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C&W Bails Out
norskode writes "Not much to go on yet, but it seems that Cable & Wireless is bailing out of their US operations. This is a big provider of IP pipes, and they run the data centers they bought from the failed Exodus folks. There are a LOT of sites that live in their data centers, but no word yet on the disposition of those facilities."
C&W pulling out, UUNet/WorldCom not doing real well, BBN getting sucked up by GTE... not much of the original backbones left it seems. Wonder how long until the US Internet is just an interconnection of all the telcos?
Chris -- http://www.bitter.net/
The reason Ellen and her gang couldn't keep this running seemed to be they kept building new data centers. Capital costs were HUGE.
But C&W bought exodus. After the fallout. For very very cheap.
How could they not make a profit off this? Is maintaince costs still so high even with no expansion? They were CLOSING data centers not buiding them.
This worries me, because if after the initial build up is done, you still can't make money off a colo then that means prices are WAY too low and for the 2 or 3 colo's left, we are going to see prices sky-rocket to come up to meet expenses.
Sad day.
Back at the end of last year, we were alerted that C&W was selling their customers to New Edge Networks. Not happy.
I know C&W controls a lot of connectivity throughout the US so this could be huge for a lot of corporations. It says they will honor their SLAs until they decide upon further action, but how well will they uphold the SLA? And more importantly does this come with a huge reduction in staff, as I would assume it will, and how can they uphold SLAs that are already being strained. Hopefully this will not result in any major down times. The beauty of the internet is its ability to adjust routes and optimize connections but loosing a big backbone provider could result is some serious revenue loss for some businesses.
"Reality is a crutch for people who can't handle drugs" - George Bernard Shaw (1856 - 1950)
As competition continues to slim down, I am afraid that it is greatly going to increase the baseline costs of these large internet companies. Of course, this will eventually make its way down to us.
Competition is good. Although I would hate for the government to regulate the internet, grants and loans for improvement of its foundation
would help keep the current system strong and affordable.
Davak
That is true. I work for the government. There are policys in place which require a investigation into where the data is being stored. As in, there has to be a really good reason why any data is stored offsite, and not just because it's easier.
Yes, it "COULD" be... but I don't think it will. C&W isn't just hitting the power switch. They'll migrate stuff. We were on C&W last year (ISP T1) and last year they sold ALL of their ISP accounts to New Edge Networks, (Which I must say is over priced, and the quality of service sucks bad!). Anyways, they are good about switching things over seamlessly, they just pick back places to sell your account to ;-(.
Can all fish swim?
Isn't Mae-East located in one of the C&W buildings in the Tysons Corner, Viriginia, USA area? I thought that was where the NSA had installed all of their Echelon sniffers. I bet there is some real back room skullduggery going on if this is true.....
Those data centers have nothing to worry about. Some company is going to buy all of that infrastructure & equipment for pennies on the dollar. It makes sense for them to leave it as is and transfer the existing customer base. Why would they reinvent the wheel if everything is already in place? No need to panic.
That's what I thought when my last place of empoyment went out of business - somebody would buy us and merge our network with theirs, or they'd just buy our 160,000 residential broadband customers, transition them to their network, and then dump us. Neither happened; the customers got screwed.
$x='S24;r)>63/* h@<5+oZ)32"5cz';$me='phroggy'x$];
$x=~y+ -xz+\0-Tx+;print$_^chop$me for split'',$x;
The article in todays' WSJ (sorry, no link,
I read the dead-tree version) cited the
basic problem in the telco industry as being
overcapacity, but then goes on to quote
the C&W prez as saying that they're going
to try to resell excess capacity to make
up losses.
The're also going to try to "hang on to
existing revenue streams" while exiting
the US Market (so, exactly what valuable
assets are you selling, and who, exactly
is buying ?)
Also says that the blulk of their revenue
comes from web hosting...there's a winning
1998 market (I just left a large recently
renamed telco doing securtiy for web hosting).
It's corporate "leadership" without a clue.
---eludom
I once worked for a company that used Digital Island (and then Exodus) for a lot of our media streaming needs. You could see the breakdown several months before C&W came in. Even after terminating our account (we owed them several hundred thousand through no fault of our own) and weeks of nasty phone calls, we were still able to walk into the data center where we were co-located and pick up about 10K worth of hardware.
They even had boxed it all up nicely for us. You'd think they would want to hold onto this for a bit. By the looks of the center, they certainly weren't hurting for free rack space.
I still get messages about maintenance and routes going down, almost daily. *sigh*
Google has something like 10 US mirror/datacenters. www-cw is one, but there's also www-va, www-sj, www-fi, etc. Sometimes you can get different results from them.
I used to work for them three years ago...needless to say it was already a sinking ship then and I'm glad I got out when I did.
Yet another reason that it should have been Bernie Ebbers and John "The Internet Doubles Every 90 Days" Sidgemore in handcuffs yesterday, not Martha Stewart.
...when all of your data centers are unoccupied by paying customers.
...
I used to work for a customer of Exodus/Cable Wireless, and saw the exodus from Exodus. I remember the boom years when I only went in on Sunday because that was the only day I could get a parking spot and not have to park across the street. I remember when you could see Dell and Compaq and Gateway and Sun systems in every cage, wall to wall. When you could sit in your cage and have conversations with two or three other customers and learn some really neat stuff. Where the soda and chips were only 25 cents. Where security walked you to your cage and unlocked it for you.
