I work for one of those Telcos and I have worked for others (read "laid off"). The main problem with the CLECs is that each of them needed such a large percentage of the market to gain profitability that if they had all been successful they would have taken 140% of the market share from the LEC. Do the math, there are/were too many CLECs all competing for the same business.
The CLEC that I now work for, Time Warner Telecom, took a whole different approach. We did one bond sale and funded our business plan for 7 years. We are fiscally responsible, do not spend money unless there is a return on investment and we sell at margin. It is tough sometimes when we have to compete with the CLECs that are buying business by selling at less than cost to simply show revenue to Wall Street, but our approach has us in a position to come out of this Telecom nightmare with a profitable business. The only thing that concerns me is that some of these CLECs going in to Chapter 11 bancrupcy will come out of it with a low debt network that they basically stole and they will be able to continue to whore out services because they never actually paid for their networks. We'll see what happens, it's been fun so far.... Tom -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Darrell Newcomb Sent: Monday, February 18, 2002 6:39 PM To: [EMAIL PROTECTED] Subject: Re: what is wrong with the job market ? [7:35611] nrf wrote: > > ""Chuck"" wrote in message > [EMAIL PROTECTED]">news:[EMAIL PROTECTED]... > > in the case of a number of the CLEC's, part of the problem was the old > telco > > monopoly that they had to fight. > > Maybe it was part of the problem, but not the whole problem. True, the > RBOC's were hindering the DSL CLEC's. But that doesn't explain the > financial failures of international network backbone providers (Global > Crossing), the biggest cable-modem ISP (Excite@Home), or the biggest hosting > service (Exodus). Or the downward spiral of many of the other big > providers. > > Now you might say that all these companies made mistakes, and surely they > did. On the other hand, I believe it is the case that even if these > companies had executed perfectly, they still would have failed, although I > agree they would have lasted longer. The biggest factor contributing to > their decline is that the demand wasn't there to sustain them. If there had > been as much demand as these providers thought there was, then I believe > that most of these providers would be doing quite well, mistakes or no. First it's nice to see folks from the trenches talking about these things in public. I totally agree that demand was less than projected. This really beat to hell the working capital management practices companies had adopted. A shortfall in demand in the short term wasn't a big deal as that'd been happening throughout the boom. It was the lack of access to new capital so that there was time to build the demand. The time horizons for profitability on many of these firms was tightened by several years. Massive changes needed to take place to realize that....we're watching that now along with a general economic recession. Another factor that most large telecom builds have in common is the use of debt(usually bonds) to fund the builds. Given two equal providers; one who has a significant debt/interest burden can't last nearly as long. We have seen much progress with providers dumping debt by negotiating with bond holders.(At least the bond holders are getting something now while they can) These facts of telecom providers led to psuedo price wars with a big downward spiral in prices. Firms trying to survive dropped pricing beyond sustainable levels to increase revenue, they have(are) gone(going) out of business. Their assets are being purchased at much lower price points with the resulting providers able to offer services much cheaper than the debt burdened providers. I'm not going to speculate here about how the telcos will pull out of this mess, but in looking at this we can't ignore the tightened timeframe to profitability higher interest payments from longterm debt aquired during the boom. Darrell Message Posted at: http://www.groupstudy.com/form/read.php?f=7&i=35820&t=35611 -------------------------------------------------- FAQ, list archives, and subscription info: http://www.groupstudy.com/list/cisco.html Report misconduct and Nondisclosure violations to [EMAIL PROTECTED]
