Kim H. Veltman

American Visions

Maastricht, December 2004.


1.      Introduction

2.      Internet

3.      AT&T

4.      Competitors                                              

5.      Baby Bells

6.      SAIC   

7.      Energy 

8.      Military

9.      Private Equity 

10.  Telco Pseudo-Crisis 

11.  Satellites

12.  Finance  

13.  Law   

14.  Conclusions

Appendices 



Abstract

According to the news media, the history of the Internet is straightforward. In the 1950s, the idea was opposed by the telephone companies, notably AT&T. In the 1960s, sponsored by the US military, the Internet started as an experiment to link scientists. This idea gained a wider audience. The breakup of AT&T in 1984 helped the process and the Internet was becoming a great success. All was well until 2000-2001 when there two great setbacks: 1) the dot.com bust and 2) a crisis in the telecommunications and specifically the telephone industry. Some link these events largely or even exclusively to the events of September 11, 2001. Since then, our safety has been jeopardized by terrorism and Internet developments have been correspondingly shaky.

This essay challenges the received wisdom concerning the Internet. There is strong evidence that there was support from telephone companies from the outset; that the breakup of AT&T did not immediately change the situation. Since 2000, there was no fundamental decline in the telecom markets. Indeed, the so called bubble might have been a diversionary tactic to take attention away from the real struggle: control of infrastructure. There have also been other important changes. Energy companies now play a central role in the media domain. In the US, the military is extending its activities in the civil sphere. Private investment firms are systematically buying up sections of the entire telecommunications infrastructure from cables to satellites. There is a case to be made that the myriad bankruptcies in the field are being planned. This plan extends far beyond new media and includes education, finance, health, law and other sectors. And while the surface transactions are legitimate, these developments are leading to a crisis of trust, which endangers all the noble values of liberty and freedom for which the United States has rightly become famous.       


Preface

 

This study began as an article called American Visions of the Internet in 2000. It had a simple purpose: to show that the major telephone companies, notably AT&T (the Baby Bells, SAIC) and MCI/Worldcom had played a more central role in the evolution of the Internet than was generally appreciated. This formed the basis of what became sections (§) 2 to 6.  The events of September 11, 2001 prompted further study and writing. On closer inspection it proved almost impossible to determine where facts ended and where speculation began. So by mid-2002, most of this material was dropped and only a few notes remained to become sections 12-14 in the present version. The essential point of these sections was to claim that what seemed like a material problem of physical terrorism was in fact a spiritual problem in terms of a crisis of trust. The article was accepted for publication and then considered too controversial. So it was circulated by e-mail and via a website. For well over a year nothing happened. 

 

In the autumn of 2004, there were five new insights. First, there was a new paradox: although everyone accepted that there was a dot.com bust and a telecom bubble burst, the statistics of the International Telecommunications Union showed no decline had taken place. The answer to that puzzle became section 10. Second, closer study revealed that energy companies, especially electricity and to a lesser extent oil, had played a pivotal role in the rise of new media. This led to section 7, revisions in sections 3, 5, 6, as well as a decision to add section 4 on AT&T’s main competitors. Third, there seemed to be a trend whereby information systems and telecommunications companies were becoming ever more entwined with military contractors. This led to a short section 8. Fourth, study of the telecom bubble burst revealed that a handful of equity firms kept recurring. These same firms were present in the breakup of multimedia empires (e.g. Vivendi, Kirch). This led to section 9 and adjustments elsewhere. Fifth, it became clear that major satellite systems were also being privatized only to end up bankrupt a few months later and then re-acquired as if nothing had happened. This led to section 11.

 

Closer study of the satellites revealed that: a) the equity companies involved in the satellite sagas were the same as those involved in the telecom debacles; b) that the telecom and the satellite crises were intimately connected in a number of ways; c) that underlying the obvious problems of debts and bankruptcies, was a much more deep-rooted struggle in terms of two competing approaches to life: one based on civilian law, the other based on military values of a particular kind, which assumed that might and force were paramount and claimed that these were ultimately outside the framework of traditional law. This led to a rewriting of sections 12-14. Within two months what had been a paper had grown into the present book. 

 

Presenting the story posed a considerable challenge. Traditionally, a company had a single name and typically it was owned by an individual or clearly defined group. Today’s companies are more complex for two reasons: 1) they often have half a dozen owners each with a stake of between 5% and 30%. Not infrequently the name of the company does not reflect the name of the principal stakeholder. 2) a large corporation is frequently a holding company with numerous, often dozens of divisions, each with slightly different names and usually with more than slightly different motifs.

 

With an audience of experts in a given field, one could assume that they knew such details. With a wider audience and a number of fields no such assumptions were possible.  On the other hand, to preface every new topic with a two to three page account of all the subtleties of a complex media conglomerate would lose readers in preliminary details long before the real story began. Our approach therefore was toprovide only minimal context for a given dimension of a corporation’s activities, often returning a number of times to the same company when considering its different dimensions. The advantage was a clearer story line, even if it meant a certain amount of repetition was inevitable.

 

There was also the problem that the details of our story were immensely complex. It threatened to become a history of the Internet, of multimedia, of satellites, of the whole of telecommunications. It also risked becoming a book of vague speculations unless we provided enough details to make our points. E solution was to use precise dates as if this were something between a chronicle and a diary. Attentive readers will be able to trace how some key events happened within weeks of each other or even on the same day.

 

There is a certain fashion these days in the writing of both fiction and non-fiction to revise Shakespeare’s notion of “All of life’s a stage” with the notion that every life and every book is a thriller; that every turn and chapter reveals more tantalizing secrets until finally the secret code is cracked. This book is not about conspiracy theories or about “whodunits.” It makes no accusations against given individuals, special groups or specific companies. In that sense it is just like the cautionary paragraph at the end of films. The difference is that the events in this book are about real events which have affected many thousands of persons directly and in some sense are affecting us all, not just in terms of some incident that becomes a news clip, but our whole way of life. The book focuses on basic facts as concisely as possible. There are hundreds of footnotes for those who wish to check facts, explore their sources and wish to pursue further specific themes.  

 

The new media are typically treated mainly in terms of new hardware and software products, stressing the virtues of one version and the shortcomings of another. This book is an invitation to look beyond such everyday problems and reflect upon the bigger picture that is evolving as various media including (mobile) telephone, radio, television, and Internet encroach ever more on our daily lives. The technologies which are changing our society also raise many societal questions. 

Acknowledgements

I am grateful to a number of individuals who have kindly read this paper and suggested improvements and references among whom: Nik Baerten, John Beckers, Hans Koolmees, Dominic Pinto, Chris Zielinski, the alias David Evans and especially . I am particularly to Jonathan Robin who provided several references and improvements. I also thank also  others whose discretion leaves them unnamed. Finally I am grateful to Dean Tummers for giving me the freedom to write this little essay which goes slightly beyond the usual borders of cultural studies.

Introduction

 

Since its beginnings in the 1960s there have been many stories about the Internet. One is that the Internet was a US invention. The story that officials in AT&T were once adamantly opposed to the Internet[1] led to a received wisdom that telephone or telecommunications companies (telcos or telecoms) and the Internet were unrelated. The telephone companies (telcos), we are told, were big monopolies, blind to innovation and the Internet was started on the sly by a few scientists and academics. The Federal Communications Commission (FCC) version was more subtle:[2] The telcos did infrastructure, while those who developed the Internet did applications.[3]

 

When one looks more closely at the evidence, a very different story emerges (§ 2). The Internet began in Europe. In the United States, which is the focus of this essay, the development of the Internet was dominated by the major telcos. While received wisdom tells us that AT&T was disbanded in 1984, AT&T remained one of the leading players in the field (§ 3). Also important until recently were competitors such as MCI/Worldcom (§4); AT&T’s Baby Bells, especially Bell Atlantic in its new guise as Verizon (§ 5) and AT&T’s BellCore in its new guise as Telcordia (§ 6). In theory, these were four sets of players. With the bankruptcy of MCI/Worldcom, there was effectively only one major player on the home front: AT&T in the various guises as itself, the Baby Bells, and its research labs (Lucent, Telcordia and SAIC). There was significantly more cohesion between the parts of AT&T than would at first sight appear. AT&T was a telecommunications company with Internet interests. Through its divisions AT&T became involved in business solutions, cable and broadband content as well as mobile communications and satellites. Through its various subsidiaries AT&T became intimately involved in education; Next Generation Internet (NGI); Electronic Numbering: to achieve Internet Telephony[4] and Domain Name Systems.

 

AT&T’s links with carrier equipment companies, computer companies, content holders and home entertainment firms, and satellite systems have led to a much more comprehensive vision that includes the entire information/knowledge production and life-cycle. An understanding of this vision gives insight into factors behind some of the bankruptcies among those who are not part of this plan.

 

Since 2000, there have been considerable changes. Energy companies, notably General Electric, have come back into the forefront (§ 7). The military is becoming ever more involved in civilian information systems (§ 8). Private (equity) firms are systematically buying up large portions of the telecommunications infrastructure (§ 9). Officially, much has been written of both a dot.com bust and a burst of the telecommunications bubble in the period since 2000-2001. The statistics of the International Telecommunications Union (ITU) reveal a very different picture: one of continuous growth in the fixed telephone, mobile telephone and Internet sectors. According to the ITU, the very big players remain NTT, ATT as well as Deutsche Telekom, France Telekom, and British Telecom.

 

According to Forbes all this changed sometime in 2003 and now the leading telephone companies of the world were Verizon and SBC Communications. According to this view the Baby Bells were now repositioning themselves to be the leading telcos in the world (§ 10). These changes affected much more than the telcos. They were intertwined with changes in satellite systems. They entailed the financial sector (§ 11) and other sectors such as energy and health (§ 12). From this emerged a much bigger picture, where the whole legal system was being undermined and the very fabric of trust as a cornerstone of democracy was being threatened (§ 13).

 

In this big picture, new media, investment, energy, the military and the secret services were inseparable. Hence, the rise of new technologies was intimately linked with key events of the past years: the Afghan war, September 11, 2001, the so-called “wars” on drugs and terrorism; the spectre of new oil crises; war with Iraq and possibly other “evil” states. This vision was prepared to use military force to attain its ends. The Internet, which was supposedly for everyone all over the world, was in danger of becoming the tool of a small elite linked with the highest echelons of the U.S. government. While posing as representatives of the people, this elite appeared to have agendas, whereby recent economic crises were overshadowed by more fundamental crises in the legal framework, and the very fabric of trust, and integrity. When statesmen such as Henry Kissinger insisted that this was linked with the challenge of creating “a new world order…to rebuild fundamental principles of world order to replace the traditional ones that went up in the smoke of the World Trade Center and the Pentagon,”[5]they would have done well to remember the great suffering that was brought in the past by such quests for a new world order. The short term greed of this elite undermined the international reputation of the United States on the world stage; threatened the future of freedom and democracy and indeed posed dangers for the future of civilization.

 

2. Background of the Internet

 

The origins of the Internet[6] are frequently linked with As we may think (1945), the famous essay of Vannevar Bush in which he described his Memex device that used microfiche and “in which an individual stores all his books, records and communications and which is mechanized so that it may be consulted with exceeding speed and flexibility.”More than a decade earlier, Paul Otlet (1934),[7] who had worked with Lafontaine in establishing a universal bibliographical organization of intellectual work (figure 2),[8] had envisaged a machine for reading:

 

Soon television will be a problem that has essentially been resolved just as it is already from a scientific viewpoint: the image reproduces itself at a distance, wireless. One can imagine an electric telescope which allows one to read at home pre-ordered pages of the books exhibited in the “teleg” room of large libraries. This will be the telephoned book.[9]

 

This led to “a machine to think/imagine the world” (la machine à penser le monde, 1943)[10]as part of his larger vision of a Mundaneum for access to all human knowledge. This was a large, television-like sphere that allowed viewers to study information literally from all sides. Neither of these machines were developed directly as Otlet or Bush envisaged. Nonetheless, Vannevar Bush’s student, Claude Shannon, applied the principles of Boolean logic to define bits and bytes as they are now used in computers. Bush’s essay also inspired Douglas Engelbart, Ted Nelson and most of the pioneers of what has since been called hypertext and hypermedia. By 1968 the Internet became a reality.

 

We are almost always told that the Internet began solely in America. This is not really true. The earliest pioneers included a Frenchman, Louis Pouzin,[11] who introduced the idea of data grams and an Englishman, Donald W. Davies,[12] who was one of the inventors of packet-switching. Indeed, Davies is credited with renaming what had been called data grams as packets in 1976.[13] Another of the great pioneers in Britain was Peter T. Kirstein,[14] who went to America at the beginning of the Arpanet in 1969 when it was decided that Davies could not go for reasons of national security.[15] According to Bruce Sterling: “The National Physical Laboratory in Great Britain set up the first test network on these principles [of packet switching] in 1968. Shortly afterward, the Pentagon's Advanced Research Projects Agency decided to fund a larger, more ambitious project in the USA.”[16]

 

Hence an English project[17] of 1968 inspired the ARPAnet in 1969, which marked the beginnings of the US Internet. It was false to claim that America invented the Internet and it was simply misleading to argue that because America invented the Internet, it was their right to control its governance through organizations such as the Internet Assigned Names Authority (IANA) and more recently the Internet Corporation for Assigned Names and Numbers (ICANN).

 

3. AT&T

 

Long before the Internet began, AT&T founded Bell Labs in 1925. In the 1930s, Vannevar Bush was a professor at the Massachussets Institute of technology (MIT) working on a Differential Analyser machine that led to the Electronic Numerical Integrator and Computer (ENIAC).[18] In 1945, Bush went on to write As we may Think, which was one of the first published visions of what the Internet might become. Vannevar Bush’s[19] student at MIT in the 1930s was Claude Shannon who recognized a close similarity between the Boolean algebra that he had learned as an undergraduate and an electric current. “The next obvious step would be to lay out circuitry according to Boolean principles, allowing the circuits to binary-test propositions as well as calculate problems.”[20] Claude Shannon, Vannevar Bush and Norbert Wiener, the father of cybernetics, all knew each other well.[21] 

 

Shannon graduated from MIT in 1940, and in 1941 joined the Bell Telephone Laboratories, where he was “charged with the tasks of developing more efficient information transmitting methods and improving the reliability of long-distance telephone and telegraph lines.”[22]Information was taken in its widest possible sense to include messages occurring in any communications medium - television, radio, telephone, data-processing devices such as computers and servomechanisms, even neural networks. This quest for multi-media avant la lettre, led Shannon and his colleague Weaver, to develop information theory (1948)[23], which is the cornerstone for the digital, electronic communication of information. Wiener’s book on Cybernetics was published in the same year. Hence, the context for the internet was prepared at AT&T’s Bell Labs.

 

The same Bell Labs did some of the first digital transmission and switching in 1962, seven years before the US Internet began. When the Department of Defense (DoD) commissioned the Advanced Research Project Agency’s Network (ARPANET) to do research into networking, it was AT&T that provided 50kbps lines. In 1969, the year that the Internet began, AT&T’s Bell Labs developed Unix, which was “the operating system behind the early Internet, and was one of the key operating systems in the middle and late ARPANET.”

 

John Quarterman has noted that Ken Thompson and Dennis M. Ritchie “originally managed to develop [the] UNIX [software], starting on a machine in an attic, largely by convincing AT&T Bell Labs that they were really working on a text-processing system for handling patents.”[24] This led later to RFC 681, “Network Unix,” (May 1975),[25] the operating system behind Usenet. Quarterman noted that “AT&T itself often didn't seem to know half of what its own people were doing. For several significant years, a sizeable proportion of USENET was supported for free by AT&T.”[26] In Quarterman’s version, AT&T had a few bright visionaries working away while the management was blind. 

 

There are reasons to believe that management must have been aware of something. Between 1969 and 1972, Bell Labs developed the C programming language basic to much of Internet software. In 1970, AT&T installed the first cross-country link between the University of California at Los Angeles (UCLA) and Bolt, Beranek and Newman (BBN) in Boston. In 1976, AT&T’s Bell Labs developed (Unix-to-Unix CoPy (UUCP), which was distributed with UNIX one year later. A more recent survey of AT&Ts achievements reminded us that it: “It launched commercial radio-telephony services across the Atlantic (with what is now British Telecom) in 1927. AT&T commissioned the first commercial communications satellite, Telstar I, in 1962 and was active in development of the internet.”[27]

 

In the 1960's, Michael Lesk “worked for the SMART project, wrote much of their retrieval code and did many of the retrieval experiments, as well as obtaining a PhD in Chemical Physics.” He joined Bell Core and in the 1970s he “worked in the group that built Unix.” He wrote Unix tools for word processing (tbl, refer), compiling (lex), and networking (uucp). In the 1980s, he “worked on specific information systems applications, mostly with geography (a system for driving directions) and dictionaries (a system for disambiguating words in context).[28] He went on to become Chief Scientist of Bellcore[29] and later became the Division Director, Information and Intelligent Systems at the National Science Foundation (NSF).[30]  

 

At the time of the divestiture of in 1984, AT&T changed its Central Services Organisation (CSO) into Bell Communications Research (BCR) “to serve the Bell operating companies providing a center for technological expertise and innovation.” That same year, AT&T introduced the North American Numbering Plan.

 

Another scientist, Dr. Bruce R. Schatz, also “spent ten years in industrial R&D at Bellcore and Bell Labs, where he built prototypes of networked digital libraries which served as a foundation of current Internet services through the Telesophy project.[31] It has been claimed that this project on multimedia information retrieval across networks “showed the feasibility of what became the World-Wide Web 10 years later.”[32] In an e-mail of 1 February 1985 18:52, Dr. Schatz described his vision of the Telesophy project as a “worldwide information community, a greatly generalized USENET.”[33] At the time, the Telesophy project was not seen as a priority at Bell Labs. Accordingly, William Y. Arms, then the Vice President, Academic, of Carnegie Mellon University, wrote a letter of support.[34]Professor Arms went on to become the Director of Library Systems (1995-1997) and later the Vice-President of the Corporation for National Research Initiatives (CNRI, Reston, VA).  Meanwhile, Dr. Schatz went on to develop the WCS [the Worm Community System]. [35]

 

Dr Schatz went on to become scientific advisor for digital libraries and information systems

at NCSA when they developed the Mosaic browser. He also became Principal Investigator of the NSF/DARPA/ NASA Digital Libraries Initiative project and subsequently developed the Interspace project, which plays a role in visions for a Next Generation Internet. (Cf. below § 4). More recently, NASA has also been exploring an interplanetary Internet, which may potentially replace the idea of packet switching.

 

In 1986, when New England was cut off from the net, it turned out that all seven of the ARPA trunk lines were in one large AT&T cable. According to their own website, from 1984 until 1996, “AT&T was an integrated provider of communications services and products, network equipment and computer systems.”[36] Could all of this have been allowed to evolve without any knowledge and endorsement by the management?

 

In 1991, AT&T merged with National Cash Register (NCR) “in a $7.3 billion deal that gave AT&T the ability to better meet customers' needs for networked computing, globally.”[37] It is striking, that when InterNic was established by the National Science Foundation (NSF) in 1993, the directory and database services were given to AT&T. In 1994, AT&T became one of the first companies to experiment with Internet banner ads. AT&T’s Worldnet – also the name of Schatz’s vision outlined above-- was one of the early Internet Service Providers (ISPs). In 1996, the corporation voluntarily split into three companies: 

 

1. AT&T                                                                 communication services

2. Lucent                                                                 communications products

3. National Cash Register (NCR) Corp.                   computer business.

 

In theory, there was now a clear distinction between 1) telephony interests (AT&T); 2) related software products (Lucent) and 3) computer/Internet interests (NCR). In practice, the situation remained more complex for at least three reasons. First, AT&T itself today had three Internet related research laboratories: a) Research Internet and Network Systems Research[38]; b) Voice Enabled Services Research[39] and c) Information and Software Systems Research.[40]

 

Second, Lucent, a spinoff from the old Bell Labs, in addition to its work on data networking and integrated circuits, had no less than eight sets of products related to the Internet.[41] Third, and perhaps most significantly, AT&T’s Central Services Organisation (CSO), which became Bell Communications Research (BCR or Bellcore) was officially sold to Science Applications International Corporation (SAIC, cf. §6), but continued to have goals very close to those of AT&T, particularly in fields such as ENUM. After 1997, AT&T was officially only a “communications services” company. Nonetheless, it continued to expand its interests beyond the narrow confines of telephony. For instance, in 1998, AT&T bought the cable company, MediaOne. According, to Clay Shirky, the motivation for this move came from AT&T’s plans to become “the sole provider for high-speed internet access for a sizable chunk of the country.[42] In January 1999, Lucent Technologies acquired “Ascend for a sum of $20 billion, thus obtaining products and skills in the IP, ATM and xDSL sectors. Also in January 1999, Lucent became “the world's leading equipment manufacturer ahead of Ericsson, with revenues of $26.845 billion, representing a 17% increase over a year.”[43] In March 1999, Lucent acquired “Kenan Systems ($1.48 billion), a leader in billing and customer management systems.”[44]

 

In the past five years, there has been enormous activity to extend networks beyond computers to include all information appliances. Here, the Home Audio Visual Information (HAVI)[45] consortium, which includes Philips, was a pioneer. Others such as the Universal Plug and Play Forum[46]wanted to extend this concept to smart objects and intelligent devices especially attractive under an IPv6 architecture where the slogan “IP Everywhere” is no exaggeration with the possibility of several billion IP numbers per mm² of the Earth’s surface.Low-level artificial intelligence systems “currently monitor military systems, optimize the water level in dishwashers, control the actions of simulated pets, and help predict natural disasters.”[47] This is an area in which the research labs of AT&T have been working for decades under the title of telemetry.[48] For instance, in 1999, Lucent's Kenan Systems and Whisper Communications entered into a global marketing agreement for utilities and energy service providers to:

 

answer the specific billing, customer care, order management, decision-support and usage mediation requirements of leading service providers in the communications and utility industries world-wide, including gas, electric, water, mobile and wireline voice and data services, broadband, Internet, and value-added services.[49]

 

If these developments are considered from a global level there are six sets of players in the global ICT game: 1) the telcos which now include cable interests (AT&T, Sprint, NTT, British Telecom, Deutsche Telecom, France Telecom, Cable and Wireless etc.); 2) the computer companies (IBM, Compaq/HP, Sun, Microsoft, Apple); 3) the carrier equipment companies (Cisco, Lucent, Nortel, Alcatel, Ericsson); 4) the content holders (Reed/Elsevier, Thomson, Murdoch, Bertelsmann, and AOL/Time Warner and Vivendi/Universal); 5) the home entertainment companies (Sony, Philips, Samsung etc.) and 6) the satellite companies (e.g. SES Global). Together these players represent different aspects of the digital knowledge production chain or knowledge life-cycle.

              

Theoretically these sets of players are all in competition with one another. In practice AT&T has links with all parts of this knowledge life-cycle. For instance, with respect to computer companies, AT&T has links with Microsoft[50] and long-standing links with IBM. Already in 1991, IBM and AT&T Paradyne announced that they would develop mainframe network technology together.[51] On December 8, 1998 AT&T and IBM announced a series of strategic agreements under which AT&T would acquire IBM's Global Network business for $5 billion in cash, and the two companies would enter into outsourcing contracts with each other. The contract for AT&T to acquire IBM's network was completed in the US on April 30, 1999.[52]

 

In 1999, AT&T and IBM also made an E-Commerce alliance.[53] In 2000, AT&T and IBM announced that they would work together in providing wireless solutions.[54] In September of 2000 IBM and AT&T signed a $450 million web hosting deal.[55] In 2001, IBM, AT&T and Lotus (owned by IBM) announced an Application Service Provider (ASP) Enablement Suite.[56] In 2002, IBM and AT&T released free privacy tools together.[57] In addition, there were a series of further links through IBM. In 2002, IBM acquired PriceWaterhouse- Coopers in order that, among other things, their educational solutions will be aligned.

 

With respect to carrier equipment, both AT&T, and IBM have close links with Cisco. With respect to content holders AT&T and AOL were poised to launch an IPO together.[58] AOL has made links with Legend Computers in China. With respect to home entertainment IBM has links with Toshiba and Sony for making Playstation 3.[59] In this constellation, pipelines and content are integrated. IBM was theoretically in competition with EDS and SAP but was also partnered with them.[60] Through a nexus of AT&T, IBM, Cisco, AOL, and Sony five sets of players were linked. Hence, even the sale of MGM to Sony did not threaten this inner circle.

 

From all this[61] it is clear that a) AT&T’s interests in networked computing existed well before the Internet; b) AT&T’s interests played a significant role in the development of the Internet and c) neither the forced split up in 1984, nor the voluntary partitioning into communications services (AT&T), communications products (Lucent) and computers (NCR) in 1996 changed this fundamentally. In short, AT&T[62] was and remains centrally active in the development of the Internet.[63]

 

               Restructuring

 

In 1999, Deutsche Telekom announced that it was restructuring into four divisions. In October 2000, AT&T announced that it was (also) restructuring into four businesses, namely, AT&T Consumer, AT&T Business, AT&T Wireless, and AT&T Broadband. It is striking that preparations for this separation appear to have evolved carefully over the past decade. 

 

               AT&T Consumer

 

In 22 July 2004, AT&T announced that it was no longer seeking residential customers.[64] This was slightly misleading. In December 2004, AT&T’s Consumer section called: At Home and on the Go claimed it was “for Voice over IP, calling plans, Internet and more.”[65] Meanwhile four of the largest media mergers in the past decade related directly to this focus on consumers, and to the quest for Broadband (cf. below) namely, a) TCI/Liberty; b) Time-Warner-AOL; c) Twentieth Century Fox and Newscorp and d) Metro-Goldwyn-Mayer (MGM).   

 

               TCI/Liberty

 

Telecommunications Inc. (TCI) began in the 1950s. Liberty Media was founded in 1990 as TCI’s programming arm. In 1988, like Comcast, TCI/Liberty also bought a part of Storer from KKR.  In 1999, AT&T bought John Malone’s Telecommunications Inc. (TCI) for $48 billion (some say $54 billion, while others claim the deal was worth $68 billion[66]). This provided AT&T with Liberty Media and “with a substantial stake in Murdoch-controlled News Corporation, a 25% share of Time Warner Cable and 39% of cable ISP @Home.”[67]  It also set the stage for a new division called AT&T Consumer Services. 

 

In 2001, AT&T spun off Liberty Media. In 2001, Liberty also took a $1.4 billion stake in UnitedGlobalCom/United PanEurope Communications cable group and in 2004 it gained control of same. Meanwhile in 2001, it bought “nine German regional cable networks from Deutsche Telekom for $5 billion and Deutsche Bank's Tele Columbus and SMARTcom AG cable subsidiaries for $1 billion. In 2003, it bought the remaining 57% of QVC from Qualcomm. By 2004, it had increased its stakes in New Corp to 17% and there were rumors that Liberty was trying to take over News Corp.[68]

 

Time and Warner Brothers

 

To begin to understand AT&T and Comcast’s connections with what some have described as the world’s largest media company requires a brief historical detour. In 1923, Henry Luce and Britton Haddon founded Time. Also in 1923, the Warner brothers founded their Studio:

 

AT&T research into communications technology was reflected in partnership between Western Electric and Warner Bros subsidiary Vitaphone about sound recording and speakers for motion films. That was used for the landmark 1926 Don Juan and 1927 Jazz Singer, with AT&T's Electrical Research Products Inc (ERPI) being established in 1927 to service and distribute Western Electric sound equipment.

