As an epilogue to the “Birth of the Softswitch” series, I thought BearonBusiness.com readers would enjoy a reprint of the April 1st, 1998 USA Today written by Kevin Maney. Below is the final part of the article. For me and I suspect many readers, it brings back fond memories.
Just so I nip it in the bud, I’d appreciate it if our readers resisted the temptation to comment on the particular day of the year that the article was published.
Reinventing a success
The concept for Level 3 is simple: It’s MFS with a fresh start. Same business plan, but this time based on Internet Protocol (IP) technology. Crowe would use Kiewit’s money to start building a network that could carry information and voice conversations far more efficiently than any network out there, then slowly fill his fiber-optic pipelines by siphoning off business from the telecom giants.
Crowe wasn’t the only one with the idea. Around the time Crowe quit WorldCom, Qwest Communications was starting to get noticed. Based in Denver, Qwest was using money from railroad magnate Philip Anschutz to build its fiber network, which would be partly IP-based and partly circuit-switched. Anschutz put Crowe on Qwest’s board. Qwest also hired fiery AT&T executive Joe Nacchio as CEO. From the outset, Crowe told Nacchio he might start a competing business.
Just before unveiling Level 3, Crowe quit Qwest’s board. Now he’s moving Level 3 to Denver, right in Qwest’s back yard, to take advantage of telecommunications talent in that region. Relations between the two are said to be chilly. Nacchio did not respond to requests to talk about Crowe.
In the meantime, Crowe figured that if he was going to do an MFS all over again, he might as well get the MFS team back. One way or another, he got 18 of his top 20 MFS executives out of WorldCom. Most have taken the exact jobs they had at WorldCom. All were wealthy enough after MFS’ sale to never work again, but they’re in their 30s and 40s and sound thrilled to be back together for another run. Mike Frank, 44, head of Level 3’s human resources, says that at WorldCom: “My usefulness was not appreciated, and I wasn’t fulfilled.”
“I have a lot of loyalty to the guys who got me here,” says Ron Vidal, 37, another member of Crowe’s reconstituted team.
Crowe’s departure from WorldCom irritated Ebbers. But the mass exodus made him boil. The rancor runs deep throughout WorldCom. WorldCom would like nothing better than to bury Level 3 in the marketplace.
That threat notwithstanding, the combination of Kiewit’s backing, the old MFS team and Crowe’s savvy makes many in telecommunications believe Level 3 will succeed. “There’s a lot of faith,” says analyst Kagan.
Investors are expected to snap up the stock. Before the Nasdaq listing, shares were tough to come by. Peter Kiewit Sons’ stock is privately held by employees only. Kiewit Diversified was held mostly by employees and former employees, though shares could be sold publicly. With the Nasdaq listing, an official split from Kiewit and a name change from Kiewit Diversified to Level 3, the stock goes public.
It’s too soon to tell whether Level 3 can challenge some of the regional Bells or top long-distance companies. The telecom giants know about the efficiencies of IP, too, and some are building IP-based networks. They scoff at the notion that circuit-switched networks will become albatrosses. “Nobody’s stupid here,” Lucent’s Penzias says. He holds that communications will wind up being a mixture of circuit-switching and IP. “One protocol to do every job would be a step backward.”
Meanwhile, WorldCom, Qwest and others are building IP fiber networks. Teledesic and Motorola’s Celestri will create high-bandwidth IP networks using satellites by around 2003. Still, demand is exploding. Communications capacity is already in short supply for data traffic, which is growing 150% or more a year. Voice calls over IP networks, a business that barely existed in 1997, will be at least a $1 billion industry by 2002, according to Forrester Research.
Level 3 seems to be a player to watch. “It has an opportunity to be quite disruptive in the industry,” says Mark Bruneau of consulting firm Renaissance Worldwide. “It’s a dream team with a dream network and a killer business plan. Just as long as they don’t screw it up.”
Leave a response (2 so far)
Subscribe via RSS