'anti-business', they are pro business. What it really comes down to is whether the Congress and the whitehouse going to be pro-Shareholder or pro-company insiders.

        • I'd say the main reason for the bankruptcy was lack of inflation. Worldcom was banking on the value of its infrastructure to rise so that it could continue to act as collateral against its massive debt. Instead the value of its infrastructure fell, partly due to misjudgements in demand, but largely due to the downturn in the economy as a whole. During the boom Greenspan raised rates too much, which kept inflation far lower than expected, something which is good for banks like Greenspan runs, but bad for debtors like WorldCom. He got away with raising rates because the stock market was soaring, however, the stock market was a bad indicator of the economy at the time. No amount of interest rate raises are going to stop a speculative bubble. Greenspan should have focussed on the economy, and let the bubble burst itself (which it did).

          The fraud was not the reason for the bankruptcy, the fraud merely covered up the inevitablility of the bankruptcy long enough to take a few more suckers down with it.

      • I think you make an excellent point about the "next boom" being related to bandwidth.

        I've been predicting for years that lots of high-speed connectivity between people will be the "key" to any future innovation related to computers and communications devices.

        I think the "pioneers" of high speed Internet suffered because they were trying to lay down the infrastructure before the "killer apps" were out there that made the general public interested in buying.

        I'm not saying this killed Worldcom. Obviously, they died due to fraudulent accounting practices and poor planning.

        In general though, the demand for high speed Internet for the consumer is primarily fueled by things they can't really promote. (Porn video streams, software piracy, and music/video piracy.) People using the net mainly to read/write email and do some research or shopping on the web don't feel compelled to spend $50 a month for DSL or a cable modem, as a rule. These activities were created around the 56K (and slower) modem connection - and "high bandwidth versions" of these services generally mean "pointless additional graphics and sounds that make it harder to get to what you need".

        The next generation of people picking up the pieces from the dead/dying pioneer companies have a real shot at getting the bandwidth out there to the masses. If/when they start doing this at prices equivalent or cheaper to using analog phone lines w/modems - people will switch "just because you get more for the same money". Only then will creative uses for all the bandwidth really start popping up.
  • It seems to me the internet is fairly resistant. If it wasn't in the news I would not know about KPNQwests problems, I have yet to see problems with my traffic. Not to say those do not exist, but I don't think they are too big.

    The other network providers have enough capacity to take the additional traffic, since they all built huge lines (and thus have financial issues) and are operating nowhere near 100%.
  • Me??? (Score:3, Insightful)

    by the_argent ( 28326 ) on Saturday July 20, 2002 @09:24AM (#3922055) Homepage
    "Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?"

    Wow, didn't realize my desire for a faster internet connection threw Woldcom in the crapper! Damn my need for lower pings! Here and I thought it was a socially irresponsible management and a poor decision to use "Creative Accounting" choices to make the immediate stockholders happy.
    • by Trepidity ( 597 ) <delirium-slashdot.hackish@org> on Saturday July 20, 2002 @11:08AM (#3922426)
      Creative accounting merely hides losses by basically listing a bunch of income that isn't really there. The actual money loss comes from somewhere else, such as selling bandwidth for too cheap.
      • You're half right. They did use creative accounting to hide losses, but they weren't booking it as income as I understand it. Instead they claimed expeneses as assets, which has the effect of making the spending look like they are retaining something. The reason it's bad is because expenses are considered just that, expenses and you pay out money. Assets are a little different in that you may have paid 2000 for that new P4 workstation, but if you were hurting for cash in theory you could sell it and get some of that money back, unlike paying for example your power bill, where after you've spent the money you have nothing to sell and retain nothing of value. By accounting for expenses as an asset, you would depreciate it so that it doens't hit your bottom line until the end of the products usefullness, at which point you can't sell it anymore and it's not really worth anything. But for big purchases, it can make a business show it's having a profit instead of a huge loss at the time when it bought the equipment.
      • CRAP has a few problems associated with it:
        • It is used to justify bad business decisions.. Decisions that wouldn't be made if the company is losing money, but (in some cases) are required to keep up the facade of plentiful income
        • By many accounts, CRAP's purpose is to justify giving massive stock options and other bonuses to company execs (see above).
          e.g. the $400M loan to WorldCom's outgoing leader would have never been doable if the true state of the books had been known.
        • It changes the nature of the stock market sellout.
          • Everybody bails out at the shock -- trying to sell out before the stock completely craters. This includes traditional risk-takers.
          • Because everybody knows that the sh*t has hit the fan, nobody is willing to buy back in until the fan has stopped spinning.. By that time, the stock is worth $0.007 and vultures are picking off the juicy bits.
          • This is in contrast to a truth-based selloff in which the nature of the share holders slowly changes from cautious stock holders to more risk-willing types. Stock prices would still go down -- but in a slow, controled manner. A large company in dire straights can sometimes survive for decades under such conditions (in the expectation/hopes of an eventual turnaround).
            IBM is an example of a company that managed such a turnaround.
        • With the stock cratered (and stock being the common backing for many loans, nobody is willing to provide interim financing. With no interim financing, the company will never have the cash to survive to better times.

        The lies and deception did more than just cover up a problem, they justified even more bad decisions and then cratered the public's faith in the company and it's leadership such that the company is now doomed to oblivion.

        (-: The acronym CRAP is copyright (c)2002 Stephen Samuel. The method for creating it is Patent Pending. :-)

      • The losses did *not* come from providing bandwidth at all. Worldcom's data business was the most profitable (in percentage of gross sales anyways) arm of the company. They lost in Long Distance Telephone, and other dying markets they were too heavily vested in.

        IMHO, if Bernie had stopped his acquistion madness just after grabbing UUNet/MFS, and avoided going on and buying MCI, the company could have flourished. It was the acquisition on MCI that killed them. Sure, it brough InternetMCI, but it also brought way more than it's fair share of baggage.

        You can even see Worldcom backpdeal on the MCI deal once they figured it out, as they took the crappy areas of the company and tried to spin them out as a tracking stock called MCIT (as it was largely former MCI business units). But the market didn't buy it and just kept hammering the main WCOM stock anyways.
    • Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

      The Economist had an article this week saying that Worldcom was the source of a much more sinister problem, too.

      During the boom, Worldcom repeated suggested their traffic was doubling roughly every 100 days, or circa 1000% annual growth. (Since 1996 or so, it was apparently more like 70% to 150%.) This puffery became industry "fact", so much so that when other companies discovered that their traffic wasn't growing like that, they concluded must be a sales problem.

