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Telecom Meltdown Facts

Telecom Meltdown Facts. Between 1997 and 2001 firms invested over $90b in high speed optical fiber By 2001 only 2.6% of fiber capacity was actually in use. Telecom equipment spending in 2000 was $110 b, up 30% over previous year. In ’01 it was lower than it had been in ’99.

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Telecom Meltdown Facts

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  1. Telecom Meltdown Facts • Between 1997 and 2001 firms invested over $90b in high speed optical fiber • By 2001 only 2.6% of fiber capacity was actually in use. • Telecom equipment spending in 2000 was $110 b, up 30% over previous year. • In ’01 it was lower than it had been in ’99. • In 2001, 77 telecom companies sought bankruptcy protection. • vs. 20 in 2000 • Includes WorldCom, Global Crossing (1st and 4th largest bankruptcies in US history). • From 2000-2002, $2 trillion in market value extinguished. • An STM-1, a phone line that can carry 576 conversations at once – between the US and Britain costs $1.8m in 2001, $12m in 1999.

  2. Why? • Cyclical industry inherited the economy-wide slowdown. • ILECs defended their positions successfully, perhaps illegitimately. • Excessive entry encouraged by UNE-P. • Dramatic decline in long distance revenues for IXCs. • Growth in demand did not keep up with dramatic growth in capacity. • Internet usage not doubling every 100 days. • Innovations such as dense wave digitial multiplexing dramatically increased the capacity of new fiber, increasing excess capacity. • Speculative bubble burst • Pattern of corporate fraud centered on this industry. • More ILEC-friendly FCC in 2000.

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