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To: jopawa who wrote (11633)	6/4/2001 1:56:40 PM
From: jopawa	Read Replies (1) \| Respond to of 15615

Bandwidth firms can't will demand into reality By Jennifer Beauprez and Kris Hudson Denver Post Business Writers Sunday, May 27, 2001 - There is no bandwidth glut. There is no bandwidth glut. There is no bandwidth glut. If telecom executives say it often enough, maybe it will come true. But even the best-case scenarios predict at least a bandwidth hiccup. And many companies, including some that employ thousands of workers in Colorado, stand to get pinched when it arrives in full force. The term bandwidth, often used to describe the frequency range of a transmission line, in this case denotes the thousands of miles of high-capacity, fiber-optic cabling that telecom companies strung across the globe in the late 1990s. They raced to build massive networks to support the anticipated wave of bandwidth-hungry applications, including digitized music, movies and software, and lifelike video conferencing. Qwest Internet chief Lew Wilks boomed in front of college audiences that bandwidth advances would alter entire industries beyond recognition before they got out of school. Well, all of that grandiose change might happen, but not nearly as quickly as many predicted. The combination of the economic downturn and miscalculations of technology-adoption rates has led to a strong possibility that a lot of bandwidth will sit unused for a while. The problem isn't one of too much supply but one of demand falling short thanks to failed dot-coms and society's refusal to surrender itself to the Internet as fast as industry expected. That's bad news for several telecom firms now pressed to turn a buck after spending billions of dollars on the promise of creating a new future. "It's a fast-growing industry, and demand is there, but the problem is that a lot of the companies that play in the bandwidth game built (their networks) for exponential growth," said David Inns, a partner in Chicago management consulting firm DiamondCluster International. Inns spoke during a panel discussion on bandwidth demand at a May 17 event sponsored by Denver Telecom Professionals. "We've been having good, strong linear growth," he said. "But the exponential growth just hasn't occurred." And we're seeing the early fallout. The roll call of big-time, new-age telecom firms forced to scale back their lofty financial projections and watch their stocks swoon includes Broomfield-based Level 3 Communications and Level 3's Canadian equivalent, 360networks, which parked a 400-employee operations center near Level 3 in Broomfield last year. Even Douglas County-based Time Warner Telecom, among the strongest of the telecom newcomers, recently warned investors of the economy's toll on its customer base. Nonetheless, the company's chief executive, Larissa Herda, told a Denver conference this month that the so-called glut is "overrated." Fiber-optic dynamo Qwest Communications International has found a way to shield itself from any oversupply by absorbing US West's big, stable customer base. Otherwise, Qwest would be trolling the depths with its fiber-optic peers. Meanwhile, Level 3 appears to have the most at stake. The company has built an ultrahigh-capacity, fiber-optic network based on innovative technology. Its executives - top-shelf leaders, by most accounts - tell the company's story so well that investors have poured $14 billion into the venture. But the fact remains: You can't will demand into existence. Last month, Level 3 pared its financial projections for this year and next. The company's stock trades around $14, nearly 90 percent below its all-time high in February 2000. CEO Jim Crowe took a chastened approach at the company's annual meeting last week, empathizing with shareholders who have lost fortunes and pledging that Level 3 will recover. Make no mistake, though - Crowe has thrown down the gauntlet for Level 3's 6,000 employees. Early last month, he warned that Level 3 brass will be "really disappointed" if the company hasn't landed a major contract to justify its business plan within a year. Translation: Make the goal or heads will roll. Level 3 will serve as the ultimate barometer of the bandwidth glut's fact or fiction. At least for the time being, the glut looks more real than perceived. "You can look at this two ways," said Steve Vonder Haar, a Yankee Group analyst who spoke at the same Denver Telecom Professionals event as Inns. "Is there a bandwidth glut to the extent that some companies may have trouble hitting their financial targets over the long term? Sure. Is there a bandwidth glut in terms of a never-ending supply of connectivity that will never be filled? Absolutely not." Freshwater Software Inc. is proof that old-world business sense can actually work in the New Economy. The Boulder company sold last week for $147 million to Mercury Interactive Corp. of California. The company never bought into the Internet hype. While other Internet firms raised ridiculous amounts of money from venture capitalists, hired hundreds of people at a time and tried to take entire markets, Freshwater increased company sales on a shoestring budget and expanded to a whopping 25 people. The company resorted to consulting to make ends meet just after its start in 1996. It eventually raised $5 million from two Silicon Valley venture capitalists and broadened its client roster to include more than 2,600 companies from banking to retail. And - gasp - the company is profitable. It says it has been for the past 14 quarters. The good news is that a piece of the $147 million prize couldn't have gone to a nicer person - company founder Donna Auguste. She's banking her money and in 30 days will be off to do good elsewhere in the world. For the past year, Auguste has led her Denver Catholic church group's effort to bring the Internet and electricity to hospitals and schools in Tanzania. --