      So to keep up with Worldcom's fictional growth, everybody built out their networks at fantastic rates. Thus, the problem wasn't the public's appetite for bandwidth; it was again Worldcom's (and others') appetite for apparent growth to prop up stock prices.
  • They have themselves to blame for a lot of this, considering the amount of advertising the telecom giants have been doing to get people to hop on the cable/DSL/whatever band(width)wagon. So you have all the costs incurred with the advertising, the support structure, etc. and considering some of the price wars they have been having, it's not overly surprising that when one of the big ones should declare bankruptcy (okay, they haven't done that yet, but it's damn near a certainty come Monday), everybody else starts getting nervous...

    Take a look at various telecom stocks and see if you don't see a lot of lack of trust in those stocks....

  • We have a T1 from Qwest at work, and they are also being investigated. My agent at keeps sending me unsolicited reassuring emails, but that makes me more nervous than anything else.

    Any Qwest insiders care to comment as AC?
    • Qwest may have to sell off some businesses, but they own too much local loop to dry up and blow away.

      I just don't see the former US West infrastructure being junked.
    • I briefly worked at Qwest... it was such a messed-up organization that I quit (before mgmt started laying off post-merger headcount). Yes, they overbuilt, not just fiber, but the CyberCenter concept (managed hosting) which never quite took off; think that may have been sold off. (?) Then of course the USWest merger, which allowed the PUC regulators in 14 states to get back in the game and address what was seen locally as poor service by US West.

      Interested parties can check out Q complaints at 'Tsewq' [].

      IMHO: it'll be decades before all the built fiber capacity is used up, because not only did the telecoms install it, but non-telecoms, like Williams (later WilTel), and electric utilities with existing right-of-way space, like AEP, also laid fiber with the intention of marketing it. But Q won't go under; the RBOC will keep them afloat, and sale of their Yellow Pages asset will generate cash (as opposed to WCOM, who lists assets of $104 billion, half of which is intangible/goodwill, and the rest of which will likely be undervalued if sold).

  • Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

    Sure they can. They didn't go bankrupt because they experienced strong demand for a product in short supply. All of them built up huge capacities of connectivity, literally burying billions of dollars in the ground with huge fibre networks noone wants to use now. They probably thought the dotcom boom would go on forever. No doubt some day people will request and pay for all that dark fibre, but until then they will be broke.

    Same for new mobile phone standards like UMTS in Germany: The telcos shelled out billions of EUR for UMTS licenses of doubtful value, now there is no product, no demand and soon several telcos fewer.
    • Railroads [] prophesied all these telecom events. But were railroad-car packets too small to see?
      The original Denver and Rio Grande Railway created by the honorable General Palmer in 1870 became the target of eastern finacial influences and the eventual pawn of ruthless railroad barrons, banks, corporate subsidiaries and the courts for more than a century. As other railroads died off in boom and bust cycles the still functioning pieces were absorbed by any survivors along the way.

      Vanity of vanities, all is vanity... (Solomon)
      • Railroads prophesied all these telecom events. But were railroad-car packets too small to see?
        Railroads prophecized many aspects of the internet/telecom/computer networks. They were the first entreprises that were widely distributed geographically that needed good and fast communications (on the order of seconds) for it's daily operations.

        So they developped more than 150 years ago the technology to transmit information and to manage operations that were spanning a very wide territory.

        Reduntancy, checksums and whatnot were all technologies developped by railroads:

        • Reduntancy: telegraphed train orders from the dispatchers were repeated by the telegraph operators in the stations;
        • Checksums: whilst the orders were transmitted and repeated, every other station on the line listened, to check for errors in fact or retransmission;
        • Master control: only one man ran a line at the same time; he alone had the authority to order train movements. This way, there was no chance of miscommunication, since every information was in one head at a time.
  • Telecom companies don't fund installation broadband capacity, telecom investors do. Apparently, cheap bandwidth costs more that we consumers have been paying. We all owe a big "thanks" to the investors getting hammered (hey, that inclueds me) for throwing money into the hat and then walking away from ivestment empty handed, so that the public can keep getting unlimited spam for free ...
    • Bandwidth doesn't "cost more than we consumers are paying". Not by a longshot!

      The problem is, telcos are over-estimating how much profit they should be able to generate, per consumer, for a given amount of bandwidth.

      EG. A single 128K ISDN circuit in St. Louis, Missouri (USA) currently costs a home user roughly $130 per month. My July phone bill just mentioned a rate INCREASE on ISDN circuits, starting next month. Why? ISDN is quickly losing popularity since most residential ISDN customers switched to DSL or a cable modem already, as soon as one or the other became available in their geographic area. I suppose they'll start complaining about the "lack of demand for our high speed services" soon, too.

      They recently RAISED prices on their DSL service too, as soon as a couple competitors died off. It's not like they were losing money on the service at the previous prices - and if anything, costs should be dropping on this stuff so they can take away customers they currently lose to cable modems.

      Speaking of their previous DSL competitors (EG. Northpoint and Covad), even their own employees were seen on old Slashdot discussions saying they were way overpaid for the work they performed.

      Mismanagement seems to be the primary reason we don't have cheaper bandwidth already. The "light at the end of the tunnel" will hopefully be a new generation of businesses buying out the dead and dying and making better use of the resources.
  • The problem is the myth of cheap bandwidth. Although _local_ bandwidth is getting increasingly fast, the nonlocal bandwidth to support that just isn't there - it costs a lot of money to manage interstate lines.

    Internet access is great, but it's not worth more than cable. When your internet bills outweigh your cable bills, you start losing customers. Therefore, companies that try to provide access for everyone find they have to have a very low price to have any volume. The large carriers, then, aren't getting a lot of money out of the deal either - they didn't think about how little money there would be in the game. They have to sell the bandwidth or else their investment is totally lost. However, so many people made these large bandwidth infrastructure purchases that there is a lot of competition, therefore the prices have to be low (and they have to be low to enable enough users on the system). Thus, the telecom providers are stuck in a situation where it is hardly able to pay its bills.

    Anyway, this is mostly a guess, but I'd bet that it's pretty close to the truth.
    • The problem is the myth of cheap bandwidth. Although _local_ bandwidth is getting increasingly fast, the nonlocal bandwidth to support that just isn't there - it costs a lot of money to manage interstate lines.
      I thought that the problem was the other way round, at least here in Europe. Every teleco and wannabe teleco has been laying fibre both nationally and internationally. The problem is that there is not enough traffic to use all the bandwidth, so the companies are not taking as much revenue as they had planned - so are going to the wall. Like the recent collapse of KPN QWest, whose network was international.
      • Yes, you're basically correct in both Europe and the US.

        The telcos made decisions on how much bandwidth to install more or less independently from everyone else- they all multiplied up their capacity by perhaps 10x; but they projected that the price per bit wouldn't go down much initially; only problem is everyone else had done the same thing, so the price fell through floor.

