Phone Company Failures Put Banks on the Alert

Recent computer failures at local telephone switching centers across the country did not impair most bank operations, but the foul-ups made bankers wonder whether they rely too much on public networks.

While questions remain about how these problems were triggered - including the possibility of deliberate intervention - all the telephone companies involved attribute their problems to errors in software they installed only very recently.

The Pittsburgh disruption was only the latest in a series that also hit Baltimore, Washington, Los Angeles, and San Francisco over the past two weeks.

The same type of software failure brought down much of AT&T Corp.'s national long distance network for a day in January 1990.

Few Options for Banks

The network failures point up both the vulnerability of the public network - as more advanced switching software is introduced to speed the routing of calls - and the fact that most banks are unable to circumvent the network when such problems arise.

In each recent outage, local telephone service was affected within a single area code. While most bank operations were able to continue, customer-service operations suffered, as local callers were unable to tell their banks to make trades or to transfer funds.

"Fortunately, this [outage] did not have a big impact on the bottom line, but it could have," said Patricia Graham, a vice president at Mellon Bank.

Mellon - along with Equibank, Pittsburgh National Corp., and the Pittsburgh Federal Reserve office - found itself virtually without local telephone service for six hours last Monday, and intermittently on Tuesday. And bankers said that 800 service and some long-distance service was also affected.

"This makes you realize everything is susceptible to failure," Ms. Graham said. "It reinforces the need to have good backup systems."

The problem in each network failure was a new technology for routing calls, Signaling System 7, only recently deployed in the network.

Software from Single Source

A single vendor, DSC Communications Inc., Plano, Tex., supplied the software to the telephone companies in California, the Washington, D.C., area, and Pittsburgh.

The AT&T outage was caused by software developed by AT&T.

The collapse of the telephone system appeared to have a limited effect on money-transfer operations. June Gates, a spokeswoman for the Cleveland Federal Reserve Bank, which oversees the Pittsburgh Fed, said the telephone outage had "minimal impact" on the district's operations.

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