Breaking The Mold

Welcome Guest. | Log In| Register | Membership Benefits

January 22, 1998 (6:42 AM EST)

Page 1 of 3

By Mary E. Thyfault,

The people who opened the first competitive cracks in the local telecommunications market are swinging their hammers again. Armed with nearly $3 billion in financing, former executives of carrier MFS Communications and its original holding company are reuniting to create the first business-focused, pure IP, local and long distance carrier -- and to break the economic and technology mold.

James Crowe

caption This week, after months of top-secret work, James Crowe, the founding CEO of MFS, will announce Level 3 Communications, a local and long distance fiber carrier that will deliver services at 1/27th the cost of today's traditional circuit-switched networks. Level 3 will be led by Crowe's top MFS colleagues and recruits from other communications companies. It will be funded by MFS' former holding company, Peter Kiewit Sons'.

"This represents an economic change as fundamental as the change from telegraph to telephone or the move from mainframe to the PC," says Crowe, now Level 3's president and CEO.

Hyperbole? Perhaps. But Level 3 has people buzzing. "This will drive the market participants nuts, and I like that," says George Mattingly, senior vice president of IT capacity planning at First Union, the Charlotte, N.C., holding company for First Union Bank. "They'll force a price break because they can deliver bandwidth so much more cheaply."

Level 3's strategy is not without risk. While researchers are rapidly improving voice-over-IP technology, business quality may still be a long way off. But, Crowe says, "We're hotly working on that."

Level 3 "will drive the market participants nuts, and I like that."
-- George Mattingly
First Union

Also, some competitors say Crowe has a long way to go. "Level 3's network is still just a concept," says Joseph Nacchio, president and CEO of Qwest Communications International, in Denver.

Still, few doubt Crowe & Co. can execute. Their previous company, MFS -- originally a division of Kiewit, in Omaha, Neb. -- increased its market value more than any other company during a 33-month period. MFS went public in May 1993 and was acquired by WorldCom in 1996 for $14.3 billion. Now Kiewit is ready to invest $2.5 billion to $3 billion in initial funding for the new carrier.

"From a financial firepower analysis, Crowe's got what it takes," says Jeff Marshall, managing partner of VantagePoint Venture Partners, in San Bruno, Calif., and a former communications executive at Bear, Stearns & Co., one of MFS' first and largest customers.

Next: Great expectations hinge on Level 3's success

Page 1 of 3