Billing problems didn't help GST: ISPs say errors were rampant, customer service unresponsive
John L. Guerra
08/01/2000
GST Telecommunications Inc., with 6,000 miles of fiber optic backbone on the West Coast, Texas and Hawaii, couldn't find a buyer before it moved to Chapter 11 bankruptcy. The Vancouver, Wash.-based CLEC, which offers voice, data and Internet access over an ATM backbone, is auctioning off its assets. Though GST officials blamed its demise on a "cash crunch," faulty billing, poor customer service and angry customers surely added to its troubles.
Blaming the CLEC's failure on a cash crunch is putting it lightly. GST had $1.2 billion in debt as of March 31 and $63.4 million in cash and equivalents. The company filed for Chapter 11 bankruptcy May 17, a day after Time Warner Telecom, Inc. offered to buy GST's assets for $450 million, about half of what the company is worth, according to analysts. The deal fell through, and the Official Committee of Unsecured Creditors appointed in the bankruptcy case gave GST permission to auction off its network and other assets. Interested bidders had until July 31 to examine GST's books, investigate its network hardware, evaluate employees, and generally eyeball the company, says GST spokeswoman Kira Higgs. A final auction was to be held Aug. 4 in New York City. "It will either be sold, or it will re-emerge with a different balance sheet with a restructured financing and continue to operate independently under an undetermined name," Higgs says, adding that GST hopes to sell the network in one piece.
Customers complain of ongoing billing problems
Customers complained about billing problems, including charges for services they never received. Philip Ardron, CEO of Linkline Communications Inc., an ISP in Mira Loma, Calif., was one who blamed GST for billing mistakes and a seeming lack of concern over incorrect bills.Ardron says that overbilling was so rampant at GST that after years of billing disputes, he finally dropped them for another backbone provider.
"We're talking over six figures they've overcharged us,” he says. “What was fairly standard practice for GST was to put things on our bill that didn't exist or keep things on our bill that had been cancelled. We haven’t received a correct bill from GST since 1998."
GST, for instance, charged him for T-1s that Linkline was no longer using and billed him for DS-3s in a location where Linkline had no customers. Ardron says GST customer service reps threw roadblocks up to prevent him from getting credits for the billing mistakes, and network problems went unfixed for months.
"They made it that way to wear you out so you wouldn't be able to collect,” Ardron claims. “What they would do is change the person I was dealing with [at GST], so I'd have to keep making the same argument over and over, having to keep proving to them that they were wrong. When one of the [customer service reps] would admit [the billing error], they would be moved to another job; there was no carryover. I had to repeat myself over and over again."
Problem is 'systemic'
Trying to get credit managers higher up the food chain didn't help, Ardron says. "The problems are systemic, they go all the way to the top. The credit managers don't care about overbilling. I asked to have a meeting about the billing mistakes, but they refused."
The effect was disastrous for his business, Ardron contends. "My customers were infected by the poor service. We were with them for about 3 1/2 years, and conservatively, I'd say we lost 5,000 customers. If you continue to have recurring problems, end users say, 'Boy, maybe I better find another ISP.'"
Other ISPs, including Cosmo Access Inc. of Lake Elsinore, Calif., have complained publicly about network problems that hurt their businesses. "Thirty or more Internet services failed on the same day. It was a disaster," John Purpura, president of Cosmo Access, told a business publication in June. Cosmo also received bills from GST for time during which it wasn't using the company's lines.
System conversion created problems
The mistakes were compounded by a billing system conversion last year, Higgs says, and GST now has a process in place to give credits for incorrect charges. Greg Bergs, vice president of voice services at GST, says the carrier was saddled with two major billing system projects that could have added to overcharges, which he says were related to backbilling issues. GST over the years purchased four carriers, each with its own billing platforms. With the Y2K deadline approaching, he says, GST had to race to move the disparate billing platforms onto Lucent Kenan's Arbor/BP system.
"The billing systems were primarily based on the acquired companies that GST acquired over the years, some of whom are no longer in service," Bergs says. The project was difficult and the developers ran into trouble that commonly pop up during conversions to new systems.
"Essentially, because these acquired businesses had their own products, they had to be evaluated and mapped to the GST product line," he says. "And it was not a one-to-one mapping. What was defined in one system was not defined exactly that way in another. We tried to get the billed amounts correct, although the services were defined differently. We had to scrub the database, getting the customer accounts data ready to go into Arbor, and it was tight time-wise because of Y2K.
"We also had to try to evaluate which products were going to be grandfathered in and which were going to be transferred to our existing core products. That may have contributed to overcharges--some of it is due to fallout from those conversions and backbilling," Bergs says.