By the end of the following year over 1,000 cinemas used that gear and most Hollywood studios were leaning to Western Electric as a supplier in the transition to sound production. That drove RCA's acquisition of a stake in FBO during 1927 and creation with Joseph Kennedy of the Radio Keith Orpheum (RKO) film production, distribution and exhibition group. AT&T in turn financed studios and cinema chain purchases of its equipment through loans from ERPI or taking a stake in the film companies.[69]

 

Very simply AT&T and Warner have been working together seriously since the 1920s. In 1957, Warner Brothers merged to become Warner-Seven Arts. In 1969, this was acquired by Kinney National; in 1971 was renamed Warner Communications and, in 1990, merged with Time to become Time-Warner.  

 

            America OnLine (AOL)

 

In 1969, Compuserv was founded, the same year as the Internet began in the US. In 1978, the Source was founded. This aimed to send “airline reservations, restaurant reviews, banking information” into per      sons homes.[70] In 1989, Compuserv bought the Source. In 1982, the Control Video Corporation (CVC) set out to start the new GameLine. In 1984, BellSouth loaned CVC $5 million to try a home subscription service called Masterline. In 1985, CVC became Quantum Computer Services. Meanwhile, Apple was using General Electric Information Services for their AppleLink. They wanted an inhouse system.  Steve Case working with Quantum began this new Applelink in 1988. In 1989, Quantum left Apple, and AppleLink was renamed America Online through Quantum. In 1991, there was a DOS version of AOL and Quantum became America Online Inc. On 11 March 1996, AOL announced an alliance with Netscape and the next day announced that Microsoft Windows would be the official AOL browser. In 1998, AOL bought ICQ messenger and Netscape[71].

 

               Time-Warner-AOL 

 

InFebruary 1999, AT&T announced an agreement with Time Warner to set up a joint venture for providing cable operator subscribers (12.6 million in 20 States) with telephone services. AT&T had a 75.5% stake in the new company.[72]In 2000, when AOL merged with Time-Warner: “the conglomerate had a market value of US$300 billion in January 2000 but had slumped to US$105 billion two years later.” By now, AT&T had a 27% stake in TimeWarnerEntertainment (TWE). In August 2002, AOL was prepared to buy AT&T’s stake for $9 billion:[73] 

 

Under the agreement, for its 27.64 percent stake in TWE, AT&T Broadband will receive $2.1 billion in cash, $1.5 billion in common stock of AOL Time Warner Inc., valued as of the time of closing, and a 21 percent equity interest (with less than five percent voting power in the election of directors) in a new cable company serving about 10.8 million subscribers.[74] 

In September 2003, dissatisfaction with AOL’s role was manifested through the Board's decision to remove 'AOL' from the AOL Time Warner corporate title.[75] This did not resolve the company’s problems. In November 2004, Time-Warner announced that it had set aside $500 million to deal with “regulatory and legal action over accounting practices at its America Online division”[76]

 

               Twentieth Century Fox and Newscorp

 

Twentieth Century Fox was another of the original Hollywood studios. William Fox founded Fox Studios in 1913. In 1935, it merged with Twentieth Century Studios and became Twentieth Century Fox. In 1998, Rupert Murdoch’s News Corp floated an 18% stake in Fox.[77] As noted above, AT&T’s acquisition of John Malone’s TCI gave it a substantial stake in Murdoch-controlled News Corporation. News Corp is one of “the three largest international media groups, operating in most sectors and most continents.”[78] In July 2003 News Corp. “signed a seven-year, $150 million deal with the telecom carrier [AT&T] for voice and international data services.”[79]

 

Meanwhile, in 2001, Newscorp sold its 49.5% stake in Fox Family Worldwide to Disney for $5.3 billion. In 2003, it bought a 34% controlling stake in Hughes Electronics (satellite broadcaster DirectTV) for $6.6 billion.[80] Hence, the attempts of Comcast to acquire Disney and of Liberty to acquire Newscorp may have been part of a bigger picture, which aimed to get back DirectTV that initially belonged to Hughes, a subsidiary of General Motors, another of the very big players behind the scenes. 

 

               MGM (Metro-Goldwyn-Mayer)

 

The history of one of the other major film studios began fully independently of AT&T and Comcast. Metro-Goldwyn Mayer (MGM) began as a merger of three companies in 1924. By the mid-1930s, they were a leading Hollywood studio (although based in Culver City) and by the late 1930s were into animation. The studios were sold to Kirk Kerkorian in 1969 and to Ted Turner in 1986, to Giancarlo Parretti in 1990, back to Kerkorian as part of a group in 1996. “In 1997, MGM purchased Metromedia International's studio properties (Orion Pictures, Goldwyn Entertainment, and the Motion Picture Corporation of America).”[81] In 2004, MGM was sold to Sony. As we shall see below under AT&T Broadcast, Comcast, played a significant role in this venture. 

 

Meanwhile, in 1997, C. Michael Armstrong, CEO of General Motors (GM) Hughes Electronics, “led a great new product launch--DirecTV, a satellite-to-home television service that beams crystal-clear programming to rooftop dishes.”[82] We shall show later that the privatization of satellites represented another important dimension to the struggle for communications channels (§10). While the above developments were momentous in themselves they represented only a quarter of the complete AT&T vision.

 

               AT&T Business

Some aspects of AT&T’s business section have been mentioned above in the discussion of links with IBM. There were a number of other elements. In 1996 J.P. Morgan, CSC, Andersen Consulting, AT&T Solutions and Bell Atlantic Network Integration formed the Pinnacle Alliance to manage parts of J.P. Morgan’s global technology infrastructure.[83] In 1998, AT&T bought IBM’s global network for $5 billion. It went on to make a $10 billion dollar joint venture with British Telecom for one stop shopping for big businesses.

On 23 January 2002, AT&T’s Enterprise Business announced a) Managed Services Portfolio, and a Strategic Approach To Serving Business Customers Worldwide; b) New High Availability And Security Services To Its Business Continuity Portfolio; c) Enhanced Capabilities to its Hosting Services Portfolio; and d) the debut of its  First Two Global Virtual Private Network Services.[84] Their Enterprise business section addressed government, wholesale, resellers, VARS and agents. It also had a separate site for Small and Medium Business.[85]   

 

               AT&T Wireless

              

A third division focused on wireless communications. AT&T claimed to have invented cellular service at its Bell Labs in 1947 and to have built the first cellular systems in Chicago and Washington in 1984. In 1994, it acquired McCaw Cellular Communications for $11.5 billion.[86] On 3 May 1999, AT&T acquired Vanguard Wireless for $1.7 billion including about $600 million in assumed debt.[87] On November 30, 2000, AT&T and NTT DoCoMo announced the formation of a strategic alliance to develop the next generation of mobile multimedia services. NTTDoCoMo invested nearly $10 billion for a 16 percent stake in AT&T Wireless.[88] In 2002, AT&T Wireless acquired TeleCorp PCS. In 2002, AT&T Wireless made a strategic alliance with Microsoft. In 2003, AT&T Wireless made a strategic alliance with IBM. In 2004, AT&T Wireless (AWE) launched the first UMTS service in the United States.

 

SBC helped to develop and had a 60% ownership of the Cingular Wireless Network. Cingular was acquired by LCC International, which then proposed to buy AT&T Wireless. By 1 November 2004, federal regulators allowed LCC’s[89] Cingular to buy AT&T’s wireless services for $41 billion.[90] Conveniently, Colin Powell’s son, Michael Powell, was the head of the FCC. Meanwhile, on 19 May 2004, AT&T announced that it had “taken its first step in re-entering the wireless market by reaching an agreement with Sprint that would allow AT&T to sell AT&T-branded wireless service to its over 30 million business and consumer customers.”[91]

 

               AT&T Broadband

              

AT&T’s fourth division focused on broadband in the form of cable. Here AT&T’s role in media conglomerates such as Time-Warner were important, but its activities centred on three major deals with Teleport, Media One and with Comcast respectively.

 

            Teleport

On 12 January 1998, AT&T bought Teleport Communications Group, Inc. (TCG), for $11 billion.[92]Under the deal, TCG’s three cable owners, Telecommunications Inc. (TCI), Comcast and Cox Communications held a 10% stake in AT&T. Within two years AT&T had also bought TCI and Comcast. Robert Annunziata, TCG's chairman and CEO, became executive vice president of AT&T and led the company's local services unit. The TSG deal gave AT&T “networks that cover 66 markets and pass more than 13,000 buildings.[93]

Media One

 

Charles Lillis was serving as president and CEO of US West Media Group. In 1998, MediaOne split from US West to become the nation’s fourth cable company. Lillis became the CEO of Media One, which employed 16,000 people, operated in ten countries and generated more than $7 billion in annual revenues through domestic and international cable as well as telephone communications, international wireless and interactive multimedia services.[94] In late 1999-early 2000, AT&T was said to have paid $44 billion to buy the Media-One Group.[95] Others claimed that “AT&T acquired the Media-One Group for $62.5 billion.” [96] The deal gave AT&T:

 

ownership of all or part of the cables reaching into 60 percent of American homes. Through its ownership of Liberty Media, AT&T is an owner of MacNeil-Lehrer Productions, the co-producer of this program. As a result of that deal, Microsoft announced it was investing $5 billion in AT&T, a move that gave the software manufacturer a strong position in the market for operating systems used in set-top boxes for cable television. [97]

 

AT&T was now a very significant player in the cable world. Within two years it seemed to have thrown away what it had acquired. 

 

            Comcast

 

In November 2002, Comcast officially acquired AT&T Broadband (i.e. its cable assets) for $70 billion.[98] A lawsuit “accused the company and its top officers of keeping the share price up” while these two deals were made. AT&T and Comcast removed this hurdle with a $100 million settlement.[99]

 

The American Cable Systems began in 1963 and was renamed Comcast in 1969. In 1986, it doubled in size by a 26% stake of Westinghouse's Group W Cable operations. In 1988, it bought 50% of Storer Communications from KKR, making it the fifth largest cable operator in the US. In 1997, Comcast took a 40% stake in E! Entertainment along with Disney. As noted above, that same year Microsoft invested $1 billion in Comcast. In 1999, Comcast sold Comcast cellular to SBC Communications. It also announced a $60 billion merger with MediaOne, did not go ahead and received instead a $1.5 billion settlement and 2 million AT&T customers.

 

In 2000, Comcast did cable system swaps with Adelphia and AT&T. In 2001, Comcast bought AT&T’s broadband arm (i.e. its cable TV) for $44.5 billion. By co-incidence the man who had been CEO of AT&T (1997-2002), became the chairman of AT&T Comcast[100]and became CEO of Comcast in 2002. To some the deal between AT&T and Comcast was not a surprise: “The two companies are no strangers. Most recently, on July 2 they closed a deal under which Comcast purchased an AT&T-owned cable TV system in Baltimore for $518 million in cash. The system had 115,000 subscribers. At the beginning of this year, Comcast sold its stake in cable Internet provider Excite@Home to AT&T in exchange for AT&T stock.”[101]On the surface, AT&T had sold its jewels to Comcast. Even so, the deal gave AT&T shareholders a majority of the economic and voting interests in the combined company.

 

On 17 February 2004, Comcast offered to buy Disney for $54 billion to create the world’s largest media company.[102] Disney rejected the offer. On 21 August, Comcast “announced a deal to acquire TV and Internet content as part of a licensing agreement that will create a new suite of programming for Comcast's broadband subscribers. The new package will be dubbed Disney Connection.”[103] On 13 September 2004, while attention was focused on Sony’s takeover of MGM, Comcast made agreements with Sony to distribute their videos in the US.[104] Comcast played a significant role in this $5 billion buyout of the Metro-Goldwyn-Mayer studios announced in the fall of 2004. Comcast invested $300 million in the bid led by Sony Corp. “The deal gives the cable operator the right to buy a 20 percent stake in MGM. Plus, it allows Comcast to distribute MGM's content through its new video-on-demand, or VOD, service.”[105]

 

On 18 October 2004, Comcast and Walt Disney Co. launched a “broadband portal Comcast Kids Channel on Monday, part of the cabler's broader effort to cater to tots, which will include a 24/7 children's cable network”[106] In November 2004, “Comcast Cable (formerly AT&T Broadband, Media One and Time Warner Cable)” described itself as providing public access by contract” and insisted that “Public Access is an extension of the First Amendment to the U.S. Constitution.”[107]

 

Comcast still owned a 21% stake in Time-Warner which it could reduce to 17% in order to make a deal with Time Warner re: Adelphia. In November 2004, Comcast and Time Warner were planning to buy Adelphia Communications, which was also the fifth largest Cable TV company in the country, but faced with creditors claiming $3 trillion.[108] The head of Adelphia's management team, William T. Schleyer, who formerly ran AT&T's cable business,[109] was rumoured to favour a buyout by private equity firms such as Thomas H. Lee Partners; Providence Equity Partners; and Kohlberg Kravis Roberts (KKR). On 8 November 2004, Comcast, as the largest cable TV provider, announced a deal with Microsoft to work together.[110]

 

From the above it is clear that AT&T remained a very major player. In an article on the top 25 digital economy companies in 1999, Business Week, basing its claims on Morgan Stanley Capital International ranked AT&T in third place (after Microsoft and IBM), with a

market value of $186.14 billion.[111] In 1999, the International Telecommunications Union (ITU) ranked AT&T as number 2 (after NTT) of the top 20 public telecom operators: as number 1 of the top 20 international telecom operators; and number 9 of the top 20 mobile telecom operators with net incomes of $147.8 billion; $3.489 billion and $7.627 billion respectively.

 

By contrast, according to the Forbes list of the top 2000 global companies in 2004, AT&T ranked number 439 (although in terms of sales it was number 85 in the world) while Verizon, SBC Communications and Bell South were now said to be the top telecoms in the world arena and appeared in positions 11, 12 and 74 respectively.[112] Perhaps as a consolation, in the period 2001-2003 AT&T received $4.6 billion in tax rebates, while Verizon received 4.3 billion.[113] Meanwhile in 2004, Lucent was due to receive a $816 million tax refund.[114]

 

If we stand back to assess these developments several interpretations are possible. A negative view would be that the former monopoly holder in telephony saw its markets fragmented into a thousand fiefdoms and was desperately hanging on by making alliances with the big players in the field. A more positive interpretation would note that AT&T had serious stakes in all the big media conglomerates in the US. Perhaps it did not own them 100%, but then no global player today does. Indeed, the former telephony company had now expanded into cable, television and Internet, or as one observer put it, Ma Bell was becoming Ma Bel, Ma Cable and Ma Internet.[115] At a superficial level AT&T was a monopoly telecom operator until 1984 and then faced increasing competition from MCI, Worldcom, Sprint and others.

 

There is clearly some truth to this as becomes evident if one looks at basic statistics concerning telephone, cable and mobile telephone operators (figures 1a-c). Of course, some looked at these same statistics to suggest that Comcast was now the central company and that AT&T was effectively a thing of the past (figure 1d).

 

We are told that in an effort to regain some of its lost ground, AT&T made bold moves into both the cable and the wireless sectors in the period 1999-2001. Having made this immense leap, they then sold off their assets in these two vitally important sectors between 2002 and 2004. If this were true, then the image of AT&T as a monolithic mastodon incapable of adapting to new developments was well deserved. From any point of view there were a bewildering number of deals going on between many competing partners.

 

But as we stand back to take a long term view another picture emerges. There are only a handful of giants, AT&T, General Electric, Westinghouse, General Motors, IBM and more recently Microsoft. Two things are notable. First, the number of close links among this inner circle of the very big players continued undiminished. Second, and even more fascinating, is how these companies “lose” assets and then regain them. For instance, as we shall see presently (§ 7), General Electric helped to found NBC, lost it in 1932 and gained it back in 1985. By 2004, it owned not only NBC but also Vivendi-Universal. It was also a central player in SES Global, a key satellite consortium. In the past decades, the time frame may have accelerated but the basic approach remained the same: divide and conquer using ever new company names responsible to the same old headquarters.    

 

 

 

 

Telephone Companies                           Millions of customers

1. Verizon                                            28.2

2. SBC                                                 24.3

3. Bellsouth                                          12.7

4. Qwest                                              8.8      

5. Sprint                                               7.8

6. Century Tel                          3

7. Comcast                                           1.3      

8. Cox                                                  0.9

9. Adelphia                                           0.9      

 

Cable Companies                                  Millions of customers

1. Comcast                                            21.5

2. Time Warner                                     10.5

3. Cox                                                     6.6

4. Charter                                                6.5

5. Adelphia                                              5.2

6. Cablevision                                          3.0

 

Wireless Company                 Millions of customers

1. Cingular-AT&T                                 46

2. Verizon                                             40

3. Sprint                                                22

4. T-Mobile USA                                  15.4

5. Nextel                                               15.3

6. Alltell                                                 12

Figure 1a) Largest telephone companies;[116] b) cable companies[117] and c) wireless companies[118] in the US in 2004;[119] d) Another view of Televison, Internet and Telephone in the US in 2004.[120]

As noted earlier, according to Morgan Stanley’s ranking of the top 25 digital economy companies, the top three were Microsoft, IBM and AT&T respectively. We noted that AT&T made various partnerships with Microsoft and IBM. Is it likely that it would simply hand over its crown jewels to Comcast and Verizon if they were outright competitors? Or is it more than a co-incidence that the head of AT&T went on to become the head of Comcast at the critical moment when this handover occurred? Was there an entente between Ma Bell (AT&T) and her not so baby Bells? Whichever interpretation one favours AT&T remained one of the largest telecoms of the world with stakes in telephony, cable, wireless, Internet, internet telephony in the form of Voice over Internet Protocol (VOIP) and even satellites, something which they began with Telstar in 1962.

 

4. Competitors  

 

The breakup of AT&T in 1984 opened the doors for hundreds of competitors. Most of these were small and short lived. On the US scene, there were three more serious competitors: MCI, Worldcom and Sprint. On the world scene, there were a half dozen serious players: NTT, British Telecom, Deutsche Telecom, France Telecom and Cable&Wireless. In the past decade, most of these have been outplayed or played out, some would claim very deliberately, and have diminished in power with respect to AT&T. 

 

               MCI

 

Microwave Communications of America, Inc. (MCI) was founded in 1968 to help truckers communicate via two-way radios. In 1969, the FCC approved MCI's application to provide private microwave service between Chicago and St. Louis. MCI went public in 1972 and in 1973 became “the first telecommunications company to market specialized services to the public.” In 1974, MCI began a series of lawsuits against AT&T that led to its divestiture in 1984.   

 

In 1975, MCI activated its first computer switch. This became the cornerstone of MCI’s network. In 1983, MCI made the largest order of fiber optic cable ever placed thus far of more than 150,000 miles. By 1987, MCI’s new coast-to-coast fiber optic network began operations. On 3 November 1996, British Telecom agreed to a merger whereby it would acquire MCI for $20 billion.[121] This would have created a major competition for AT&T. The combined BT-MCI would have been “one of the largest companies in the world, with annual revenues of $40.6 billion, 181,000 employees, and 43 million customers in 72 countries.”[122] Some spoke of a new world order.

 

In May 1997, the EU gave its consent. In July 1997, the US Justice Department agreed to the merger[123]and in July the FCC also agreed to the merger. Then, on 10 July, 1997 MCI warned “shareholders that it was running up unexpectedly large losses as it tried to break into the local phone business. The company said those losses could reach $800 million in 1997 alone.” On 21 August 1997, the deal was in disarray; there was discussion that if British Telecom bought MCI, it would pay “from 10 percent to 25 percent less for the company than the original terms of the deal. That consensus knocked “$3.4 billion off the company's market value in one frantic trading session.”[124] The next day BT renegotiated saying it would “pay about $17 billion [rather than $20 billion] to buy MCI and create a joint entity, to be known as Concert Plc.” BT already owned about 20 percent of MCI.[125]

 

In October 1997, presumably of their own accord, Worldcom announced plans for a hostile takeover of MCI for $40 billion that threw into question the planned BT-MCI merger. By July 1998 the MCI-Worldcom deal was done; Cable and Wireless had bought MCI’s Internet assets and BT was looking for a new partner. On 10 November, 1998, AT&T and BT applied to the FCC for a joint venture, called Concert which lasted until 16 October 2001.[126] Two years and one week after MCI planned serious competition to AT&T through a merger with BT, AT&T had created its own joint venture with BT against MCI.  

 

               Worldcom

 

Although founded in 1983 by Bernie Ebbers, Worldcom’s website used to claim that during the 1960s and 1970s, Worldcom itself had pioneered packet services and the use of international X.25 standards for public packet services for point of sale and credit card transactions. In 1977, Worldcom introduced the first internal e-mail service (INFOPLEX); in 1979, the first online consumer service; in 1983, the first e-commerce application with an e-mall of 100 stores, where orders could be placed and in 1988, the first Internet access service and first commercial connection to the Internet. The company went public in August 1989.

 

In the decade that followed, WorldCom became involved in a number of pioneering experiments leading to higher bandwidth such as the National Science Foundation Network (NSFNET linked with Compuserve, 1989); a long-haul Synchronous Optical Network (SONET, 1990); a public Frame Relay service (1991); a commercial version of frame relay on a cell-based network platform (1992); a dedicated, multipoint, Internet Protocol Virtual Private Network (IP VPN, 1994); integrated service for voice, data and video transmission over an ATM network (1994); combined Synchronous Optical Network (SONET) and Asynchronous Transfer Mode (ATM) technologies and the first 10 Gbps data transmission on an enterprise network (1995) and high-speed Frame Relay service (1996).

 

UUNet, founded in 1987, became the first business Internet Service Provider (ISP) with a backbone network.[127] They too claimed to have introduced a number of firsts: a first commercial connection to the Internet (1988); commercial application-layer firewall services for Internet Protocol (IP) Networks (1992); significantly higher Internet backbone access speed level, from a T-1 (1.544 Mbps) in 1993 up to the current 10 Gbps OC-192c level (1993); designed and installed the first dedicated multi-point Internet Protocol Virtual Private Network (IP VPN) Service (1994); the first profitable ISP (1995) and the first ISP to offer Extranet VPNs and Web Hosting services (1996). That same year WorldCom bought Uunet.

 

MCI/Worldcom introduced commercial Internet traffic on a backbone network at OC-192 speed of 10 Gbps (2000) and initiated an all optical network (Terabit Challenge) to optimize use of available bandwidth (2001).[128] In the next years, Worldcomalso focussed increasingly on infrastructure. In 1997, they had the first undersea (Gemini) cable system network to carry production traffic, connecting city centres in New York and London. In 1999, they began building the Southern Cross Cable Network, the first undersea cable network system primarily for Internet and data use between the United States, New Zealand and Australia.

 

In 1998, MCI acquired the ailing Cable and Wireless company “for $1.8 billion dollars” and subsequently “acquired Exodus Communications and Digital Island for a total outlay of $1.19 billion dollars.”[129] In 1998 also, in order to help the MCI/Wordcom merger MCI sold its backbone to Cable and Wireless for $625 million.[130] By 22 July 2002, MCI/Worldcom was bankrupt:[131] Some spoke of an $11 billion accounting fraud.[132] Others noted that it had over $1 trillion dollars of intercompany debts, of which $380 billion involved unidentified entities within the company.[133]  To be “worldconned” became a new expression for persons who were conned “big time.”

 

It is noteworthy that two weeks after Worldcom’s bankruptcy in 2002, its customer base was taken over by Verizon (formerly Bell Atlantic). On 25 November 2003, MCI, the company formerly known as WorldCom, “won a 10-year contract, potentially worth $250 million, to provide advanced voice, data and Internet communications for the Commonwealth of Virginia Network initiative. COVANET, one of the most techno-logically advanced statewide networks in the country.”[134] MCI, formerly known as Worldcom, emerged from Chapter 11 in April 2004, after 21 months of restructuring. The day after the elections, MCI “reported net losses of $3.4bn for Q3, due to falling revenues and a write down of the value of its network.”[135] On 8 December 2003, MCI, Sprint and Time Warner Cable entered a Voice over IP deal.[136]

 

Bell South had hoped to acquire Worldcom’s fixed wireless assets. So did Nextel, which had as its President and Executive Vice President, two executives from AT&T Wireless.[137]   On 25 July 2003, Nextel Communications Inc. was awarded the fixed-wireless assets of bankrupt WorldCom Inc. by Bankruptcy Judge Arthur Gonzalez. Nextel agreed to pay $144 million for the licenses. By co-incidence, the Chairman of Nextel, William E. Conway, Jr., a former executive at MCI, was also a founding partner of the Carlyle Group.[138] The same Judge Gonzalez, was also involved in the Enron case, and had also helped settle a Worldcom-Verizon dispute.[139]

 

In November 2004, MCI boasted the “industry's farthest-reaching global Internet backbone,[140] spanning six continents, over 140 countries, over 2,800 cities and over 4,500 Points of Presence (PoPs).”[141]  Hence, like AT&T, MCI/Worldcom was extremely active in the development of the Internet as we know it today. Unlike AT&T, however, the eight years since its planned merger with BT eliminated MCI and Worldcom as central players. They were no longer real competitors in the global game.

 

 

            Sprint

 

In 2004 Sprint claimed to be the number three carrier in the US although in terms of customers it was number five (cf. figure 1). It began as the Brown Telephone Company in 1899. In the 1930s, it was reorganized as United Utilities. In 1976, it became United Telecommunications. By 1980, it had installed its first fiber-optic cable and first digital switch, established “UNINET as the world's third largest commercial packet data network.”[142] In 1986, under the new name of Sprint, it launched its domestic long distance service “with the nation's first 100% digital, fiber-optic network.”[143] On 28 April, 2000, Sprint agreed to a merger with Worldcom for $115 billion; a proposal that the EU officially vetoed on 28 June, 2000[144] and a plan they terminated on 13 July 2000 due to regulatory conditions. This effectively eliminated Sprint from the league of AT&T’s serious competitors.  

 

In 2001, Sprint and America OnLine (AOL) announced a strategic alliance. As noted earlier AT&T had more than an alliance. It owned a substantial chunk of the Time-Warner-AOL trio. Sprint also developed links with SAIC (§ 6). In 2004, Sprint had more than 75,000 employees and served 26 million customers in more than 70 countries. Officially it was doing well but there were rumors about it going bankrupt.  On 19 May 2004, AT&T signed a deal “with Sprint, which runs its own CDMA-based wireless network in the US and competes with AT&T for long distance. AT&T will lease the ability to offer its own service using Sprint's existing wireless infrastructure.”[145] Sprint was now effectively a useful tool for AT&T’s larger plans. On 9 December, 2004 Sprint and Nextel, whose chief executives were former AT&T executives announced plans for a $36 billion merger. On 14 December, 2004, Verizon announced that it had the backing of its wireless partner, Vodaphone, to acquire Sprint. Such a move could bring Sprint back into the limelight. On the other hand, if the so-called competition between AT&T and Verizon was merely a façade, then this could be the final step in the integration of Sprint into to the Ma Bell bosom.     

