by Larry Summers General Manager, WTS Online [March 26, 2004]

Since the CISPA Agreement appeared to deny control over "Their" customer, Bell-Heads concluded that they had to put ISPs out of business to regain the control they wanted, eventually. Bells tend to think in decades, not what is going to happen next week.

Cranking up the stomp and squash machine
I am not saying that the CISPA Agreement was the only reason the Bells cranked up their stomp and squash machine. But it was one of the reasons, in my opinion. They probably would have done it anyway.

Now before you fall in the floor laughing at the Bell business plan, complete with hundreds of millions in losses on the front end, take a look at the history of RBOC investment activity in the past couple of decades: lost billions in real estate, lost billions in out-of-area yellow pages (like Australia for crying out loud), lost billions in foreign phone company investments, fined hundreds of millions of dollars by regulatory agencies, lost more billions in the computer business, and a host of other sad investments in arenas outside of their core business.

All the while Bell Managements, with the advice and consent of their collective Boards of Directors were losing billions and billions of dollars doing stupid things, yet they still made money. They made money because of a guaranteed return on investment historically granted to monopoly services. They promised better service in the form of fiber optic in exchange for a better rate of return.

Then they promptly reneged on the deals. Heck, if you believe what is posted on www.newnetworks.com, the Bells inflated their returns by claiming bogus equipment they didn't even own as part of the rate-of-return formula. If true, that is criminal, but do you see anyone rushing to investigate? I don't.

And none of them got fired by any of their Boards of Directors except Joe Nacchio at Qwest.

What I am trying to say, is that if the corporate culture of the Bell-Heads decides to do a Godzilla romp and stomp, they will do it, damn the consequences. All their tame Boards ask is that they eventually either make money or get out of the business when it proves to be a dog. And it is my belief that they have in fact decided to do a real life Godzilla and the competition, as defined by them, is who they are going to splatter all over the landscape, namely you and me.

With a guaranteed rate-of-return, there is no incentive to be careful with money. So they aren't.

I have a theory about why Bell-Heads keep trying to do stuff they are not competent to do. Now keep in mind that upper management at a typical RBOC is very, very well paid. They have tens of millions in options and are paid tens of millions of dollars in salaries. By some accounts, stock options alone are worth billions in total. So why do they keep throwing money away in crazy schemes and dubious business plans? I think I have a clue. What they don't have is entrepreneurial class, at least in their own minds. Let me explain.

What the heck is exciting about adding fiber lines or repairing copper or managing a bunch of union people—in the eyes of those who populate the "Elite Circles" down at the Country Club? How do you get your egotistical face in the paper alongside Bill Gates or the founders of Yahoo.com when all you have to talk about is dial tone or guaranteed rates of return?

How do you look powerful to your peers by not laying off union people?

In my theory, it is all about power. So Bell-Head top management bragged about starting Yellow Pages in Australia and that failed. Then they bragged about investing in foreign telephone companies and that failed. Oh, but they did get some neat trips out of the deals. BellSouth even had an office in Beijing at one point in time. Then they bragged about laying off more union workers and they haven't got caught on that one, yet, except in fines for deteriorating service. And of course they are still laying them off.

Bell-Head management bragged about getting in the computer business, the real estate business, the equipment business, and so on, and they all failed. Gosh, now what's a highly paid, top banana supposed to do with all that failure stuff so they can look good amongst their peers? Then along came the dot.bomb era that took down so many of the executives they were trying to emulate to justify their tens of millions of dollars in compensation.

Sez they, "uh, now what do we do?"

 

1. Opinion: Godzilla vs. Bambi on the ISP Planet

2. Doing the research

3. Cranking up the stomp and squash machine

>4. A chorus, singing against the dinosaurs