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"...This book offers a scathing analysis and a riveting read?a very readable book...it?s a must read" (The Inquirer, 19 June 2003)
Lenette Crumpler, a former employee of Frontier Communications, lost $86,000 of her 401(k) money. Paula Smith worked most of her life at US West and then lost her life's savings of $400,000 after Qwest took over US West.
How and why did these employees find themselves in such an outrageous situation? To find the answer, Om Malik burrowed deep inside the so-called broadband bubble -- the colossal build-out of communications networks that accompanied the technology and investment boom of the late 1990s.
He unearthed copious evidence of what he dubs, "broadband bandits" — businessmen who took full advantage of the telecom bubble to line their own pockets even as their companies collapsed.
The result was "Broadbandits," a book that tells the whole sordid story of the dishonest men who profited from the broadband boom. The author, a senior writer at Business 2.0 magazine, provides a clear, sober account of what he calls' 'the robber barons of the information age" —and how they pulled off one of the biggest heists of all time.
Some $750 billion vanished when the telecom bubble burst, Malik writes. More than 100 companies went bankrupt and an equal number shut down, leaving up to 600,000 telecom industry workers without paychecks.
"The biggest bubble in the history of the modern world was not the dot-com bubble but the telecom bubble," the author writes.
Some of the industry insiders Malik cites as culprits are Global Crossing's Gary Winnick, WorldCom's Bernie Ebbers, Qwest Communications' Joe Nacchio, Salomon Smith Barney telecom analyst Jack Grubman, Enron Broadband Services' Ken Rice, and Lucent's Richard McGinn.
To understand the unscrupulous insiders who got rich on an industry built on light and fiber, one must first understand the broadband bubble. Malik writes that about 80.2 million miles of optical fiber was installed in the United States from 1996 through 2001. That means about three-fourths of the installed base of 105 million miles was put in place in just six years.
What's even more stunning is that the vast majority of this cable is not even used today amid the colossal fiber glut that has emerged from years of overbuilding. As Malik points out, "the world is crisscrossed with fiber that is unlikely to be used for decades."
The whole complicated situation began with the Telecommunications Act of 1996. The act was meant to increase competition in the once closed-off telephone industry and to help create new companies. The capital markets caught wind of this new technology revolution and basically threw money at anything or anyone connected with this new open telecom market. Along with deregulation of the telecom market, demand for bandwidth skyrocketed.
These conditions set the stage for the broadband bubble. Malik writes that' 'the broadband bubble and the dot-com bubble resulted from overblown expectations and irrational exuberance."
This book is the story of the unsavory businessmen who benefited as companies collapsed and rank-and-file employees saw their life savings and retirement funds dissipate.
The saddest part of the whole story is that these men basically got away with their greedy corporate maneuverings while many of their loyal employees had their lives turned upside down by the downfall of the companies they worked for.
The financial shenanigans of the telecom executives and insiders have become the stuff of legends.
For instance, Gary Winnick of Global Crossing took in $735 million while the company was blowing through $15 billion in investor money, eventually ending up as the fourth-largest bankruptcy case in U.S. history.
Then there's stock analyst Jack Grubman, who had buy recommendations on 20 telecommunications companies. Twelve are now bankrupt and the others are on the brink. Grubman himself pocketed $100 million and has been barred from the securities industry.
The exploits of the companies are no less staggering. Sometimes it seemed as if common sense had completely blown out the window. For example, Lucent acquired 21 companies between September 1997 and July 2000, spending a staggering $43 billion. CEO McGinn was fired in October 2001. His severance package was $12.5 million and his total take' 'for reducing Lucent to shambles" was about $38 million, Malik writes.
The author clearly exposes the mismanagement and wrongdoings of these individuals and companies. He relentlessly pursued them in his research and interviews, peeling back the layers of misconduct to reveal the shocking greed and dishonesty so prevalent as the broadband bubble grew bigger and bigger.
The bubble finally burst, creating a huge mess for all but the executives who took care of themselves.
The book is fascinating and well-written. Lay people will appreciate the way Malik cogently analyzes the tumult in telecom.
This book enables even those who have never read a stock market report in their life to understand exactly what happened and why the broadband bubble—and its demise—were so stupendous. (San Jose Mercury News, July 20, 2003)
"...a compelling account of the downfall of the telecom giants..." (Dunstable Gazette, 6 August 2003)