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KPNQwest begins network shutdown

The epic bankruptcy saga of KPNQwest takes another twist as the data-services company begins to shut down its Ebone Internet network.

KPNQwest, the bankrupt Dutch telecommunications group, has begun shutting down its Ebone network, leaving up to 4,500 companies without their Internet connection.

Administrators in Belgium rejected a rescue bid in the epic bankruptcy saga, and parts of the KPNQwest network are expected to be sold within days.

"Ebone was the first backbone of Europe," said Graham Kinsey, staff convenor at the Ebone network center in Belgium. "I am disgusted."

KPNQwest was declared bankrupt at the end of May after its supervisory board, including representatives of its founders and key shareholders KPN and Qwest, resigned. Ebone is part of KPNQwest's 15,500-mile network, which carries a quarter of Europe's Internet traffic and mainly includes rings around major Western European cities.

Plans to sell KPNQwest's fiber-optic network have been plagued by numerous obstacles and have been complicated by the sheer number of bankruptcy procedures filed by its units in nearly a dozen European countries.

The bankruptcy trustees had so far managed to keep the network operational, despite a dispute with KPNQwest's banks over funds collected from clients.

The Ebone network still had about 50 percent of its total customer base, estimated at 45,000 at the time KPNQwest purchased Ebone in March, Kinsey said. "Around 20 percent of the remaining customers had no alternative provider arranged. Smaller customers will be hurt the most," he added.

"It is one big mess," Kinsey said. "But we are trying to shut down in a controlled way...It will not be easy to start up again."

Ebone operators made the decision to pull the plug because a temporary arrangement to pay them expired Monday, and a bid for the network by Oakley Capital was rejected by Belgian administrators the same day.

"The banks have cut their throats," said Kinsey, pointing out that one major bank involved in the process stood to lose major links that were carried by the Ebone network.

Deals could be signed in the next couple of days, with the separate sale of KPNQwest's Central European operation coming first. Other parts of KPNQwest will be sold as well.

The Ebone staff is not optimistic about finding jobs, Kinsey said. "One thousand people have been fired from Ebone, but 17,000 are going from (troubled telecommunications giant) WorldCom. There are not many (Internet service providers) taking people on."

ZDNet U.K.'s Peter Judge reported from London. Reuters contributed to this report.