Vic, should SI close down, stick to what you know and you'll do fine.
Ya got to love those "unstoppable" telecom cowboyz.
<<Before the telecom cowboys, the phone was just something you picked up to make a deal.
But once the cowboys decided the phone itself was the deal, the rush to riches was on. In hindsight, the telecom crash that followed seemed inevitable.
Now the entire telecommunications industry is wondering where the next land mine will explode.
The founders of WorldCom, Global Crossing and Qwest Communications International had zero telecom experience when they started their companies. They'd been in sales, finance and other businesses that paid handsomely and quickly.
When Bernard Ebbers started what became WorldCom, he was a small-town Mississippi basketball coach who'd bought some motels.
Gary Winnick's experience before starting up Global Crossing included riding a furniture-retailing business and a mattress company into bankruptcy and working as a lieutenant to Michael Milken, the bond trader who did prison time.
And before Philip Anschutz launched Qwest, he'd been an oil wildcatter whose strikes enabled him to buy railroads, real estate and sports teams.
Now the three men's deeply troubled companies — all under federal scrutiny for accounting misdeeds — embody the telecom disaster that has left the information superhighway strewn with carcasses. They are the tip of a large iceberg made up of dozens of once-competitive phone companies and equipment vendors that have dropped from sight in the past year.
Although mismanagement and accounting shenanigans contributed to the bust, they are secondary, observers say. Any big opportunity to make money will draw more takers than it can satisfy, they say, and the telecom cowboys replayed a role seen before in boom-bust cycles associated with railroads, automobiles and other ventures.
"We went from one extreme to another, from a Soviet-style monopoly phone system to wide-open competition," said Royce Holland, chief executive of Allegiance Communications. "When you open a market and have tremendous forces like the Internet at work, you're bound to get a gold rush. It's happened before. But this one happened on Internet time.
"From the Model T Ford boom to the auto-industry bust took about 15 years," Holland added. "The telecom boom-to-bust unfolded in about three years."
The confluence of new technology, growing demand for Internet capacity and the unraveling of the industry's monopoly created a grand opportunity to make money. Most who heeded the call were entrepreneurs with no phone experience.
"When new markets open, the opportunities are grabbed by people new to the industry," said Jim Speta, an assistant law professor at Northwestern University. "In the monopoly-telecom days, you needed technical experts, regulatory experts, but in the competitive era you needed people skilled in finance, sales, marketing and other fields that weren't so important to the monopoly system."
The telecom cowboys' dealmaking prowess delighted Wall Street, goosing stock prices and giving them the currency to make more deals. This was especially true at WorldCom, where Ebbers stitched together more than five dozen companies as his stock grew by an eye-popping 7,000 percent.
But making deals and integrating companies are different skills. WorldCom was little more than an umbrella atop units that continued operating as independent companies, observers say.
Kathy Perone, CEO of Chicago-based Focal Communications, worked for three firms sold to WorldCom. She recalled that long after these companies had become part of Ebbers' organization, the various units continued to market products as if they were stand-alone firms.
"There was actually contention in front of customers over who owned that customer," Perone said. "There was just not enough time taken between acquisitions to integrate the new firms into one organization."
In the end, experts say, it was the deals themselves that assured the merged company would falter.
In 1998, when WorldCom sought to buy MCI Communications, Dan Schiller, now a communications professor at the University of Illinois in Urbana-Champaign, wrote a scholarly paper calling it the "bad deal of the century."
Schiller predicted a combined MCI-WorldCom would stumble and fail under a mountain of debt, which would prove catastrophic should its stock value drop. He based this on Ebbers' willingness to pay far more for MCI than British Telecom or GTE would offer.
A parallel situation emerged when Qwest raised the ante to win US West away from a merger with Global Crossing. The huge debt from that deal — which made Qwest the provider of local-phone service in 14 Western states, including Washington — imperils Qwest's survival. Global Crossing, meanwhile, is in bankruptcy and seeking to sell assets.
"When you unleash these cowboys, they will make deals and take things to an extreme," Schiller said. "In the best of all worlds, it would be nice to find a medium between monopoly and runaway enterprise. But history proves that's not easy to do."
Excess fiber-network capacity and a desperate scramble for customers have driven down prices to the point where even the staid Bell companies find it difficult to make money serving large business customers.
"In the competitors' heyday, any idiot could get money to start up a company," said William Daley, president of SBC Communications. "They made a lot of money in initial stock offerings and bankers' fees and have weakened the entire industry."
As recently as a year or two ago, Daley said, Ebbers and Winnick were widely admired high-fliers, while Bell executives like Edward Whitacre, the SBC chief, and Richard Notebaert, who formerly headed Ameritech, were seen as boring.
"Nowadays, boring doesn't look so bad," Daley said.
Indeed, Anschutz and Qwest's board last month called upon Notebaert to take over the Denver-based company in the hope this credentials can help it avoid bankruptcy.
For all the damage the telecom boom and bust has brought to investors, employees and customers, few experts can say what might have been done to avoid the whole thing.
Maintaining a monopoly isn't the answer, said Northwestern's Speta. "When you look to Europe, where monopoly phone companies last longer, the prices are higher, and service isn't as good," he said.
There's nothing wrong with the vision that drew the cowboys to telecom, said Glen Macdonald, a vice president with Adventis, a Boston consultancy.
"The vision was fine, but the timing was off," he said. "More applications going online, faster speed, more network capacity — all that is happening."
But instead of taking two years, it will take maybe 15 years to create enough demand to match all the capacity that was built, he said. "When the history books are written on this chapter of capitalism, it will look like another case of tulip mania in the Netherlands. This isn't the first march of folly."
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