        However, the rule of thumb is that growth in datatraffic in the middle of the network is doubling every 12 months or so. So 10x more bandwidth is enough bandwidth for more than 3 years.

        And in the meantime the bandwidth requirements if anything slowed down after the dotcom crash. Before the dot com crash some companies were buying 4 OC3 lines when an ADSL line would have done fine.

        Right now, bandwidth cost (c.f. price) is cheap and if anything getting cheaper- you can buy the equipment on ebay because companies are selling it off for pennies on the dollar. Right now, telecom equipment manufacturers can't sell much at all. And the overcapacity isn't going away much even though the network companies are going bankrupt left, right and center.

        Mind you that's the cost of the bandwidth to the telecoms companies- many telecom providers were unable to make profit during the dotcom boom times, so they are raising prices now to get a chance to turn a profit. So they have pushed their prices up, and they're going to try to keep them there for a while I think.

        As the growth curve on the bandwidth carries on going up- I don't think there's anything to stop it, the cost and price per bit will carry on coming down- but it may slow slightly as the bandwidth providers have to buy more kit to provide backbone when the current overcapacity comes to an end.

  • WorldCom Storm (Score:5, Insightful)

    by evestrum ( 210254 ) on Saturday July 20, 2002 @09:38AM (#3922099)
    The question is: Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

    Most certainly, if executives can be satisfied with a couple of hundred tousand dollars a year each instead of tens and hundreds of millions of dollars a year each, and if stock holders can be satisfied with modest but steady returns on their investment. Greed ends up killing all it touches.
    • Re:WorldCom Storm (Score:5, Interesting)

      by Restil ( 31903 ) on Saturday July 20, 2002 @01:41PM (#3923104) Homepage
      You're partially correct. However, it isn't the amount of the exec salary that is the problem. Its the salary cap. Exec salaries over $1 million can't be deducted. Now you can debate until you're blue in the face what a proper exec salary is, but in the end, it comes down to, whatever the company is willing to pay and whatever the exec is willing to work for. The marketplace at work.

      However, by implementing a cap on the salary, the corporations are forced to find alternative ways to make up the difference. They're not going to throw money away to the government, so they pay the execs with stock options instead. Now, stock options for the regular employee aren't always a bad thing. It builds company loyalty, and gives the employees an extra reason to go the extra mile. However, with execs, the situation is different. A lowly employee typically would be unable to cause a massive shift in the stock price by anything he/she is able to do. However, execs can. They have full control over the corporation, including what the public finds out about. And since they also have control over how the accounting system works, and their salaries depend on the stock price always going up, they're going to manipulate (to the razor's edge of legality if necessary) the accounting to maximize the value of their options.

      There might be another reason why this happened, that didn't have much to do with executive greed. Worldcom screwed up, but its possible that they didn't actually do anything illegal. A lot of expenses CAN legitimately be expensed over 10 years, even labor in some cases. Ultimately, it wouldn't matter, they just pay the expenses over a longer period of time. In the dot com boom, they had a desparate need to expand quickly, so they depreciated the expenses, which is permitted, and wouldn't have had such a dramatic effect, except for one small problem. The bubble burst, and their steadily increasing revenue stream suddenly fell far short of where it should be.

      Now, Worldcom isn't in bad shape, they're just deep in debt. Its still a viable corporation with a healthy revenue stream, and given enough time and some responsible financial management, it would recover from this without any problem. However, in the wake of Enron, there was a pressing need to find and disclose all potential problems, and with these new startling revelations, the creditors are suddenly panicing and pulling their lines of credit. Hence their
      current situation.

      What's potentially scary about this, as of yesterday, you could purchase a controlling share of Worldcom for about $10 million. Of course, the low price is due to the impending bankrupcy. However, as daunting as the billions of dollars of debt might seem, Worldcom is still a viable company for someone who might be able to refinance the debt. Know of any large software companies that have that much working cash available?? Who might want to own a significant percentage of the backbone? Think its too far fetched??

    • Worldcom, L3, Global Crossing, and anybody else who built out big fiber networks got caught because the technology for multiplexing lots of very fast connections on a fiber finally caught up with the market. Back in 1990 or 1991 I heard a talk from somebody at MCI predicting we'd have problems like that, though back in those days we were worried about the failure mode of "Cheap bandwidth, smart PBXs -> customers build their own phone networks and undercut the telcos" as a likely method of killing the cash cow, rather than the internet-speed version of the problem.

      European telcos were hit by this, partly because they'd gotten away with charging huge amounts of money for small connections for years, and all of a sudden they could be out-competed, but they had another serious problem: They'd believed all the market hype about wireless and spent billions of euros on auctions for government licenses to allow them to run the next-generation wireless technology, when in fact the revenue just wasn't there, so they bankrupted themselves. Unfortunately, after the first auction collected a few billions for the lucky government running it, everybody else got into the act, and the wireless companies all believed that they *had* to pay up, because otherwise they wouldn't get their piece of the pie, and besides, everybody else had mortgaged their futures so *they* presumably knew what they were doing and knew that the marketing analysts were correct. Unlike the Internet market, where could fail and only bother the employees, stockholders, and venture capitalists plus a few suppliers and their loyal customer base, this was a much larger amount of money (I think I read that the totals were about $35B, more than all the Silicon Valley VC money during the boom) this upfront tax on vaporware trashed a lot of companies providing critical infrastructure for the continent, and dragged down most of the European economy's productivity by taking otherwise useful money that might have funded real business activities and pouring it down the drain.

  • At the end of swight1701's post, they state "Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?". This is incorrect. WorldCom is not going under because of the decreasing price of bandwidth. WorldCom is going under because of bad management.

    Take Sprint for example, they also carry a large percentage of Internet traffic and yes, they posted a loss. But not from the "large pipe" business, from the long distance business! This is also what hit Worldcom. All companies that are relying on long distance billing to be their bread-and-butter are going to be taking a hit. In WorldCom's case, they use some "creative accounting" to avoid this impact.

    The only exception to this may be Qwest. Which in my mind is a simple case of too much dark capacity (over construction).
  • According to a friend of mine, about 40% of the internet traffic in Austraria goes through WorldCom's subsidiary ISP. All the small service companies that work for ISP want cash up front before work begins because the credit is no good anymore. Of course the WorldCom's money is in limbo now so they can't cut a check out to them. As a result routine maintenance or repair work doesn't get done. The infrastructure situation is a complete fubar over there because of the WorldCom mess.
  • All things being equal, if there is a demand, someone will meet the supply. That is simple economics. There is no mystery about it and high demand and low supply usually mean higher prices.

