The Telecom Crisis

Telecom companies are staggering into the emergency rooms of the world economy, candidates for life support or even euthanasia. Long viewed as leading the way into the “information age” of productivity and enlightenment, they are suddenly presenting symptoms of what appears to be the same life-threatening disease. In the United States, dozens of companies have gone bankrupt over the past two years, with no end in sight. Lucent Technologies, the largest U.S. maker of telecom equipment, has suffered ten straight unprofitable quarters through October 2002 and recorded gigantic losses. Layoffs throughout the industry-more than five hundred thousand as of August 2002, and still counting-have eliminated many more jobs than have been created in telecom since 1996.

Abroad, the situation is no better. Eli Noam observed in the Financial Times (July 19, 2002) that the “cumulative debt of the seven largest European carriers is greater than Belgium’s gross domestic product.” In November 2002, Germany’s Deutsche Telekom announced the largest corporate loss in that nation’s history. The industry’s woes are rocking global finance, evoking comparisons to the 1980s savings and loan de...