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Massive Internet Outage Hobbles India Outsourcers

India's lucrative outsourcing industry struggled Thursday to overcome Internet slowdowns and outages after cuts in two undersea cables sliced the country's bandwidth in half.

The disruption -- which has hit a swath of users from Egypt to Bangladesh -- began to affect much of the Middle East on Wednesday, when outages caused a slowdown in traffic on Dubai's stock exchange.

Such large-scale disruptions are rare but not unknown. East Asia suffered nearly two months of outages and slow service after an earthquake damaged undersea cables near Taiwan in December 2006.

The cables, which lie off the coast of Egypt in the Mediterranean, were snapped as the working day was ending in India on Wednesday and the impact was not immediately apparent.

But by Thursday, the Internet was sluggish across the country with some users unable to connect at all and others frustrated by spotty service. The Internet Service Providers' Association of India said the country had lost half its bandwidth.

In all, users in India, Pakistan, Egypt, Qatar, Saudi Arabia, the United Arab Emirates, Kuwait and Bahrain were affected. Engineers in several countries were scrambling to reroute traffic to satellites and to other cables.

The biggest impact to the rest of the world could come from the outages across India, where many U.S. companies outsource customer-service call centers and other back-office operations.

"There's definitely been a slowdown," said Anurag Kuthiala, a system engineer at the New Delhi office of Symantec , a security software maker based in Cupertino, Calif. "We're able to work but the system is very slow."

"There's no sense of how soon the problem will be fixed," he added.

Officials said it could take a week or more to fix the cables, apparently cut north of the Egyptian port city of Alexandria, as they scrambled to reroute traffic to satellites and through Asia.

A top Egyptian telecommunications official said that workers wouldn't know for sure what caused the cuts until they are able to get repair ships and divers to the area, though there was speculation a ship's anchor was to blame. The official in Egypt's Ministry of Communications and Information Technology asked not to be identified because he was not authorized to speak to the media.

Rough weather and seas prevented repair ships from getting to the site Wednesday, the official said -- and it was unclear how soon they could get there.

Even once the repair workers arrive at the site, it could take as long as a week to repair the cable, the official said.

India has built up massive amounts of bandwidth in recent years and is likely to be able to handle the situation without major economic losses, analysts said.

But it will be disruptive, especially for smaller companies that depend largely on local Internet service providers and do not have the sophisticated backup systems used by larger corporations.

"Telecom and bandwidth are the bedrocks of the IT industry," said Ajit Ranade, chief economist at the Aditya Birla Group, an international manufacturing and services company. "If something happens to the bedrock, obviously the IT industry will suffer."

Infosys, Wipro, IBM Disrupted?

For smaller companies, that appeared to be case.

"The Internet service has been close to nonexistent. Most of our ... consultation with our overseas customers is done online. The Internet is our main business tool," said Praveen Mathur, an executive at Streit India Advisory Services, an equity investment consulting firm based in New Delhi withclients in the United States and Canada.

Rajesh Chharia, president of Internet Service Providers' Association, said some companies were rerouting their service through cables running under the Pacific, but that there was no way to immediately restore all the lost bandwidth.

"The companies that serve the (U.S.) East coast and (Britain) are worst affected. The delay is very bad in some cases," he said. "They have to arrange backup plans or they have to accept the poor quality for the time being until the fiber is restored."

Big Indian outsourcing companies, such as Infosys and Wipro , said they were still trying to determine what, if any, disruptions to their work had taken place. Other major foreign companies with significant back-office or technology development operations in India, like IBM , said they, too, were trying to assess the impact.

At Intel's India operation, which is focused on research and development, there were few problems because the company had backup plans, connecting to the Internet through servers in the United States rather than India.

"When one of the nodes goes down the network is able to reroute itself," said Rahul Bedi, who heads Intel's business operations in South Asia.

Much of the Middle East continued to feel the impact of the cuts on Thursday.

TeleGeography, a U.S. research group that tracks submarine cables around the world, said the disruption reduced the amount of available capacity on the route from the Mideast to Europe by 75 percent.

Like those in India, many providers in the region will have to reroute their traffic around the globe, to Southeast Asia and across the Pacific and Atlantic oceans, the firm said.

Alan Mauldin, research chief at the Washington-based group, said similar outages in the future could be averted by new cable construction -- though even multiple cables could not guarantee against outages.

An official at the Dubai International Mercantile Exchange, Gerald David, said trading Thursday morning resumed normally following the Wednesday slowdown afterbackup systems kicked in.

Saudi Telecom Company did not answer calls on Thursday, a day off in the kingdom, but the English-language Saudi newspaper Arab News said Saudi Telecom had lost more than 50 percent of its international online connectivity due to the problem.

Israel was unaffected by the outages because its Internet traffic is connected to Europe through a different undersea cable. Lebanon and Iraq were also operating normally, and most governments in the Middle East seemed to be unaffected, apparently because they had switched to backup satellite systems.

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