    As for businesses being affected by one company's problem -- if you don't have redundancy for every critical piece of your business model, then you deserve to go bankrupt. Don't think you can afford that extra T1 from another Telco? Bet you don't think that after being down for 2 weeks straight cutting your revenue stream in the process.

    It really isn't rocket science. If your downtime costs you more than redundancy, the choice should be clear.
  • by H3XA ( 590662 ) on Saturday July 20, 2002 @09:49AM (#3922125)
    .... alternative communication technology like.... carrier pigeons and smoke signals - they are wireless so they MUST be good....

    if you invest now you get FREE management monkeys and emu auditors

    - HeXa
  • by Tim Ward ( 514198 ) on Saturday July 20, 2002 @09:49AM (#3922127) Homepage
    The big investments in infrastructure (roads, bridges, cross channel tunnels, whatever) never pay back fast enough for the original owners to survive.

    So they go bust, the banks sell off the assets minus debts to new operators, who do fine (after all, an operating profit was available, just not enough to service the debt).

    The bill is picked up by the banks, private investors and/or government, depending on your local system.
  • by FirstOne ( 193462 ) on Saturday July 20, 2002 @09:49AM (#3922129) Homepage
    Since it looks like Worldcom has secured debtor-in-possession financing, Sources: WorldCom May File ... [] .

    The typical exit strategy for a bankruptcy like this, chapter 11, is a debt for equity swap.
    Where the bond holders and banks become the new stockholders.
    And existing stockholders get the short end of the stick !!

    The only questions which remain are.....
    Will the emerging DEBT FREE comm giant, OUT COMPETE, the remaining DEBT LADEN survivors?
    Trigging a cascade of bankruptcies? AT&T, Sprint, etc. who is next?
    Will the same thing happen to airline industry?
    Kinda like musical chairs, the first company to bankruptcy court wins?

      • Will the emerging DEBT FREE comm giant, OUT COMPETE, the remaining DEBT LADEN survivors?

      It's very unlikely that the debtors will want to run Worldcom. First off, all the major debtors, and there are a number of them, would have to agree to this. Otherwise the other debtors would have to buy out the debtors that didn't agree and the one's who didn't agree would want as much as they could get for their share.

      The debtors are not going to want to run a telecom, there's no money to be made there. They'll want to sell off the assets at any price they can get to secure something and write the rest off as a bad investment.

      It's more complicated that this, really, but I'm not reading where these banks are going to want to run Worldcom.

      The best thing that could happen is that the banks, in cooperation with the relatively healthy telecoms (Verizon, SWB), would finance the purchase of the major assets of Worldcom. There's going to be big disruptions as Worldcom customers move around, but this scenario keeps all the infrastructure up and running.

      The worst thing that could happen is that the Worldcom debtors can't afford to sell the long-haul telecom assets for what the market is willing to pay and shutting down is their best option. I certainly hope the Fed would pressure them not to do this.

  • 1) High demand for your product.
    2) ...
    3) Go bankrupt!
    • You're repeating the falacy that caused the telcos to throw their fortunes into holes in the ground.
      'High demand' is meaningless when supply exceeds demand by 100 times or more. There is a high demand for air to breath but no-one makes money selling it.
      Economics 101: you can only make money in a market when demand and supply are balanced. To reach that balance, you can cut supply (e.g. OPEC, De Beers, etc.) or you can allow prices to fall (e.g. WorldCom shares). Presumably traffic prices will have to fall by an order of magnitude or two before the market is stable again.
      The question is: what killer application will soak up that capacity? Voice? File sharing? Video on demand? /.?
  • 'Welcome to WorldCom - the pre-eminent global communications company for the digital generation.'

    sign me up.
  • by ZahrGnosis ( 66741 ) on Saturday July 20, 2002 @09:58AM (#3922159) Homepage
    "Can telecommunications giants realistically keep up with the public's need for ever- growing bandwidth without going bankrupt?"

    I love that question from an economics standpoint. How can over-demand for a product cause a company to go bankrupt? You don't think we're over regulating the telecom industry or anything, huh?
    • by crawling_chaos ( 23007 ) on Saturday July 20, 2002 @10:32AM (#3922260) Homepage
      You don't think we're over regulating the telecom industry or anything, huh?

      Puh-lease. WorldCom's financial problems have little to with over-regulation. They are in trouble because they committed F R A U D. Y'know if the accounting industry was more carefully watched, this major implosion might never have happened.

      • The fraud was to hide financial problems -- they hid losses and overstated profits to make it look like they were making money when they were actually losing it. So this can't be the cause of their problems; it merely hid them so everyone else didn't think they had problems (thus inflating their stock price). If they had been more carefully accounted, they'd still be losing money, we just would've known about it as it was happening, instead of finding out years later.

        As for whether they've been losing money because of over-regulation or because of some other reason, I don't know.
        • We wouldn't be looking at a sudden, severe problem without the fraud. If they had honestly reported their earnings along the way, they would never have acquired so many companies and would not have as large a segment of the Internet backbone as they do today.

          WCOME was a shell game, a gigantic Ponzi scheme that left a few executives and investors rich and screwed everybody else. More regulation by the SEC would have nipped the problem in the bud.

      • No. WorldCom was always in trouble. the F R A U D only hid the trouble WorldCom was in. The fraud that was committed allowed the top execs to make out like bandits at the expense of shareholders - not the company. The value of a companies stock is only an indicator of how the company is doing - not vice versa. The actual stock price does not affect the assets and liabilities a company has but instead is a reflection of those.
    • I'm not trolling but I don't get it. I remember one of the statements being touted a lot during the dot-com bust was the telecom sector. How the telecom sector had overbuilt capacity based on the anticipated demand and now that that didn't hold true there was all this excess capacity which would cause a financial collapse.

      So what happened? How do we go from having too much capacity to too little in a lean economy? Or am I confusing types of capacity or something?
  • by dcavanaugh ( 248349 ) on Saturday July 20, 2002 @10:01AM (#3922175) Homepage
    Last year, our pitiful ISP discontinued frame relay service in our area, along with our T1 (probably a violation of our contract). So we signed up with UUnet, thinking they were "too big to fail". Oops.

    When we signed up for a T1, Worldcom/UUnet was also pitching all kinds of value-added services (managed VPN, website hosting, etc.) I'm generally paranoid about outsourcing, especially outsourced telecomm. services. As a result, we bought only raw bandwidth from them, just in case we had to switch carriers again. At the time, I was concerned about UUnet's attitude toward spam and the possibility of a massive blacklisting operation against them -- as you see against the Chinese ISPs today.

    Well, here we are. I feel stupid about choosing Worldcom, but I feel like a genius when I kept the corporate website and corporate VPN "in house".

