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by jwhite
2886 days ago
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On your first point: I seem to remember plenty of companies that failed that were not telecom. In fact when I went looking just now I found a bunch of listicles about retail startups that failed. The telecom bubble and crash was almost a side-effect. The telco executives saw the web taking off and used it to justify wildly over-inflated projections of traffic demand growth, and then began building out debt-financed networks to meet it. When the traffic didn't materialize (partly because the dotcom bubble burst), they had a bunch of overcapacity not generating revenue to service the debt that financed it, and that killed them. |
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Their contribution to losses in the dotcom bubble were measured in the millions. Telecom, last mile service providers and B2B losses were measured in the billions. [0] You obviously know those lists are infotainment.
> The telecom bubble and crash was almost a side-effect.
I'd characterize it as more of a feedback loop. They weren't simply increasing capacity with the expectation of a customer demand that didn't materialize, they were pushing through an evolutionary hump in search of a global minimum. The world would look very different today if they hadn't, at great cost, setup the network the way it is today - pushing way beyond the original design of NAPs (Network Access Points) to IXPs (Internet Exchange Points). I guess you could attribute the change to capacity, but I'd say it is more accurate to describe it as a recognition of inevitable scalability problems and as a result - a change in philosophy. That change, the official government handoff, occurred in '95. There was also an amazing amount of very interesting R&D work going on, from strange new operating systems to packet switching on fiber optics without copper interruption. Even Enron was getting in the game by trying to setup a commodity market for bandwidth. The entire situation reminds me of the evolutionary problem, where you've got massive metabolic costs in brain size growth.
So no, it wasn't an overestimation of traffic growth. Everybody was trying to figure out the way the new world would work, a lot of people got it wrong.
Also... 401k participation spiked in '95 - I don't think that is a coincidence.
[0] https://money.cnn.com/2000/11/09/technology/overview/