Optic bubble bursts

Not long ago Level 3 Communications in Denver Colorado was proposing to sell 91 Express Lanes, the toll project it had acquired, by accident, along with the fiber optic networks of Peter Kiewit Sons. It wanted to concentrate on its “core business” of fiber which promised fabulous profits. Two years later 91 Express is about the only part of Level 3 which has a future. The toll road is the one solid business asset that the stumbling Denver giant owns!

The WALL STREET JOURNAL reports Level 3 is one of many fiber companies “burning hundreds of millions of dollars per quarter” and almost certainly doomed to bankruptcy. It estimates the proportion of fiber capacity unused and earning zilch at 97%! That’s like the George Washington Bridge carrying 10,000 vehicles a day instead of 320,000! (Didn’t Wilbur Smith have a unit doing broadband telecom forecasts?)

The internet ‘explosion’ is a fizzer, providing a market for just three percent of the backbone telecom capacity that has been built.

Reports the WSJ: “An epic telecom bust reverberates around the globe... Telecom companies which gorged on some $650b in debt in the past few years are failing in record numbers...” They say it is shaping up to be “one of the biggest financial fiascos ever” and likely larger than the S&L collapse of the late 1980s.

For toll roads it means the drying up of one ‘alternative’ revenue source. Leasing rights to install fiber were a nice little extra revenue stream for a while there. Back to the solid “core business” now!