    At this point, why would anyone buy "value-added" services from their ISP? For a long time, Worldcom/UUnet was really hyping this stuff, as if VPNs and website hosting was some kind of rocket science that only a big ISP can do properly. They have single-handedly destroyed the entire "ISP value added" service industry. Who would be crazy enough to depend on ISP-managed services now?

    • The thing is that all of the ISP pitched value added services like managed VPN and hosting because it was easy to do and had great profit. They where counting on revenue from these services to make up for lost revenue for pure co-location and bandwidth as capacity was overbuilt. They never had many takers. Why pay a few thousand a month for somthing that you can set up in a few hours and have better control over? The only way to justify it would be to get savings by downsizing. Most managers do everything they can to avoid downsizing.
  • by tytso ( 63275 ) on Saturday July 20, 2002 @10:07AM (#3922185) Homepage
    ... and panic.

    FCC regulations (authorized by the Communications Act of 1934) require that company provide 60 days notice before terminating telecommunications services. This has been interpreted more recently to mean notice before cutting off voice or data services, and means that even in the case of a chapter 7 bankruptcy, the bankruptcy trustee isn't allowed to just sell all of the assets and leave customers hanging high and dry.

    Furthermore, in WorldCon^Hm's case, they will almost certainly be filing for a chapter 11, which means they are trying to reorganize debts, and not shutdown the business. In a chapter 11, the advantage is that Worldcom will paradoxically be more able to get financing after they file for bankruptcy, since lenders know that they won't be screwed by past debts.

    (Bankruptcy essentially creates a two legal companies from the perspective of debt --- before the bankruptcy and after the bankruptcy. It means that equity shareholders will be completely screwed, and that debt holders will be partially screwed, but hopefully the company will emerge from bankruptcy able to pay its bills. That means that creditors that lend a company money after the bankruptcy have more of a chance to get paid --- which means that suppliers will more likely be willing to give WorldCom credit, and banks will be more likely to give WorldCom short-term loans, etc.)
    • There's a problem with your theory. They may have to lay off many of the technitians that are required to keep their networks running. They may continue to nominally provide pipe, but will routing loops take longer to resolve? Will QoS get hosed? Will fiber cuts cause more downtime than they should?

      I'm confident in WCOME's long-term outlook (so much so I bought 8500 shares of their stock at the fire sale), but the short-term may not be pretty.
      • They may have to lay off many of the technitians that are required to keep their networks running.

        Oh, they *will* lay off as many people as they can. First option and *priority* for any "corporate" company is to destroy careers first, ask questions later.
        • That's a rather silly outlook. Critisizing how they got where they are is one thing, but at this point keeping people on to the detriment of the company would not help those people (they might have a few weeks or months more employment at most). Laying people off and/or selling non-profitable business units is the best thing that can be done for the company and the employees that are left at the end.

          Destroying careers is bad business, but then so is mis-managing revenue. Worldcom made a major, MAJOR Internet bid at just the wrong time. They're paying for that and how they handled the down-turn. They'll recover.
          • Critisizing how they got where they are is one thing, but at this point keeping people on to the detriment of the company would not help those people (they might have a few weeks or months more employment at most).

            Mass chronic layoffs are rarely, if ever, used to
            keep a company afloat. More likely they are used, like most other "strategies," to benefit the quarterly earnings reports. Fortune 500 companies are not going to go out of business by keeping the people *they hired.* They're always re-hiring in two years anyway.

            AOL makes $48M a month in subscription revenue. They laid off 2000 people at one point last year. Why? Their combined monthly salaries are pocket change to a company with 23 million subscribers?

            Well, we all know why.

            Laying people off and/or selling non-profitable business units is the best thing that can be done for the company and the employees that are left at the end.

            Employees who will be shown the door next, no doubt.

            Destroying careers is bad business

            Dow's off 3000 points. NASDAQ's off 4000. Highest unemployment in the last FOUR recessions.

            Plaintiff rests.
          • Critisizing how they got where they are is one thing, but at this point keeping people on to the detriment of the company would not help those people (they might have a few weeks or months more employment at most).

            Mass chronic layoffs are rarely, if ever, used to
            keep a company afloat. More likely they are used, like most other "strategies," to benefit the quarterly earnings reports. Fortune 500 companies are not going to go out of business by keeping the people *they hired.* They're always re-hiring in two years anyway.

            AOL makes $48M a month in subscription revenue. They laid off 2000 people at one point last year. Why? Their combined monthly salaries are pocket change to a company with 23 million subscribers?

            Well, we all know why.

            Laying people off and/or selling non-profitable business units is the best thing that can be done for the company and the employees that are left at the end.

            Employees who will be shown the door next, no doubt.

            Destroying careers is bad business

            Dow's off 3000 points. NASDAQ's off 4000. Highest unemployment in the last FOUR recessions.

            Plaintiff rests.

            (Wow. If posting the comment doesn't go exactly the site's way, it becomes a REAL CHORE to re-submit... this is attempt NINE)

            • Mass chronic layoffs are rarely, if ever, used to
              keep a company afloat.

              You weren't discussing just any company. This is a company that has more debt than it can handle and *will go out of business* unless they do something. What they will do (roughly) is this:

              1. Secure financing for restructuring costs
              2. Go chapter 11 to protect company assets from ceditors
              3. Pay off and/or work out long-term plans on as much debt as possible to avoid liquidation of essential assets
              4. Sell some non-core assets and/or business units
              5. Restructure

              Restructuring is the hard part. The goal there is to re-shape your business so that you can afford what debt you come out of chapter 11 with (mostly your new debt that consolidated some of your old). Debt payments are expensive, and you have to do something to assure the courts that your credit will be good, or you won't get out of chapter 11.

              So, you cut costs where you can, sell off anything that you don't actually need (Worldcom made some acquisitions that didn't make a whole lot of sense anyway) and close the ones you can't sell. This is where the bulk of the layoffs will usually come from. You don't lay off people who are required for your core business unless you have to, since that's where your revenue will have to come from post-chapter-11.

              It's not about trying to screw over your employees or make your earnings look good (the accounting mess that got them where they are was about earnings). It's about getting the money together to pay off debt.

              AOL makes $48M a month in subscription revenue. They laid off 2000 people at one point last year. Why? Their combined monthly salaries are pocket change to a company with 23 million subscribers?

              Ok let's do the math. Let's assume those 2000 people only cost AOL an average of $50,000/yr each (that's basically a smidge over minimum wage plus benefits plus social security plus unemployment insurance plus accounting and hr and other overhead). If these were more senior people that number is usually between $100,000 to $200,000 per employee.

              Take that $50,000 and divide by 12. You get a little over $4,000 per month per person, so for 2,000 people that's $8million per month. However, you actually have to shrink that number a bit because some of the layoffs will come from overhead areas like accounting and HR (less people, less overhead).

