Is Nacchio a Scapegoat
Is Joe Nacchio the Scapegoat hiding a far greater crime? Visiting Denver from Alaska and helping my wife with her mission of importing Fair Trade coffee, I happened to see the “Nacchio case mantra” article in Rocky Wall Street West. The strategy of the prosecution and the team of legal “All Americans” was so well written that it looks like Nacchio ‘s guilt is a given. I think not, and with some investigative journalism, there is an untold story here that would rank with other recent great documentaries and exposés.
To understand what happened in 2001, one needs to understand the disruptive, even revolutionary nature of digital technology, the explosive growth of the Internet and the computer economy. There was a clash of cultures. The technology of computer processing was growing at a geometric rate with price reduction evolving concomitantly and doubling every 18 months, a phenomenon widely referred to as Moor’s law. The technology was rapidly extending to the Internet with predictions that the Internet would become the computer. Digital capacity on the Internet, bandwidth, was growing even more rapidly than the computer processor. Much of the backbone of the internet and especially the last mile of connectivity of the Internet was and still is controlled by the Telcos.
The Telcos meanwhile had little interest in this advancing technology other than to control it and optimize income from it. The phone company was a survivor of multiple antitrust and anti-competition investigations. It was a culture honed to political valorization, market power and hidden or sanctioned monopoly. Telcos had zero intent to broaden bandwidth or lower their prices, and the communications tax on your phone bill, a bonanza to the government’s general fund tended to keep it that way.
There developed a state of open business warfare between new, innovative, competitive Internet companies, attempting to penetrate the obstacles, obstructions and the latent technology, and disinterest of the Telcos. Furthermore, and generally more understandable the Telcos were threatened by the prospect of VOIP, a protocol wherein everyone could communicate for free over the internet. This capacity, especially given the introduction of fiber optics, the so-called information superhighway, had to be stopped at all cost or at least delayed until such time that the Telcos could completely control it.
One of the most brilliant moves towards advancing the capacity of the Internet was made by Phillip Anschutz, a Denver entrepreneur. Anticipating by many years this need for fiber, Anschutz bought the Southern Pacific Railroad, then sold it while retaining access to the adjacent right away. Anschutz then formed a new fiber optic company, Quest with ownership to this right-of-way. Quest buried two large conduits one packed with fiber optic cable and the other with room for next generation technology. This is the time when I bought Quest and probably about the time Nacchio came along. The rest is history. The fiber optic pathway, conceived by Anschutz, became part of the Internet backbone. Quest grew in wealth to a point where Quest made a hostile take over bid to buy USWest. The take over was a success. The US was aggressively replaced by the Q. It was a strategy to gain control of a significant portion of the last mile, for Internet connectivity, in an area served by the Quest network of fiber optics.
Nacchio executed the strategy, but he and Quest choked on the deal. The imbedded Telco culture of USWest, one of the baby bells, was too much for new management to overcome. The remaining old-line Telco executives on the Qwest board of directors soon squeezed Nacchio out. Can you seriously blame him for selling his stock? but that too is not the point.
These were desperate days for the old-line Telco executives. They were loosing control to the small, competitive, technologically savvy Internet companies who were recognized by venture capital and investors as having the future of communications and the Internet tenuously in hand. The valuations were based on an exuberant and speculative expectation of continuing growth. Noting this somewhat extended vulnerability in the competition’s valuation the cartel of Telcos may have deliberately set out to show the very poorest of financial reports amid a PR campaign claiming a lack of demand for bandwidth and an industry wide over built capacity of dark fiber. The Telcos may have engineered the poor quarterly financial reports by simply purchasing un-needed supplies for the quarter. Qwest, over Nacchio’s objection, may have even been party to such illegal activity. The reality was in fact that the Telcos checked demand through high prices for access, denial of service, lack of technology and denying the last mile of connectivity, precisely the reason for the Quest takeover of USWest.
If indeed such a scenario did take place it would be an unrecognized anti trust violation destroying investors life savings in the trillions. In fact, the depression of 2001 amounted to some three trillion. Did the combined Telcos have the market power to pull off such a caper? Their combined revenue compares to the federal budget and probably exceeds the budget deficit. Would they have? You bet, they all play golf together. Is there circumstantial evidence? Look how they emerged from the depression with name changes, mergers and more power than ever. How could they divert attention elsewhere? Look for the ultimate scapegoats. Put a face on the loss of life savings of employees and investors and at the same time punish the Telco players who chose to go against the combined interests of the Telco cartel by facilitating the deployment and growth of the Internet.
Where does Nacchio come in on this dirty story? Let me ask another question. Was it a coincidence that vast numbers of AT&T employees called or wrote legislators asking for prosecution of Nacchio and others, some of whom did have culpability from financial excesses and SEC violations? Nacchio was targeted, as well as MCI and Enron, all three with positions contrary to the interests of the Telco cartel. Is Nacchio guilty of the same illegal behavior, or is he the target because he attempted to break the stranglehold on the last mile of Internet deployment?
Nacchio did good when he took Quest from nothing to a major corporation capable of buying out one of the “Baby Bells.” I lost money too when the “bubble” broke, but it was not because of Nacchio. Too many crimes of gargantuan proportions go unnoticed in this country while someone in the wrong place gets the ax.
The PR photograph of Cliff Stricklin in the Rocky Mountain News looks like someone who has a great deal to gain by prosecuting Nacchio, weather he is culpable or not. Stricklin looks like the All American prosecutor even if he is from Texas, but I wonder if political aspirations and image as depicted in this photograph do not suggest that he has something personal to gain as well. Where is the humble justice if it chooses a target of convince and ignores the probable anti trust issues underlying this case, issues that go un recognized or un-prosecuted?