The last few years saw the datacenter become a ghost town. Granted, it was a 62 degree ghost town, but still a ghost town. Where every cage around ours became empty, and we even went from a full cage to a half cage thanks to faster and smaller equipment. The parking lots are never full, soda and chips are now priced the same as everywhere, and no one to talk with. And now security gives you the key to your cage and you walk past rows of empty plastic-coated wire mesh cages.
How do you lose money?? Because you have to run a gazillion foot data center, with all of it's associated infrastructure needs, and you don't have any customers in it. Compare it to the cost of running an apartment building if it is only half occupied. There are still maintenance costs, but now you only have half the tenants to cover it. You still have to heat and cool the empty apartments, although not the same as the rest, and you have no one to pay for it.
Don't get me wrong though. I loved the facility. It was clean and well maintained. I could get away from the home office and work without being interrupted. I didn't have to worry about AC and power and network outside of our cage. If C&W was still a viable company, there would be no hesitation about using them for a data center.
But the 90's are over
I rarely read replies, it's my opinion and if you thought about your opinion a little more, I'm OK with that.
I worked at CWUSA from 94 to 2001 and I have been predicting their demise for years now. Around 96 the executives were complaining that they were only making 3 cents of profit for every 6 cent call. Having had experience in a mature sector(retail) I recognized immediately that they were spoiled by huge margins. I knew that once the telecom industry became saturated and they actually had real competition that they would either adapt or change. Management did change but instead of concentrating on their core business, telecom services and custom billing for small businesses(which brought them to the Billion in rvenue mark), they decided to buy MCI's crappy internet backbone and become an internet company. Nevermind that they had no experience in this market and the executives didn't know what they were buying. Internet was sexy and they could market that much easier than boring old long distance. Their long distance service was an incredible cash cow.
New offerings were brought up and provisioning and billing systems were rushing into place(sometimes). Often a new product would have to be provisioned manually and there was no way to tell if a customer wasn't paying their bill for well over a year after they first started selling the product.
Then to top it all off the mothership(PLC) decided they were going to become a global organization and they ended up picking up the biggest inept blowhards in CWUSA to help create the global organization. While all this was going on they were still having their yearly layoffs, which they did even when they were making a billion a year. Management would lay off the workers and keep the management around. It was not uncommon to know of managers and directors with no people.
Not long after I left they decided to lay off all the techincal people and outsource the work to IBM. Many people were gone for good and many were tranferred to IBM. But the funniest thing about this grand plan was the first task of the plan-- assign a senior management team to organize the layoffs(to them management teams were the "magic pixie dust"). Those people were so management happy that they have a few building in Vienna Virginia stocked with managers, senior managers, director and AVPs that are quite adept at bullshitting, creating powerpoint documents and dodging bullets but they can't manage a damn thing. I could write for hours about the shenanigans that went on in that place but I'll just end with something an old relative who has been a businessman since WWII told me. "Anyone can make money when times are good, it's when times are tough that you find out who the real businessmen are." They were poseurs and it was only a matter of time before their hubris coupled with reality bite them in the ass. The sad thing is these same losers will end up getting nice cushy management positions at Verizon, Worldcom or AT&T and probably for more money.
It's very simple: there are no customers.
I've walked around a bunch of the old Exodus datacenters in New York City: even the "older" ones (ie the former GlobalCenter colo on 8th avenue, and the original NJ1 at Exchange Place)) were like ghost towns: row after row after row of empty racks.
The colocation "boom" of the 1990s was a pyramid scheme: VC-financed colo companies selling space at completely fictional rates to VC-financed startups. As soon as the venture money dried up, the small customer vanished...and then the big customers vanished...and then the behemoths themselves began to die off.
No matter how much you cut your costs, you can't make a profit if you have no customers.
My completely off-the-cuff guess is that even if C&W mothballed 90% of their colo facilities in the US, and all of their competitors (UUNet, AT&T, Globix, Level3) did likewise, there would still not be enough customers to keep them afloat. Colo is expensive, and there just aren't that many companies who actually need six-sigma uptimes. (Not that any of the colo providers ever came anywhere near their promised reliability numbers in practice, but that's a whole different rant.)
News for Nerds. Stuff that Matters? Like hell.
The signs were theee in the fall of last year. I wrote about it, and why hosting businesses tend to fall part, earlier this year.
. ht m
http://www.practical-tech.com/network/n04172003
Long story short, stupid business plans and lousy management equals failure. C&W's US business had both in spades. The real question, from where I sit, is will C&W continue to survive in the UK? That was unthinkable only a few years ago, but they've made so many bad moves recently and bleed out so much capital you really have to wonder.
Steven
I work for a small ISP, and actually around December C&W sent us a letter that basically said:
"btw, we're pulling out of X% of our US markets. Your pipes will be shut off in 30 days. Yes we know that we've got a 7 year contract agreement, but well, too bad. have a nice day".
This resulted in legal action on our part and a lot of frantic searching for other providers. It all shook out ok in the end, but it there was a lot of sleepless nights for some time.
The problem with this idea is that there is no significant barrier to entry in the low-end colo or hosting market, other than running fiber to a facility. As soon as the rates for hosting go up, a lot of people will look for cheaper ones, and you'll see another crop of low-end companies start up.
Don't forget that even that barrier is significantly reduced by the fact that the capacity is always there on most of that dark fiber, so they have an incentive to sell it, as long as they haven't pulled it out of the ground and turned off the power to it. Not to mention that Verio and other former players in the big data center market will still be looking to get out from under some of the leases for their closed facilities, for at least the next couple of years. Even if they default on their leases, the building owners will be much happier leasing you the facility as is instead of having to rip out all the heavy infrastructure modding.
Hosting's going to be a commodity market for a long time, if not from now on, I think.
Get off my launchpad!