              Let's call it (and this is really just ballpark) $5,000,000 per month. So you say that they have $48,000,000 per month in revenue. So, you're talking about reducing your costs by about 10% of your total revenue by laying off those 2,000 people.

              This is all arm-waving without being able to see AOL's books, but you can see how laying off staff can quickly put a company's earnings back in line to the point that they not only make investors happy, but they're able to pay their debts. Event a profitable company is constantly incurring debt, and if it ever gets out of control, you end up in Enron/Worldcom land. Very bad. Do not do.

              Lay offs are not the only and often not the best solution, but any comprehensive restructuring cannot afford to ignore layoffs (even in those few private companies that view layoffs as harmful to their long-term health such as Fidelity Investments).

              I'm not an accountant, but I've had enough exposure to the theory and the practice of corporate accounting that I don't have the innocent "if only people weren't evil it would all work" view. Running a business is insanely hard, and there comes a time where you have to make the choice to keep the business running or lay people off. It's always painful because you know these people rely on you, but you have to think of the health of the whole company and help those you can. Even Japan had to learn this lesson (which was totally foreign to their way of doing business until the 90s).
    • 60 days notice may be required by law, but that doesn't prevent companies from breaking said law. Don't know if said law applies in this case, but one SoCal DSL provider (I can't think of the name offhand, since I don't use 'em) went belly-up last month and gave their customers (including ISPs) less than a week's notice. Caused a friend to have to run frantically around doing paperwork to get his commercial clients switched to a new provider.

  • If the execs didn't didn't snarf every dollar as soon as it came in, and instead took $.99 of each buck and paid
    guys like us to actually do the work, then they would have a viable business, we'd be swimming in Negroponte-style
    bandwidth and eventually, management would still be making a considerable pile of cash.

    But no. They had to immediatly run off with all of the working capital and even that wasn't enough.
    Once they got a taste of $10Mil a year, they wanted to see what $100Mil felt like. Life begins at half a billion.
    Filtered down from the top, the exec VP's want a proportional cut, the junior VP's, and so on.

    Now there's no money to run and grow the network. Engineers, wire pullers, suppliers, all the way down the line,
    are out of a job so there's nobody with enough cash to buy services. Thus the perception of over-capacity.

    Oh well, instead of making a living wage, we C programmers and network engineers can be grounds keepers
    and security for the elite for eight bucks an hour. The elite, including our government, think that things worked out quite well.

    Thanks dubya, good job. There is hope however. Many of us will be able to enlist in the national guard so we can
    police the homeless tent cities that will be springing up next year when the banks start failing. Good work if you can
    get past the brutality you'll be showing to your fellow "citizens".
  • Like all the other telecomm companies - they were laying fiber which they expected to light in a few years, but still a large percentage of it is dark, and will not be lit anytime soon. Why? Because they all thought that demand for bandwidth would be increasing so fast that noone could keep up, but the rapid increase in demand never came. Sure, the p2p explosion created a small bump, but most of the serious p2p traffic was already there, just using different applications, like IRC. I wouldn't expect great financial things from anyone in the telecomm industry, unless they held thier breath while everyone else was gambling on laying fiber.
  • If "demand" is the amount of money people are willing to pay per bit, then demand is increasing at an amazing pace.

    But if "demand" is the total amount of money that people are willing to spend on internet access,
    then demand is only increasing moderately.

    Consider dialup vs. ADSL.
    Dialup is about $20 a month. ADSL is about $45.
    Last year, some people switched from Dialup to ADSL. But most did not.
    And if you look at the ones that did switch, you find that most of them had a second phone line,
    (about $15 a month) which they terminated when they got ADSL.
    IOW, the demand in terms of money spent increased less than 20%.

    My prediction for the future is that demand will continue to be inflexible,
    (i.e. people aren't going to pay more than $20-$30 a month for connectivity)
    and the cost of supply will continue to decrease at about the same rate it does now.

    End result: every year, the total dollars spent will be approximately the same, but the amount of bandwidth we get for those dollars will increase. A larger percentage of the internet will be carried by a smaller number of providers. Worldcom is just the first in a long series of companies that will go under as the market shifts to more and more efficient providers.

    -- this is not a .sig

  • Reuters [] reports that the debt-for-equity swap deal for bondholders has fallen through, and a bankruptcy filing is expected tomorrow.

    Reuters: "WorldCom is expected to file for bankruptcy on Sunday after a $3.85 billion accounting debacle forced it into the nation's largest insolvency, the sources said. It would eclipse the Chapter 11 filing by collapsed energy trader Enron Corp. as the largest bankruptcy in U.S. history."

  • Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

    That depends.. can profitable telecommunications companies (MCI) resist being acquired by bullshit corporations (Worldcom) who just want to leech money and discard them like last night's whore?

  • by Astin ( 177479 ) on Saturday July 20, 2002 @01:29PM (#3923045)
    If the underlying network is controlled by a handful of large corporations, and they can't keep up with the bandwidth demands without losing money, what's the alternative? They can charge more as the requirements increase, but that will effect the consumer side of it in the end. Corporations and companies that use large amounts of bandwidth will have to pay more, and those costs will have to be passed on down the line, until Joe User is paying through the nose. Not to mention the effects on home users who could see their subscription prices skyrocket as the costs are passed on to them to connect.

    There's only so much the consumer will bear before either switching methods (back to dial-up, less usage) or switching off. Problem is the power users out there (and I think most of /. falls under that category) will complain and demand their cheap, uncapped access.

    So, if large corporations are vulnerable to bankruptcy and the network suffers because of this, there are only two options that I can see to provide a more stable situation. The first is government control of the networks. I know there's a collective cringe when that's suggested, but as the Internet grows, so does the need for support. Roads, public transit, electricity, hydro, sewage, etc, are all subsidised or controlled by government agencies and paid for through taxes. So does an Internet tax get added to all connections? There's a gas tax and a car tax that goes towards road maintenance after all. I know this is practically taboo to talk about, but in the end, the upkeep of the Internet's infrastructure is an enormous cost that has to be covered to maintain a quality of service.

    The other option is of course the polar opposite to government control - community networks. Be it shared broadband, wireless networks, or some other situation, this too would be viable except for a small problem or two. I know how to set up a wireless access point, you know how to, and if we don't, we know where to find the HOW-TO and how to read it. We're the minority though. My 83 year-old neighbour who loves his computer and is always breaking it for the "upgrades" he tries to install would have no idea how get a wireless NIC installed let alone set up access to the neighbourhood. Are there enough geeks out there to make this viable in large urban centres? Outside of small pockets, I doubt it. On top of this there's no control over the points beyond the individual who has been gracious enough to permit access. If I decide to move and take my antenna with me, anyone who relies on that access is now without, and I don't care because I'm not about to leave a few hundred dollars worth of equipment lying around and then reinvest to set up again somewhere else. Add to this the fact that not everyone is gracious with access and there are a large number of leeches and script-kiddies out there who would abuse this sort of system, throwing the user-provider balance way out of whack. It's a nice thought, but still years, if not decades, away from being feasible.

