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From the PublisherThe latest in an increasingly popular string of works analyzinganother burst bubble, this book takes on the demise of the telecombroadband industry. The author, formerly a writer at Red Herringand now an editor at Forbes, focuses on the individuals andcorporations involved in some of the most egregious hypes andheists of the telecom industry. The individuals profiled includeBernie Ebbers (WorldCom), Phil Anschutz (Qwest), Gary Winnick(Global Crossing), Jim Crowe (Level 3 Communications), Ken Rice(Enron), Alex Mandl (Teligent), John Doerr (Excite@Home). TeddyForstmann (Forstmann, Little & Co.), Jack Grubman (SalomonSmith Barney), John Roth (Nortel), Gururaj Deshpande and DanielSmith (Sycamore Networks), and Vinod Khosla (Cisco). This is alively work, though edging toward overblown, which delights indishing the dirt on some once high and mighty industry giants. Byproviding background and details, however, it helps the readerconnect individuals with corporations and gives insight into thetangled web that has now almost completely unraveled. Purchasewhere there is interest. Susan Hurst, Miami Univ. Libs., Oxford,OH (Library Journal, June 15, 2003)
"...This book offers a scathing analysis and a riveting readíavery readable book...it's a must read" (The Inquirer, 19June 2003)
Lenette Crumpler, a former employee of Frontier Communications,lost $86,000 of her 401(k) money. Paula Smith worked most of herlife at US West and then lost her life's savings of $400,000 afterQwest took over US West.
How and why did these employees find themselves in such anoutrageous situation? To find the answer, Om Malik burrowed deepinside the so-called broadband bubble — the colossal build-out ofcommunications networks that accompanied the technology andinvestment boom of the late 1990s.
He unearthed copious evidence of what he dubs, "broadband bandits"— businessmen who took full advantage of the telecom bubbleto line their own pockets even as their companies collapsed.
The result was "Broadbandits," a book that tells the whole sordidstory of the dishonest men who profited from the broadband boom.The author, a senior writer at Business 2.0 magazine, provides aclear, sober account of what he calls' 'the robber barons of theinformation age" —and how they pulled off one of the biggestheists of all time.
Some $750 billion vanished when the telecom bubble burst, Malikwrites. More than 100 companies went bankrupt and an equal numbershut down, leaving up to 600,000 telecom industry workers withoutpaychecks.
"The biggest bubble in the history of the modern world was not thedot-com bubble but the telecom bubble," the author writes.
Some of the industry insiders Malik cites as culprits are GlobalCrossing's Gary Winnick, WorldCom's Bernie Ebbers, QwestCommunications' Joe Nacchio, Salomon Smith Barney telecom analystJack Grubman, Enron Broadband Services' Ken Rice, and Lucent'sRichard McGinn.
To understand the unscrupulous insiders who got rich on an industrybuilt on light and fiber, one must first understand the broadbandbubble. Malik writes that about 80.2 million miles of optical fiberwas installed in the United States from 1996 through 2001. Thatmeans about three-fourths of the installed base of 105 millionmiles was put in place in just six years.
What's even more stunning is that the vast majority of this cableis not even used today amid the colossal fiber glut that hasemerged from years of overbuilding. As Malik points out, "the worldis crisscrossed with fiber that is unlikely to be used fordecades."
The whole complicated situation began with the TelecommunicationsAct of 1996. The act was meant to increase competition in the onceclosed-off telephone industry and to help create new companies. Thecapital markets caught wind of this new technology revolution andbasically threw money at anything or anyone connected with this newopen telecom market. Along with deregulation of the telecom market,demand for bandwidth skyrocketed.
These conditions set the stage for the broadband bubble. Malikwrites that' 'the broadband bubble and the dot-com bubble resultedfrom overblown expectations and irrational exuberance."
This book is the story of the unsavory businessmen who benefited ascompanies collapsed and rank-and-file employees saw their lifesavings and retirement funds dissipate.
The saddest part of the whole story is that these men basically gotaway with their greedy corporate maneuverings while many of theirloyal employees had their lives turned upside down by the downfallof the companies they worked for.
The financial shenanigans of the telecom executives and insidershave become the stuff of legends.
For instance, Gary Winnick of Global Crossing took in $735 millionwhile the company was blowing through $15 billion in investormoney, eventually ending up as the fourth-largest bankruptcy casein U.S. history.
Then there's stock analyst Jack Grubman, who had buyrecommendations on 20 telecommunications companies. Twelve are nowbankrupt and the others are on the brink. Grubman himself pocketed$100 million and has been barred from the securitiesindustry.
The exploits of the companies are no less staggering. Sometimes itseemed as if common sense had completely blown out the window. Forexample, Lucent acquired 21 companies between September 1997 andJuly 2000, spending a staggering $43 billion. CEO McGinn was firedin October 2001. His severance package was $12.5 million and histotal take' 'for reducing Lucent to shambles" was about $38million, Malik writes.
The author clearly exposes the mismanagement and wrongdoings ofthese individuals and companies. He relentlessly pursued them inhis research and interviews, peeling back the layers of misconductto reveal the shocking greed and dishonesty so prevalent as thebroadband bubble grew bigger and bigger.
The bubble finally burst, creating a huge mess for all but theexecutives who took care of themselves.
The book is fascinating and well-written. Lay people willappreciate the way Malik cogently analyzes the tumult intelecom.
This book enables even those who have never read a stock marketreport in their life to understand exactly what happened and whythe broadband bubble—and its demise—were so stupendous.(San Jose Mercury News, July 20, 2003)
"...a compelling account of the downfall of the telecomgiants..." (Dunstable Gazette, 6 August 2003)