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Taking telecom to the next level
October 31, 2000 12:00 AM PT
by Michael J. Ybarra
From the December 2000 issue of UPSIDE magazine
On a clear day outside Jim Crowe's office in Broomfield, Colo., the Rocky Mountains stretch toward heaven, some peaks topping 14,000 feet and dwarfing everything else in the landscape. Somehow, it doesn't seem like an accident that Crowe decided to build a company in such a dramatic setting.
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"I am kind of hoping for a Justice Department antitrust investigation of our market dominance before I'm gone."--Level 3 CEO Jim Crowe
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Three years ago, Crowe founded Level 3 Communications (LVLT). It wasn't your average startup. For one thing, Crowe's seed money was $2 billion. For another, there was his business plan, which basically called for burying at least three times that amount in the ground, to create a global fiber optics network that would become the fast lane of the information superhighway.
And he was betting on a technology called Internet protocol (IP), the long-haul trucking service of the Web but an unproven way of making phone calls, which Level 3 would have to offer to compete with other telecoms. Finally, Level 3's aim was to cut prices continually and expand bandwidth to introduce Moore's Law of exponential leaps in computing power to the staid world of telecommunications.
Crowe's goal, in short, was to make Level 3 the dominant data carrier of the early 21st century, the company whose name is synonymous with its market: in other words, another Intel (INTC) or Microsoft (MSFT).
"I am kind of hoping for a Justice Department antitrust investigation of our market dominance before I'm gone," says Crowe, the cheerful and confident CEO of Level 3.
Thinking big
Bold plans, to be sure, but Level 3 already has won over Wall Street, which has showered billions on the company, allowing it to fund its $13.7 billion, five-year construction project.
And this month, Level 3 expects to complete its 16,000-mile U.S. fiber-optic highway, which will ultimately tie the company's 56 metro networks in the United States and 6.5 million square feet of data-storage facilities with similar communications webs that Level 3 is building in Europe and Asia. Level 3's plan is to provide the cheapest and most advanced network to connect the dots of the dotcom world.
"While people don't focus on it," Crowe says, "the fact is that the whole data world --what we call the Web, the Internet and all of those dotcom companies -- essentially rides on the physical infrastructure owned by the telcos. None of which was designed to handle that kind of rapidly changing traffic. That whole infrastructure has to be rebuilt to the tune of a trillion bucks or something."
And no one is digging faster than Level 3, which is burning through $121 million a week (or $6.5 billion this year) to create in five years the size network that MCI spent 15 years building. So far, Level 3's plan is running ahead of schedule. Analysts are smitten with the company.
"If past is prologue, they're going to knock the ball out of the park," asserts William Klein, an analyst at Wasserstein Perella Securities. "A year ago, people thought of Level 3 as an old coal-mining company slapped together by some weirdo in the boonies of Colorado. But Crowe's really built himself an extremely low-cost network and probably the most scalable network in the world. There are only a handful of guys I consider visionary in this business. Crowe's one of three."
"It's my favorite stock," adds Andrew Hamerling, an analyst at Banc of America Securities. "I think Level 3 has the most upside of all the emerging networking companies. The management is tier-one, and it's a deep bench. Fifty years from now, this network will still be usable. Provided that bandwidth consumption really takes off, then the Level 3 model will be the best model out there."
Next Page | Digging ditches
Taking telecom to the next level
page 1:
Laying the groundwork
page 2:
Digging ditches
page 3:
Understanding the numbers
page 4:
Filling the pipes
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