Telecom Lessons for Washington
Heavy Lifting Analyst Notes Stan Hubbard, Director, Communications & Research, MEF 2/27/2009
The mounting bad news has brought back painful memories of the bursting of the telecom bubble and spurred me to ask if there are any lessons learned from that experience that could be helpful to Washington policymakers.
As an industry analyst, I followed the bubble burst in great detail. I tracked the deterioration of Tier 1 carrier bond ratings, the unprecedented explosion in carrier bankruptcies, the loss of some 1 million industry jobs, and the 50 percent decline in annual wireline capital spending by carriers worldwide between 2000 and 2003. I counted more than 165 operators that defaulted on $220+ billion worth of debt between May 2000 and July 2002. My employer at the time went through 10 major job cuts, and 70+ percent of our workers were dropped from the payroll.
Despite the impact of all of this turmoil on the lives of millions of industry workers, family members, and investors, I never once heard talk of a federal government bailout or potential nationalization of a single carrier or telecom equipment provider. Everyone understood that the route to industry recovery – no matter how painful it might be – would involve working through the bankruptcy and restructuring process and ultimately adopting better business practices.
The telecom industry that has emerged from the bursting of the bubble is one of the most competitive, vibrant, and healthy parts of the global economy today. Our industry provides the digital fuel that drives innovation and productivity up and down the economy, and it touches every life like never before.
Our industry recovered with greater stability, not because the White House and Congress decided to pick the winners and losers. We recovered not because we saddled future generations with debt so that the government could throw tens of billions of dollars our way to help us get back on our feet.
We recovered in a healthier position because Washington kept its hands off private assets and limited its role to establishing and enforcing the rules under which everyone would operate. We recovered because we collectively had the courage to let free-market principles play out.
— Stan Hubbard, Senior Analyst, Heavy Reading