KPNQwest network shutdown deadline looms

KPNQwest NV's fiber-optic network, Europe's largest, could be shut down Tuesday if the trustees of the bankrupt Internet services company find that not enough customers have paid their dues and an advance on June fees in the past days.

Late last week, the trustees asked KPNQwest customers to pay outstanding bills and an advance for June, so the company would have enough funds to keep its network online. Originally, customers had until close of business on Monday to pay, but the deadline was extended until Tuesday, a source close to the trustees said.

Keeping the network running would give customers more time to look for an alternate carrier, while the trustees have more time to find a buyer and maximize proceeds for the creditors because an operating business is worth more than a defunct business.

IT services company TietoEnator Corp. uses KPNQwest's backbone to connect its offices in 10 countries and is one of the KPNQwest customers that was asked to pay. The company had not done that by late Monday afternoon, said Jüri Tuks, chief information officer at TietoEnator in Espoo, Finland.

"We are still a customer, even though they want to throw us out. Now they say that if I pay in advance that I can have a service guarantee for June. We have to let our lawyer look at it first. I am not interested in paying for something that I can only have for a week," he said, adding that TietoEnator has a fallback solution and is looking at a new primary supplier.

Customers underestimate the effect of a network shutdown, according to Graham Kinsey, who as a network operations engineer manages the Ebone network from a network operations center in Brussels. Ebone was acquired by KPNQwest last year.

"The biggest corporations are the ones that do not believe that Ebone will go down. They don't really appreciate how close we are to shutting down. Any company that has no backup will go down," he said. "Some customers may have a fallback provider, but it may not be sufficient."

Kinsey, together with several other Ebone staff, have been volunteering to keep the Ebone network up since they were laid off last week, he said.

The impact of a KPNQwest and Ebone network shutdown will ripple far beyond the direct customers, according to Kinsey.

"If KPNQwest goes down it will mean a slowdown of the European Internet generally," he said. "There has never been a network the size of KPNQwest to shut down overnight; nobody really has any perception what it will mean."

KPNQwest, a stock market darling worth US$40 billion in the days of the technology boom, went bankrupt in late May after a plan to sell some assets to meet its most urgent financial obligations failed. The heavily indebted and loss-making business went into a financial tailspin after its founders, main shareholders Koninklijke KPN NV and Qwest Communications International Inc., and banks withdrew support.

Analysts estimate KPNQwest amassed a €2.3 billion (US$2.13 billion) debt building its business.

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