    It comes down to money in the end. Why should a corporation set up a redundant network in case another company goes kaput? Why should a company increase its capacity beyond what is absolutely necessary? This all costs far more than they're willing to spend, and they sure as hell aren't going to do it for the good of the public. In the end, SOMEBODY has to control and maintain the backbones and connections that we all take for granted.

  • The Economist reports that WorldCom inflated the traffic figures for UUNET, [] and that the whole "traffic doubles every 100 days" myth was a WorldCom fabrication. Other telecoms believed WorldCom's numbers and expanded to keep up with this phony growth. "WorldCom executives are thus more responsible for inflating the Internet bubble than anyone".

    We need some honest network statistics. Slashdot readers are likely to have access to good data. Where can we get real Internet traffic stats?

  • by Catbeller ( 118204 ) on Saturday July 20, 2002 @02:06PM (#3923218) Homepage
    Is Worldcom going bankrupt from providing bandwidth?

    Nope. They make lots o' money from that.

    They are going bankrupt because they got greedy. As did Enron, Haliburton, and all the others to come.

    Remember, the mantra for the last ten years is to maximize shareholder value. To do so, firing your workers en masse is acceptable. Buying up synergystic businesses at silly prices is okay, too, because no matter what the true value of the company is (read: earnings per share), the perception of the stock market has become the ONLY ruler to measure performance.

    So, to keep stock values high, they cooked the books, constantly, and eventually were caught.

    The people who ran Worldcom made themselves millionaires. They will never see a real jail. They know this, they knew this.

    Alan Greenspan himself, an #1 acolyte of Ayn Rand, has finally grown up and wrote the epitaph for unbridled corporate greed []:

    "An infectious greed seemed to grip much of our business community" as stock prices ballooned in the late 1990s, Greenspan said. "It's not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously."

    If Greenspan can see it, then the end of this madness may be at hand. Sadly, my portfolio agrees as well.

    Have these companies created mighty servers and bandwidth for all this trouble? Let's just say I'v spent 10 minutes trying to search for Greenspan's speech online, and I've given up because even on a cable modem, it's too slow, especially on a beautiful sunny day with lots to do outside.

    AOL made billions, and should have been a rock-solid stock based on just being rich. But they blew it on acquisitions. Why? To make themselves even richer. To boost stock prices.

    Greed, stupid dumbass greed, is causing the collapse of the world economy at the moment. Greed combined with an infectious contempt for the common welfare of all people as well, for greed was GOOD for the businessmen who profited. WE are going to pay for all this mess. We are going to see higher taxes to cover the shortfalls, to pay for the interest on all that lovely new debt incurred by tax cuts for rich people. Our standard of living is going to plumment for the benefit of a couple million rich connected people, one of whom was crowned President by his dad's judges.

    Time to get a commune and set up to ride this era out. Peace out, baby :)

    • A very interesting read to augment your argument is a book by Thomas Frank called "One Market Under God" []. It works hard to undermine and expose the myth of the free markets, and how we have been used as consumers and fed lies as to how the markets are the great liberator. As such, what does it matter how all of our jobs have been shipped overseas when we have the gift of the markets.

      I watched Thatcher state that on a PBS documentry about Thatcher/Reagan and the great market liberation of the modern world.

      I picked up this book right afterwards.

      Remeber VA Linux anyone?
    • (* Alan Greenspan himself, an #1 acolyte of Ayn Rand, has finally grown up and wrote the epitaph for unbridled corporate greed []: "An infectious greed seemed to grip much of our business community" as stock prices ballooned in the late 1990s, Greenspan said. "It's not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously." *)

      Perhaps it may be time to think about dumping the accounting steps. You judge a company simply by their dividends and product popularity. That way they don't have to provide statements about what is going on *internally* and have a bunch of complicated reporting rules which most investors can't make heads or tails of anyhow.

    • Greenspan sits atop one of the highest apexes of unelected power in the world, a tool and author of vast economic policy. He's a hard core monetarist. Whatever lip service he pays to the free market, his main job is micromanaging the money supply at the official behest of the US government.

      Is this sort of meddling in the market really what a n "acolyte of Rand" would do? I don't think so.


      p.s., none of this has to do with whether I agree with the meddling, just taking issue with your accusation.
      • Greenspan is not just an acolyte of Ayn Rand metaphorically, he actually hung out with her. It's not an accusation, it's the simple truth.

        The Fed, Alan Greenspan, and Ayn Rand []

        Alan Greenspan, Cultist? []

        The Motley Fool: Who is Alan Greenspan? []

        In the 1950s, Greenspan, who had been steeped in the free-market skepticism of John Maynard Keynes along with most economists of his generation, became an acolyte of Ayn Rand. Rand's philosophy of what she termed "enlightened selfishness" bears considerable similarity to today's libertarianism. Greenspan met Rand through his first wife, painter Joan Mitchell. Although Greenspan's friends and colleagues suggest that his relationship with Rand's Objectivism was more of a flirtation than a real commitment, Greenspan remained part of the philosopher's circle until at least the late 1960s. In addition to writing for The Objectivist, a rather surprising essay he wrote in defense of the gold standard -- surprising in light of his later work, that is -- appeared in the Rand-edited 1967 collection of essays Capitalism: The Unknown Ideal. Still, something about Greenspan's obvious pragmatism and political instincts fits poorly with the uncompromising sense of purity that characterizes Rand's heroes. If Greenspan ever was an Objectivist, his years in Washington have probably made him reconsider.

        Businessweek: The Chairman as Political Animal []

        RAND FAN. By his mid-20s, Greenspan turned from music to economics--and the virulently antigovernment views of philosopher-novelist Ayn Rand. Greenspan became a regular in her salon in the 1950s and remained in touch until her death in 1982.

        Randies may think of Greenspan as an apostate today, but the Chairman still thinks of himself as a Randite, if his reading preferences are any indication. And it's not hard to get become an apostate of Objectivism -- dissent ain't tolerated much in that salon.

        Mayhap Greenspan deviated from Rand because he's actually working in the real world.

        The Fed may be anti-democratic in nature, but thank god for that, or we would have collapsed into something resembling the Weimar Republic in the 80's.