 

               World Scene: NTT

 

On the world scene, Nippon Telephone and Telegraph (NT&T) is the only company operating at the scale and size of AT&T. As one might expect these giants have been co-operating happily. In 1996, they worked together in creating a new kind of fibre optic wire (cf. below § 10). On 28 April 1999, the two companies announced that they would “develop agreements and business ventures that provide value-added networking solutions for large and mid-sized multinational businesses and industries in the Asia Pacific….The first priority of the two companies will be to collaborate on the operation and development of the IBM Global Network (IGN) in Japan which AT&T is in the process of acquiring.”[146] On 30 November, 2000 NTT DoCOMO and AT&T announced:

 

a long-term partnership to develop wireless multimedia applications. The alliance will enable users to access HTML applications and content on mobile wireless terminals and allow the two companies to promote common global standards. As part of the deal, NTT DoCoMo will invest nearly $10 billion for AT&T referred stock, equivalent to 406 million shares of AT&T Wireless tracking stock.[147]

 

As a result NTT’s DoCoMo had a 16% stake in AT&T Wireless.[148] On 26 December 2002 AT&T Wireless and NTT DoCoMo outlined “plans for targeted rollout of W-CDMA services in four US cities by 2004.[149]  

 

               British Telecom

 

A number of private telegraph companies emerged from 1846 onwards. The Telegraph Act of 1865 passed control of these to the General Post Office (GPO). This was renamed the Post Office in 1969 with a separate division called Post Office Telecommunications (PTO). This division was renamed British Telecom in 1980-1981. It was privatized in 1984 and renamed BT in 1991.[150]

 

Although much smaller than AT&T, BT operates around the world. In 2004, its global services department had 20,000 employees on four of the five continents (not in Africa).[151] On 29 March 1996, British Telecom and Cable & Wireless “restarted discussions about a merger which would see C&W acquire BT in a reverse takeover.”[152] In 1993, BT announced an alliance with MCI. In 5 November 1996, they announced a definitive merger:

 

They announced Concert, a new high-growth global communications powerhouse borne from the union of British Telecom and MCI. This is different from the "Concert" they created three years ago. That organization will now be called Concert Communications Services. This new global company will provide local, long distance, and international services including voice, data, wireless, Internet, information technologies, and outsourcing.[153]

  

This merger would have posed serious competition for AT&T. Indeed, BT planned to become “the leading global telecommunications operator” with “network related products and services.”[154] By 1998, this plan was definitively derailed by the Worldcom/MCI merger. In July 1998, BT announced a joint venture with AT&T. In September 1998, BT bought the Concert Business Services back from MCI. On 16 November, AT&T announced that it would: “beef up its international business services by integrating the Concert global telecom products of its joint venture partner, BT.”[155]
 
But there was much more to this alliance than a simple joint venture by two companies. Three other companies were involved: 1) VLT  Co.  L. L. C., (a  Delaware  limited  liability  corporation,  which was  a  subsidiary  of  a  holding  company  based  in  the  Netherlands) 2) Violet  License  Co.  LLC, (a wholly owned subsidiary of VLT) and 3) TLTD, (a  Bahamas-  based  corporation,  was  also  a  subsidiary  of  a  holding  company  based  in  the  Netherlands). In February 1999, the five companies made an application “to assign to VLT ownership interests of AT&T:


a) of authorization in international cable facilities within United States territorial limits”:

            AT&T Corporation (multiple authorizations)

AT&T Alascom (multiple authorizations)

AT&T Puerto Rico, Inc. (multiple authorizations)

AT&T of the Virgin Islands, Inc. (multiple authorizations) 

b) of licence applications of cable landing licences:

            AT&T Corporation (multiple licenses)

Transoceanic Communications, Inc. (multiple licenses)

AT&T Puerto Rico, Inc. (multiple licenses) and in addition

c) to License Co. earth station radio licenses held by AT&T or its subsidiaries: 

            AT&T Corporation (multiple licenses)

AT&T Alascom, Inc. (multiple licenses)[156]

 

In short VLT, was assigned AT&T’s licences within US territorial waters. In a separate document, those licences outside US territorial waters were assigned to TLTD: 

 

TLTD, a Bahamas-based corporation, is also a subsidiary of a holding company based in the Netherlands that will be equally owned by AT&T and BT. AT&T proposes to assign to TLTD its ownership interests in international submarine cable facilities outside the U.S. territorial limits. TLTD's assets will also include BT's ownership interests in international submarine cable facilities outside the U.K. territorial limits and AT&T's and BT's operating agreements to provide international telecommunications services to various countries.  TLTD seeks new Section 214 authorization to provide facilities-based and resold international basic switched, private line, data, television, and business services.[157]

 

By 2000, TLTD, Telespace Limited, (not to be confused with the Canadian company of the same name) had moved to Redmond (of Microsoft fame). It had also merged with and changed its name to Qinnet.com which became: “the parent corporation of Beijing based QinNet Electronic Technologies Co. Ltd., which provides complete Internet services, including Internet service providers, Internet content providers, E-business, and E-commerce solutions, to government entities, private enterprises, and individuals in China.”[158]

 

At the start of 2000, when Concert finally “began”, nothing was said of these other companies. On 11 May, 2000, BT, AT&T and Concert announced that they were investing $2 billion over three years: “to deliver global e-commerce services via a network of 44 Internet data centres in 16 countries. The centres will be directly connected to an Internet protocol (IP) backbone and will provide the wide range of co-location, web hosting, application and networking professional services.”[159] By 16 October 2001, BT and AT&T had ended Concert with $7 billion in losses.[160]  

 

Some would point to this failure as vivid proof of how profoundly the telecommunications bubble burst brought suffering even to the mightiest telecoms. Other interpretations are possible. In the course of five years, AT&T had removed BT as a potential competitor on the global scene. Its pseudo-pact with BT allowed it to shift a great number of its licenses to unknown companies, whereby it could work more effectively and invisibly on the global scene.

 

               Cable and Wireless

 

The company had its beginnings in the 1860s with the laying of the 1866 Atlantic cable.  Founded in 1872, the Eastern Telegraph Company was an amalgamation of a number of important smaller telegraph companies. “In the early years of the 20th century, the Eastern became part of the Eastern and Associated Telegraph Companies which incorporated many other telegraph companies from all around the world.”[161] In 1929, it became Imperial and International Communications (IIC) and in 1934 it was renamed Cable & Wireless.[162]

By 1887, the company owned 22,000 miles of submarine cable. By 1929, this had increased to 164,400 nautical miles of submarine cable. By 1992, “C&W owned 25% of the world's digital and analogue submarine cable systems including 28,000 km of digital cable - due to increase to 42,000 km by the end of the decade.”[163] By 1990 it had 37,681staff worldwide.[164]

In 1998, MCI acquired the ailing Cable and Wireless company “for $1.8 billion dollars.”[165] In July 1998 also, in order to help the MCI/Wordcom merger MCI sold its backbone to Cable and Wireless for $625 million.[166] By 2003, Cable and Wireless were also bankrupt and sold “their USA based operations to private investment firm, Gores Technology Group,[167]for $125 million dollars.”[168] This deal was due to be concluded in March 2004.[169] Gores Technology was owned by Alec Gores. As we shall see presently, Alec Gores’ brother, Tom Gores owned Platinum Technology, which was also making aggressive acquisitions of infrastructure in Europe. The Gores Group, like the Carlyle Group, had profited from the Iraq war (cf. § 9 below).

 

More interesting for our purposes, by November 2004, Cable and Wireless claimed to have developed a new webMethods software with Deloitte[170] and Touche and described itself as having:

yearly revenues in excess of £8 billion (US$11 billion) and customers in 70 countries. Its focus for future growth is on providing business customers with seamless IP (Internet Protocol) and data services and solutions on a global scale. … To position itself as a one-stop provider of global telecommunications services, Cable & Wireless has aggressively acquired operations in the U.S., U.K., and Asia and built out its existing network to offer high performance products and applications. The company has committed $3.5 billion towards building the most advanced single-hop Internet infrastructure in the world and has spent more than $650 million acquiring Internet service providers and network integrators in Europe….. Cable & Wireless acquired 11 ISPs in Europe alone, each bringing its own internal systems and applications to the table.[171]

It was amazing to trace how an ailing, near bankrupt company could be bought for a  low price; make acquisitions many times this said price; go bankrupt at a much lower price and then be able to make investments of over $4 billion within a few years.[172] Even so what was once the largest cable company in the world no longer posed serious competition to the international vision of AT&T.

 

               Deutsche Telekom

 

Deutsche Telekom is “Europe´s largest telecommunications company” and also a “global player with a presence in about 65 countries on six continents.”[173] Deutsche Telekom was privatized in 1996.

 

In 1988, Deutsche Telekom and France Telecom worked together to create a value added network, Eucoom. This led to other joint ventures: Eurnetcom (outsourcing services) in 1992; and Atlas (virtual private networks). On 15 December 1995, the FCC cleared the way for a joint venture that began in 1996, whereby Deutsche Telekom and France Télécom each acquired a 10% stake in Sprint and the three partners together created “Global One, to provide multinationals with global services.”[174]  By 1999, Global One had “1,400  points  of  presence  in  over  65  countries” and claimed to have: “one  of  the  world's  largest  and  most  advanced  ATM-  based  networks,  which  delivers  a  high  speed  service  --  1.5  Mbps  to  155  Mbps  --  that  simultaneously  supports  voice,  data,  Internet,  and  multimedia  in  a  self-healing network.”[175]

 

In 1999, Deutsche Telekom focused its core activities in four strategic divisions: mobile communications, Internet services, data communication/IP/system solutions and fixed-line network access. In 1999, Deutsche Telekom bought Britain’s One2One. There were rumours it might buy Sprint, Cable and Wireless or other major players. In 2001, Deutsche Telekom quietly bought Voice Stream Communications and Powertel.[176] In 2004 it remained one of the significant players on the world scene. Not surprisingly, AT&T and TMobile signed an alliance on 2 February 2004.[177] As a result AT&T gained access to the latest third generation mobile phones.

 

               France Telecom

 

France Telecom was formally launched in 1991. It too is a major European telecom with a global reach. In 2003, it divested a number of subsidiaries, namely, Telecom Argentina, Wind, Casema, CTE Salvador and Eutelsat. Even so it has been developing a world wide strategy in conjunction with Deutsche Telekom.

 

In 1949, the Société Internationale de Télécommunications Aéronautiques (SITA) was founded. This became the global data network for major airlines, and companies such as Boeing. SITA became Equant, operating “an advanced IP-based network that offers global wide area network (WAN)- to-local area network (LAN)-to-Desktop connectivity over the  world's largest commercial data network.”[178] On 20 November, 2000, Equant and France Telecom announced that they would merge Equant and Global One. On 2 July, 2001, Equant began full operations “as a combined company, providing advanced global IP and data services for multinational businesses over the world's largest commercial data network, spanning 220 countries and territories.”[179]

 

France Telecom was one of the only global players which remained on a course independent of AT&T. As we shall see later, however, by 2004, companies such as Level 3 Communications and Equity companies such as Platinum were posing a threat to the French company’s infrastructure (§10). 

 

               Telefonica

 

With 115 million customers, Telefonica is the leading Telecom for Spanish and Portuguese peoples, active in 13 countries. On 14 April 1997, AT&T “signed a memorandum of understanding with Telecom Italia, Telefonica de Espana, S.A. and Companhia Portuguesa Radio Marconi, S.A. to plan to build Columbus III, an undersea fiber optic cable network that will link the United States with southern Europe by July 1999.”[180] In 2002, there were threats by AT&T Peru to sue Telefonica for being “anti-competitive.”[181] Nonetheless, Telefonica continued to grow as a serious player. On 8 March 2004, Telefonica acquired Bell South’s South American cellular markets and became the world’s fourth largest cellular company with 62.5 million customers.[182]

 

From all this emerges a very complex picture. AT&T, which supposedly broke up in 1984; broke up into 3 companies in 1996 and divided its main interests into 4 new companies in 2000. Those who have painted it as an archaic structure, unable to shake off its old habits, incapable of responding to the challenges of a multimedia, digital world, overlooked a number of things. AT&T had a serious stake in almost every major project both at home and around the world. Almost every company that became involved with AT&T ended up bankrupt or being swallowed. We shall return to these themes (§ 10) but first we must examine the role of the Baby Bells, SAIC and some other players.

 

5. Baby Bells

 

After the “breakup” of AT&T, seven Regional Bell Operating Companies (RBOCS) or Baby Bells were formed. After the Telecommunications Act of 1996, regional Bell companies had to open their local markets to competition.[183]By 22 May 1997, Nynex announced that it reached an agreement with AT&T, allowing the nation's largest long-distance company to offer local telephone service in Nynex's local market.[184]In short, what had become the territory of the Baby Bells, was becoming anew the territory of AT&T. As noted by Clay Shirky, and cited above, a similar motivation led AT&T to buy Media One.

  

 Meanwhile, in the course of the past two decades the seven Baby Bells became four (figure 2). Southwestern Bell acquired Ameritech and Pacific Telesis.[185]US West[186]sold its wireless operations to Air Touch Communications. In January 1999, Vodaphone took control of Air Touch for $62 billion.[187] In May 1999, Vodaphone shareholders agreed to acquire Air Touch for $74.7 billion. The new company claimed to have 29 million subscribers spread throughout 23 countries.[188]

 

 

      1984                            2000                             01.2002                     06.2002           

  1. Ameritech[189]]                =6                   

2.   Bell Atlantic[190]           Bell Atlantic                     Verizon                      Verizon

  1. Bell South[191]               Bell South                         Bell South                  Bell South
  2. Nynex[192]                      =2
  3. Pacific Telesis   =6
  4. Southwestern Bell[193]     SBC[194]                        SBC                           SBC
  5. US West                      Qwest[195]                     QWest[196]                    =2 ?

 

Figure 2. A history of the Regional Bell Operating Companies or Baby Bells (RBOCs).

 

In September 1999, Bell Atlantic and Vodaphone announced plans to “merge their US mobile phone businesses to create a company worth between $70bn and $80bn (£44bn - £50bn), owned 55% by Bell and 45% by Vodafone, which would be floated on the stock market.”[197] Airtouch, subsequently joined with parts of Primeco, General Telephone and Electronics Corporation (GTE), and Bell Atlantic to form a Code Division Multiple Access (CDMA) network, in conjunction with Vodafone, called Verizon Wireless Company “the largest nationwide wireless voice and data network and approximately 30 million customers.”[198]Another of the Baby Bells, Bell Atlantic Corp. acquired Nynex (1997) and merged with GTE Corp. to form Verizon (2000), which now represents a major force with approximately 248,000 employees.[199]Verizon's general counsel, William Barr, was attorney general under President George H.W. Bush.[200] In May 2004, Verizon announced plans for selling video over fibre optic lines.[201] In November 2004, SBC announced plans to develop IP based TV.[202]

 

The bankruptcy of KPNQWest in 2002 and accounting problems analogous to Enron[203]at Qwest (formerly US West) were striking. When the old AT&T was divested into the seven Baby Bells, US West (now Qwest) had the largest area of land of any of the RBOCs. On 9 March 1998, Qwest announced a merger with LCI International making it the 4th largest long distance company in the U.S.[204]

 

Qwest joined with KPN in the Netherlands to create KPN/Qwest, with the largest optical network in Europe. The Denver based Qwest had one significant rival in the area: Level 3 Communications, a fast rising company[205]with close connections to Enron[206]and the blessing of Warren Buffett.[207] We shall examine Level 3 in more detail later (§9) and show that it played a key role in US efforts to acquire European Infrastructure (figure 7).

In 1997, Global Crossing appeared on the scene. Soon it had one of the best fiber optic networks: “Nearly 100,000 route miles join more than 200 cities around the globe.”[208] On 29 September 1999, Global Crossing formally merged with the Frontier Corporation.[209] In January 2002, Global Crossing “filed for Chapter 11 bankruptcy….The fourth largest bankruptcy in U.S. history, it listed assets of $22.4 billion and liabilities of $12.4 billion.”[210] We shall examine this in more detail later (§ 10). For the moment, it is of interest that both Level 3 and Verizon were among those tobid for Global Crossing.[211] (Richard Perle, a defense advisor to the National Security Agency (NSA) and on the board of Autonomy,[212] played a profitable role in selling Global Crossing. In light of criticism, he resigned his post as security advisor.)[213] On 18 August 2002, Hutchinson Telecom-munications and Singapore Technologies Telemedia acquired 61% of Global Crossing for a bargain.[214] In March 2003, Global Crossing re-emerged from the ashes.[215] In 2004, both Global Crossing and QWest were active in Voice over IP.

 

As indicated earlier (§4), MCI/Worldcom was also a serious competitor to AT&T. On 4 April, 2002, it was awarded a $450 million Defense Research and Engineering Network (DREN) contract.[216] Worldcom also bid for a 3.5 billion Federal Aviation Authority (FAA) contract to upgrade the country’s air traffic control communication. However, on 16 July, 2002, the FAA awarded the contract instead to Harris Corporation (of Melbourne, Fla., which had links with Jeb Bush),[217] which led a team of brand name telecom firms, including the “Baby Bells” Verizon, SBC and BellSouth Corp (which also had links with Governor Jeb Bush),[218] as well as Defense contractor, Raytheon Technical Services Company.[219]On 21 July, Worldcom filed for bankruptcy.[220] On 26 July, 2002, Verizon Wireless Inc.[221], the largest U.S. mobile-phone company, announced it would“take over the accounts of customers now billed by bankrupt WorldCom Inc.”[222]

 

In 1984, the year that AT&T was divested, Arun Sarin began his telecommunications career at Pacific Telesis Group, working in particular on cellular business acquisitions. This led to AirTouch Communications, where he became CEO before Airtouch merged with Vodafone in 1999.[223] In April 2000, Mr Sarin became CEO of Infospace “a leading global provider of infrastructure services for wireless devices, merchants and Web sites,”[224]with links to Verizon and VeriSign.[225] In 2000, Arun Sarin also outlined his vision of how the Internet and telcos could link together in the future. Not surprisingly his firm, Infospace had a serious role in that vision. Significantly the carriers in that vision were former Baby Bells (Verizon) and AT&T. 

 

In January of 2001, Sarin[226] left Infospace. In February 2001, the Venture Capital firm Accel Partners, based in Menlo Park, California, and leveraged-buyout (LBO) giant Kohlberg Kravis Roberts (KRR), based in New York, “announced a new joint venture called Accel-KKR Internet. Its goal was to create companies with integrated online and offline assets, especially in the burgeoning business-to-business arena.” Arun Sarin became the CEO of the new venture.[227]

 

Accel-KKR was one of the few firms, which was reportedly happy with the enormous bankruptcy woes among the telecoms. On the surface, this wais because these impoverished telcos represented a bargain for enterprising investors, bankers and leveraged buyout persons.[228] In the spring of 2004, for instance, KKR quietly acquired PanAmSat for $4.1 billion.[229] We shall see later (§11) that this was part of a much bigger picture, whereby formerly state owned satellite systems were being taken over by the private sector.

 

Was it not curious, however, that one of the protagonists in this game should be someone who began with one of the Baby Bells? It almost looked as if the disbanded group were reconfiguring. One forced the competition into bankruptcy, or preferably leveraged buyouts, then took them over at a bargain price.[230]Just after one had raised considerable money on the argument that they were the cash cows of the future, one spread the word that the telcos were in desperate straits and complained that they could not survive without subsidy. Such complaining was effective. In 1996, it led to the Telecommunications Act, which helped AT&T return to former markets. Some believed that the Internet Freedom and Broadband Deployment Act (2001)[231] would solve these problems. Others feared that this was another subtle step of the major telco(s) to regain the position they once had. Indeed, some expected that it would accelerate that process. Between 1984 (when AT&T was divested) and 2000, the seven Baby Bells reconfigured into four. With the possible bankruptcy of Qwest, the number of Baby Bells would have dwindled to 3. At the same time Qwest was conveniently looked after by Verizon (= 3 former Baby Bells in one: Bell Atlantic + Nynex +Qwest). Meanwhile, in 2004, Qwest Wireless and the Cellco Partnership applied to the FCC to transfer 62 licences to Verizon.[232]

 

A futurist would have predicted that the number of Baby Bells would decrease. One could almost see coming the argument that because the telco situation was so desperate and utterly hopeless, the only hope was to allow the Baby Bells and AT&T to save the day using the entirely modern and novel idea of a monopoly.[233]In any case, in November 2004 the Bell Operating Companies (BOCS) were actively filing to gain permanent control of their broadband lines.[234] In November 2004 it was also announced that “within the next several months, Verizon Communications Inc. will be asking consumers to start thinking of Verizon as a television brand, alongside Comcast, NBC, DirecTV, and Fox.”[235]

 

6. SAIC (Science Applications International Corporation) 

 

A fourth essential player in these developments linking telephony and the Internet is perhaps less known but not less important. The same year that the Internet began in the United States (1969), a former member of Los Alamos Laboratories founded the Science Applications International Corporation (SAIC). Within a year, they were using computers to identify two branches of computer-related growth: large-scale systems analysis and modeling; 2) development of integrated software, including provision of data-processing services and training based on the latest in computer technology.[236] During the next decade their concerns were increasingly linked to diverse military applications with one common thread: the use of computers and the development of advanced specialized software.[237]

 

By 1987, SAIC was a national leader in Computer-Aided Logistic Support (CALS).[238] By 1997, SAIC was “one of the world’s top systems integrators, one of the leading research and development firms in the U.S., and a major builder of the country’s defense information infrastructure. SAIC also was one of the largest providers of solutions in information technology, data security, electronic commerce, Internet and Intranet services, and one of the largest and most successful government contractors.” National security services remained SAIC’s largest business area.[239]

 

To understand how these developments became crucial for our story a short excursus is necessary. Formal naming of the Internet came under the auspices of Network Solutions when it was founded in 1991. In 1993:

 

Network Solutions was awarded, through a competitive bidding process, a 5-year Cooperative Agreement with the National Science Foundation to continue this work…Network Solutions managed both the front-end registration services (now known as registrar services) and the back-end addressing, resolution, and distribution services (registry services) for .com, .net, and .org, domain names, through an agreement with the Defense Data Network-Network Information Center (DDN_NIC).[240]

 

In 1994, the official body for Internet naming became the Internet Assigned Names Authority (IANA).[241] In 1996, the Science Applications International Corporation (SAIC) bought Network Solutions. This soon led to complex developments linking Network Solutions, SAIC, and Verity. In 1997, the same Science Applications International Corporation (SAIC) bought AT&T’s BellCore and soon after renamed it Telcordia Technologies.[242] SAIC now employed some 30,000 professionals and had official sales of $4 billion.

 

With respect to operations and business support systems (OSS/BSS), SAIC teamed up with webMethods to create a RapidApps™ integration platform for companies with critical time-to-market needs and/or limited budgets.[243]In April 2001, SAIC and webMethods, were among the partners along with VeriSign, Microsoft, Baltimore Technologies, HP, IBM, IONA, PureEdge and Reuters, to announce a second-generation Public Key Infrastructure (PKI) Standard known as XML key management specification (XKMS).[244] Hence, SAIC, working with the RSA and Verisign, was deeply into security.

 

During the fiscal year 2000, SAIC launched new initiatives and expanded its business in information technology (IT), e-commerce, and next generation networks. Mergers expanded SAIC’s scope considerably,[245] although these initiatives remained small compared to its military contracts. In 2002, SAIC won – or pre-negotiated - major contracts in three commercial growth areas including: application hosting, wireless technologies, and health. Already in February 1999, Bellcore (now SAIC’s Telcordia) announced with the Toshiba Corporation a project to create: “technologies necessary for the integration of wireless and Internet communications,”[246]

 

Also in 1999, the same Bellcore, now as, SAIC's Telcordia Technologies, signed “an agreement with Sprint to develop the core software for a visionary new direction in networking that enables the integration of telephone calls and data service over Sprint's Integrated On-Demand Network.”[247] By 2002, Telcordia Technologies was “providing mobility solutions and won contracts to provide OSS software components and intelligent network platforms.”[248]

 

Telcordia Technologies, owned by SAIC, became a serious player. It held key patents for broadband data communications technologies like Asynchronous Digital Subscriber Line (ADSL), Asynchronous Integrated Network (AIN), Asynchronous Transfer Mode (ATM), Integrated Subscriber Digital Network (ISDN), Frame Relay, Switched Multimegabit Data Service  (SMDS), Synchronous Optical NETwork (SONET), and Video-On-Demand (VOD). It invented, developed, implemented or maintains software on which 80% of the U.S. telecommunications network depends[249]and its vision was to be “THE major enabler - worldwide -of tomorrow's Next Generation, packet-based, data centric network model and information-based, e-commerce economic model.”[250]

 

AT&T in its various guises, and its partners were extending well beyond telephony and the Internet into four further areas, namely, a) telephone number mapping, b) domain name systems, c) education and d) Next Generation Internet. In 2004, SAIC was very active in Homeland Security[251] and had developed an Automated Exercise and Assessment System (AEAS).[252] SAIC was working with Juniper Networks for new military networks.[253]

 

In November 2004, there were plans by SAIC to sell Telcordia for 1.3 billion (i.e. a profit of 600 million) to the buyout firms Warburg Pincus and Providence Equity.[254] This development is again open to a number of interpretations. Some would say that the increasing presence of for profit firms in areas that were traditionally linked with the public telecoms sector, inevitably meant a greater turnaround of ownership purely in terms of which companies were most lucrative at the moment. Others would be inclined to ask whether it was co-incidental that these deals were being made by a surprisingly small number of private equity firms such as Carlyle, Providence, Gores, Cinven, and Apax (cf. § 9). Still others would wonder if the turnarounds themselves might not be a façade to hide a set of closer links among a select group of partners. Four interconnected examples will serve to explore this suggestion: ENUM, DNS, Education and Next Generation Internet.

 

               Telephone Number Mapping or Electronic NUMbering (ENUM)

 

In 2000, Telcordia and Verisign committed themselves to Telephone Number Mapping or Electronic NUMbering (ENUM).[255] By coincidence, Lucent, which continued to see itself as an AT&T lab, also saw ENUM as their solution for internet telephony problems. Sometimes it seemed as if AT&T and SAIC/Telcordia were two faces of a same strategy. The Telephone Number Mapping (enum) initiative entailed other players such as the Internet Engineering Task Force (IETF) and the International Telecommunications Union (ITU):[256]

 ENUM is the name adopted by the telephone numbering working group of the Internet Engineering Task Force (IETF) to describe a mechanism using the Internet Domain Name System (DNS) to map E.164 numbers to Uniform Resource Locators (URLs).  E.164 is an International Telecommunication Union (ITU) standard that describes the format of telephone numbers used around the world.

 

The proliferation of communications devices at our disposal has created a problem: A multitude of devices that access different networks (PSTN and IP) through different address conventions (phone number, SIP address, email address, etc.) and input capabilities (telephone, computer, PDA). This problem has created the need for a method which allows easy accessing of the growing list of emerging devices, regardless of the platform to which they are connected or which device is being used to access the information. ENUM is a solution to this growing problem: a convergence enabler that bridges the PSTN and IP worlds.

 

There are many service applications that will be facilitated by the ENUM standard. One of the more prominent ideas is the establishment of a single contact number for individuals.  This would, for example, allow the business card of the future to contain a single number rather than a long list of addresses for home phone, office phone, fax, cell phone, and email. Various services will use the Internet to translate that one number into service specific addresses.  Some experts believe that ENUM has even broader potential. A recent article in Communications Week International described ENUM in these terms.

