Regular readers know that BusinessWeek SmallBiz has been warning for months about the shaky finances at some of the biggest vendors of high-speed Web service. On Aug. 7, less than a week after Rhythms NetConnections Inc. filed for court protection, the warning hit home again as Covad Communications Group announced that it also planned to file for Chapter 11 bankruptcy.
Unlike some of the smaller providers that have gone belly-up, Covad says it will continue providing service to its 330,000 customers while trying to line up new financing. If all goes as planned, Covad says it should have enough cash to keep the company operating "into the beginning of 2002."
So what should a small-business customer do? Switch to another provider is, of course, the most obvious option. The question is who? Covad and Rhythms are among the biggest players in DSL (digital subscriber line) service, and the list of companies that have earlier filed for bankruptcy includes Winstar Communications, NorthPoint Communications, and PSINet Inc. As for the regional phone utilities, complaints about their inability to provide reliable service have been widespread.
BACKUP PLANS. Greg Zissu, a senior analyst at AMI-Partners in New York, doesn't see any reason for Covad customers to switch in a hurry. He says it's unlikely that Covad customers will see a repeat of the fiasco that affected NorthPoint Communications Group, when service was cut off suddenly in the wake of its bankruptcy. That said, it would be prudent to have a dial-up service in place as a backup. You can ease the transition by purchasing WebRamp from Ramp Networks or a similar device that will switch your DSL line to dial-up. If you're storing data on the Web, make sure you've got recent backups on your hard drive.
Meanwhile, says Zissu, small companies should start researching alternate DSL providers "so that they're not scrambling in a panic at the last minute." Watch out for locally based services. While their name may be on the bill, they're often just reselling DSL service that they buy wholesale from providers like Covad. If you crave stability, Zissu says you may just have to go with the local phone company, because they're not in any danger of going under.
After making your choice, expect something rarely seen in this industry: Rising prices. AMI says the hikes vary by region, but the days when you could expect ever-lower prices for high-speed service are over. By Rick Green in New York