        • The Fed may be anti-democratic in nature, but thank god for that, or we would have collapsed into something resembling the Weimar Republic in the 80's

          well, let's not put the cart before the horse. Who's to say the policy of the Feds didn't in fact lead to the SnL scandals? convince Reagan that grotesque military spending was good?

          I'm just skeptical of it.

          Besides, there's a reason why USG hasn't sold off Fort Knox. The partial reserve system is borrowing against Fate, cosigned by Providence. It's only a matter of time... Scare people enough and they will run the banks and that will be the end of the Fed, lock, stock, and barrel.


  • Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?

    Basic economics will tell you that this is not true. If the public had a need for growing bandwidth, the public would find a way to pay for it. I think part of the problem is that there isn't a need for growing bandwidth, which means that those companies that are financially structured such that they need growth are basically screwed.

    Think about it, how does a little company like Worldcom buy a giant like MCI? By borrowing a shitload of money, that's how. How does get a loan that big? By borrowing against future revenues. Revenue which needs to be much larger than current revenue. Personally, I was amazed that Worldcom was able to buy MCI. I was amazed the regulators, bankers, etc. allowed it to happen.

    I think Worldcom was doomed from the minute they bought MCI. It was a stupid deal which never should have been allowed to happen. The accounting frauds were only delaying the inevitable. The debt load on the combined Worldcom-MCI was so high that only in a perfect world where nothing went wrong and every financial projection was met would the company have survived. Meanwhile, in the real world where economic downturns happen, debt-laden companies like Worldcom are going to go down the tubes. Qwest will probably go down too for the same reasons, and I wouldn't be suprised to see AOL-TimeWarner go also. A lot of the big mergers and buyouts we saw in the last five years resulted in fragile, debt-laden corporations which aren't likely to last.
  • the problem is address space.

    If you have a web site that has less than a /21 of usable address space. (Yes folks thats 2048 addresses), you are forced to get your address space from an upstream provider.

    The rules on arin:

    say that you need to show that you have used the equivalent of a /21 (2048 addresses) to get a /20 (4096 addressess).

    With these 4096 addresses you can then have "portable addresses".

    This means that you do not need to get your address space from an upstream provider.

    So lets imagine these scenarios:

    1: Single homed (1 connection) company.
    Potential problems:
    If upstream goes out of business, then you have nowhere to route to.
    To migrate you have to get a BRAND new set of IPs for your company.
    You better hope that your DNS TTL is low, and that all the places out there that cache it honor it and dont set it to something astronomically high. (this does occur).

    2: Multi homed (N connection (n>1) company. (running BGP).
    Potential Problems:
    If upstream goes out of business, then you are still routing the address space of your out of business provider out your alternate provider. (good).
    You are now at arin's mercy depending on what they do with the upstreams IP space. You can bet that they will not give you a small chunk to stay as who you are.
    Other large providers may get crazy ideas and start filtering. Ie: Worldcom has not paid me so I filter their netblock as protest. (see PSI).
    The best help in this scenario is your own problem, the small IP range you have. Since you have a small range, you then have a "more specific" route to your network. That will override most things as null routes etc. (it will not override ACLs though).

    Pretty much this scenario will keep you on the net for longer, but, should the ISP you have your space from go down and stay down, you will need to migrate address space, dns ttl etc.

    3: Multi homed (N connection (n>1) company at multiple datacenters.
    Potential problems:
    Hopefully you have different providers at each datacenter, or at least the address space is given to you by different providers.
    In this case, the worst you lose is 1 datacenter. hopefully your site can maintain full traffic out of the remainder of your datacenters.
    The biggest problem here is again DNS, but if you are doing multiple datacenters, you can probably remove 1 out of the picture realyl quick.

    --- This does not end the list of possible scenarios, there are many others you can do. (for example: you could have address space from 2 carriers at the same datacenter, and multihome/map addresses from each carrier onto them. ) etc.

    Now as to the likelyhood, when Exodus went bankrupt for a few months last year, they did not lose all their advertisments, and for the most part they did stay up. I'd guess this would be the same thing as uunet.

    Also UUnet has much more traffic than exodus. that hopefully means that most ISPs will not kill their peering with uunet.

    That being said, if the rats leave the ship called uunet, uunets peering will fall to low levels, and then ISPs will be able to contractually cancel with uunet. Possible, but not likely.

    Now, if you wanted to have multiple carriers, and be truly independent of any of them going away, you have to show effective usage of a /21.

    The good part of this is that you can split this into multiple sections:
    ie: I have 2 datacenters, and each need a /22
    ie: I have 4 datacenters, and each need a /23
    you can seperate address space out to that, and show use of a /21, and hopefully get a /20. It helps if you show that you are growing.

    ie: I have 2 datacenters, and each need a /22 but i'm opening another withing 6 months
    ie: I have 4 datacenters, and each need a /23 but i'm opening another withing 6 months

    What you have to look out for is that you probably should not advertise anything more than a /23 or you may get filtered by other ISPs.

    for example take this recent nanog posting: html

    Too many specific routes (/24 and above) add more work to peoples bgp routers, as such limiting accepted routes helps performance of the router, and keeps things more stable.

    In summary,
    if you have 1 carrier, get 2.
    if you do not have enough address space, be prepared to have to change it.
    If you have multiple datacenters you should be good to go, but with some exposure as you have to re-ip.
    if you have enough address space to be portable, you are good to go.
    • Why not gang a whole bunch of people together and just get a block from ARIN? Sure, we have to pay a fee every year, but at least we'll be in control of the block.

      On a different note, does anyone know why we have to kowtow to ARIN? It hardly seems any more benevolent than the ICANN folks...
  • "Can telecommunications giants realistically keep up with the public's need for ever-growing bandwidth without going bankrupt?"

    They could if the stockholders and the board would get it through their heads that telling executives to raise the stock price as fast as possible is a bad idea. Companies need to make money to survive, and this is why companies like Verizon and AT&T are doing just fine.
  • Get out your modems, and install uucp on your boxes! I have a feeling that the collapse of the Internet backbones is going to be a wonderful thing.

    less bandwidth means:

    -less spam
    -web designers won't use flash anymore
    -companies will realize that the Internet is NOT a good place to do marketing

  • The companies are anouncing these plans because they want the Wcom assessts to look like they aren't worth anything. It a trick to get the value down so they can afford to buy part of it.

    I nkow of serveral compaines that are looking for bits of UUnet and are willing to pay a fortune for it. At this point, I'm not sure that Wcom stock is even undervalued based on all the vultures that are looking at the remains. Monday they are filiing Chap 11. This means that the judge will decide if they can be restructured or not. With a company that large, the inital decision will be that it needs to be looked into and that could take years. Until that happens, no one can pull the plug on any service they are providing wcom for lack of past payments.

Evolution is a million line computer program falling into place by accident.