 

ENUM seems destined ultimately to emerge as the most important new Internet platform since the World Wide Web - perhaps even eclipsing it in long-range importance.  A measure of its broad significance was the Internet standards speed record recently set by the initial adoption of the ENUM specification on the road to an Internet standard.[257]

 

On the surface this promised to be a magnificent development. The ENUM standard could establish the framework for a global numbering system that could ultimately enable persons to use only one number to access all of their communication devices including cell phone, fax, phone, and e-mail. But who precisely was in charge? We were told that:

 

The Internet Architecture Board (IAB) and ITU-T Study Group 2 are discussing collaboration on the operational, administration and delegation issues related to deployment of ENUM protocol-based services. This requires extensive consultation with administrators of resources derived from the international E.164 numbering plan including national and integrated numbering plan administrators.[258]

 

At a practical level, it was the IETF, which was in control. But the situation was more complex. In North America, the ENUM initiative arose from an agreement between Telcordia[259] and Verisign. If the plan of Telcordia and Verisign succeeded, it looked as if the traditional naming activities of organizations such as the International Telecommunications Union (ITU) and the International Standards Organisation (ISO) could come exclusively under US jurisdiction. Some have seen the conclusions of the ITU meeting in Marrakech, September 2002 as a new basis for a continuing European role.[260] Meanwhile, the ENUM Forum was dominated by Telcordia, AT&T, Illuminet (now owned by Verisign)[261] and Neustar (which has an alliance with Telcordia)[262] and included Worldcom and the International Internet Telephone Organization (IITO).[263] 

 

               Domain Name Systems (DNS)

 

Officially and formally the question of Domain Names has been under the jurisdiction of the Internet Assigned Names Authority (IANA) since 1994. When IANA was being reformed in 1998, among the players in this field were the Policy Oversight Committee and the Council of Registrars (POC/CORE),[264] who suggested the development of a global “whois” search by name. There were many debates. President Clinton appointed Ira Magaziner to advanceU.S. interests but his approach did not work in Europe and especially in Geneva.[265] Objections were made on the basis of privacy issues,[266] but interestingly enough the idea of a universal Whois or Uwho is now part of Verisign’s official plan. There were also other players. When Dr. Robert Kahn, one of the founders of the Internet, was asked in 1998 about the possibility of unified network directories he noted that:

 

One possible way to accommodate this is to use the existing Handle System technology that was supported by DARPA and has been operating on the Internet for the past several years. This could be incorporated with essentially no change in the way the existing DNS system operates. A major feature of this System is that it provides the necessary coordination mechanisms for a unified directory system and can easily support multiple registrars for a given TLD [Top Level Domain].[267]

 

Dr. Kahn, who was the President and CEO of the Corporation for National Research Initiatives (CNRI, see below), was also a protagonist in the development of Digital Object Identifiers (DOIs):

 

CNRI has been providing both registry and directory manager services for an alternative identifier system (known as Digital Object Identifiers or DOIs) on the Internet in conjunction with publishers in the U.S. and Europe. The technology was developed with support from DARPA and is being used by other groups such as the Department of Defense and the Library of Congress, and in various digital library research efforts. The registry is a single logical entity that is distributed in multiple locations and supports open interfaces. Multiple directory managers will likely be added by the publishers in the coming year, but the basic identifier system can be used by others as well.[268]

 

In short, the naming game was not only about telephony and computers. In July 2001, the Korean company Enpia applied the Digital Object Identifier (DOI) to commercial e-business solutions. By co-incidence, the CEO of Enpia, was also the vice-chairman of the Digital Content Forum, vice chairman of the Korean E-Book Industry Association and vice chairman of the Digital Music Standard Group.[269] The DOI via Content Directions also made deals with Microsoft’s Corbis.[270] Meanwhile the CEO of Content Direction.com[271] claimed that

 

As the DOI spreads from publishing to other industries and becomes (over time) the primary mechanism by which people find and access structured information on the Internet, I believe that every company in every industry will want to assign DOIs to their objects. This represents a tremendous opportunity for CMS [Content Management Systems] and DAM [Digital Asset Management] vendors.[272]

 

This will be especially true in a MPEG 21 environment with its multi-media meta-data DRM abilities.[273] In 2004, it lookrd as if Radio Frequency Identification )RFID) were becoming part of that vision. Some saw the DOI as replacing earlier visions of an Universal Resource Name (URN).[274]Not surprisingly, DOI extended to the library world also. As will be shown presently, this explains why the Dublin Core Metadata Initiative of the Ohio Library Computer Center (OCLC) was part of a much bigger picture. Full consideration of the names and naming debate is beyond the scope of this paper and will be considered elsewhere.[275]Even so, in the present context, it is important to consider briefly the realm of education. 

 

 

 

               Education

 

One dimension of the naming discussions has been that the .gov domain should go to the government, the .org to ISOC and that the .edu domain should come under the auspices of Educom, which is connected with Educause. A former head of Educom, Mike Roberts, has also been a head of ICANN. It could hardly be a co-incidence that in this same period, Educom, in conjunction with the IEEE, was working on a National Learning Infrastructure Initiative[276](NLII) to create an Instructional Management System (IMS) "to enable an open architecture for online learning."[277] This entailed the use of a Learning Object Model (LOM), used by the Global Learning Consortium.[278] By co-incidence the US Army also used a Learning Object Model (LOM).[279]

 

In January, 2001 the American Society for Training and Development (ASTD) in its Learning Circuits had a simple newsbyte about Standards Movement Gains Support: “The agreement between a committee under the IEEE [Learning Object Metadata Working Group ] and the Dublin Core Metadata Initiative (DCMI), pledges coordination of their efforts to create a set of metadata specifications.”

 

The standards drive has also picked up some significant endorsements from learning management technology providers. Three makers of LMS [learning management systems] technologies, including category-leading Saba[280], said they are at various phases of incorporating the Sharable Courseware Object Reference Model (SCORM) into their systems. SCORM is a methodology developed by the federal government's Advanced Distributed Learning (ADL) initiative under which learning content can be designed and described to allow it to interoperate with different LMS systems.[281][

 

The same Learning Circuits of January 2001 contained a seemingly unrelated newsbyte that: “PricewaterhouseCoopers…and its team beat out rival groups for the $453 million contract, including the team of Click2learn.com and SAIC, as well as Arthur Andersen, EDS, and IBM.”[282]

 

One of the rival groups mentioned, SAIC, was the developer of the Sharable Courseware Object Reference Model (SCORM) mentioned in the preceding newsbyte. SAIC was the corporation that bought Network Solutions, owned its spinoff Verisign, Bell Labs and via Telcordia was leading the Electronic NUMbering (ENUM) initiative in North America. SAIC lost the contract in January 2001. But since then the US Army became more involved with SAIC’s SCORM[283]  as did the training company, THINQ,[284] which worked closely with the Department of Defense in their Advanced Distributed Learning (ADL) programme.

 

The scope of the game becomes clearer when it is realized that the same SAIC was also involved with business objects where they were working with IBM, with SAP –which was started by former IBM employees—and entailed bodies such as the Object Management Group (OMG), Open Applications Group (OAG), Workflow Management Coalition (WfMC), E-business eXtensibe Markup Language (ebXML) and Universal Description, Discovery and Integration of Business for the Web (UDDI).[285]

Five years ago, Blackboard was a relatively unknown method for the delivery of electronic learning materials. On 29 November, 2000 Blackboard Inc. announced that it was acquiring the former AT&T CampusWide Access Solutions and CEI SpecialTeams, a division of iCollege.[286] In 2001, “the company more than tripled its installations, from 1,800 to 5,500.” In 2002, the company “booked over $80 million in sales.” In 2001, Blackboard also partnered with Bantu Inc, a “leading provider of secure, business-grade Instant Messaging and Presence solutions,”[287] which had amongst its partners SAIC, Sprint, SRA/Assentor, Verisign and the US Army. Blackboard also became a portfolio company of the Carlyle Group[288] with close links to the White House. It is fully natural that senior members of the government are concerned with the future of education in their country. Is it also fully to be expected that they invest in specific technologies with which they themselves are implicated through private firms? We shall see presently (§ 9) that these links involved not only electronic blackboards but also e-voting machines. Here the circle included SAIC, Carlyle and Northrop Grumman.

 

               Next Generation Internet and the Grid

              

In 1998, SAIC made an alliance with Cisco Systems in support of Next Generation Networks. In 1999, Telcordia and General Electric (GE) Information Services activated “the telecom industry's first Internet-based interconnection clearinghouse to facilitate critical business transactions between telecom carriers and to facilitate national telecommunication interconnection,” and launched the Next Generation Network Initiative.

 

There were also network dimensions to this vision. As noted earlier, MCI introduced the first commercial connection to Internet. In 1989, the National Science Foundation Network (NSFNET) launched a high-speed digital network capable of transmitting large volumes of data among academic computing centers throughout the country, forming the foundation of today’s Internet. MCI played a leading role in this cooperative effort. CompuServe e-mail service was the first to be connected to NSFNET.

 

In 1996, Worldcom bought Uunet the largest ISP at the time. In 1997, Worldcom boughtMCI and helped to create an undersea cable system network linking the US and Europe. In 1999, Worldcom began an undersea cable network system linking the United States, New Zealand and Australia. In 2001, Worldcom created the Terabit Challenge to optimize available bandwidth on a complete optical network.[289] Not surprisingly Worldcom was also one of the initiators of the Internet2 project also known as the Next Generation Internet (NGI) initiative which, beginning in April 1998, linked 115 universities and research institutes – a number which had grown to 202 in June 2003. The Next Generation Internet entailed organizations such as Internet2 and the University Corporation for Advanced Internet Development (UCAID) whose advisory groups reads like a Who’s Who of the Internet.[290]

 

The NGI network was based on Very High Performance Backbone Network Service (vBNS)-Net which was originally established to link the five civilian supercomputers, namely, the Cornell Theory Center (CTC), the National Center for Atmospheric Research (NCAR), National Center for Supercomputing Applications (NCSA), Pittsburgh Supercomputing Center (PSC), and the San Diego Supercomputer Center (SDSC).[291] It will be recalled that the other key proponent of Next Generation Internet was Telcordia, or rather its mother company, SAIC.[292] In 2000, Worldcom planned a merger with Sprint, which was blocked by the EU.[293] Even without a formal merger, there is every reason to believe that MCI/Worldcom and Sprint continued to co-operate.

 

To understand the global dimensions of the scheme it is useful to recognize that those involved in the NGI were also the proponents of new forms of parallel computing called grids.[294] As with the Internet, this was an idea which began in Europe. The Large Hadron Collidor at the European Organization for Nuclear Research (CERN), which begins operations in 2005, will generate petabyte/sec amounts of information which no single computer in the world today could hope to handle properly. Physicists at CERN thus mapped out a vision for a new level of parallel, distributed computing to address the challenge. The NGI[295] and the Grid Project weree linked with the European GEANT[296] project and the Eurogrid project.[297]

 

Ian Foster, an immensely charming physicist at the Argonne National Laboratories (ANL) and his colleague Dr. Kesselmann at the University of Southern California, Information Sciences Institute (USC/ISI), made this idea accessible in a very useful book.[298] The idea of the grid soon became popular on the hype charts. Major corporations such as IBM and HP were now fully committed to making both the Next Generation Internet (NGI) and the grid vision a reality, especially in the context of e-science.

 

At INET 2002 (Arlington, June 2002) a very senior scientist from Caltech, Harvey Newman, modestly pointed out that it would really require investments of $1 billion per year to make this work. The big vision was “big bucks,” though doubtless this will be seen to be modest compared to the total costs related to full IPv6mandated Internet Protocol Security (IPSec) and Domain Name System Security (DNSsec). 

 

All this was closer to telephony, computers and naming than it may seem. The Next Generation Internet (NGI) was leading to a Next Generation Information Networks (NGIN) which entailed, as Gregory Pankauski, explained in The Next Next Generation in Learning,“ a virtual field trip that takes 200,000 students to the Louvre…. The network's Web-based tools will include videoconferencing, which will allow students in the district’s more than 11,000 classrooms to share information.”[299] The latest version of this vision entailed the National Lambda Rail where a number of private bodies were systematically buying fibre optic lines to produce their own educational solution. The rhetoric surrounding this project was magnificent. But the project was ultimately aimed at a privileged few who could afford to pay for the resources. Very little was said about the great majority of persons whose finances would not allow them access to this next generation internet. Ultimately this new vision extended the American notion of gated communities into the corridors of education.

 

To be sure, all this was happening in the context of wonderfully politically correct sounding bodies such as the Internet Educational Equal Access Foundation (IEEAF).[300] Meanwhile, the same conquest of names, which brought a few hundred millions to Network Solutions in its new guise as Verisign; more hundreds of millions to SAIC’s Business Objects; more hundreds of millions for a Learning Object Model applied to military training especially in the army, could now, via global networks bring many more billions through a Learning Object Model (LOM) applied to education around the world. In this context, European alternatives such as Educational Modelling Languages (EML), appeared like minor distractions.[301]

 

As was suggested earlier, the Next Generation Internet (NGI) plan was connected with the Dublin Core Metadata Initiative owned by OCLC, which had similar goals of universal application in the library world. By 2004, the OCLC Dewey Decimal Classification system was used in more than 26,000 libraries around the world. If this plan succeeded, the applications to science, business, and military training would be applied to all of education.

 

Over the past few years, the United Nations Educational Scientific and Cultural Association (UNESCO) was working on a global portal for Culture and E-learning. Meanwhile, the World Bank was creating a (Global) Development Gateway “where worlds of knowledge meet,”[302] which also had an e-learning portal that focused largely on distance learning solutions from the United States. UNESCO and the World Bank offered two alternative visions of the world: one multilingual and multi-cultural: the other uni-lingual and uni-cultural.

 

One might be tempted to believe that the plans for a Next Generation Internet were yet another example of the hype that so often accompanies the high tech field. On closer study there is serious evidence to the contrary. In the early 1990s, the Japanese Nippon Telegraph and Telephone (NTT) developed a prototype multimedia Multi-User Dungeon (MUD)-like service, Interspace, which allowed people:

 

to navigate through a graphically rendered space and communicate with other people by text, telephone or video. The system is designed to enable distance education, as participants "attend" lectures and discussions, or catalog shopping, as participants wander through a virtual shop and talk to sales people. The system is implemented as a client running on a PC that downloads scene renderings from a central server over an ISDN link. Narrow bank ISDN is also used to support voice and visual communication….NTT is prototyping a network service in collaboration with several Japanese universities and with retailers.[303]

              

This was reported by US observers in 1994.[304] By 2002, futurists such as Oliver Sparrow were predicting the advent of an interspace in the context of telecommunications.[305] Nor was this just a vague prediction. It was being worked on by the Defense Advanced Research Projects Agency (DARPA), which was concerned with creating the net of the 21st century. This effectively entailed redesigning the whole of the Internet as we know it today. This project also explained increased top-level military and political U.S. understanding and their new approach that made IPv6 implementation and migration a priority.DARPA described the Arpanet as a first wave, the Internet as a second wave and foresaw the Interspace as a third wave for which a first prototype was developed in 1998. The Interspace:

 

will bring the level of analysis, of correlation of knowledge. It will move past search of individual repositories, beyond federation across repositories, to analysis of diverse groups of information across sources and subjects. To develop the new technology needed for this new wave 10 years hence, one needs to begin now so that widespread research prototypes can be available for the new millennium supporting global semantics. In this third wave, the Interspace, there will be distributed services to manipulate concepts across domains just as the ARPANET had distributed services to transfer files across machines and the Internet is having distributed services to transfer objects across repositories.The Interspace environment supports fundamental manipulation of concept spaces: indexing and retrieval, grouping and sharing.[306]  

 

Describing the Interspace[307] project in 1995 at the ASIS (American Society for Information Science and Technology) annual meeting, Dr. Bruce R. Schatz, who also developed the Telesophy project (see above §3), spoke of “building the WorldNet, every community big and small living in the interspace of all the world’s knowledge.”[308] By co-incidence, AT&T developed a WorldNet service.[309] More recently the Interspace vision led to Medical Interspace Projects (Medspace) which foresaw systematic changes in medicine including virtual town doctors.[310] Medspace “is developing research technology for semantic federation of community repositories and deploying that technology in a large-scale testbed for clinical medicine.” For starters, Medspace would make a semantic index of all of MEDLINE and BIOSIS. Semantic, in this case, had little to do with personal meaning. It entailed mainly formal, subsumptive relationships such as whole/part.  

 

If one looked more closely at the Interspace conceptual diagrams one found interesting parallels with the Spatial Paradigm for Information Retrieval and Exploration (SPIRE) project[311] at the Pacific Northwestern Labs, particularly their ThemeView method and the methods being developed at Sandia Labs.[312] It was almost as if the advanced military labs of the Department of Energy were working on another stage of prototypes for the Interspace. As so often there were competing visions of the future. The National Aeronautics and Space Administration (NASA) was working on the idea of an Interplanetary Internet which would combine terrestrial and space systems in a new system which would no longer be IP based. 

 

More recently, problems of terrorism came to play an important role in plans for the future of the Internet. On September 19, 2001, a week after September 11, there was an article asking: “Can Cyber-Intelligence Prevent Real-World Terrorism?”[313]The author of the article acknowledged the Federal Bureau of Investigation's (FBI) Carnivore system (now called DCS1000), but noted that perhaps the most promising development was DARPA’s Genoa Project, which “employs a combination of a cutting-edge search engine, sophisticated information harvesting programs, and P2P computing methods.”  

 

The article did not point out that the Genoa project, was developed jointly between DARPA and Syntek Technologies.[314] In 2001, Syntek was one of the companies to receive a Naval Sea Systems Command (NAVSEA) Multiple Award Contract (MAC) for 15-years, with a total ceiling of $14.5 billion.[315]At the time, the Vice President of Syntek[316]was John M. Poindexter, of Iran-Contra fame.[317]On February 13, 2002, Americans were warned that the nation was facing the threat of danger to homeland security. That same day, John M. Poindexter.[318] was appointed Director of the Pentagon's Information Awareness Office (IAO).[319]The IAO worked jointly with the Information Exploitation Office (IEO). These two organizations would receive “a big chunk of the $48bn of the taxpayers' money George Bush is pumping into his war on the evildoers.”[320]The IAO was already very active. Until recently it included eleven programs and one project. A cursory look at their goals suggested an emphasis on military dimensions rather than information for the public good.

 

 On 21 March 2002 the IAO made a Broad Agency Announcement (BAA) about a new Total Information Awareness (TIA) programme.[321] The deadline for the first round of submissions was 22 April although the call was supposedly open for one year.[322] On 7 August 2002, the Defense Advanced Research Projects Agency announced publicly that it would begin awarding contracts for the design and implementation of a Total Information Awareness (TIA) system.[323] TIA had as its motto the phrase Scientia est Potentia (Knowledge is Power) and its symbol was the Masonic pyramid and eye which is familiar from the American dollar bill.[324] The only difference was that the rays of the eye stretched out specifically over EurAsia and Africa and effectively to the whole world. TIA was the latest program[me] within the IAO. The Program Manager of the TIA system was John M. Poindexter:[325] “Grant applicants are warned that no money will be invested in "research that primarily results in evolutionary improvements to existing technology"; officials are committed to a fundamental redesign of technology.”[326]

 

In simple terms, the plan was to replace the Internet as it now exists with what some saw as a thinly disguised spy machine. All this was happening with effectively no consultation at all outside America. A small group within the United States was treating the rest of the world as insignificant. The plan met with opposition from within the US. On 23 January 2003, the Senate:

 

voted in favor of the Wyden-Feinstein amendment to the current omnibus appropriations bill (Senate Amendment No. 59) which would block the deployment of any TIA program until it has specifically authorized and appropriated funds. Exceptions in the amendment allow a TIA program to be used to support a lawful military operation or a lawful foreign intelligence activity conducted wholly overseas or wholly against non-U.S. persons, it should effectively preclude the use of TIA inside the United States against citizens.[327]

 

On 24 January 2003, it was reported that the Senate officially voted to stop funding the TIA project.[328] On 27 January Share Me technologies The Mobile future Weblog reported: “As you may know the Senate killed the Total Awareness Inititative. However, the big Brother aspect of control and invasion of your privacy is still alive and now taking new roots at OASIS in the form of a new XML format initiative called LegalXML Lawful Intercept XML (LI-XML).”[329]

 

Similarly a report on 29 January 2003, stated that TIA was not yet dead.[330] On 7 February 2003, the Electronic Frontier Foundation (EFF) urged support of the Wyden-Feinstein Amendment[331] and the same day Amercian Forces Press Service announced that TIA would go ahead under the supervision of two boards.[332] On 12 Febraury, 2003, the House and Senate of the US decided that TIA could not be used to spy on American citizens.[333] Nonetheless, on 3 May, 2003, DARPA “awarded a $3.5 million contract to Xerox Corp.'s Palo Alto Research Center (PARC) to create a privacy-protection system as part of DARPA's controversial Total Information Awareness program.“[334] On 17 July 2003, it was announced that the Senate was blocking funds for TIA,[335] which launched a new series of reports that TIA was killed. That same day Paul Rozenzweig, Michael Scardaville and Ha Nyugen published WebMemo 315 entitled: “Senate Should Restore TIA Funding” as part of their research on homeland security for the Heritage Foundation.

 

But on 22 July there was a new note urging that that the TIA should be stopped and that it still required the decision of a joint House-Senate Conference committee.[336] A note on 23 July pointed to the ongoing threat to privacy posed by TIA[337] and on 24 July a note from the Department of Defense pointed out that TIA was too broad but intimated that it was necessary nonetheless. On 24 September 2003 a conference on the subject agreed with the Senate position to eliminate funding for TIA. They concluded, however, that research on earlier projects should continue, namely: Bio-Event Advanced Leading Indicator Program; Rapid Analytic Wargaming; Wargaming the Asymmetric Environment and Automated Speech and Text Exploitation in Multiple Languages (including Babylon and Symphony. Significantly they added: “The conference agreement does not restrict the National Foreign Intelligence Program from using processing, analysis and collaboration tools for counterterrorism foreign intelligence purposes.” The objections made against TIA in the US were not against the system. The concern was simply that it should be applied only to foreigners and not to American citizens. We shall explore the psychological motivations for such distinctions later (§ 13).

 

In 2004, the idea re-emerged with a consortium founded on 28 September 2004 to create a war net or Internet in the sky to provide the military with a “God’s eye view of the battle.” The consortium included “Boeing; Cisco Systems; Factiva, a joint venture of Dow Jones and Reuters; General Dynamics; Hewlett-Packard; Honeywell; I.B.M.; Lockheed Martin; Microsoft; Northrop Grumman; Oracle; Raytheon; and Sun Microsystems.”[338]The proposed pricetag of the new system was in the range of $200 billion. Observers noted that the Pentagon had made two previous attempts: “Its Worldwide Military Command and Control System, built in the 1960's, often failed in crises. A $25 billion successor, Milstar, was completed in 2003 after two decades of work.”[339] The new vision was being championed by Donald Rumsfeld’s advisor, Bill Owen, who now also headed SAIC and Nortel Networks. This was the same Admiral Bill Owen who was Chairman of Vote Here. a company which was producing new electronic voting software (§ 9). 

 

               Only English or Multilingualism? 

 

Ten years ago the Internet was overwhelmingly English. Today the Internet is approx-imately 35% English, has Chinese as its second most important language; Spanish in third place, Japanese in fourth, German in fifth, French in sixth and Korean in seventh place.[340]  The Internet as envisaged by the United States remains effectively a uni-lingual, uni-cultural phenomenon.

 

To be sure there were multilingual projects in the United States. But their purpose was very different. In the military, there was a quest to develop new tools, which allowed communication with knowledge only of English. A “Translingual Information Detection, Extraction and Summarization (TIDES) program was developing advanced language processing technology to enable English speakers to find and interpret critical information in multiple languages without requiring knowledge of those languages.”[341] In the American vision, the worlds of e-business and e-science required global, standardized solutions in which variations of culture and language at the national, regional and local level played no significant role. In their high industry, there was a quest for tools, independent of language and culture: 

 

A major task will be to create tools independent of language and culture that can be instantly used by anyone, regardless of location or national origin. Tools will have to be developed that allow for effective remote interaction. Collaboration technologies will require models of the dynamics of human interactions that can simulate behaviors, characteristics, and appearances to simulate physical presence.[342]

 

The US is perfectly free to develop a comprehensive vision of the Internet that affects the whole of telephony, libraries, publishing and education within their own country. The problem was that this US vision foresaw controlling not only their own education but the edu. domain for the entire world, assumed that the future of education and e-learning would be in the image of their own uni-lingual, uni-cultural “melting pot” model of reality. Indeed to assume that a vision of 4.5% of the world, or rather the vision of a few thousand individuals in that great nation, should determine the future of world learning was at odds with the US’s own quest for democracy. Much more than money and profits were at stake. Here lack of vision could destroy trust and cultural diversity, which are a basis of culture and civilization everywhere in this global village.

 

In these developments there were serious contradictions between 1) a rhetoric of a universal Internet for everyone; 2) a plan whereby the US version of the Internet was exported globally and 3) the realities of the today’s Internet, which included well over 70 of the world’s 6,500 languages. When the Internet Society told us that the Internet was for everyone, did it perhaps believe that a US version of the Internet should serve as a model for everyone?[343] If so there was a question which of the three alternatives would win: NASA’s Interplanetary Internet, ARPA’s Interspace or the new Total Information Awareness or Terrorist Information Awareness (TIA) system?

 

All this posed important challenges for Europe, Asia and the rest of the world. When the United States painted a vision of an Information Highway, Europe insisted on the need for an Information Society[344] and some even spoke of a Knowledge Society. While the United States continued to assume that the Internet was to all intents and purposes in and forEnglish, Europe had been very conscientious in making the key documents of the European Union available in at least 11 and now 25 languages. Faced with this new vision it again had a choice. It could blindly follow the American solution, or it could remember its roots and insist on a multi-lingual, multi-cultural, open source model for the future of the Internet, which was becoming intimately linked with the future of knowledge and culture. 

 

7. Energy

 

Thus far we have established that AT&T and the Baby Bells played an important role in the development of the Internet and the evolution of new media. We have shown also that MCI/Worldcom and Sprint also played a significant role in the development of the Internet especially in America. We have shown how their efforts together were linked with most of the major U.S. multimedia mergers of the past decade. To understand the big picture it is also important to explore links between energy companies and new media, both in terms of electricity and oil.  

 

               Electricity

 

The obvious connections between electricity and new media take us back to the 1920s when AT&T owned Western Electric and the two were so obviously dominant that they were forced to divest some of their holdings in 1932. Less well known are other connections. In the United States, the two largest electricity firms have been General Electric (GE) and Westinghouse Electric. These very large corporations were active in a whole range of fields from aircraft production to wired and wireless communication, and were again linked with AT&T. General Electric was the nation’s sixth largest defence contractor. We have already noted links between General Electric and SAIC. General Electric Capital remains by far the largest equity investment firm in the United States. In fact, GE and Westinghouse have played and are playing a central role in the American media industries. For our purposes a few highlights of these connections will suffice.

 

Film Studios: Universal

 

Universal Pictures was begun by Charles Laemmle in 1912. In 1946, it merged with International Pictures to become Universal-International. In 1952, Universal-International became a part of Decca records. In 1962, the Music Corporation of America (MCA, founded 1924), bought Universal. In 1990, MCA was acquired by Matsushita, a counterpart of General Electric and Westinghouse. In 1995, a controlling stake in MCA was acquired by Seagrams. In 2000, Vivendi acquired Seagrams and Universal and renamed itself Vivendi-Universal.[345] In 2003, General Electric acquired Vivendi-Universal. In so doing it simultaneously acquired one of America’s major film studios and what had been one of Europe’s largest media conglomerates.        

 

               Radio Networks

 

The Radio Corporation of America (RCA) was founded “in 1919 to control the US patents of GE, AT&T, Westinghouse and United Fruit.”[346] In 1929, RCA purchased the Victor Talking Machine Company for $154 million and began manufacturing radios and phonographs as RCA/Victor. In 1932, concerns of a growing monopoly forced GE and Westinghouse sell off their stake in RCA which became linked with RKO, which in turn was sold to Howard Hughes in 1948. In 1985, General Electric (GE) re-acquired RCA.

 

 

 

               Television Networks

 

RCA formed the National Broadcasting Company in 1926. As noted above, GE and Westinghouse were forced to divest RCA and NBC in 1932 for regulatory reasons. In 1985, when GE re-acquired RCA it also re-acquired NBC. In 2003, GE formed NBC-Universal that included:

 

the US film studio, theme park and cable tv interests of Vivendi Universal. At that time GE had revenue of around US$135 billion and assets of US$575bn, with around 315,000 employees in over 100 nations. It ranked as the 5th largest US company by sales and the 8th largest in the world.[347]

 

Similarly, the American Broadcasting Company (ABC) began as the second network in the US in the 1920s as a joint venture between General Electric and Westinghouse, was acquired by Capital Cities Communications in 1986 which, in turn, was acquired by Disney in 1995 for $19.5 billion.[348] Originally the third network, the Columbia Broadcasting Service (CBS) had a different origin. It was founded by the Paley family in 1927. In 1962, CBS-Sony records was founded in Japan. But in 1995, Westinghouse Electric acquired CBS and renamed itself CBS. In 1996, CBS bought Infinity radio and broadcasting and outdoor advertising group for $4.7 although, Mel Karmazin, Infinity’s CEO remained the largest shareholder. Karmazin became CEO of Viacom.  

