Just in Case, Many Firms Work to Set Up
Redundant Telecommunications Systems
By DENNIS K. BERMAN
Staff Reporter of THE WALL STREET JOURNAL
interactive.wsj.com
John Smiley typically wears suits. But as the executive in charge of telecommunications for Lufthansa Systems' North American operations, he recently put on jeans and work boots to inch his way into a dirty train tunnel beneath New York City's Grand Central Terminal.
His mission: to inspect new fiber-optic cables that snake through abandoned gas pipes, ensuring that they are running on a safe, separate path from a set of nearby fibers carrying the German airline's reservations data.
Mr. Smiley says he isn't going to take any chances after enduring phone disruptions to two critical reservation centers following the Sept. 11 terror attacks. He has ordered two completely separate lines coming into his locations so the next disaster doesn't knock out all of his company's connections. But he wanted to see the proof himself.
"The 11th made us take a serious look at our backup plans nationwide," he says. "A lot of locations had no diversity."
Indeed, customers and suppliers alike have learned a lot about the fragility of the nation's communications infrastructure after the near destruction of a critical Verizon Communications Inc. switching hub that abutted the World Trade Center. About 300,000 voice lines and 2.5 million data circuits were damaged by the attack as nearby buildings collapsed. Three months later, an estimated 5,700 lines still haven't been restored.
Now, corporate technology planners are scrambling to devise ways to keep telecom systems intact should another worst-case scenario turn into reality.
Large businesses have traditionally had multiple lines running in and out of their buildings. To guarantee service, the new goal for telecom managers is a still more sophisticated system: at least two carriers, pushing voice and data over two independent routes to two different telecom hubs. "It comes up in every single conversation we have," says Mark Ward, chief executive of GiantLoop Network, a Boston-based telecom upstart.
This is harder than it sounds. Even though they sell separate phone service, competitive local-service carriers typically run fiber in the same pipes and network hubs as the local Bell companies. That overlap was tolerated before Sept. 11. But not now, say Mr. Smiley and a growing number of business and telecom experts. When redesigning Lufthansa's infrastructure, he pored over network maps from Focal Communications Inc., a Chicago-based company that provided the routes. "I didn't want any red lines going over each other," he says, referring to the maps showing paths of the fiber lines. Mr. Smiley also uses Verizon for some services, increasing his system's redunancy.
Such belt-and-suspenders setups don't come cheaply. On average, businesses should expect to pay 2.5 times their annual telecom costs to create truly diverse networks, says Todd Tanner, president of the Tanner Group in Salt Lake City, which designs systems for call centers. Mr. Tanner is now recommending that companies have at least three carriers, and two geographically diverse call centers, when designing their networks.
Though he has received a lot of inquiries since Sept. 11, Mr. Tanner says many companies are locked into long-term volume contracts with carriers that prohibit them from splitting their traffic. "There is a huge penalty going to multiple carriers and multiple sites," he says.
Yet many companies seem willing to pay for redundancy, and that's creating fresh demand for telecom firms that claim true independence from the Bells' networks. Nowhere is that difference more clear than in New York City, where the underground jungle of pipes and wires has made for strict control over rights-of-way, most of it via Empire City Subway Co., a Verizon subsidiary that got its start 110 years ago. The only other company with approved access to telecom rights-of-way is Con Ed Communications Inc., a unit of power company Consolidated Edison Inc. Its business for corporate customers has been up 100% since the attack, says Chief Executive Peter Rust. "Customers want to divide the pie a little bit," says Mr. Rust, who has recently won contracts with the federal courts and has received increased interest from area hospitals and media companies.
ConEd is now taking it a bit further, touting that its 120-mile network will one day avoid many parts of Manhattan, which is still perceived as a ripe target zone for terrorists. In one route, data and voice would travel through Brooklyn, skirt through New York Harbor and eventually land in New Jersey without once hitting Manhattan. Mr. Ward, of GiantLoop, said a few customers have asked that their telecom routes specifically avoid the island.
These plans could spell some trouble for Verizon. The company now controls about 30% to 40% of the telecom market for large corporations in the New York area, according to Lehman Bros. analyst Blake Bath. While it tries to rebuild its devastated infrastructure, competitors can now tout something other than low-cost service. That's a welcome development for an industry segment in which fierce price competition and a glut of capacity have created a run of bankruptcies and failures. In addition, smaller businesses -- a market in which Verizon has a penetration as high as about 70% -- are beginning to address these questions, and may begin branching out from their habitual Bell contracts. "Competitors are having a great time," admits Verizon spokesman Eric Rabe. "I'm sure they're taking full advantage."
But even Verizon CEO Ivan Seidenberg admitted in a speech earlier this month that the company needs to "rethink concentration of facilities in a few places." The company said it would relocate one of four telecom switches housed in the damaged switching station, with hopes of better spreading out capacity.
Just how much new spending is the cause of telecom diversity likely to attract? Mr. Bath doubts it will "move the needle" for telecom services and equipment, given that "the loss in overall economic activity is offsetting any of the rebuilding efforts"
Still, the times are changing for the likes of John Gilbert, chief operating officer of Rudc Co., a large real-estate operator with 10 million square feet of New York office space. Rudin has long encouraged multiple carriers to operate in the company's buildings, but they weren't always used. Now, tenants in the company's downtown buildings are being asked by their customers, in turn, to show new telecom backup plans, says Mr. Gilbert. "They need to show that this will never happen again."
Write to Dennis K. Berman at dennis.berman@wsj.com
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