C&W ditching ATM, frame customers

FRAMINGHAM (10/24/2003) - Cable and Wireless PLC's America unit is getting ready to pull the plug on its U.S. ATM and frame relay backbones, a move that has customers scrambling to find replacement providers and wondering about the future of the carrier's Web hosting and IP services.

The carrier warned domestic ATM and frame users in a letter dated Oct. 14 that they would have to seek an alternative service provider by Dec. 15.

The shutdown is the latest strategy change at the struggling carrier that has kept customers on edge and analysts on their toes. "I wouldn't take anything they say as a guarantee," says Ron Kaplan, an analyst at IDC. "They have exited a lot of markets, and they keep redefining their core business."

In May 2002, the company dropped U.S. customers that only used its services domestically, but stressed its commitment to customers with multinational service needs. However, this past June the carrier announced plans to exit the U.S. market entirely. In between, the carrier carried out a major business restructuring, laying off more than 3,000 employees at one point.

C&W could have sold its remaining 100 to 400 ATM and frame customer contracts, as it did earlier this year with other contracts, but the service provider decided that was not an option. The carrier likely has been migrating as many of its legacy data service customers as it could onto its IP VPN services over the last several months, says Brownlee Thomas, an analyst at Giga Information Group Inc.

The carrier declined to say specifically why it is decommissioning the backbones rather than selling them off, offering only that it is "trying to make the business stronger and profitable."

Thomas says that ridding itself of the ATM and frame backbones - which presumably weren't pulling in much revenue - might make the rest of C&W America more attractive to suitors.

However, that's of little comfort to the carrier's hosting and IP service customers.

"There is some concern about what they're going to do," says Richard Thimble, manager of IT at Moldflow Corp., a software company for the plastics industry, which relies on the carrier to manage a 15-site IP VPN in the U.S., Europe and Asia. "But there's not a lot I can do about that. We're under contract, and so are they."

Thimble says even if C&W is successful selling off its hosting and IP services businesses, there's no guarantee he'll be happy with the outcome.

"There are certain companies that I wouldn't want to buy them," he says.

IDC ranked C&W as the second-largest Web hosting service provider in the U.S. coming into this year, with a 13.4 percent share of the market. IBM Global Services is the market leader, while AT&T Corp., Digex Inc., Electronic Data Systems Corp. and MCI are among the other players. C&W was ranked as the 10th-largest business ISP in the U.S. last year.

The company says it will continue to offer ATM and frame relay services outside the U.S.