 

In 1999, Viacom theoretically acquired (Westinghouse Electric renamed as) CBS for $50 billion. Others would note that Viacom and CBS merged as partners and that the interests of CBS (or rather Westinghouse in disguise did not gone away). By 2004, Viacom included “CBS, MTV, Nickelodeon, VH1, BET, Paramount Pictures, Infinity, Viacom Outdoor, UPN, Spike, Country Music Television, Comedy Central, Showtime, Blockbuster and Simon & Schuster.”

 

Hence all three of the major television networks in the United States were intimately connected with energy in the form of electricity.  These energy companies, under the guise of different names have begun to make serious inroads into the European media markets. In 2002 and 2003, General Electric quietly bought Vivendi Universal. On 24 August 2004, Viacom acquired a 75.83% stake in Viva Media AG in Germany.[349] We shall see presently (§ 9) that these were not isolated examples. At a higher level, General Electric was playing a key role in GE Americom, which since its merger with SES to form SES Global  transformed the satellite industry.  

 

            Cable Television Networks

 

Just before re-acquiring its radio and television networks in 1985, GE began to explore cable networks. In 1982, General Electric (GE) was thwarted in an attempt to acquire Ted Turner’s CNN network.[350] In 1989, GE founded CNBC (Consumer News and Business Channel), a cable and satellite television news channel, which subsequently spread to Asia and Europe in 1997. Meanwhile, in 1996, GE partnered with Microsoft, to launch the cable news network MSNBC. In 2002, GE acquired Telemundo Communications Group “for $2.7 billion in a deal with an investment group that includes Sony and Liberty Media.” GE also acquired the Bravo Network from a deal with Cablevision and MGM for $1.25 billion.[351]

 

From the above, it is obvious that electrical energy companies such as General Electric and Westinghouse played a central role in many of the high profile media companies of the US even if their name was usually in the background. They represented the highest level, involving deals in the tens of billions. Our next two examples, WCS and Anschutz/Qwest, are at a much lower level. On the surface, WCS was about a small energy company that went into communications, went into debt for $6+ billion; went bankrupt and was acquired for a “mere” $270 million. We shall examine this company more closely as a case study to understand in more detail aspects of the dot.com and tele.com.bust. 

 

            Williams [Energy] Company and Williams Communication Services (WCS)

 

In 1985, Williams became the first energy company to harness its core competency as a builder of networks to enable competition in the communications industry when it founded a subsidiary, Williams Communications Services (WCS), of which it owned approximately 86% of the stock.[352] On 9 February, 1999, Concentric Network Corporation made an alliance with Williams.[353] In July 1999, Williams signed an agreement with “the Genesys Group, an international teleconferencing services provider and the market leader in Europe and Asia, which will acquire the video conferencing business unit”.[354] (In 2004, Genesys via the Trans company was making inroads into the Russian telecoms market). 
 
In 1999, Williams had an Initial Public Offering (IPO). For the next two years it was one of the most interesting pioneers and seemed to have every chance of being a triumphant success. On 29 January 2001, Williams sold its interest in its Houston-based enterprise services business unit to Platinum Equity.[355] On 3 April, Platinum Equity acquired all of Williams Communications. Also on 3 April, three new members were added to the board: retired Nortel Executive John A. (Ian) Craig; Nextel Co-Founder, Morgan O’Brien and High Profile Sports Executive, Julius W. Erving.[356] On 22 April 2002, Williams filed for bankruptcy because it had $6 -- some say $7 – billion in debt. On 16 October 2002, it emerged from its chapter 11 proceedings as WilTel Communications Group, Inc.[357] By October 2003, Leucadia National had acquired its entire assets for $420 million.  

 

When we look more closely at Williams Communications, we see that it had all the right contacts. For instance, on 14 November 2000, Williams Communications teamed with Boeing to deliver a first-run major motion picture from Miramax Films in Los Angeles to AMC Theatre in New York in Digital Format.[358] On 1 November 2001, it signed a 20-year telecommunications agreement with the Boeing Company valued at $267 million.[359]

 

Williams had two unique features. First, it developed many international agreements. To appreciate their extent it is worth listing them in some detail. On 1 March, 2000, Williams acquired “dark fibers on Telia's 28,000-mile fiber-optic network throughout Europe.”[360] On 3 May, 2000, Williams extended  its international reach as one of the largest stakeholders in the new $1.06 billion Asia-Pacific Cable Network (APCN-2.), “an intra-Asia 19,000- kilometer submarine cable project that will connect China, Hong Kong, Japan, South Korea, Malaysia, the Philippines, Singapore and Taiwan.”[361] On 14 May 2000, an agreement between Williams Communications and PowerTel Ltd. gained significant capacity on the Southern Cross Cable Network, an undersea fiber-optic cable linking Australia and New Zealand with Hawaii and the West Coast of the United States.[362]
 
On 22 May 2000, National Grid Group ( London); Chilean carrier Telefonica Manquehue; and Williams Communications invested $220 million to found the Southern Cone Communications Company, S.A., a major new broadband fiber-optic network linking Argentina and Chile.[363] On 19 February 2001, Williams obtained a facilities-based Type I license allowing it to establish a base of operations in Japan and transport traffic from Japan to its U.S. backbone network in a full-circuit configuration via an undersea fiber-optic cable linking the two countries.  By now, Williams’ U.S. network had more than 33,000 miles in operation, making it the largest next-generation network in the United States.[364]
 
On 18 March, 2001, Williams announced that it was “providing New Skies Satellites teleport facilities for New Skies' Asia Pacific satellite, giving customers a combined fiber and satellite connection between North America and the Pacific Rim.”[365] On 26 March, 2001, two of its satellite teleports received Loral Skynet Satellite Services' Uplinker Awards.  On 29 August, 2001 the Japan-US (J-US) cable consortium, comprising a group of 44 leading telecommunications companies, activated the J-US Cable Network providing direct connectivity between the US and Japan.[366] On 20 September 2001, Williams “signed a letter of intent to enter a three-year commercial business transaction to purchase network capacity.”[367] On 20 December, 2001, Williams “closed on its asset purchase agreement to obtain the fiber-optic network, intellectual property, and Internet protocol capabilities of CoreExpress.” On 10 February, 2002, Williams expanded its network's international reach through acquisition of long-term capacity on Canadian and Pan-European network segments operated by Teleglobe, a leading supplier of global broadband and data services.[368] On 20 February 2002, it expanded its relationship “with KDDI America, Inc., a wholly owned subsidiary of KDDI Corporation, the largest international telecommunications company in Japan.”[369] In short, Williams developed the best connections between US local networks and the emerging global networks. 
 
Williams second unique feature was a special relation with the Baby Bells. Already on 8 February, 1999, Williams Communications formed a unique alliance with SBC to transport long distance voice, data traffic and SBC’s Equity Investment underscored Williams Communications' network and solutions strategy.[370] On 29 February, 2000, it was announced that Williams would acquire the “long distance network assets of Ameritech Communications Inc., a subsidiary of SBC.[371] On 1 August 2001, Williams was “selected by SBC to provide long distance service to Cingular Wireless in the traditional SBC13-state region.” By this time, Cingular Wireless, a joint venture between SBC Communications Inc. and Bell South, was the nation's second largest wireless carrier.[372] On 20 November 2001, Williams became “the preferred provider for long distance voice and data traffic for SBC in Missouri and Arkansas.”[373] On 5 Febraury, 2002 Williams “signed an agreement to provide long-distance services to Verizon Global Networks Inc., a subsidiary of Verizon Communications.[374] Interestingly enough, on 31 October 2002, the day Williams emerged from bankrupty as the newly formed, WilTel Communications, Keith W, Storey became President[375] and Chief Executive Officer (CEO). Storey had 20 years of industry experience including management positions at Cox Communications, Southwestern Bell, and Bell Communications Research. In short, the special relationships with the Baby Bells, meant ultimately that someone with 20 years of experience in their network could take over Williams. 

           

We noted earlier that after floating its initial IPO in 1999, Williams was sold to the Platinum equity firm on 3 April 2001 and that less than three weeks later declared bankruptcy. It is noteworthy that the special agreements with SBC, and Verizon continued to develop.  It helps to know that in 1998, before Williams even came onto the horizon of public attention, it formed a “formal working relationship” with the Blackstone [Equity] Group, which served as their “financial and strategic advisor” and specifically advised the “sale of Williams Communications Solutions to Platinum Equity and Williams Communications Canada to Telus Corporation in transactions valued at over $400 million.”[376] We shall see later that Blackstone prides itself on its links with major firms such as AT&T (§ 9).

 

Williams Communications remains of interest as an example of energy firms becoming interested in new media. At the same time the story of its short lived success is open to many interpretations. Some would say that Williams simply had very bad luck making deals with Teleglobe and Global Crossing months before these impressive firms went bankrupt. Others might ask whether Williams’ amazing ability to create links between national and international networks was precisely what made it so important to the Baby Bells. Federal jurisdiction laws prevented the RBOCS from making these links on their own. But with Williams as a front much more was possible. Some would be tempted to suggest that Global Crossing and some of the other international ventures served the same purpose. They were effectively Trojan horses to enter into walled markets that had been closed to them.

 

On 10 July 2001, the President of Williams commented on the health of the company: “It's unfortunate that the telecom industry is being painted with the same broad brush, causing our stock and bond prices to be undervalued.”[377] In this view, the burst of the telecom bubble dragged Williams down with it. But is it not possible that the so-called telecom bubble burst was itself a diversionary tactic a) to hide some all too quick deals and more significantly b) to ensure that a lot of new companies with unknown names could serve as pawns for the really big players to enter markets which were legally beyond their reach? This would help to explain a paradox that the ITU statistics record no real slump or slowdown in the IT and telecom sectors. It might also explain why the buyouts equity firms seemed less a passive response to unfortunate bankruptcies and more an active search for fortunate companies. We shall return to this theme (§10).  

 

Anschutz

 

Our second example, at a much smaller scale than the General Electric and Westinghouse networks listed above, is Anschutz “holding company for Anschutz's portfolio of companies with holdings in energy, transportation, media, communications, professional sports, agriculture, entertainment and real estate,” which began in 1958, and which is now the largest stockholder in Qwest.

 

Qwest started in Dallas as a small player of no real significance. It was acquired by Anschutz. It was catapulted into the world scene in 1996 when it partnered with Frontier Communications to build a national fibre optic network for the United States, a story to which we shall also return (§ 10). Soon Qwest was merged with US West. The combined company then became partnered with the Dutch national telephone company, KPN. As a result the company had access to some of the best networks in both the US and Europe.

 

Suddenly they also had amazing talent as their managers. From 1997-2002, Joseph P. Nacchio, formerly Chief Engineer of AT&T, became President and CEO of Qwest. Since 2002, the chairman and Chief Executive officer of Qwest has been Richard C. Notebaert,who stepped down as chairman of the board of Ameritech Corporation (cf. figure 1) in December 1999. His 30-year career with that organization included appointments as president of Ameritech Mobile Communications (1986), president of Indiana Bell (1989) and president of Ameritech Services (1992).

 

And yet by 2002 KPN/Qwest was bankrupt. By August 2002, the Carlyle Group had acquired its Qwest Dex online (Yellow Pages) phone book. By 2003, its amazing networks had been snapped up and, as we have mentioned by 2004, Verizon had applied to acquire 62 of its licences. Some observers would say that the Qwest saga epitomizes the tragic ups and downs of the telecom bubble burst. Companies which seemed to have all their ducks and Dex in a line suddenly found themselves sinking.

 

More questioning minds might consider another possibility. Qwest’s sudden links with one of the American networks served to it set up as bait for a European partnership with KPN which owned the E-Bone and had helped found Unisource (cf. §10). As a small mid-Western company it posed none of the threats of one of the telecom giants. As a small company it could also plausibly go awry. Once bankrupt those who had bigger plans could conveniently buy up the networks which they could not be perceived as wanting directly. To facilitate this they were fortunate to find the co-operation of the equity companies (§ 9). If one made enough noise about the tragedy of a little company that was successful (not mentioning that it was vastly over-inflated); failed and returned to being a small company, one might even hope that persons would overlook what happened to the treasures that were temporarily there.

 

This could be what happened with Williams and with Qwest. Could it be that the whole telecom bubble burst was effectively about a number of such cases which served elegantly to distract the public’s attention from a contemplated attempt to take over public service infrastructure in the US, Europe and if possible around the world? We need to consider further evidence before assessing whether this is even a plausible scenario. We shall begin with a brief look at connections between oil and media and then look at military contractors and equity firms before examining more closely the pseudo-telecom crisis and the anything but pseudo satellite crisis.            

 

Oil: Enron

 

Amidst the various scandals of the Enron Corporation, which was both an energy and an oil company, very little has been said of the 200 former Enron employees who now work in the Bush administration, and even less is heard of Enron Broadband which “owns 18,000 miles of fiber network that deliver high-quality, efficient bandwidth solutions. Enron has also established pooling points in 25 key cities around the world, including cities in Europe and Asia that provide an interconnection and switching platform for providers and consumer of bandwidth capacity.”[378] By 2004, Enron also offered four new businesses: Global Semiconductor Services; Media Services; Global Voice Minutes Services; Digital Content Services (DCS).[379]

 

            Film Studios: Paramount 

 

Initially, Paramount had nothing to do with oil. In 1912, Adolph Zukor founded the Famous Players Film Company. In 1916, it merged with the Jesse L. Lasky Company, and the new combined company was renamed Paramount. In 1966, Gulf+Western (oil) Industries gained control of Paramount. Hence, an oil company owned one of the major film studios and in 1989 renamed it Paramount Communications before merging with Viacom in 1994.[380]

 

Further connections between the oil industry and new media have been studied by others: e.g. links between, Clear Channel, “the Texas-based owner of more than 1200 radio and 36 television stations in the USA, with its own syndication and tour management divisions,” the Carlyle Group, the Bush family and administration. Many other connections have been noted, e.g.:

 

Secretary of State Colin Powell was on the corporate board of America Online, now merged with Time-Warner, which owns CNN. A member of AOL/Time-Warner's board of directors, Carla Hills, also sits on the board of directors of Chevron. She was the first President Bush's trade representative. On the board of directors of Exxon-Mobil sits J. Richard Munro, former chairman and CEO of Time-Warner. Secretary of Defense Donald Rumsfeld was on the board of the Tribune Company, owner of the Chicago Tribune, the Los Angeles Times, Newsday, and many other newspapers as well as TV stations….The director of Texaco (recently merged with Chevron), former senator Sam Nunn, is also on the board of directors of GE/NBC….Texaco board of directors member Charles Price sits on the New York Times/Boston Globe board of directors. Corporate board member William Steere is on the board of directors of Dow Jones/Wall Street Journal. A member of the Dow Jones/Wall Street Journal corporate board, Rand Araskog, also sits on the board of directors of Shell Oil.…The connections of the current White House administration with big oil hardly need mentioning. Most notably, National Security Advisor Condoleezza Rice comes from the board of directors of Chevron -- which has a tanker named for her -- and Vice President Dick Cheney (secretary of defense during the first Bush presidency) was chairman and CEO of Halliburton, which provides construction and maintenance services to the oil and other energy industries as well as field support to the military.[381]    

 

This quote is form an article in 2001 that listed many more such connections which, incidentally have not diminished after the 2004 election. Any attempt at a comprehensive list thereof connections would lead to a long study far beyond the scope of this paper. For our purposes it is the big picture that is of interest. Two points stand out:

 

1) The rise of new media in the United States were intimately connected with the energy, especially in the form of electricity and oil. Almost without exception, the greatest film studios, radio networks, television networks, cable networks, and media conglomerates were intimately connected with the energy sector.

 

2) these media –energy connections inevitably took us back to a handful of a) very large corporations; b) persons in the highest echelons of the administration; c) companies with close military connections (§ 8) and d) private equity firms (§ 9).

 

One striking example of these connections is MCI/Worldcom. In 2002, when Worldcom went bankrupt, it was “rescued” by investments from Citibank, J. P. Morgan Chase and General Electric Capital.[382] In 2002, the “bankrupt” company “jumped to eighth among all federal technology contractors in 2002, with $772 million in sales,”[383] and in 2003 it was awarded a wireless deal in Iraq.

 

8. Military

 

All over the world the military plays a significant role in the development of new media and as is to be expected many of the details of their activities in this domain remain secret. The details of such activities in the United States are not of concern in this paper. As noted earlier there are trends for individuals and organizations with close military connections to be become involved in new security systems such as TIA (cf. § 6). The details thereof are again beyond the scope of this paper. Our concern rather is with another trend whereby the military, or more specifically, the chief companies that work with the military, were increasingly becoming involved with security and information systems for the public sector and for civilian life. One example was just cited: GE which was intimately connected with the rise of the film studios, radio, television and cable networks, was also the nation's sixth largest defense contractor.

 

But this is only the surface. Traditionally, we think of Boeing, Lockheed Martin and Northrop Grumman as aircraft companies with strong ties to the military and space. In 2002, these three companies received $42 billion in Pentagon contracts.[384] The past decade has also seen major growth in their involvement in information systems, particularly government information systems.

 

               Boeing

 

Boeing had a government information systems company, which it sold to SAIC in 1999. In April 2000, it founded “Boeing Government Information & Communications Systems, which concentrates on global positioning navigation systems; airborne early warning and control systems; integrated command, control and communications systems; and integrated battle management systems.”[385]

 

 

Lockheed Martin

 

“Lockheed Martin is the leading provider of information technology to the federal government--and has been for the past ten years.”[386] “For the sixth year running, Bethesda, Md.-based Lockheed Martin retained its crown with about $2.4 billion in information technology contract obligations during fiscal 1999…” “Lockheed Martin also made the first cut on the $1.8 billion, 10-year Air Force Integrated Space Command and Control contract. Lockheed Martin and TRW Inc. of Cleveland each passed the down-select phase and now are competing head to head for the lucrative contract…”[387] Lockheed and Boeing together formed United Space Alliance, a company to which NASA outsourced much of its back office needs. Raytheon was active and foresaw large growth in information technology estimating that the “tasking, processing exploitation and dissemination of information offers a market of $6 billion to $12 billion over the next five years.”[388] Lockheed Martin also runs Sandia Labs.[389] The Honourable E.C. “Pete” Aldridge Junior, was on the board of directors of both Lockheed Martin and Global Crossing.[390]  Another member of the board of directors of Global Crossing was Lt. General Donald L. Cromer, the former president of Hughes Space and Communications Company.[391]

On October 4, 2004, the US government awarded a contract potentially worth “$3 billion to Lockheed Martin and its partners, which include AT&T, Qwest, BellSouth, and Verizon. The service will involve the integration of all postal data communication networks into a single network service that will provide enterprise data transport, voice, wireless, remote access, network management, and managed security services.”[392]

            Northrop Grumman

Northrop Grumman was also active in this field. In 2001, it bought Litton Systems, another strong player in the government information technology market.[393] In 2002, it bought TRW Systems.[394] TRW owned Vinnell which worked closely together with Kellogg Brown and Root (KBR also known as Halliburton). “The Vinnell-Brown&Root joint venture had at least six contracts worth nearly $200 million from 1998 to 2002. In addition to the United States, Vinnell and VBR performed work in Egypt, Oman, Saudi Arabia and Turkey. They were also one of three major beneficiaries of the “rebuilding” of Iraq. Their bill alone amounted to over $20 billion (figure 3). A full list has been made by the Center for Public Integrity.

Northrop Grumman, the current parent company, had nearly 4,000 contracts worth close to $42.5 billion from 1990 through 2002.”[395] Kent Kresa the CEO of Northrop Grumman was aware of the big picture.

Vinnell Kellogg Brown and Root (Halliburton)   $11,431,000,000

Parsons Corp.                                                              $5,286,136,252          

Fluor Corp                                                                   $3,754,964,295

Figure 3. The three biggest beneficiaries in the rebuilding of Iraq.[396]

His company, along with Lockheed had its eyes on the contract for the Joint Strike Fighter worth $200 billion – although some have mentioned an amount near $1 trillion:[397]

Having completed all 21 of the B-2 stealth bombers ordered by America's air force, Northrop Grumman has contacted the Bush administration, offering to build 40 more for a mere $545m apiece. If the Lockheed Martin team wins the contract to build the JSF, then Mr Kresa's company, as a Lockheed partner, would end up with a 17% stake in America's manned fighter for the 21st century. The military revolution championed by Mr Kresa, in which wars will be fought with information rather than pilots and bullets, continues.[398]

 

Another person aware of the big picture was C. Michael Armstrong who was an officer IBM (1961-1991); was chairman and CEO of Hughes (1992-1997), chairman and CEO of AT&T (1997-2002), chairman of the board at Comcast (2002-2004) and went on to become a director of Parsons Corp. and Citigroup Inc. We noted earlier how a small group of companies were becoming ever more closely linked. Could this have something to do with how a handful of individuals move as heads of these same companies almost as if in a game of musical chairs? Or was this simply further evidence of American competitiveness at work where one company after another captured their competitors’ best men? 

 

            Information Security Management

 

In 2004, George Washington University had a programme on Information Security Management, which was certified by the National Security Agency (NSA).[399] The corresponding site also had a section on employment opportunities. Seven companies were listed.[400] Striking was the extent to which this had military connections. Not surprisingly there was SAIC. Another company was Symantec which was trying to acquire Veritas for $13 billion in December 2004. The CEO of SAIC was Bill Owens, who was also a director of Symantec, and incidentally also president of Nortel Networks. “Between 1988 and 1991, Owens served as senior military assistant to Secretaries of Defense Frank Carlucci and Dick Cheney, the senior military position in the Office of the Secretary of Defense.”[401] A third company was Cisco, which had agreements with SAIC. A fourth company was TRW, now owned by Northrop Grumman discussed above. A fifth was Veridian owned by General Dynamics. A sixth was Booz, Allen Hamilton which had on its board a former head of the CIA. Finally, there was BAE Systems also active in both the defence and space industries.   

 

Any attempt to document all the connections between Boeing, Lockheed Martin, Northrop-Grumman and the new media would take us far beyond the scope of this study. Nor can we examine related companies such as Raytheon or Hughes. We have merely signaled the existence of this important dimension because we shall find that the same companies are players in the telecom troubles (§10) and central players in the satellite saga (§ 11). By way of context, however, it is necessary first to explore the role of equity companies.

 

9. Private Equity

 

Successful companies make money. In order to begin they require money. This was traditionally the role of banks and more recently the role of venture capitalists, private investment firms and private equity firms. One of the best known of such firms was Kohlberg, Kravis, Roberts (KKR), which began in 1977 by acquiring A. J. Industries Inc. ($26 million). In 1984, it acquired Pace Industries, Inc. ($1.6 billion); in 1985, Storer Communications ($2.4 billion) and it continued to grow. In the past three decades, KKR “completed more than 110 transactions involving in excess of $118 billion of total financing.”[402] The story of how this firm began as a brash, aggressive company that slowly shed “its hostile takeover for a kinder, gentler, buy-and-build strategy,” with its new motto of “proactive, patient, creative” has been told by others.[403]A realistic businessman will rightly note that such transactions, buyouts and takeovers are a natural and necessary dimension of a healthy business environment.

 

For our story, KKR is of a certain interest because, as we seen on several occasions, it frequently re-appeared in complex media transactions. Our real concern lies not in such individual transactions, but rather in a trend whereby a small group of equity firms were ever more consciously and systematically investing in whole sectors of the economy on a scale that had global implications. A few concrete examples will help to make this point.    

By way of introduction, a slight detour is necessary to explain the underlying ambitions of the new investors. It is important to note that the United States, which traditionally had a frontier mentality -- epitomized by the phrase “Go West young man” until stopped by the Pacific Ocean –or Hawaii,-- now saw the world as its new frontier. Some of those frontier spirits still live in the American West. One was Ted Turner, the largest individual landowner in the United States with over 1.7 million acres in Montana, New Mexico, South Dakota, Alaska and Florida.[404] Another was John Malone,[405] who headed Liberty Media and also the Eastern Management Group which had Worldcom among its clients. In 2001, there were reports that “Liberty Media is investing more than $5 billion in European cable-TV.” On June 21, 2001, Liberty Media “announced that it would acquire six cable-TV companies in Germany from Deutsche Telekom for terms that haven't yet been disclosed.”[406]

In 2001, Liberty Media also invested an additional $543 million in cash[407] in another company with the modest title of UnitedGlobalCom,[408]the European operations[409] of which were run by a firm with the equally modest name of United Pan-European Communications (UPCOY or simply UPC) in Amsterdam. Its CEO, Mark Schneider had a clear ambition: “To build a European AT&T, owning high-speed pipes that go into homes and businesses and using them to sell everything from Web content to phone service:”

It's the ultimate digital convergence play.…Schneider is running far more than a branch operation. UPC is not only providing Internet access but is also coming up with content, from TV programming in 22 languages to an Internet portal called chello. And by taking advantage of the thick cables, he's offering phone service, too….For his assault on the communications giants, Schneider has a powerful partner: Last winter, as part of an initial public offering, he sold 7.8% of the company for $333 million to Microsoft Corp….The buying spree has tripled Schneider's TV subscription base, to 6 million. And UPC, listed in Amsterdam and on the Nasdaq, has skyrocketed to a market cap of $18 billion, even though its revenues were just $419 million last year….No matter who wins, though, much of the credit for wiring Europe will belong to the onetime Washington lawyer working out of Amsterdam.[410]

 

One observer described UPC “as a central part in Mr Malone's strategy to build a pan-European cable empire after making billions in the US industry.” As noted earlier (§3) AT&T also invested $1.4 billion in these companies. For a very brief period, the UPC company seemed wildly successful. “In the U.S., the company's American depositary receipts soared as high as $79 in March 2000 before crashing to the current $1 level.” [411] On 30 September, 2002, “UPC, Europe's largest cable television company…filed for bankruptcy protection in the US and Netherlands. The move is part of a restructuring that is expected see United Global Com…emerge with 65.5% of the company in return for erasing two thirds of its ˆ10bn (£63bn [clearly a typo for £6.3bn]) debt.”[412]

 

There are two reasons for examining this case. First, on closer inspection, this was not simply a case of an investment that went wrong, went bankrupt, whereby many innocent investors collectively lost 10 billion euros. It was a company fronted by the so-called Darth Vader of media and of the information highway.[413] When the UPC company went bankrupt, many innocent investors lost their money, but the mother company, United GlobalCom, and John Malone increased their influence.     

Second, if this were an isolated case, it would simply be yet another example of the dot.com bust and the burst of the telecommunications bubble that ruined Williams Communications and saw KPNQwest shut in 2002 and brought difficulties to Carrier1 and Level3 Communications “after spending billions building pan-European networks.”[414] They were not isolated cases, however, which brings us back to the main topic of this section: the role of private equity firms. We shall look first at the Carlyle Group, then at some of the other private equity firms to indicate the dimensions of the problems. We shall show that they were closely involved in some of the most dramatic crises in multimedia firms including Kirch, Bertelsmann and Hollinger.

