Another DSL victim

Digital Broadband Communications, a provider of voice and DSL services in seven eastern states, has declared bankruptcy and will discontinue service Friday.

The move follows a mid-December round of layoffs, designed to extend the company's viability while a search was conducted for funding or a buyer.

According to a statement on Digital Broadband's Web site, the search came up short. "Due to a dramatic downturn in the financial markets, we were unable to attract sufficient additional financing to maintain our growth," the message said.

Digital Broadband is working to transition the company's 1000 customers to other service providers. Company executives declined further comment.

In the failure of Digital Broadband, however, one can see a domino effect in the decline of technology stock prices. The failure of a debtor can affect a company's bottom line - or at least make investors nervous.

Digital Broadband's biggest creditor by far is Cisco Systems Capital, which is owed an estimated $70 million. However, Cisco is generally conservative in its vendor financing practices, said Lissa Bogaty, data networking analyst with Credit Suisse First Boston. "Their total financial exposure is under $2 billion," she said. "I just don't see how there could be that much of an impact on their balance sheet or cash flow."

Tom Lauria, director of telecom equipment research at ING Barings, believes the perceived weakness in the competitive carrier sector has been exaggerated. The equipment market will continue to grow because there is still competition among incumbent LECs and established CLECs, he said.

"Competition is going to drive spending growth, because the capacity on the network is growing, and there is no fundamental way around that."