New Ground: Web Access Insurance

When Joe Russell's broadband access provider suddenly shut off service this spring, he resorted to a wireless link connecting his offices to an access line in a neighboring suite.

When Joe Russells broadband access provider suddenly shut off service this spring, he resorted to a wireless link connecting his offices to an access line in a neighboring suite. It was more than a month before he got a new high-speed connection of his own.

"I cant afford extended downtime," said Russell, president and CEO of Inabled Online Corp., in San Diego. "That situation cost me several dozen Krispy Kreme doughnuts every week."

With friendly neighbors, Russell got off easy. Enterprises caught unaware by service shutdowns often have to wait weeks for new connections, forcing many back to the dark ages of dial-up service in the interim. And usually at a cost far greater than doughnuts.

As the broadband service provider bloodbath continues to swell (last week Rhythms NetConnections Inc. announced bankruptcy), the long-term viability of todays providers becomes increasingly unclear.

Starting this week, however, businesses leery of their service providers health will be able to buy Internet access "insurance" from IntelliSpace Inc.

Competing service providers have long acted as vultures in the Internet access business, sweeping in to pick up the pieces when a rival goes out of business. Many providers, including New York-based IntelliSpace, even offer "rescue" programs to sign up stranded customers quickly.

But IntelliSpace is now taking the concept a step further—and is no longer waiting for its rivals final gasps before offering itself as an alternative.

Targeting customers of troubled service providers—those who are trying to reorganize under Chapter 11 or those whose stock price is collapsing—IntelliSpace is offering to prewire offices with a backup, fiber-based Internet connection. Customers pay a one-time wiring fee but dont have to pay for service unless their existing provider goes out of business.

Inabled Online, which provides touch-screen lobby portals and Web development, plans to buy several IntelliSpace "insurance" connections for sites currently served by XO Communications Inc. and Winstar Communications Inc., according to Russell.

"I want to make sure I have some protection," he said.

Most struggling access providers dont appreciate IntelliSpaces approach. The companies dont consider themselves troubled even when outsiders view them as such. Covad Communications Group Inc. maintains it is conducting normal business, even though the NASDAQ has delisted its stock. NorthPoint Communications Inc. said much the same until it went out of business in January.

Like many competitors in this arena, Cypress Communications Inc., which is appealing a July 6 NASDAQ delisting alert, contacts customers left stranded by defunct service providers.

As for IntelliSpaces aggressive insurance strategy, however, Cypress Manda Hunt called it "presumptuous."

"We are not going out of business. Our stock price has nothing to do with our service," said Hunt, corporate communications manager, in Atlanta.

To find out which providers are in imminent trouble, IntelliSpace talks with the investment community and equipment manufacturers, said Paul Brindak, IntelliSpace co-founder and chief marketing officer.

"We knew about [Allied Riser Communications Corp. ceasing retail services] months before it went down," Brindak said. "But were not looking to promote all these guys going out of business. Theres room for all of us."

IntelliSpace offers service in 14 of the largest U.S. cities, and the Internet insurance program is available only to customers in the roughly 800 buildings where the companys infrastructure is already deployed. The company does not expect to make a profit installing backup lines and is charging only for their costs—beginning at $200 per line, Brindak said.

If they are ultimately turned on, the IntelliSpace lines offer access speeds ranging from 64K bps for $69 per month up to 10 Gigabit Ethernet for thousands of dollars per month.