 

Carlyle

 

Much has been already been said by others about the Carlyle Group. Connections between the Carlyle Group, Halliburton (Kellogg, Brown, Root or KBR) and the Bush family have been made by many persons.[415] Halliburton's prime contracts with the Pentagon jumped from $483 million in Fiscal Year 2002 to $3.9 billion in Fiscal year 2003, an increase of almost 700%.[416] The Wikipedia has an entry.[417] Dan Briody has written a book on these connections.[418] Alfred Mendes has warned of the dangers of this group[419] as has Sherman H. Skolnick (Citizen's Committee to Clean Up the Courts).[420] In November 2004, Henry A. Waxman, called for a Congressional hearings into the VBR’s role in Iraq alleging overcharging of $61 million. As we have intimated earlier (figure 3) this is but the tip of an iceberg.[421] There were, of course, also conspiracy theorists, who linked this group with a quest for a new world order. These have also drawn attention to the presence of a swastika on the Radio Frequency Identification (RFID) chips linked with Carlyle.[422] These topics are beyond the scope of our essay.

 

 

 

Aerospace & Defense

Automotive & Trans

Consumer & Retail

Energy & Power

Healthcare

Industrial

Opportunistic

Real Estate

Tech & Business Sys

Telecom and Media

 

 

 

 

Year         Acquistion by Carlyle Group and others                                                     

1992        Military electronics group from General Dynamics[423]

1995         Federal Data Corporation (FDC)[424]

2002, 04   Healthcare and business publishing from Vivendi Universal [425]

2002, 06   Sonera Smart Trust AB[426]

2002, 08 QwestDex publishing business from Qwest Communications[427]                          

2003, 02   Casema, 3rd  Dutch Cable company with Providence from France Telecom[428]          

2003, 04   Retevision Audiovisual TV and signals section from Auna[429]

2003, 06   FiatAvio’s Aerospace Business [430]

2004, 04   Kingston Inmedia from Kingston Communications[431] 

2004, 05   Hawaii wireline from Verizon Communications[432]

2004, 06   60% of DDI pocket from KDDI[433]

2004, 06    27%, KKR 44% of Panamsat[434]

2004, 06   Loews Cineplex[435]

 

Figure 4 a) Focus industries of the Carlyle Group;[436] b) Media companies acquired by Carlyle between 1992-2004. [437]

 

We are concerned specifically with new media connections. It is striking, for instance,  that in 2004, the Carlyle Group had as its chairman, Lou Gerstner, who used to be head of IBM; that Carlyle was closely linked with Halliburton (Vinnell, Brown and Root or VBR); that the Parsons Group, the second major beneficiary of the Iraq war, had as a director, C. Michael Armstrong, who was the CEO of Comcast, AT&T and before that the CEO of Hughes; that one of Vinnell’s heads was the same Kent Kresa, who led the military efforts of Northrop Grumman, had become a director of General Motors and was also linked with the third group that has most profited from the Iraq war: Fluor. That some of the greatest corporations in the US, IBM, AT&T, General Motors, Northrop Grumman, and Comcast, were linked through their executives to private equity firms, which also had close links to the military events in Afghanistan and Iraq was noteworthy. More significant for our purposes was the scope of Carlyle which had 10 focus industries (figure 4a). The activities of Carlyle were global. For instance, along with J. P. Morgan they were involved in selling the Korean Koram Bank.[438] 

 

In 2004, the managing Director in telecommunications and Media at Carlyle was James A. Attwood, Jr., who oversaw corporate strategy at GTE, helped acquire BBN before spinning it off as a public company, was instrumental in the GTE – Bell Atlantic merger that led to Verizon and was Verizon’s Strategy and Development Chief.[439] He “committed more than $2 billion of equity in telecom and media investments since 2001. He led the firm's investments in Qwest Dex (now Dex Media, Inc.), eAccess Ltd., Telco Hawaii (pending) and DDI Pocket, Inc. (pending). Mr. Attwood is Co-chairman of the Board of Directors of Dex Media, and was scheduled to serve as a member of the Boards of Directors of Hawaii Telcom and DDI Pocket.”[440] Attwood’s predecessor was William E. Kennard, who was on the board of Nextel; was the director of the Federal Communications Commission (FCC), and also played a part in AT&T’s broadband strategies.[441]   

 

It could, of course, have been a complete co-incidence but it was, nonetheless, fascinating that a single individual, who was directly involved in a number of the bankruptcies and mergers of telecom burst, was also the managing director in telecommunications acquisitions in one of the leading equity firms. One needs only to consider a few of the key acquisitions of Carlyle in the communications field to suspect that a plan, some might say a carefully orchestrated plan, was underway (figure 4b). Around the world, Carlyle was buying significant bits of infrastructure, which were hit by the pseudo dot-com bust and the pseudo-telecom bubble burst (cf. §10). These included the DDI pocket, from KDDI which entailed mobile, wireless technologies from Japan in an area where America was lagging behind the rest of the world. NTT’s recent announcement to invest $40 billion in fibre to the home infrastructure suggested that there was at least one company, which was responding to these acts of hubris in a serious way.

 

A full analysis of the ten focus areas of Carlyle would lead far beyond the scope of this essay. It is striking, however, that Carlyle was also involved in Vaxgen, a firm which was searching for new AIDS vaccines, although it had not yet produced an effective treatment. Meanwhile, the World Health Organization had ordered India to stop producing cheaper alternatives. In November 2004, the same Vaxgen Corporation, in which Carlyle and others had invested, received a contract of $877 million for Anthrax vaccines. Critics noted that Fort Dettrick, the national facility, had long ago developed more effective means.[442]

 

Similarly, the Carlyle Group apparently had stocks in the parent company of Bioport, “the recently FDA approved monopoly holder of an anthrax vaccine.” The chief stock holder of this parent company of Bioport was Admiral William Crowe, Jr., who was Chairman of the Joint Chiefs of Staff; (worked closely with the then Secretary of Defense, Frank Carlucci, Chairman Emeritus of the Carlyle Group),[443] and incidentally was also the Chair of the Advisory board of the Center for Middle East Public Policy (CMEPP).[444] On all sides, there was evidence of using public monies to subsidize private firms, in which the politicians had considerable investments of their own. We begin to appreciate the enormous range of the Carlyle Group’s interests when we realize that it was also active in the domain of e-voting. 

 

               E-Voting Software

E-voting is a hot topic in every sense. We depend on new technologies for e-voting to be assured that the counts of votes at polls have been done correctly. One of the pioneers in this domain was Diebold, which created an elections software. One of the competitors in this field was the company, Vote Here, which, according to their website, was partnering with Sequoia Voting Systems, "to provide a new level of electronic ballot verification to customers of the AVC Edge touch screen voting system."

All this sounds unproblematic until we examine the details. The Chairman of the Board of VoteHere was Admiral Bill Owens, who was also former president, chief operating officer, and vice chairman of SAIC. Hence, SAIC, which was supposed to vet Diebold's elections software, was itself in the elections business.[445] Another former SAIC board member, also on the board of VoteHere, was ex-CIA Director Robert Gates, a veteran of the Iran-Contra scandal. Meanwhile, as noted above, Admiral Bill Owens, who was also head of Nortel, “served as Vice Chairman of the Joint Chiefs of Staff and was a senior military assistant to Secretaries of Defense Frank Carlucci and Dick Cheney. Carlucci's company was Carlyle Group, while Vice President Dick Cheney's former employer was Halliburton.[446] Some would see in all this the potentials of a conflict of interests. The present administration clearly saw no such conflicts and seemed impervious to the irony of taking the high ground with respect to voting problems in the Ukraine, just after entering a second term under conditions where their own counting procedures were questioned by many.    

 

Such problems with voting machines were compounded by allegations, already in the presidential election of 2000, concerning the use of subliminal advertising. In September 2000, it was reported that an: “ad aired for two weeks this month criticized Gore's prescription drug plan. An image of Gore was followed by fragments of the words "Bureaucrats decide," with the word "RATS" flashing for less than one second on the screen before the entire word "bureaucrats" appeared.”[447] The FCC investigated the matter. Significantly, one Commissioner, Furchtgott Koch who, as we shall see (§ 11) helped in the AT&T-BT joint venture, and was one of the most eloquent spokesmen for liberalization and deregulation, attacked the investigation stating that the FCC had no jurisdiction in this area.[448] In 2004, there were also accusations that: “CNN has been using subliminal advertising for Bush, flashing the word 'trust' in ads for CNN as well as coverage of Bush.”[449]

 

A diplomat of the old school would insist that countries such as the United States, which are seen as pillars of freedom and democracy, have every right to govern themselves as they best see fit. This is perfectly true and ultimately our concerns have nothing to do with American sovreignty in their own country. As even the American lawyer, Lawrence Lessig, has pointed out, however, there is grave concern internationally about the extent to which a small group of Americans, acting in the name of their people, are affecting and attempting to determine the lives of persons far beyond their own borders without these persons’ consent and sometimes very much against their will. He cited the case of some Americans who tried to tell Canadians what programmes they were allowed to broadcast on television stations within their own country. He admitted that if a foreign country were to arrive in Washington to tell the FCC what regulations they should have there would have been a great outcry and rightly so. The reason for inventing borders was that there would be some limits to what came from outside, and incidentally, also conversely.

 

The overzealous influence of some Americans tarnished America’s name because these extensions beyond borders were effectively twofold: 1) physical invasions into Afghanistan and Iraq which were well publicized; 2) invisible invasions of values which affected the whole world. We shall explore the reasons for this and the underlying psychology that caused it later (§ 13). For the moment, we shall begin by showing that Carlyle’s activities were not in isolation; that Carlyle worked directly with other equity firms in pursuing larger targets and that implications of their activities stretched far beyond internal matters (innere Angelegenheiten), as the East Germans used to say, i.e. far beyond American  borders.

 

As an example in passing one could mention James A. Baker, who was in the Department of Justice as Counsel for Intelligence Policy, was a senior counsel of the Carlyle Group; actively increasing Iraq’s debts through his government and this company while serving as president’s personal envoy charged with restructuring Iraq’s $132 billion in debt which generated at least $5 billion in new revenue annually. On the surface, America made a great show of forgiving Iraq’s debt. But this was conditional on Arab nations such as Kuwait forgiving Iraq’s debt to them. Hence, Baker’s challenge was to persuade Kuwait to be forgiving in this lose-lose situation for non-Americans. This was a level of conflict of interest that proved too much even for the press and a successor was eventually found for this task. 

 

To return to the bigger picture, we shall examine recent upheavals in global multimedia conglomerates. A reassessment of the telecom debacle and the satellite saga will reveal that much more was involved than isolated companies in single sectors.

 

 

               Related Equity Firms

 

We noted that Carlyle played an important part in the satellite acquisitions. But they were by no means alone. In the case of Panamsat, Carlyle worked directly with KKR and “split” the results 27% and 44% respectively.  There are other firms with whom Carlyle completed a series of acquisitions. A number of these appeared at events such as The 2004 European Private Equity Funds Conference in New York. Once again, we are not interested in exhaustive lists. Rather our concern is to draw attention to significant trends and dangers.   

A first matter of interest is the scale of these activities, KKR, founded in 1977, claimed that “The total financing raised by KKR (including the $18 billion of equity) for management buyouts and other investments exceeds $118 billion.” Cinven which, like KKR was founded in 1977, focused on larger European buyouts which entailed transactions “in excess of 23 billion euros.”[450] Cinven was active in Europe with Gores.[451] Beginning in 2002, Cinven became very active in the media field[452] (cf. below under Vivendi). On 1 November 2004, there was a merger between Apax/Cinven/World Directories.[453]

The Blackstone Group entailed transactions of over $80 billion. The official website of the Carlyle described it as “one of the world’s largest private equity firms, with more than $18.4 billion under management.” Permira advised $13 billion; Candover made investments of 25 billion euros. Apax has invested over 12 billion euros. This included 39 media companies of which 9 were in the US and 30 were in Europe. These investments extended to some 379 companies “around the world at all stages of development”[454] in six major sectors: IT, Media, Telecoms, Healthcare, Financial Services, Retail and Consumer. Thomas H. Lee managed $14 billion; Apollo managed $9 billion; Madison Dearborn managed $ 9 billion;[455] CVC Capital managed $9 billion; Clayton, Dubiler and Rice  invested $5 billion.[456] Terra Firma managed $4.7 billion;  Providence a modest $2.8 billion; Oak Hill, $1.6 billion; Platinum Equity founded by Tom Gores was valued at $1.4 billion, his brother (Alec) Gores Technology a ‘mere” $400 million. In this kind of company, united we stand took on a more weighty significance.

 

Apax                                                    Candover, Taylor & Francis    

Blackstone                                           CVC 

Carlyle                                                 Apax, Cinven, KRR                  

Cinven                                                  Candover

KRR                                                    Axel Springer 

Lehman Private Equity             J.P. Morgan

Providence Equity                                 Thomas H. Lee; Warburg Pincus         

 

Figure 5. Examples of equity firms and their partners in major bids

 

 

A second interesting phenomenon was that these equity firms typically partnered with each other or some other major corporation in order to make bids as consortia (figure 5). In rare cases as in the bids to take over the bankrupt Adelphia Communications, major corporations, such as AT&T and Warner were planning to compete with other equity firms (e.g. Thomas H. Lee Partners; Providence Equity Partners; and Kohlberg Kravis Roberts (KRR). In most cases, however, the equity firms appeared to play the role of go-betweens.  

 

A third noteworthy point was that the large banks also had their own private equity firms, with considerable funds as we learn from their websites. For instance Goldman Sachs managed “$11 billion aggregate capital commitments as of September 2002.” The Lehman Brothers Private Equity had a “total committed capital of approximately $9.5 billion.” JP Morgan had “over $19 billion under management.” Together the investments of the equity firms mentioned in the previous three paragraphs amount to over $380 billion. It is sobering to recall that in 2004, General Electric (GE) Capital had assets of “approximately $500 billion.”[457] By way of comparison, it is instructive to note that in 2003 the Gross National Product (GNP) of Switzerland, ranked as number 17 of the world’s richest countries, was 309.465 billion.[458] A combination of GE Capital and the equity firms mentioned above was greater than the GNP of Canada. Given that the equity firms had links with the highest echelons of government, the leading corporations and the major banks, they were potentially poised to wield enormous power.

 

               Private Equity and New Media                        

The major equity firms made no secret of their interest in (new) media, telecoms and information technology (IT). As we have noted, firms such as Carlyle and Cinven had specific departments devoted to these sectors. The site of the Blackstone Group stated that it “has partnered with leading corporations around the world, including AOL Time Warner (Six Flags transaction), AT&T (Bresnan transaction), Northrop Grumman, Sony, Union Carbide, Union Pacific (CNW transaction), USX, and Vivendi.”[459] There was considerable reason for concern, however, since these same firms were in the thick of the enormous deals which were at the centre of dot.com bust and the telecom bubble burst.  A brief look at five examples will make this clear.

               AOL

In January 1998, Cinven acquired IPC (the UK’s leading consumer magazine publisher) from Reed International for 1.376[460] billion euros:

At the time of acquisition, IPC…published 67 titles in 26 market sectors including women's weeklies, home interest, fashion and TV weeklies. Its subsequent merger with LH Media, another Cinven investment, in October of the same year, added 26 specialist consumer magazines in 8 market sectors.[461]

In 2001, Cinven sold IPC Media to AOL for $1.67 billion.[462] This signified a gain of approximately $300 million over the original purchase price. In 2003, when AOL-Time Warner recorded a $54.24 billion quarterly loss, the board decided to remove the AOL name and to sell Time Warner’s music business. EMI Group Plc made a bid and lost. On 20 November, 2003, a private equity consortium bid $2.55 billion. The offer included provisions for Time Warner to retain a 20 per cent stake in the business.[463] The consortium included Edgar Bronfman, Jr. Thomas H. Lee Partners, Bain Capital and Providence Equity Partners.[464] On March 2, 2004, Time Warner sold its Warner Music Group (including its record labels Warner Brothers, Atlantic, Elektra and music publishing division Warner Chappell) to this consortium for $2.6 billion in cash.[465] On 18 July 2003, Time Warner finalized deal to sell its music distribution arm WEA (CD and DVD manufacturing division to Cinram International for approximately $1 billion.[466]

At the time, there were plans for a merger between Warner Music and Bertelsmann. Instead Bertelsmann’s BMG group merged with Sony, a move that was approved by the European Commission in July 2004, by which time there were strong rumors that “Warner Music (12%) and EMI (13%) will have to merge to keep up with the new conglomerate and Universal Music Group (23%).”[467]

            Vivendi

Vivendi-Universal was one of the world’s largest media firms with investments in many sectors. In 2002, it spun off its engineering and services arm as Veolia Environment which had revenues of ˆ30.079 billion (57% from outside France). In June 2002, Vivendi sold its business and health publishing arms, Aporia and Medimedia for 523 million euros to a consortium led by Cinven resulting in Cinven 37.5%, Carlyle 28%, Vivendi Universal 25% and Apax Partners 9.5%.[468] In October 2002, Vivendi sold its US publishing business (Houghton Mifflin) to the Blackstone Equity group for 1.7 billion euros.[469]As noted earlier (§ 3), in October 2003, Vivendi Universal and GE formed NBC Universal: 80% owned by GE, 20% by Vivendi. In addition to music and theme parks Vivendi held 26.8 million shares in Time-Warner). GE claimed they paid $18 billion. Some claim $7 billion.[470]

 

One might have imagined that the Vivendi saga might have ended there but this was not the case. On 11 August, 2004 there was a discrete note that Cinven and the Altice One Group (Luxembourg) were in exclusive talks to buy Vivendi’s cable television rights, namely, Canal+ in conjunction with France Telecom for about 500 million euros.[471] This was hardly the whole story. The idea had been floated on 19 March, 2004, in an article with the innocent title: “Canal Plus, France Telecom cable divisions to merge,” The headline explained that the companies “want a new majority shareholder in the operation, with Canal Plus and France Telecom each retaining a 20 per cent share.” The article pointed out that: “Together, the two units have 1.7m subscribers, with connections to 4.3m households and sales of around ˆ400m for 2003.” It casually added that “Liberty Media, whose international division, UnitedGlobalCom, offered ˆ660m for Noos, the country’s largest cable operator, a few days ago, is thought by analysts to be a likely purchaser of the new operation.”[472]

 

Attentive observers have pointed out that if no objections were made within a few months, the whole of the French cable television domain would be in foreign hands, and more specifically those of John Malone of Liberty Media via United GlobalCom, which in turn had large investments from AT&T. It was hardly surprising to find the so-called Darth Varder of media trying to gobble sections of European infrastructure as if this were another bit of the Wild West especially since, as noted earlier, both he, and his henchman, Mark Schneider -- who was also the son of Gene Schneider, who founded Liberty Media-- had stated their aims so clearly. What was highly troubling, however, was to find a London based equity firm playing a key role in helping to achieve this American scheme, rather than protecting Europe’s interests. More troubling still was that companies such as Canal + were anything but struggling firms, whose lack of competence had doomed them to bankruptcy. They were among the best success stories in European new media that were being acquired, some would say, surreptitiously snatched.

 

This was all the distressing because it appeared to be a part of a larger movement. On 10 April, 2002 “Platinum Equity, LLC, a leading private buyout firm focused on acquiring and growing technology companies, acquired the ˆ1.5 billion (US$1.3 billion [sic!]) European operations of Alcatel's (Paris: CGEP.PA, NYSE: ALA) enterprise distribution and services business.” The new firm would be called Nextira.[473] Platinum’s website revealed that the company: “has acquired more than 25 technology-driven companies and several billion dollars of revenue from leading Fortune 500 Corporations including WorldCom, AT&T, Viacom, Dow Jones & Company and IBM. Platinum has an established infrastructure in North America, Europe, Asia and South America and a workforce of more than 10,000 employees serving tens of thousands of customers throughout the world.”[474]

The above would suggest that major corporations were using seemingly minor equity firms to acquire pieces of a bigger puzzle, which only they saw, understood and increasingly controlled. Ultimately the danger lay not so much in the Mark Schneiders (UnitedGlobalCom) or even in the supremely ambitious John Malones (Liberty Media) of this world. Individuals retire and their companies often fade with them. The deeper danger lay with the great corporations, which would then buy their mini-empires and make them part of schemes that undermined the powers of free companies and free nations.

 

            Kirch

The Bavarian, Leo Kirch, developed one of the largest media empires in the world with assets including TV rights to the World Cup and other sports, ProSiebenSat 1 (Sat 1; Pro Sieben, Kabel 1; N24 cable channels), DSF sports channel; Taurus  Produktion (Film and TV production units); Taurus Lizens and others (film and media rights);  and Kirch Sport. On 8 April, 2002, when the firm declared bankuptcy, it marked “Germany's biggest corporate collapse since World War II.”[475] The Kirch empire was so complex that a full account of its holdings and their fate would be far beyond the scope of this essay. Our concern, simply is to highlight, as in the Vivendi case, the extent to which equity firms, especially American equity firms, played a role in the breakup of a media empire.  

A month after the bankruptcy announcement, on 10 May 2002 it was announced that BayernLB “would team up with Lehman Brothers and J.P. Morgan to purchase Kirch's 40-percent holding in Axel Springer, a family controlled company that publishes Germany's top selling newspaper Bild Zeitung.”[476] On 9 October, 2002, the Deutsche Bank sold a stake “of 10.4 % of the equity capital of Axel Springer Verlag AG to Mrs. Friede Springer.” This reduced the stake of Deutsche Bank to below 30 per cent.[477] Exactly one year later, on October 9, 2003, the American investment firm, Hellman & Friedman LLC “signed a definitive agreement to acquire a 19.4% stake in Axel Springer Verlag AG from Deutsche Bank AG for ˆ350 million. After the sale, Deutsche Bank will only hold 10% of Axel Springer shares.”

This made the American firm the largest partner and as a result Axel Springer, which produced the notorious BildZeitung, Germany’s version of the Daily Mirror moved into American hands.[478] In this case, it was two American equity firms that set the process in motion. In 2003, Axel Springer agreed to sell Ullstein-Heyne-List book publishing interests to Bertelsmann’s subsidiary, Random House. This was another one of the mainstays of the Kirch empire, which became associated with an American name, albeit via a German holding.

Bertelsmann (Springer Verlag) and Kluwer 

Bertelsmann is by any standards one of the greatest media conglomerates of the world. Rumours that it was in financial difficulties and possibly a candidate for bankruptcy seemed absurd. In retrospect, it was possible to recognize that there were ulterior motives, this time coming from two London based equity firms. The background to this attack came from an unexpected quarter. The Dutch multinational, Kluwer Academic Publishers was a successful publishing company. On 18 October 2002, Candover and Equity announced that they had agreed in principle to acquire Kluwer for 500 million euros. In fact, they each agreed “to invest ˆ107.5m in the business, with senior debt and mezzanine facilities arranged and underwritten by Barclays Capital.”[479]

Next began attempts to acquire Bertelmann’s Springer Verlag, a high level scientific publisher – that had no relation at all with the Axel Springer/Bildzeitung debacle. Three fronts emerged: 1) was led by former Springer CEO Jurgen Richter, and backed by the Venture Capital (VC) firms, Blackstone and CVC Capital Partners; 2) was a joint approach by U.K. academic publisher Taylor & Francis and VC company Apax Partners and 3) was a bid by Candover and Cinven. On 27 May 2003, Bertelsmann’s highly prestigious Springer Verlag was sold to Candover and Cinven for ˆ1.05 billion (about $1.23 billion).[480] Thereby, two of the greatest names of academic publishing, which were not in a crisis state, moved into the hands of two English private equity firms. In the process, Bertelsmann, Europe’s greatest media corporation, had lost one of its choice holdings even if, ultimately, it was not shaken and perhaps not even stirred by the threats of its demise. As in the Canal+ case mentioned above, this was another disturbing example of healthy companies being acquired in the interests of quick gain rather than long term viability. A further consequence of such shuffles was that the publishing industry found it increasingly difficult to make ends meet. New media were bringing down the costs of publishing, but the intrusions of inequitable equity companies and others were threatening a whole trade.

            Hollinger

The case of the former empire of Conrad Black was very different, was undecided as of November 2004, and yet it invited comparison with respect to the tactics being used. As might be expected there were bidders for individual portions of the company. But again there were two sets of partners interested in controlling the whole. A consortium of U.K. private equity companies Candover and Apax Partners & Co. Ltd (APX.YY) put in a bid for the papers. Reports said that:

U.S. private-equity firm Kohlberg Kravis Roberts & Co. (KKR.XX) and German publishing company Axel Springer (SPR.XE) are interested in bidding for the whole of Hollinger, which also owns the Chicago Sun-Times and the Jerusalem Post. The company, which has its headquarters in Chicago, is currently trading at $18.44 a share, which values the company at $1.6 billion.[481]

The presence of equity firms at all these major media bankruptcies of the past years pointed to something more than coincidence. It would appear that equity firms, especially in the United States and the United Kingdom, were implicated in the so-called dot.com bust and the telcom crisis. Some would say that their focus on short term profits undermined confidence in the new media industries. Could it be that these crises were in some senses imaginary, or rather, that these crises were deliberately planned? Was it just their own greed that fueled these activities or were they, in turn, on assignment for others? If this were a Sherlock Holmes mystery, Dr. Watson would be working overtime. For our purposes it is useful to reconsider some details of the so-called telecom bubble burst. 

 

10. Telco Pseudo-Crisis

 

The official story is so well known that it seems almost superfluous to state it once again. All was well in the new media industries until 2000-2001, when there two great setbacks: 1) the dot.com bust and 2) a crisis in the telecommunications and specifically the telephone industry. Some link these events largely or even exclusively to the events of September 11, 2001 and the received wisdom is that since then Internet developments have been as shaky as our safety has been jeopardized by terrorism.

 

There was almost universal consensus that the impact of these setbacks was huge. With respect to the dot.com burst, according to the San Francisco Chronicle: “the top 200 companies in the San Francisco Bay Area alone lost $409 billion in market value during 2002.”[482] Between 2001 and 2003, AOL-Time Warner lost $200 billion in market value.  The telecom debacle was depicted as even worse. In 2002, in the US alone: “The telecom and cable sectors produced $40.2 billion of defaults, or 70 per cent of the first-half total.”[483]  In 2004, “With over 60 bankruptcies to date, it's now clear that the sector sank under too much capacity and debt. Telecoms have now shed half a million jobs and about $2 trillion in market capitalization.”[484] Nor was this limited to the United States. For over a year it seemed as if Deutsche Telekom, France Telecom, British Telecom, Telecom Italia, KPN, indeed almost all the national telecoms were in imminent danger of bankruptcy.

 

Everything went very quickly. To take a concrete example: The EBone began in September 1991 “when members of several European academic and research networks met to resolve long-standing European connectivity problems.”[485] In March 2002, KPNQwest finished its acquisition of EBone for 645 million euros. At the beginning of July 2002, KPNQwest NV was shut down. On 15 July 2002, Interoute acquired the EBone for 15 million euros.[486] In November 2002, Alcatel forced Interoute into liquidation. Two weeks later it emerged from liquidation following an agreement with Alcatel.[487]  There were many such examples. In the process, some of the greatest media conglomerates of the world, Vivendi, and Kirch were bankrupt within months and even the titans, Bertelsmann, and now Murdoch have felt more than tremors. Or so the story.

 

A number of reasons have been given for the bubble burst. These include: glut in the market; irregularities in accounting and fraud; a supposed lack of investment money; problems of competence and viability; effects of convergence and simple over-ambition. We shall outline briefly why these reasons did not explain the problem; examine in more detail the fate of one key player, Level 3 Communications, before standing back to look again at the world scene where a very different picture emerges of a healthy growth in telecoms worldwide. Were the US players ignorant of this big picture? Or was the whole telecom bubble burst ultimately a diversionary tactic? We shall suggest that the source of the crisis began long before 2000; that the real struggle involves control of key infrastructures and that that struggle did not end in 2001. In 2004, it continued full pace although it now entailed a new dimension: control of satellite networks (§ 11). An analysis of this problem will lead us to suggest that a deeper source of these crises lay elsewhere, in a struggle between a peaceful model of a society bound by law versus a military model bound by command, which saw itself above, or more accurately, outside the law. This was America’s real crisis. Perhaps they were striving to impose their crisis on the world, so that they could refashion global politics and create a new world order.  

