[quote]Originally posted by BRussell:
Also, the Bush admin. made policy that favored Enron after receiving umpteen millions of dollars from them...</strong><hr></blockquote>
I'm not buying it but it seems to comfort you to believe this so, yeah, whatever. So did the Clinton admin. Robert Rubin seems to have been so hardwired into Enron that Ken Lay offered him a seat on their board. None
of this had anything
to do with Enron going belly up. Look, I don't like the way Enron did business even if they hadn't cooked their books. They are poster boys for crony capitalism. But the attempt to tar Bush with the apparent criminality that went on at Enron is just desperate. And no, Global Crossing isn't a "Democratic Enron" anymore than is Enron itself a Republican scandal.
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[quote]When everyone from Congress to the SEC to the FBI is done trying to turn Global Crossing into Enron, maybe someone will ask the $100,000 question: How did a well-funded company building something everyone wanted - a globe-straddling, fiber-optic infrastructure for the broadband age - suddenly find itself in the lurch?
We're not saying that inventive accounting could not have played a role in its failure. But dozens of other broadband providers are also in bankruptcy, including Excite@Home. The falling share prices of Global Crossing's competitors - Level 3, Qwest and WorldCom among them - suggest that factors beyond errant bookkeeping are a problem. Even AOL's stock took a big hit Wednesday after a Lehman analyst put out a report saying, among other things, the company was running into obstacles with its broadband rollout.
We've pointed out before that the excruciatingly slow deployment of broadband is the bane of Nasdaq's existence. This is one of the unintended consequences of the six-year-old Telecommunications Act that governs the industry and the pre-Internet thinking that undergirds it. Turning Global Crossing Chairman Gary Winnick into Ken Lay won't help matters.
At the heart of the broadband dilemma is something called the "last mile" of service. These are the wires that connect ordinary homes to broadband. Companies such as Global Crossing have tied the world together with high-speed networks, but because this "last mile" remains largely in the control of the Baby Bell phone companies and their cable-TV rivals, most Americans remain unconnected.
We have the Telecom Act's rigid classifications - phone company, cable company, broadcaster, etc. - to thank for this. In a day when the market is pushing for a single company to provide all these services, the Telecom Act saddles each arbitrary category with its own unique set of regulations. Telecom companies, for example, have to wonder how they will be classified if they offer a new service. Three different district courts already have rendered three different decisions on the classification of cable modem services.
Add to this the huge pricing disincentives to invest in broadband upgrades. If Verizon wants to offer DSL connections to the Web, it must first upgrade the wires in its network. Doing so is both risky and expensive. Then, after the upgrades are completed, the Telecom Act mandates that a regional Bell must lease the use of its network to rival broadband service providers - at a price determined by the FCC and state public utility commissions. Is it any wonder that the Baby Bells are foot-dragging on this last mile?
"Global Crossing built the highway," says Jeffrey Eisenach of the Progress & Freedom Foundation. "But the FCC destroyed the incentives for the Bells to build the on-ramps."
Reps. Billy Tauzin (R., La.) and John Dingell (D., Mich.) agree. They've been pushing legislation to lift the Telecom Act's sharing requirements and clear away the old-style telephony regulations hampering new Internet technologies. But their bill is hung up thanks to opposition from AT&T and other cable operators.
Companies like Global Crossing that dumped billions into broadband infrastructure were, of course, gambling that sufficient demand would materialize to fill their pipes. For that matter, so were their shareholders - a fact too easily lost from sight now. Until last year, traffic was doubling every few months and backbone providers were enjoying stratospheric profit margins.
Why this came to a sudden halt is not just a matter of overbuilding. Many homes already wired for broadband have chosen not to subscribe. Why is anyone's guess. Perhaps the price is too high. Perhaps, with Napster on the ropes, Hollywood is not doing its part to speed the cornucopia of digital entertainment options that was expected to excite consumer appetites.
What we do know is that Global Crossing and its competitors have found themselves with lots of debt and little financing, thanks to the rapid deceleration in demand for data carriage. Theirs was a risky bet to begin with, but Washington's hobbling of last-mile regulation was and remains a big reason why it didn't pan out.<hr></blockquote>