To understand what happened in 2001, one needs to understand the disruptive, even revolutionary nature of digital technology, the explosive growth of the Internet and the computer economy. There was a clash of cultures. The technology of computer processing was growing at a geometric rate with price reduction evolving concomitantly and doubling every 18 months, a phenomenon widely referred to as Moor’s law. The technology was rapidly extending to the Internet with predictions that the Internet would become the computer. Digital capacity on the Internet, bandwidth, was growing even more rapidly than the computer processor. Much of the backbone of the internet and especially the last mile of connectivity of the Internet was and still is controlled by the Telcos.
The Telcos meanwhile had little interest in this advancing technology other than to control it and optimize income from it. The phone company was a survivor of multiple antitrust and anti-competition investigations. It was a culture honed to political valorization, market power and hidden or sanctioned monopoly. Telcos had zero intent to broaden bandwidth or lower their prices, and the communications tax on your phone bill, a bonanza to the government’s general fund tended to keep it that way.
There developed a state of open business warfare between new, innovative, competitive Internet companies, attempting to penetrate the obstacles, obstructions and the latent technology, and disinterest of the Telcos. Furthermore, and generally more understandable the Telcos were threatened by the prospect of VOIP, a protocol wherein everyone could communicate for free over the internet. This capacity, especially given the introduction of fiber optics, the so-called information superhighway, had to be stopped at all cost or at least delayed until such time that the Telcos could completely control it.
One of the most brilliant moves towards advancing the capacity of the Internet was made by Phillip Anschutz, a Denver entrepreneur. Anticipating by many years this need for fiber, Anschutz bought the Southern Pacific Railroad, then sold it while retaining access to the adjacent right away. Anschutz then formed a new fiber optic company, Quest with ownership to this right-of-way. Quest buried two large conduits one packed with fiber optic cable and the other with room for next generation technology. This is the time when I bought Quest and probably about the time Nacchio came along. The rest is history. The fiber optic pathway, conceived by Anschutz, became part of the Internet backbone. Quest grew in wealth to a point where Quest made a hostile take over bid to buy USWest. The take over was a success. The US was aggressively replaced by the Q. It was a strategy to gain control of a significant portion of the last mile, for Internet connectivity, in an area served by the Quest network of fiber optics.
Nacchio executed the strategy, but he and Quest choked on the deal. The imbedded Telco culture of USWest, one of the baby bells, was too much for new management to overcome. The remaining old-line Telco executives on the Qwest board of directors soon squeezed Nacchio out. Can you seriously blame him for selling his stock? but that too is not the point.
These were desperate days for the old-line Telco executives. They were loosing control to the small, competitive, technologically savvy Internet companies who were recognized by venture capital and investors as having the future of communications and the Internet tenuously in hand. The valuations were based on an exuberant and speculative expectation of continuing growth. Noting this somewhat extended vulnerability in the competition’s valuation the cartel of Telcos may have deliberately set out to show the very poorest of financial reports amid a PR campaign claiming a lack of demand for bandwidth and an industry wide over built capacity of dark fiber. The Telcos may have engineered the poor quarterly financial reports by simply purchasing un-needed supplies for the quarter. Qwest, over Nacchio’s objection, may have even been party to such illegal activity. The reality was in fact that the Telcos checked demand through high prices for access, denial of service, lack of technology and denying the last mile of connectivity, precisely the reason for the Quest takeover of USWest.
If indeed such a scenario did take place it would be an unrecognized anti trust violation destroying investors life savings in the trillions. In fact, the depression of 2001 amounted to some three trillion. Did the combined Telcos have the market power to pull off such a caper? Their combined revenue compares to the federal budget and probably exceeds the budget deficit. Would they have? You bet, they all play golf together. Is there circumstantial evidence? Look how they emerged from the depression with name changes, mergers and more power than ever. How could they divert attention elsewhere? Look for the ultimate scapegoats. Put a face on the loss of life savings of employees and investors and at the same time punish the Telco players who chose to go against the combined interests of the Telco cartel by facilitating the deployment and growth of the Internet.
Where does Nacchio come in on this dirty story? Let me ask another question. Was it a coincidence that vast numbers of AT&T employees called or wrote legislators asking for prosecution of Nacchio and others, some of whom did have culpability from financial excesses and SEC violations? Nacchio was targeted, as well as MCI and Enron, all three with positions contrary to the interests of the Telco cartel. Is Nacchio guilty of the same illegal behavior, or is he the target because he attempted to break the stranglehold on the last mile of Internet deployment?
Nacchio did good when he took Quest from nothing to a major corporation capable of buying out one of the “Baby Bells.” I lost money too when the “bubble” broke, but it was not because of Nacchio. Too many crimes of gargantuan proportions go unnoticed in this country while someone in the wrong place gets the ax.
The PR photograph of Cliff Stricklin in the Rocky Mountain News looks like someone who has a great deal to gain by prosecuting Nacchio, weather he is culpable or not. Stricklin looks like the All American prosecutor even if he is from Texas, but I wonder if political aspirations and image as depicted in this photograph do not suggest that he has something personal to gain as well. Where is the humble justice if it chooses a target of convince and ignores the probable anti trust issues underlying this case, issues that go un recognized or un-prosecuted?
posted by Clancy Hughes | 2/24/2007 12:19:00 PM
0 Comments:
Post a Comment
<< Home