 

            Glut in the Market

 

One of the most common explanations for the telecom troubles of 2000-2001 was that there was a glut in infrastructure: too many cables and networks and not enough content. If this were the cause, then all the telecoms should have been affected equally, which was by no means the case. In addition, one would expect that the building of infrastructure should have come to an abrupt halt after 2001. This was also not the case. Clearly the story was more complex and explanations need to be sought elsewhere.   

 

Irregularities and Fraud 

 

Another popular explanation was that the telecom meltdown arose from irregularities in accounting -- gone rampant some would add. In June 2001, Worldcom filed for bankruptcy with a $30 billion debt burden, amid allegations it hid billions of dollars in expenses. Many lawsuits ensued.[488] In May 2003, the Securities and Exchange Commission issued a Civil penalty of $1,510,000,000.[489] As noted earlier the actual amount of debt was $1 trillion with over $350 billion of unaccounted inter-company debt. By 8 August 2001, it was reported that, the European arm of Worldcom, Worldcom International, and Global Crossing UK were facing problems.[490] Such irregularities also occurred in a number of other companies that went bankrupt including Enron, and Adelphia. In some cases, simple fraud undoubtedly played a role in the bankruptcies. But a few rotten apples could not explain a large tremor in a major industry. Nor could they explain how some of the firms that went bankrupt, e.g. BBN and Williams, almost immediately went on to be very successful.

 

            Lack of Investment Money

 

It was also often claimed that success or failure was simply a question of having or not having money from investors. A number of examples show the contrary. One of KKR’s competitor’s in New York, Forstmann Little, was led by Ted Forstmann. Since 1978, Forstmann Little bought eighteen companies, including General Instruments[491] and computer-magazine empire Ziff-Davis (1994), for $1.4 billion.[492] In January 2000, Forstmann Little invested approximately $1.5 billion in XO Communications. In April 2001, Forstmann Little invested an additional $250 million in XO. He also invested in McLeod. Each of these investments included funds that Connecticut had committed to the two Forstmann Little partnerships. Both McLeod and XO subsequently filed for bankruptcy protection, effectively wiping out Forstmann Little’s equity investments. [493] XO, originally supported by Craig McCaw and subsequently under the aegis of Carl Icahn, also had plans in Europe, which it “voluntarily” abandoned. Hence, although XO had been dubbed one of the telecom trinity (along with 360 communications and Level 3), it clearly was not part of the vision that supported Level 3. Viatel had real networks in Europe, but after its initial financial troubles had difficulties raising $60 million at a time when its competitor had raised over $14 billion. Hence, money alone could not explain success or failure.

 

            Competence and Viability

 

Another of the myths connected with the dot.com bust and telecom bubble burst was that there were a great number of naïve and overenthusiastic individuals, who lacked the competence to succeed and the discipline needed to create a viable company, which became clear when the realities of the market brought them back to earth. No doubt there were such cases. But one could hardly say that companies such as BBN (Bolt, Baranek and Newman) belonged to that category. After all they belonged to that very small group that founded the American Internet. They were absolutely solid and had the best possible credentials. They were taken over by GTE, which was taken over by Verizon and renamed Genuity. As we have noted, Verizon showed no signs of bankruptcy and yet they discarded Genuity (formerly BBN), which soon went bankrupt.

 

Traditionally bankruptcy marked the end of a firm after all its hopes for survival had gone. The ingenuity of the new kinds of bankruptcy typified by Williams or BBN (in its guise as Genuity) was that firms with proven competence and ability saw their assets diminished, died and then, phoenix like, arose anew as if nothing had happened. Within a year of being integrated within Level 3, Genuity was thriving as never before. Far from being a case of incompetence, it almost looked as if the deeper reason for its bankruptcy was in order that someone else could profit from their competence. In the short term, this was Level 3. Perhaps there was a much larger picture: perhaps even Level 3 was merely a pawn in a vastly larger game.     

 

 

IBM Global Services

Rational Software

Informix

Price Waterhouse

Coopers

Lybrand

IBM Global Services (Lotus, Rational, Informix, Price, Waterhouse, Coopers, Lybrand)

EDS

A.T. Kearney

MCI Systemshouse

EDS (A.T. Kearney, MCI Systemshouse)

Klynveld

Peat

Marwick

Goerdeler

KPMG (Klynveld, Peat, Marwick, Goerdeler)

Deloitte

Touche

Tohmatsu

Bakkenist

Deloitte-Touche, Tohmatsu, Bakkenist

Cap

Gemini

Sogeti

Ernst

Young

Clarkson, Gordon

Cap Gemini, Sogeti, Ernst and Young (Clarkson&Gordon)

Andersen Consulting

Accenture (Andersen Consulting)

Booz

Allen

Hamilton

Booz Allen, Hamilton

Oracle

People Soft

J.D. Edwards

Oracle (People Soft, J.D. Edwards)

SSA Global

Baan

SSA Global (Baan)

Atos

BSO

Origin

SEMA

Atos Origin (BSO, SEMA)

Logica

CMG

Logica (CMG)

Computer Sciences Corporation

CSC

CGI Group

CGI Group

 

Figure 6. The big picture: Mergers of accounting, consultancy[494] and software firms in the past decade.[495]

 

Convergence 

 

Another reason given for the bubble burst was that it was part of a larger technological development or “shakedown”: a move towards convergence as the concerns of Information and Communication Technologies (ICT) shifted slowly towards Universal Convergence Technologies (UCT). As a result computer hardware and software firms, accountancy and consulting firms, which had once been very different sectors found themselves merging into new entities with expertise that bridged across these sectors. Hence, IBM, once a computer hardware firm, could sell its computer arm to the China in November 2004 and still continue as a powerful firm.

 

An IBM could also buy PriceWaterhouse and Oracle could buy PeopleSoft. As a result, what were 41 firms in 1990 are 14 in 2004 (figure 6). But again, notably, those which were swallowed up were not unsuccessful firms. On the contrary, in the case of Clarkson in Gordon, it was the best firm in Canada that was acquired by forces with a transnational and later a global vision. Instead of eliminating incompetent firms, convergence simply collected successful firms into much larger entities. This in itself should not have caused bankruptcies. 

 

Over Ambition

 

Others have claimed that the failures were caused by the excessive greed and over ambition of a few. Again this could not be the whole story. On 11 October, 2003, Brady.com spoke of three firms in particular as a telecom trinity: XO, “controlled by vulture investor, Carl Icahn; 360Networks Inc., supported by investor Wilbur Ross and Level3 Communications, supported by Warren Buffett.[496] All three seemed realistically ambitious and extremely successful. In 2004, XO and 360 Networks were bankrupt and only Level 3 remained.

 

In this context, the dot.com bust and the telecoms meltdown emerged in a more complex light. It was not simply a result of a glut in the market; a lack of competence and ability or even a lack of funding. The companies that failed often had all the right ingredients and the companies that were ultimately successful often had all the appearances of being unsuccessful, going bankrupt at the same time as key investors were reshaping their future. Curiously, the epicentres of the crises were three American cities: New York, Washington and San Francisco (along with the adjacent Silicon Valley). There were of course rumblings other centres of world finance such as London, Paris, Frankfurt and Amsterdam, and Tokyo. To understand the bigger picture we need a) to zoom in on one of the key players and then b) to stand back in order to understand the world scene.

 

Level 3 Communications

 

We mentioned Level 3 in passing earlier (§5). As with Williams Communications it will be useful to examine Level 3 as a case study in order to throw light on other dimensions of the so-called telecom bubble burst. Level 3 was founded in 1985 as Kiewit Diversified Group Inc. (KDG), a wholly-owned subsidiary of Peter Kiewit Sons', Inc. (PKS), a 114-year-old construction, mining, information services and communications company, headquartered in Omaha, Nebraska.[497] On 19 January 1998, KDG announced it was changing its name to Level 3 Communications, Inc. and on 31 March 1998, Level 3 became an independent corporation traded on Nasdaq. The company had direct links with Warburg Pincus Co-President, Joseph Landy.[498] By 2000, money was not really a problem:

 

Through the third quarter of this year, our capital expenditures have been $4.5 billion. We expect to spend $6.3 billion on capital goods through the end of 2000. These figures both represent increases in the amounts we expected to spend at the beginning of the year. We have raised almost $14 billion and invested in people, network infrastructure and operational capability very different from those of our competitors. Important parts of our US, European, Asian and undersea infrastructure will be completed in the very near term, on or ahead of schedule.[499]

 

An announcement on 26 April 2001 by XO made it clear that it was working with Level 3. XO stated that it would “reduce capital spending by roughly $2 billion over the next five years by canceling its European buildout and delaying expansion and activation of parts of its U.S. fiber-optic network. In addition, the company will take payments made to Level 3 Communications related to its European network and apply them to amounts due Level 3 for XO's North American networks.”[500] On 22 July 2001, Warren Buffet invested $100 million personally and his partners invested $400 million in level 3[501]

 

Meanwhile, Viatel, an American company founded in 1991 had acquired a 7,700-route   kilometer pan-European fiber-optic network and a trans-Atlantic cable system. On 1 March 2000, Viatel acquired AT&T’s UK subsidiary and thus expanded its pan-european routes by 1700 kilometers.[502] On 12 April 2000, Level 3 Communications and Viatel made an agreement to collaborate on the trans-atlantic system.[503] In May 2001, Viatel made use of chapter 11 bankruptcy protection in 2001 as it struggled with debts of $2.1bn. On 23 August, 2001, Level 3 Communications acquired the transatlantic network assets of Viatel.[504] On 10 September 2001 “Level 3 Communications Inc. bought back the transatlantic network it sold to bankrupt carrier Viatel last year. Level 3 released Viatel from its $9-million debt; Viatel will pay Level 3 $500,000 for a one year lease of two 2.5-gigabit wavelengths for existing customers. Level 3 will retain cash payments it has already

received from Viatel, including $94 million paid at the end of 2000. At the time of the original sale, Viatel's 25% stake in the network was valued at over $150 million.”[505] On 14 September 2001, Level 3 received another $750 million underwriiten by Goldman, Sachs & Co. (in conjunction with Salomon Smith Barney Inc.; Chase Securities Inc.; Credit Suisse First Boston Corporation; J. P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated).[506]

 

Good connections with the financial world continued. On 17 December 2001, Level 3 announced that it had “signed a 15-year lease agreement to provide data center space to Lehman Brothers, the global investment banking firm.”[507] On 25 February 2002, Level 3 acquired Corporate Software.[508] Meanwhile, at Viatel, Lucy Woods, who had been the head of Worldcom International, went on to become the new head. Meanwhile, creditors swapped their loans for 97% of the company's shares and on 10 February, 2002, four investors including Morgan Stanley raised $60 to keep the firm afloat.[509]Three weeks later, on 2 March 2002, Viatel was bankrupt. Level 3 acquired the whole Viatel network (figure 7).

 

 

 

Figure 7. Level 3 networks in 2004.[510]

 

In 1969, the year that the American Internet began, a small firm with strong ties to the military called BBN (Bolt, Beranek, and Newman) was also founded. BBN helped to build the original Internet, invented the e-mail protocol and "@" symbol, and in 1971, sent the world's first e-mail message.[511] It was subsequently taken over by Verizon, then dumped, changed its name to Genuity, went bankrupt and was then acquired by Level 3 in February 2003 (although the intention was announced on 27 October 2002), Level 3 acquired Genuity for $242 million.[512]

 

By 2004, Genuity had expanded and owned Software Spectrum, “one of the world’s largest resellers of business software” and Structure LLC, “a leading IT infrastructure outsourcing company.” On 9 August 2003, Level 3 acquired Telverse, a Voice over IP startup.[513] On 6 October, 2004, Level 3 announced “new agreements to supply network services in the UK and Ireland to ntl, one of the UK's largest broadband services providers.”[514]On 18 October 2004, Level 3 Communications announced that it had “signed a five-year, $337 million deal to provide Northrop Grumman with IP VPN services. This deal stems from a contract that Northrop Grumman signed with the U.S. Department of Homeland Security earlier this year.”[515]

 

Meanwhile, in April 2004, Level 3 announced the purchase of ICG Communications' dial unit for $35 million and on 1 October, 2004, it announced that it would pay $34 million cash for Sprint's wholesale dial-up Internet access business.[516] On 24 November 2004, Level 3 announced that it was launching a channel partner programme in Europe: “Commencing early 2005, Level 3 will initially focus its partner-recruitment and sales efforts around (3)Tone Business, its hosted VoIP offering for small and medium-sized enterprises.”[517]

 

Level 3 was not the only company to expand into Europe. We noted the activities of the Carlyle Group; Blackstone; Platinum; Cinven, Apax and other equity groups. Meanwhile, Cogent Communications (Washington) began in August 1999. In April 2000, it made a $310 million Cisco partnership agreement. In September 2001, it acquired NetRail and became a Tier One Service Provider. In April 2002, it acquired the major US operations and assets of PSINet. In January 2004 it acquired LambdaNet France, Spain, including operations in the United Kingdom, Belgium and the Netherlands. In March 2004, it acquired the German network assets of Carrier1.[518] By 2004, Edward J. Lu, the co-founder and Vice-President of Corporate Development of Cogent, was with the Carlyle Group.

 

The number of these takeovers was considerable. In April 1999, Global Telesystems (GTS) took “a 52% stake in Omnicom, a new entrant in the telephone market in France, for nearly $210 million, with a view to raising its holding to 67%. This access gave GTS/Hermès, which also controlled “French licence holder Esprit, a national presence plus numerous agreements with distributors.”[519]On 9 September 1999, Concentric Network Corp (San Jose) acquired Internet Technology Group plc, one of the UK’s largest ISPs.[520]  On 7 April 2000, Aether Systems, Inc. acquired IFX Group, PLC “Europe's largest provider of mobile financial data.”[521] On 6 October 2000, Via Net.Works, Inc. (Reston, VA), announced that it was acquiring Highspeed-Server-Internet Verwaltungs GmbH.[522] On 6 February, 2004, AG Interactive, the new media subsidiary of American Greetings Corporation, “acquired K-Mobile and key brand Kiwee, an established major European player in the mobile content provider arena.”[523]On 16 March 2004, Air2Web, an American “top wireless solutions provider,” announced its acquisition of “Wokup SA, the European leader in providing mobile applications.”[524] On 1 June 2004, Premier Devices, Inc. (San Jose), claimed that it had acquired all of the shares of Motorola Broadband Nurnberg GmbH.[525]

 

To return to Level 3: The story of its success raised more questions than it answered. On the surface, Level 3’s venture into Europe via Viatel, which was linked with WorldCom International, could have been a co-incidence. It could have been entirely independent of John Malone, Gene Schneider (père) and Mark Schneider (fils), who saw Europe as another version of the Wild West, and were acquiring infrastructures by buying Noos and Canal+ France. It could also have been independent of Platinum Equity’s acquisition of Alcatel’s network. There was reason to believe, however, that they might all have been connected, for at least three reasons.     

 

First, Warren Buffett, who supported Level 3, also recommended United GlobalCom as a worthwhile stock.[526] So he must have been aware of their basic plans. Significantly he did not invest in them directly. Second, Warren Buffett, in addition to leading a team to invest $500 million in Level 3, “now owns 879,000 shares of Level 3 (LVLT), as well as 1.6 million shares of fellow broadband network WilTel (WTEL).[527] Without inside knowledge, Warren Buffett would have been very ill advised to buy more than 1.6 million shares in the new version of Williams Communications which had just gone bankrupt.   

 

To appreciate the third reason we need to return for a moment to the investment history of Platinum Equity. In 1998, Platinum “bought the networking operations of Racal Electronics, on which Racal had lost $300 million the previous year. [Tom] Gores paid $12.5 million in cash for the business, giving Racal a ten-year note for the $35 million balance of the purchase price. Under Gores the Racal sub became Milgo Solutions…. Milgo built up its service business, advising clients before they built their data and voice networks, as well as servicing those systems when they were up and running.”[528] As we noted earlier, Platinum Technology also bought Williams Communications three weeks before it announced bankruptcy. Platinum then combined Milgo and Williams (which was soon renamed Wiltel)   to form Nextira:. As Platinum’s website explained: “Nextira competes head-on with Equant, a publicly traded company being acquired by France Telecom. Equant has $1.6 billion in sales, $350 million in debt and $111 million in losses over the last 12 months. Equant's market cap: $5 billion.” [529]

 

Thus, Warren Buffett would have had a good reason to recommend UnitedGlobalCom. It represented essentially the same vision as his own: to insist that the dot.com and the telecom meltdown were very serious; to drive down prices of some key players; to buy these and then to enter the European market using these as back doors. This support of GlobalWorldCom also served as a convenient distraction for investors, while investing for oneself in both Level 3 and in Wiltel at a time that they seemed to be only a bankrupt telco and a struggling start-up and long before the outside world realized that in their new form these companies would be competing with France Telecom.

 

To make this a reality would have required undermining the French giant’s infrastructure. Here, Level’s 3’s acquisition of the Viatel (WorldCom) legacy could be seen as a first ingredient; Platinum’s acquisition of Alcatel’s French network could be seen as a second ingredient; and UnitedGlobalCom’s acquisition of Noos and Canal+ as a third and fourth ingredient.

 

A possible scenario was, of course, not necessarily a description of what actually happened.   Nor could we expect investors such as Warren Buffet to share their trade secrets and reveal all the reasons for their successful investments. Nevertheless, it remained remarkable that prescient individuals were able to invest in bankrupt ugly ducklings just months before they emerged as beautiful swans. Were they working alone? Were there more powerful interests in the background than the short term ambitions of ambitious investors and equally ambitious start-up companies? Or were they effectively just carrying out assignments? To even consider such questions, we need to make a small detour: to look at the same events from the world scene.

 

Year

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2000

Services

403

448

470

517

596

672

712

767

854

920

968

1'020

1'070

Equipment

120

132

135

158

183

213

234

248

269

290

264

275

300

    Total

523

580

605

675

779

885

946

1'015

1'123

1'210

1'232

1'295

1'370

 

 

Main telephone lines (millions)

546

572

604

643

689

738

792

846

905

983

1'053

1'129

1'210

Mobile cellular subscribers (millions)

16

23

34

56

91

145

215

318

490

740

955

1'155

1'329

International telephone traffic minutes (billions)5

38

43

49

57

63

71

79

89

100

118

127

135

140

Personal computers (millions)

130

155

175

200

235

275

325

375

435

500

555

615

650

Internet users (millions)

4.4

7.0

10

21

40

74

117

183

277

399

502

580

665

 

 

Figure 8a. Growth of the telecom industry from 1991-2003 and b) related statistics according to the ITU (International Telecommunications Union).[530]

 

World Scene

 

When we stand back to look at the global picture we are confronted with what appears as a blatant paradox. As a result of the bust and meltdown, there should have been a world wide slump in both the Internet and the telecommunications industries. According to the statistics of the International Telecommunications Union (ITU), however, this was not the case. Between 1989 and 1999, the Internet grew from 100,000 users to over 100 million. Between 2000 and 2004 the Internet grew from 100 million to 800 million in September 2004. It was due to grow to 940 million by the end of 2004 and surpass 1 billion users in 2005. Between 1991 and 2003 the telecommunications industry grew from $523 billion annually to $1.37 trillion annually. The mobile market grew from a mere 16 million in 1991 to 1.329 billion in 2003. There was no slump. There was only growth (figure 8).

 

Meanwhile, the world changed. A decade ago the G7 seemed a comfortable club and there were polite discussions whether Russia should be included as an additional member to form a G8. By 2003, six of the original members held their place. In terms of GDP, China was number 7; Spain was 8, Canada was 9 and Russia was 16. Since August 2001, China had the largest telephone company in the world. It was now also the largest mobile phone producer in the world.   

 

September 11 may indeed have slowed down developments in telephony and the Internet in the United States, but the world did not bother to wait. While Mr Kissinger urged Mr. Bush to work on a new world order that still reflected the world view when he was in power, a new world order of a more tangible kind was emerging. It was not concerned with either rhetoric or double-speak. It looked at real numbers. A decade ago a great majority of Internet users were in the United States and an overwhelming majority used English. In 2004, English represented 35% of the Internet, Chinese was 16% and in simple quantitative terms was predicted to surpass English within 3 to 5 years. In 2004, the United States entailed less than a third of Internet users and that percentage was dwindling daily. Nor should this really be a surprise. If the Internet was truly for everyone then a country that represented 4% of the world population needed to recognize others, even if continued to lay claim to 40% of the world’s energy.

 

When we look more closely at the momentous telecom battles between the RBOCs (Regional Bell Operating Companies) and their competitors; between the Turners and the Malones, between the KKR’s and their competitors; even between Tine-Warner and Disney the sums were typically in the $1-10 billion range and at most in the $10-100 billion range. This was small potatoes in a world where the big time military contracts were in the $100 billion to 1 trillion range; or for that matter in a world where the annual telecom earnings were $1.3 trillion. From this point of view the dot.com bust was a storm in a teacup and the telecom bubble burst was probably literally a bubble amidst the great telecom oceans.    

 

            Ignorance or Distraction

 

Why then were we confronted so inexorably with all the gory details of local events when the global picture looked so much better; is so much better? Why make such a fuss when looking further would have allayed fears, calmed markets and helped the global economy? Here again a number of interpretations and answers offer themselves. A benevolent view would note that the Americans were so caught up with their self importance that they were simply unaware of the existence of Internet life beyond the galaxy of their fifty states. No doubt it would be quite easy to find such persons on the street. Their equivalents exist in every country of the world.   

 

A crucial point is that such “persons on the street” were hardly those who were making decisions about the future of Telecommunications and the Internet. One would expect that the heads of the Internet and the heads of ICANN, who held meetings all over the world, must have realized that the Internet was spreading. Some cynics would answer: of course they did and that was precisely why they have downplayed international aspects of the Internet while all the time paying lip-service to the importance of national representatives. Focussing attention to the crises in America made it easy to overlook that events elsewhere were rendering these crises ever less significant.

 

Others would point out that even this was too generous a view of the situation. Ambitious American companies such as Liberty Media, GlobalUnitedCom, Level 3, Platinum Equity; including failed ones such as Worldcom, Global Crossing, Unisource and Viatel were fully aware that Europe, Japan China, India and the rest of the world had telecoms and Internet markets which could not simply be brushed aside. Moreover, they worked with the great banks (Citicorp, Credit Suisse) and major equity firms such as Carlyle, and Blackstone, which had offices or at least officers around the world and had full access to the both the global picture and its national variants.

 

Conspiracy theorists would point out that companies such as Unisource and Viatel were closely linked with AT&T; that AT&T could have deliberately sold its treasured holdings to these companies; encouraged conditions which led bankruptcy; then recovered their possessions as if nothing had happened. This might well be exaggerated. In any case, American firms wishing to make inroads in these other Internet and Telecom markets had very good reasons to sell their version of the story about a dot.com bust and a telecom bubble burst even though they knew it was only local news, and were almost certainly conscious that these troubles were being self-induced. If everyone could be made to believe that this was really a global problem, prices, especially infrastructure prices, would plummet; companies could be acquired for a song. Before anyone realized what was happening, Europe would unwittingly have fallen to the wiles of the fibre barons, even more so than their ancestors had been taken in by the robber barons a century earlier. If this sounds like an overly paranoid assessment, in 2004 American telecom firms were still taking over infrastructure in Europe (cf. figure 7) and some groups continued their efforts to persuade us that the US remains the epicenter of all these activities.

 

 

Company

1997

1998

1999

2000

2001

2002

2004

NTT

9

9

11

8

9

8

28

Deutsche Telekom

31

35

35

48

52

41

363

British Telecom

78

73

66

64

72

84

76

Bell Canada Ent.

95

81

110

264

214

178

162

France Telecom

---

64

69

70

69

51

376

 

 

Company

2002

Operating

Revenue

(US $m)

2002

EBITDA

(US $m)

2002

EBITDA

Margin %

2002

Net profit

(US $m)

2002

Debt to

market

cap

BT Group

33,098

11,160

34%

1,639

1.11

Deutsche Telekom

56,338

17,721

31%

(25,502)

1.11

Ericsson

16,730

(996)

(6%)

(2,143)

0.29

FranceTelecom

48,930

8,525

17%

(21,937)

1.41

Nokia

31,497

6,600

21%

3,602

0.01

Swisscom

10,506

3,255

31%

817

0.13

Telecom Italia

31,900

8,683

27%

311

0.45

Telefonica

29,813

(1,126)

(4%)

(11,933)

1.52

Teliasonera

6,827

1,192

17%

(918)

0.22

Vodafone

36,778

2,106

6%

(25,242)

0.16

 

Figure 9a. Statistics from Forbes ranking the world’s largest telecoms; b) statistics from Deloitte concerning the top European telecoms for 2002.[531]

 

 

Traditionally the statistics produced by Forbes have been accepted internationally as synonymous with the most accurate facts available at a given time. Their lists covered top companies, richest persons and so on. Of interest to us are their statistics concerning the world’s leading international telecoms for the years 1997 through 2004. For the moment we shall focus on five companies which are universally recognized as significant players (figure 9a).[532]

 

Yearly fluctuations in sales and operations inevitably led to some minor shifts as seen in NTT’s position from 1997-2002. Bell Canada Enterprises (BCE) were more quixotic than would be expected. But our chief concern lies with the statistics for 2004. In the case of British Telecom (BT) which had agreements with AT&T, there was no significant change. But within the period 2002-2004 NTT moved down from position 8 to 28; Deutsche Telekom from 41 to 363; and France Telecom from 51 to 376. Meanwhile, in the full list, the top telecoms of the world were Verizon (11) and SBC Communications (26).

 

A comparison with the statistics of Deloitte concerning the top European Telecoms revealed that operating revenues and the profits of Deutsche Telecom and France Telecom were very much higher than those of British Telecom. Moreover, the web pages of Deutsche Telekom and France Telecom had firm statistics to show that the income of these two companies continued to increase during the period 2001-2003. It would look as if the US firms were trying to reposition themselves as the only serious players on the block. Perhaps, if their figures resembled even remotely the charts of the International Telecommunications Union (ITU) for the same period, their hubris would be less evident, and their claims more convincing. The implication, unfortunately, was that even the Forbes lists had become tainted by a focus that made them useless for impartial observers of events on the world stage. Such a loss of face and reputation could ultimately cost their native country much more than many a dot.com bust.

 

The obvious question was: Why would Forbes do this? It could be that the real causes of the telecom debacle lay elsewhere and that a much bigger game is involved. First, although the media focused our attention on the timeframe 2000-2001, it was striking that these problems in the telecom world began in 1996 and continued in 2004. Second, these problems affected specific domains of telecommunications, namely infrastructure and networks. Third, we shall find that these problems extended to other dimensions of infrastructure, namely satellite communications. Once we have examined these connections we shall be in a position to suggest a very different explanation of recent events.      

 

Networks in North America, Europe and Globally

 

In some ways, telephone companies were not unlike railways. Without railway tracks there could be no railway system. Without telephone lines and cables there could be no telephone system. Both required enormous investments in infrastructure in order to function. The enormous costs and the need for long term investments over a 30-50 year time frame were beyond the reach of any individual company. That is why both railways and telephones were initially state owned monopolies. Only the state had the necessary long-term vision and the monies to make it happen. To ensure that such monopolies did not get out of hand the Federal Communications Commission was founded in 1934.