To the auction block
It's anyone's guess which form GST will take now that it's been on the auction block. Buyers will certainly be interested in its backbone, but little else is certain. The company was in the middle of a partnership with Covad Communications, developing interfaces for voice over DSL service. That is now on the backburner, according to a Covad spokesperson. Covad has other partners with which it will continue to develop VoDSL. As for GST, what was once a company is now up for grabs in a glorified yard sale.
"We're a little bit like a scrambled egg," Higgs says. "How do you break out the whites of the egg when you're scrambled?"
962 WORDS
Are ASPs for the home user on the right track?
New wave of firms rent software to residential, small business customers
By John L. Guerra
There's a new niche in the application service provider market, but not everyone is convinced it's a viable market segment.
ASPs for the most part lease industrial-strength software applications, including billing, customer care and accounting software to large companies. Now, a few emerging companies are offering low-end, shrink-wrapped software applications over the Internet to residential and small business users.
One such "software rental" company, Personable.com, offers home users a library of basic applications, such as Windows 2000, Microsoft Office (complete suite or piecemeal), Quicken products, and even online courses in nursing, project management and other subjects.
Software comes at flat rate
The users--small businesses and residential customers--are charged a flat monthly fee for an application, usually between $9.95 and $36.95.
But industry observers question why home users or small businesses--Personable.com targets businesses with three to 50 users--pay a monthly fee instead of simply buying the software from the local office supply store? Not only that, home PCs often come stuffed with such applications as Microsoft Windows and other commonplace programs.
Peronable.com touts several advantages to the rental model, including the ability to store one's work on either the desktop or on the company's server in California. "With our proprietary encryption, compared to a home system, it's safer," says Pauline Cha, Personable.com's spokesperson. "You're operating out of our servers, and it gives you unlimited access to the virtual desktop. We handle the patches and upgrades; the user doesn't have to worry about it."
Service 'not that compelling'
At least one ASP analyst is unimpressed with the home software rental market.
"I'm not convinced the premise is sound," says Robert Rosenberg, president of Insight Research Corp., of Parsippany, N.J. "The Microsoft suite is not that compelling. Don't give me something I can buy as a single user and offer it over the Web and expect me to pay for it."
Rosenberg says ASPs might do better, especially in the small business niche, to offer more sophisticated applications that can give small businesses an edge in accounting and other management areas. "What would be compelling is an Oracle database or some kind of very high-end accounting program--not Quicken,” he says. “Why not a corporate-sized financial package that puts the small business in the same ballpark of a Fortune 1000 company? How about very sophisticated human resource tools, or middleware applications or process engineering tools?"
Got to have true 56K access
There are drawbacks to the software rental business, Cha admits. "We say that you must have a minimum 56K speed, but that's not always the case. People with 56K modems don't always have enough bandwidth, so they have to have a true 56K connection, such as with DSL."
Security concerns are another drawback, Rosenberg says. Will small businesses feel comfortable storing proprietary "internal" memos outlining new product launches or pricing plans on a server they can't control? "And what about the security in transmission?" Rosenberg asks. "If you're on a cable modem, there are questions about the protection of the transmission of the cable access portion of the network. It's only as safe as the partitioning of the customers on that node, to prevent some kind of spoofing. Anything can be hacked."
Billing for the small ASP customer
Online software rental companies handle two types of accounts: the small company and the home user, and each is processed differently. Personable.com uses an in-house account manager system that differentiates between the two.
"When you log in with your user name and password, we use that to track your account using the account manager," Cha says. The customer then keys in his credit card number, which is recorded in a customer account database separate from the servers that hold the rentable software applications. "If you open up a software program]our servers can view your account activity and track your usage and apply it to your account."
"The credit card information is captured on our servers, and system utilization by the customer is continuously captured," says Jeff Apsley, business developer for engineer support at Personable.com. "We know when they log on, what application they're using and how long they're using it," Apsley says. “We take that detail and create the bill by generating it off the detail. If they are using a credit card, we generate a bill offline."
Too early to tell
It may be too early to tell whether ASPs can make a lot of money in the residential and small business niche. Although millions of people have Internet access, DSL and other broadband services are not universal. There are network quality issues, as well as bandwidth bottlenecks that can slow or even prevent users from opening the applications. Some online vendors--including cable provider Comcast Corp. and Walt Disney Corp.--rent otherwise expensive computer games for a modest monthly fee. In a recent Wall Street Journal article, a mother explained why the business model worked for her. In the past, her son often grew bored of computer games and begged her to buy new ones, at about $40 per CD Rom. By using an online computer game software provider, her son can play any number of games for $9.95 a month. Analysts aren't sure whether DSL availability will lead to greater demand for online software rentals, or the ability to rent software online will increase demand for DSL. Whatever the reason, DSL will become more common in households in the next several years. The Yankee Group reports that broadband is in about 1.7 million homes now, but could reach 3.3 million by the end of the year and 16.6 million homes by 2004.
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