Telecom companies plan to spend more, on average, than any other industry on Year 2000
compliance projects, but they also have spent the smallest percentage of their Y2K budget to date than other industries
have, according to Triaxsys Research L.L.C., Missoula, Mont.
In its research of the Y2K disclosure statements of
Fortune 500 companies, including 13 telecom companies, Triaxsys found telecom companies had spent on average
only 30 percent of their Y2K budget at the end of the third quarter, the latest quarter for which information is available.
That places the telecom industry last in terms of progress measured by the percentage of budgeted funds already
spent.
“Telecom is the absolute bottom of the barrel in terms of progress,” said Steven L. Hock,
president of Triaxsys, who noted telecom lags behind the health care industry, which commonly is perceived to be the
furthest behind in terms of spending.
Several companies in their disclosure statements were careful to note that
spending is not necessarily a good indicator of progress toward compliance, and many telecom companies indicated
they would spend a large portion of their Y2K budget during the fourth quarter of 1998 and the first part of this year.
Hock, however, said in most cases the testing phase of Y2K projects should comprise about half of a company’s Y2K
budget, and the 30-percent mark would suggest a company is still in the assessment phase of its project.
Telecom
companies plan to spend about $276 million each for Y2K projects, said Hock. In comparison, pharmaceutical
companies plan to spend an average of $140 million each, and financial services companies plan to spend $125 million.
Financial services and pharmaceutical companies have made the most progress in terms of spending, at 57 percent and
53 percent, respectively.
AirTouch Communications Inc., the only independent wireless carrier included in
Triaxsys’ research, had budgeted about $75 million and had spent only about $16 million as of the end of the third
quarter. AirTouch reported it had completed the first two phases of its Y2K work, including inventory of all mission-
critical systems and the identification of hardware, software and embedded technology that are affected by the Y2K
problem, and analysis and design of modifications for each affected component.
Most large telecom companies said
they plan to have their Y2K projects completed by the end of the second quarter. The small percentage of spending so
far, however, could indicate telecom companies may have some problems when the clock rolls over.
“With
this much progress at this late date, the chances these companies can remediate the problems and thoroughly test them
is remote,” said Hock. “The result would ultimately be service disruptions.
“I think it is a
reflection of the fact that telecom companies face a much more daunting task because they have much more complex
technical requirements,” said Hock.
AT&T Corp., for instance, reported it has about 3,000 internally
developed applications that it needs to assess for Y2K compliance. That translates into 350 million lines of code that
must be assessed, repaired and tested. The company said it had completed most of the assessment and repair and about
two-thirds of the application testing as of the end of the third quarter.
Telecom companies face the additional
challenge of dealing with numerous third-party players, including other telecom carriers, whose Y2K compliance or
non-compliance ultimately could reflect on their own Y2K readiness.
