Telebomb: The Truth behind the $500-Billion Telecom Bust and What the Industry Must Do to Recover

Telebomb: The Truth behind the $500-Billion Telecom Bust and What the Industry Must Do to Recover

Telebomb: The Truth behind the $500-Billion Telecom Bust and What the Industry Must Do to Recover

Telebomb: The Truth behind the $500-Billion Telecom Bust and What the Industry Must Do to Recover


"The business environment of the mid-1990s created a combination of easy money, newly opened markets, and uncontrolled deregulation in the telecommunications industry that caused many businesspeople–honest and dishonest–to propose, fund, and carry out ventures designed to change the way the telecommunications industry worked. Change came quickly, and with it came a corporate tangle that threatens to send the entire industry spinning out of control.

Telebomb describes the origins of the chaos and follows each of the long-term trends that originated in the mid-1990s. This thought-provoking book, written by an industry insider, draws conclusions about the ultimate winners and losers during and after the telebomb. After analyzing the effects of the Telecommunications Act of 1996, the book takes a much-needed look forward to explore how the industry must change to become more responsive to customers and more profitable for investors -- and to prevent another telebomb."


The notorious dot-com crash was heavily covered by the press, but a larger revolution was going on at the same time in the telecommunications industry and it received comparatively little attention. The telecommunications revolution followed a similar trajectory to the dot-com boom and bust, but it wasted more investor dollars and created much more havoc in the economy than the dot-coms. In fact, the “telebomb” likely wasted more real investor dollars than any—and possibly all—of the previous stock manias in the U.S. equity markets.

The dot-com wave broke and washed away the pretenders, leaving an industry populated by only a few strong companies. However, the telecommunications revolution has, through its ups and downs, touched most citizens in the United States. All are customers and many are investors in and/ or employees of the industry. Even those who have not yet felt the changes brought on by the Internet revolution will do so in the next few years.

The overall cost of the crash in the telecommunications industry was staggering. More than $500 billion was lost because of overinvestment and ill-advised mergers. The network construction boom in the industry led to a spending bubble that consumed $220 billion above a steady-state investment rate within the industry that already approached $50 billion per year. The result of merger mania also brought losses to the industry. High-profile failed mergers such as AOL/Time Warner, Qwest/USWest, and AT&T’s many cable acquisitions resulted in asset write-offs of nearly $300 billion.


How could so much money be wasted? Perhaps the first question should be: “How could so much money be raised in the first place?” Leading up to the telebomb, a unique combination of events occurred that have not been seen in telecommunications or any related industry in modern business history. The dot-com phenomenon was only one factor. It spawned both hype about the Internet and a resulting fascination in anything that . . .

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