 

During the 1960s and 1970s, there was a new wave of anti-monopoly feeling that led a) to the “breakup” of AT&T in 1984 and b) to the Telecommunications Act of 1996.  This was the first overhaul in almost 62 years and had as its goal “to let anyone enter any communications business -- to let any communications business compete in any market against any other.”[533] In theory, therefore, 1996 was the crucial year for leaving the monopolistic model behind and entering into an open, competitive telecommunications era.  Deregulation and liberalization became the new buzzwords of the day. We shall review key developments at the US, continental and global levels separately and then bring to light unexpected connections between these three arenas. Of course, one of the first paradoxical things that happened was that the new telephone companies made deals with the railway companies using their tacks to create an alternative that might have been termed an “information railway.” Alas this again was a track that went beyond our current study.   

 

            United States

In the United States, everything seemed to get off to a good start, almost. The basic Telecommunications Act was ready by 8 February although there were revisions that took until 13 January, 1997. On 8 March, 1996, Chairman Hundt of the FCC, named Solomon J. Trujillo to head the new Telecommunications Development Fund. Conveniently, Trujillo was also President and CEO of US West Communications Group.[534] “Trujillo became President and CEO of US West as a whole in June 1998.”[535] He went on to become the CEO of Orange and was a member of the Bretton Woods Committee, a “group organized to increase public understanding of international financial and development issues and the role of the Bretton Woods institutions -- the International Monetary Fund, the World Bank and the regional development banks -- in the global economy.”[536] (Frank Carlucci, Chairman Emeritus of the Carlyle Group was also a member).

Soon there two attempts to create a new US network. It would have been a bit too obvious if the head of the new Telecommunications fund, who was also a head of a Baby Bell would immediately have engaged his company to build a network to further the liberalization process. So two relatively unknown firms did the building, went bankrupt and then were taken over by the Baby Bell whose head was leading the telecommunications fund. To make sure this worked the Baby Bell acquired executive help from AT&T. To divert attention from these activities there were soon new mergers and name changes. Or at least that was one very plausible way of reading what happened.    

            Qwest-Frontier                                  

We noted earlier (§ 7) that the Denver based Anschutz (holding) Company was the owner of a regional telecom called Qwest Communications, which “began in 1995 when SP Telecom, a subsidiary of Southern Pacific Railroad, combined with Qwest Corporation, a small Dallas-based digital microwave firm. “Realizing early on that the Internet would create unseen demands that existing networks couldn't possibly meet, Qwest set out to build a whole new kind of network – faster, more flexible and more robust than any network on earth. Today, the Qwest Macro Capacity ® Fiber Network contains the world's most advanced optical networking equipment and reaches 104,000 miles around the world.”[537]

On 21 October, 1996, Qwest and Frontier[538], “announced they were going to jointly build a new nationwide fiber network. This announcement sparked a huge cross-country construction boom in telecommunications.”[539] Frontier was linked with Alltell.

Since AT&T basically had its own infrastructure, one might have expected that one of the Baby Bells would be the initiators of a new national network. Instead it was two relatively unknown companies: Qwest and Frontier. However, two months and one day later, on 22 December 1996, Joseph P Nacchio, former Chief Engineer of AT&T was named CEO of Qwest.[540] He began in early 1997.

In June 1998, the US West Communications Group, the telecommunications and data networking unit, and MediaOne, the cable and international business unit, were separated into two free-standing companies.”[541] By March 1999, AT&T was attempting to buy MediaOne, (which happened within a year), and on 30 June, 2000, there was a merger of US West and Qwest.[542] This created:

a $19 billion global giant with leadership in network technology, as well as applications and services. Its advanced fiber optic networks link directly to nearly 30 million customers through more than 2.6 million miles of fiber in the U.S. The company also has a rapidly growing presence in Europe through an alliance with the Dutch telecom company, KPN, and a foothold in Asia through a new Asia-Pacific office and interests in the US-Japan Cable project. [543]

On 31 October 2000, Qwest Communications International Inc. “the broadband Internet communications company, today announced an agreement with McLeodUSA for voice and data communications services worth approximately $600 million in revenue to Qwest over three years.”[544] By 11 February 2002, Mcleod had $3.3 billion in debt and had filed for bankruptcy after having sold “350 POPs and its ISP client base to high-speed network Level 3.”[545]

Hence the Qwest company, which was theoretically creating a network to compete with AT&T, was almost immediately run by AT&T’s chief engineer; soon merged with one of the Baby Bells, which spun off its Media One. Comcast was going to merge with Media One and compete with AT&T. Instead, AT&T acquired both Media One and Comcast. We shall see presently that there were also European dimensions to the Qwest story. But the pattern was clear: As new competitors to AT&T came on the horizon they met with one of two fates: bankruptcy and/or takeover and usually in that order.

            Vyxx (Williams Communications)-IXC

Two and a half months after the initial Qwest-Frontier announcement, on 8 January, 1997, Vyvx, Inc., a division of the Williams Companies, and IXC Communications also teamed up to build a new nationwide network. Vyxx was soon renamed Williams Communications Systems (WCS), whose adventures we outlined earlier (§ 7). WCS went bankrupt, was renamed Wiltel; merged with Milgro and the combined company became Nextira, which posed as a competitor for Equant. And as we have shown Williams Communications effectively became an instrument of SBC and Verizon, i.e. the Baby Bells.     

Meanwhile, IXC Communications operated a digital communications network comprising of 9,300 fiber route miles of fiber optic transmission facilities. In 1998, the company acquired Network Evolutions, Inc., Eclipse Telecommunications, Inc., The Data Place, Inc., NTR.Net Corporation and Smartnap.[546] In March 1999, there was speculation that IXC might be sold.[547] On 21 July 1999, Cincinnati Bell announced it would acquire IXC in a stock swap for $3.2 billion and acquire the 20,000-km network it was building to link over 150 American cities.[548]

According to another account, Broadwing, the parent of local telephone firm Cincinnati Bell, entered the broadband business in 1999 by purchasing IXC Communications for $2.2 billion. On 26 Febraury 2003 Broadwing sold IXC to a joint venture of Corvis and Charter Communications (a Paul Allen of Microsoft investment) for $130 million.[549]  In February, 2004, Corvis agreed “to acquire Focal Communications Corporation ("Focal"), a Chicago-based competitive local exchange carrier that provides voice and data solutions to enterprises, carriers and resellers for total consideration of $210.0 million.”[550] In January 2002, Lynn Anderson, formerly CFO at GE Capital, became the Chief Financial Officer (CFO) of Corvis. By co-incidence, the majority owner of Corvis was the Carlyle Group. Perhaps not by co-incidence the company flourished.

In 2004 one of its websites boasted that it: “leads the industry as the world’s first intelligent, all-optical, switched network provider, and offers businesses nationwide a competitive advantage by providing data, voice, and Internet solutions that are flexible, reliable and innovative on its 18,500-mile fibre optic network and its award-winning IP backbone.”[551] Some would have said that it was a happy co-incidence that this second American network to provide liberalization had the luck to be guided by a former GE executive and owned by the efficient Carlyle Group. Others might have marveled that the two new networks, intended to compete with former monopolists such as AT&T and General Electric, had very close connections with AT&T and General Electric respectively.

 

               Europe

 

At first sight the European turf battles for infrastructure were completely unconnected. In terms of pan-European networks there were essentially three ingredients: 1) e-Bone; 2) Unisource and 3) AT&T’s UK Holdings. Closer inspection suggests that they might have may have been more closely linked than suggested by the wide ocean separating them.   

 

By way of context, it is useful to make a small detour on George Soros, whose investments have bridged both oceans and continents. He too was interested in networks. In 1997, the Telecom Venture Group (TVG), backed by George Soros, became a foundation shareholder in Powertel with a $17 million investment. TVG sold its stake in 1999 at more than $2 a share, representing close to a 500% return. Wiltel became the chief shareholder of Powertel. Almost predictably Powertel went bankrupt. The TVG syndicate subsequently offered $14 million for the debt and equity interests of PowerTel's largest shareholder - struggling US telecom WilTel - in a deal that would have given it a controlling interest in PowerTel.[552] The ploy did not work and instead BT acquired Powertel.

 

One interpretation was that TVG, Wiltel and Powertel were merely three of the hundreds of cases of small time “wannabes” that became overextended, went bankrupt and were gobbled up. This would not explain why the likes of George Soros and Warren Buffett were interested. Another interpretation was possible: As our case study of Williams Communications Systems (WCS) revealed, Wiltel was part of a much bigger picture. Two new American networks were being built: 1) Qwest+Frontier, soon to be owned by Baby Bell, US West; 2) Williams Communications Systems (renamed Wiltel)+ IXC with strong links to another Baby Bell SBC, as well as GE Capital and Carlyle. Both of these networks had their eyes on links with their European equivalents. George Soros also had his eyes on these European networks and had already made significant inroads there. This context would provide a motive for Soros’ interest in three seemingly marginal, American players: his hope being to link the established European and the emerging networks. But he was up against other players. At an individual level, it was George Soros versus Warren Buffett. But at an organizational level this meant that Soros was up against the Baby Bells, with support from GE and Carlyle, with AT&T in the background. He was not part of the inner club. What seemed to have been a brilliant plan for an integrated Euro-American network was eclipsed by more powerful interests. Soon after this, Soros receded from public attention.

 

As we shall see, by 1999, Qwest-Frontier merged with Global Crossing and Global Crossing acquired the first of the new American Networks. Global Crossing had quietly been commissioned into being by AT&T. Global Crossing then merged with US West. This gave them further access to the assets of a Baby Bell. Global Crossing soon went bankrupt and seemed to go to an unexpected buyer: Singapore Technologies. Fortunately they were a bona fide member of the WorldPartners scheme of which, by coincidence, AT&T was a founding member. The game was not over yet: liberalization was proving to be liberating even for former monopolists. We must now return to Europe to pick up the thread, or was it fibre, of our story.

 

               e-Bone

 

The European Ebone was founded in Copenhagen in 1991 and established the first pan-European tier I, “IP backbone, providing service to Internet Service Providers and telecommunications carriers.” 1993 saw the advent of a second company, Hermes Europe Railtel, partly sponsored by Soros. This “created the first independent pan-European fibre optic network and led the industry in the adoption of advanced optical technology to serve the telecommunications market.”[553] The company had a 20,000 km fiber network as well as carrier and ISP services. By 2000, it was “the largest pan-European internet backbone, carrying approximately 50% of European traffic, impacting 100,000 European businesses.[554]

 

               E-Bone  GTS (Global TeleSystems) 

 

Michael J. Kleeman was one of the founders of Wiltel (formerly Williams Communications Systems). He was also one of the founders of Global Telesystem Group (GTS), [555] “a company conducting telecommunications activities financed by George Soros.”[556] So Kleeman, also a Director at Arthur D. Little and the Boston Consulting Group, was a direct bridge between George Soros’ plans in both America (Wiltel) and  in Europe (GTS). In 1998, Global Telesystem Group (GTS) acquired 89% of the Hermes Railtel Europe joint venture which had joined as a co-founder of the E-Bone as a company in 1993. Global Telesystem thus acquired the E-Bone and renamed its main business E-Bone “reflecting the existing name of its pan-European IP backbone.”[557] On 8 December 1998, Global TeleSystems (GTS) announced a $4.1 billion merger with Esprit Telecom.[558] For a short time George Soros seemed to be winning in the background. By 2002, however, GTS was bankrupt. By 2004, it had re-emerged as an Indian company, GTL. [559]

 

 E-Bone  KPN/Qwest 

 

Meanwhile, in 2000, Qwest, had made an alliance with the Dutch National Telecom, KPN. From Qwest’s point of view, there were very good reasons for this alliance, because KPN, as we shall see below, had also been one of the co-founders of another network called Unisource. When GTS announced its bankruptcy, KPN/Qwest agreed to buy their holdings:   

At the time the pre-negotiated bankruptcy deal was announced, Ebone claimed 250 ISP and telecom customers, 4,000 enterprise customers, 14,000 dial-up users and a total debt of EUR 2,345 million.”[560] On 18 March 2002, KPNQwest completed its previously announced acquisition of the Ebone and Central Europe businesses of Global TeleSystems (GTS) in a bankruptcy deal valued at EUR 210 million plus the assumption of EUR 435 million debt. The new combined company will operate a 25,000-kilometer network with connections to 60 major European cities. In addition, 14 Metropolitan Area Networks (MANs) will be in service.[561]

Alas, by 31 2002, May KPN/Qwest was also bankrupt.

Infonet

Computer Sciences Corporation (CSC) was founded in 1959. In 1969, CSC formed Infonet to deal with its timesharing business. In the next decades CSC, expanded considerably in scope, gaining a 51% hold of the French office of KPMG and developing military contracts. On 12 June 2002, less than two weeks after KPN/Qwest went bankrupt, Infonet “won bankrupt KPNQwest's position as the supplier of IP virtual private network services to customers of the troubled data carrier's parent company KPN.”[562]

Unisource      

 

KPN, along with Telia and Swisscom, had also developed a second European network, Unisource. In 1994, AT&T and Unisource established an “alliance,” Uniworld. On 14 May 1996, they built on this alliance: AT&T and Unisource announced the formation of two companies, AT&T-Unisource Services and AT&T-Unisource Investment.[563] Given AT&T’s subsequent links with BT in 1999, the European Commission required AT&T to sell its stake. It was assumed that AT&T would sell it back to Unisource.[564] Unfortunately, both Unisource and its founders such as KPN were also in difficulty so, instead, on 19 April 1999, AT&T sold AT&T-Unisource [Communications Services (AUCS)] to American based Infonet “for a European Reach.”[565] Europe’s two main networks were now in American hands. By 2002, Infonet and Genuity (under Level 3) were being cited in tandem.[566] On 16 November 2004, BT took over Infonet for $520 million.[567] This theoretically brought them back into the European sphere, but given the close ties that had evolved between AT&T and BT in the meantime, the connection with the European continent was still not clear. In any case, the pioneering and central role of the Netherlands in both the E-Bone and Unisource had been eliminated.  

 

AT&T UK  Viatel  Level 3

 

In 1994, AT&T had also established AT&T UK Communications. On 30 March 1999, after AT&T set out on Concert, its joint venture with BT, the European Commission noted:

 

AT&T is currently the second biggest telecommunications operator world-wide by turnover, and first US long distance telecommunications operator. AT&T is also active internationally, notably in the UK where it operates a group of wholly-owned subsidiary companies including AT&T Comms UK, and ACC Long Distance UK, a subsidiary of ACC Corp.. AT&T has also recently completed its merger with Tele-Communications, Inc. (TCI), a US corporation that owns approximately 22% in Telewest Communications, a UK cable company offering television channels, telephony services, data communications services, and Internet access. AT&T currently has a share in AUCS (AT&T- Unisource Communications Services). It is also a member of the WorldPartners alliance which is made up of AT&T, KDD, Singapore Telecom, Unisource and Telstra. Both AUCS and WorldPartners provide global telecommunications services to multinational corporations that AT&T distributes in the US, as well as in the UK for AUCS services.[568]

 

Of course, AT&T had foreseen this. On 29 February 1999, it had sold AT&T UK communications to Viatel. As noted earlier Viatel, then went bankrupt and Level 3 got their networks. Thus another European network entered into American hands. In our discussions of giants such as General Electric we noted a pattern whereby they sold off a serious asset and then acquired them anew. Something similar seemed to be happening here: AT& T sold off its two main holdings in Europe, Unisource and its UK branch and then regained access to them. Meanwhile, it did not have to worry about the seeming, competing efforts of Pan European Communications or their owner, United Pan-Global, because these were in turn owned by Liberty Media in which AT&T had gained a significant stake by buying TCI/Liberty. Meanwhile, the heads of the company possibly had their eyes on a much bigger picture.

 

               World

 

The year 1996 was significant not only because of the Telecommunications Act but also because it saw a radical breakthrough in technology:

In February 1996 Fujitsu Ltd., Nippon Telephone and Telegraph Corporation, and a team of researchers from AT&T succeeded in transmitting information through an optical fibre at a rate of 1 trillion bits per second—the equivalent of transmitting 300 years of newspapers in a single second. This was accomplished by simultaneously sending different wavelengths of light, each carrying separate information, through the optical fibre.[569]

Fibre optics were no secret. In addition to classic players in the cable industry, such as Cable and Wireless, there were companies such as Reach, which now have connections with more than 40 submarine cables.[570] Even so, the 1996 breakthrough changed the rules of the game. It meant that the rhetoric of multimedia could become a reality. The report was conscious of this: “If it can be integrated into a network, this new technology will make it easy, inexpensive, and incredibly fast to send information, such as video and memory-sensitive three-dimensional images.”[571] The good news was that this technological advance set the stage for the broadband revolution, which would become a hot news item in the coming years. But while the news media spoke of broadband as if these were ADSL connections of 1-2 Megabits, the Fujitsu, NTT and AT&T pioneers fully realized that this heralded a future terabit era.   

The bad news was that AT&T’s (and indeed everyone’s) existing cable infrastructure was obsolete.[572] A new network had to be built. It would not have been very practical for AT&T to announce that it was building a new monopolistic network, the very month that the anti-monopolistic Telecommunications Act was coming into effect. As noted above, there were also revisions to the Act which took until 13 January, 1997. That same month the newspapers said nothing of the fibre optic breakthrough and simply reported: “AT&T needed to raise $750 million in a hurry to lay an underwater fiber-optic cable across the Atlantic. Risking $15 million of his own money, Gary Winnick formed a new company, Global Crossing, and raised the total in record time.”[573]

On March 20, 1997 Global Crossing[574] announced “their first fiber build – Atlantic Crossing 1 – connecting the U.S. with the U.K. and Germany. By the end of 1997, Global Crossing had also announced projects connecting the U.S. to Bermuda and the Caribbean, the U.S. to Central American countries, and the U.S. to Japan – all undersea fiber builds.[575] In August 1998, Global Crossing became a publicly traded company on Nasdaq: “Although the company had quarterly revenues of only $117.7 million in their first public report, the stock market valued the company at over $5 billion….. By March 1999, when they first agreed to purchase Frontier, the stock market value of Global Crossing had increased to $30 billion.”[576] On 30 April 1999, the FCC approved the proposed merger of Global Crossing and Frontier.[577] As a result Global Crossing, now owned “the nationwide U.S. fiber network that Frontier had built with Qwest, along with a bunch of top-notch web hosting centers and a local telephone company.”[578]

On 17 May 1999, Global Crossing announced that it would merge with US West to create a first global and local service provider called Global Crossing Corporation a “$75 billion company with 115,000 route miles” that would “connect 185 cities worldwide.”[579] On 19 June, 1999, Qwest offered “$41.3 billion for U S West, as well as $10 billion in assumed debt” and “$13.6 billion for Frontier and assume $1.4 billion in Frontier net debt.[580] On 28 September, 1999, Global Crossing completed the acquisition of Frontier Corporation for approximately $11 billion. By 2000, the scene looked even rosier: “Global Crossing Ltd. is building and offering services over the world's most extensive global IP-based fiber optic network, which will have more than 101,000 route miles, serving five continents, 27 countries and more than 200 major cities.”[581]

By all appearances, this was proof that the liberalization of the telecoms markets was working magnificently. Very conveniently, on 11 October 2000, Global Crossing had a new CEO, Thomas J Casey, who had been at the Antitrust Division of the U.S. Department of Justice (1975-1978) “responsible for the development of evidence concerning common carrier issues in US v. AT&T, the government's antitrust suit that led to the breakup of AT&T.”[582] Three years later (6 May 2003) the technology reporter, Russ McGuire, believed that Global Crossing “merely focused on managing these construction projects and selling the capacity – not operating the networks in competition with AT&T, Worldcom, Sprint or others.”[583] Like so many others, the reporter appeared to have forgotten, or perhaps never knew, that the original incentive for Global Crossing came from AT&T.

 

On 28 January, 2002, Global Crossing announced bankruptcy “in combination with the announced takeover of the company by Hutchison Whampoa and Singapore Technologies for $750 million (later reduced to $250 million).”[584] Platinum Technologies, Gores Equity and even AT&T had expressed an interest in buying the bankrupt firm but did not. Fortunately, there was already a World Partners alliance which linked: AT&T (40%), KDD in Japan (24%), Singapore Telecom (16%) and Unisource (20%).[585] On 9 December, 2003, Global Crossing emerged from bankruptcy. In retrospect, perhaps it was more than co-incidence that:

a)      John M. Scanlon, who had 24 years of experience with AT& and Bell Labs, became the first CEO of Global Crossing when it went public in 1 April 1998.[586]

b)      Robert Annunciata, who had been the CEO of Teleport, which he sold to AT&T for $12 billion in 1998, before heading AT&T's $22 billion worldwide business services group, was named CEO of Global Crossing on 24 February 1999;[587]

c)      Leo Hindery, who was President and CEO of TCI, and CEO of Liberty, before they were acquired by AT&T; who was then President and CEO of AT&T Broadband & Internet Services, the business unit responsible for all of AT&T's domestic local telephony, video and Internet operations, was named CEO of Global Crossing on 2 March, 2000 [588] and that:

d)      John J. Legere J. Legere, who was president and CEO of AT&T Asia-Pacific from 1994-1997 and from 1997-1998 was president of worldwide outsourcing at AT&T Solutions was named CEO of Global Crossing on 4 October 2001 and remained so in 2004.[589]

Again multiple interpretations are possible. The media focused on these rapid turnovers of CEOs as proof of the terrible state of the telecom meltdown; how even the most clever persons from AT&T were “powerless” in light of these tumultuous events. A cynic might have suggested that the invention of a company that attracted enormous amounts of capital to build a new fibre optic network and then conveniently went bankrupt so that it could be taken over by an invisible parent, was certainly a lot more economical than trying to build the whole network using one’s own money. In any event, it was more than striking how a small number of executives moved incredibly smoothly among these giants. The news media painted the departure of Annunciata and others from AT&T as a rejection of the old regime. Some might suspect that they were actually covert emissaries from a new regime in the same company.

A paranoid mind would begin reflecting about the World Partners alliance. The European Unisource thought it was a serious partner only to find its networks shifted to American hands. KDD thought it was a serious partner. Was Carlyle‘s acquisition of their DDI packet a first step in the direction of what happened to Unisource? Was this a competing bid for the same resources If so who was the eminence grise?  Such questions pointed far beyond the scope of this modest essay.    

Global - Local 

 

We noted earlier that Global Crossing claimed in May 1999 that they were creating the world’s first global and local service provider. This was not quite true. As we shall see presently (§ 11), the same arguments were used in 1990 at the founding of the Teledesic satellite system. They were also used by Harold Furchgott Roth, who was responsible for examining the proposed AT&T –BT alliance. Some aspects of the five companies involved in the alliance were mentioned in our discussion of BT (§ 4). The report, written in February 1999, showed a full awareness of international competitors such as Cable and Wireless, GlobalOne and Equant.

 

This led to a very telling conclusion: “we  conclude  that  a  carrier  may  be  a  provider  of  global  seamless  services  even  if  it  does  not  own  a  facilities-  based  global  network  or  offer  "one stop  shopping"  on  a  global  scale.” [590] A cynic might paraphrase this: if one cannot own everything in telecommunications one can at least try to control everything. Perhaps a more realistic reading would be that this conclusion meant precisely what it said: that one did not need to build and own one’s own networks to be a leading player. If so, this one sentence of 1997 was a blueprint for a new AT&T. The old AT&T had been a bulwark of physical phones and phone lines. The new AT&T was about software and services. Parallels with IBM would be possible. The implication was to sell one’s physical possessions. 1997 was also the year that AT&T sold its entire satellite infrastructure to Loral.  

 

It was undoubtedly a great stroke of fortune, at least from AT&T’s viewpoint, that the author of the document in February 1997 went on to become a Commissioner at the Federal Communications Commission (FCC) on 3 November, 1997. Commissioner Harold Furchtgott-Roth, was “the only Commissioner who is not a lawyer, and the one most supportive of deregulation, and limiting the regulatory authority of the FCC. He opposes the FCC's use of its authority to approve license transfers to conduct competitive analysis of mergers which duplicates the antitrust merger review process of the Department of Justice.”[591] Commissioner Furchtgott-Roth was one of the early champions of the new liberalization of telecoms and deregulation. As noted earlier (§ 9), he was also very adamant that questions about subliminal adds in election campaigns were beyond the purview of the FCC.

 

The 1997 report linked with his name went on to identify potential emerging providers: 

           

We  also  find  that  several  new  carriers  and  alliances emerging as  potentially  significant  providers  of  global  seamless  services. Many  of  these  carriers  are  fast-  growing  due  to  their  ability  to  provide  global  services  over  "state-  of-  the-  art"  IP-based  global  networks.  For  instance, Teleglobe,  the  largest  Canadian  international  services  carrier,  announced  plans  to  build  an  IP-  protocol  network  that  will  reach  400,000  route  miles  on  several  continents…Qwest  and  KPN,  a  Dutch  carrier,  recently  completed  the  first  of  six  fiber  optic  rings  across  Europe  that  will  provide  IP-  based  services  to  large  corporate  customers…Global  Crossing,  which  recently  acquired  Frontier,  is  building  a  global  IP  network  that  may  be  the  first  to  be  completed…GTS,  which  merged  with  Esprit  to  provide  service  over  its  pan-European  network  in  12  countries  and  20  cities,  also  is  building  a  global  IP-  based  network  to  carry  traffic  at  speeds  up  to  1.28  terabits  per  second…Level  3,  which  is  building  a  global  IP  network  with  transatlantic  and  transpacific  undersea  cables  joining  the  continental  networks,  plans  to  offer  an  innovative  bandwidth  package  to  corporate  customers  that  includes  free  voice  services…Viatel  is  a  facilities-  based  international  services  provider  building  the  Circe  network.[592]

 

         

United States 

Europe

Global

1991-

 

E-Bone

Cable and Wireless

Teleglobe

1997

Qwest-Frontier

 

Global Crossing-Frontier

1998

Vnyx (WCS)-IXC

E-Bone- GTS (Global TeleSystems) 

E-Bone KPN/Qwest-Qwest

GTS-Esprit

 

1998

 

AT&T UK-Viatel- Level 3

Level 3

1999

 

AT&T- Unisource –Infonet-BT

Liberty- United Pan-Global

 

 

Figure 10. Some of the competing networks in the United States, Europe and Globally.

 

The list thus identified six supposed competitors: 1) Teleglobe; 2) Qwest/KPN; 3) Global Crossing/Frontier; 4) GTS/Esprit; 5) Level 3 and 6) Viatel. In retrospect, we know that within the next three years five of these would be bankrupt and only Level 3 remained. This could, of course, have been merely the luck of the draw, as could the fact that, by 2004, the Yankee Group named AT&T as number 1 and Level 3 (partly owned by AT&T through the TCI/Liberty acquisition) as number 2 in overall reputation for excellence.[593] More suspicious minds would be tempted to think that in 1996 or at least by 1999, a small group could see what was coming. Cynics might even claim that the entire telecom burst was effectively a convenient way to eliminate the competition and assure that the traditional monopolistic approach continued under a cloak of liberalisation and deregulation. This could lead to speculation which was far beyond the scope of this essay.

 

In any case, if we stand back to take a bird’s eye view (figure 10), it is noteworthy that: a) that there were effectively a small number of players in the infrastructure wars; b) that these were also the central players in telecom bubble burst and c) that AT&T was the only company that ultimately had some control in all these companies. While some persons were fretting about bubble bursts in telecommunications, some companies were bursting forth into new global markets under new and often unknown guises. If this were simply luck or fate, then these were extremely lucky companies.

 

There is always the danger of reading into past events intentions which may never have been there. The complex steps AT&T took in preparing for the Concert venture, discussed earlier (§4) reduced this likelihood as did AT&T’s further joint ventures in 20 other countries. Once again, discussion of these would be beyond the scope of this essay.[594] For the purposes of our story, it is necessary to lift our eyes upwards to developments in the skies. These will reveal uncanny parallels with the telecom problems on earth and could throw further light on the dimensions of a new great game or perhaps only a great new game.  

 

11. Satellites

 

As we have seen the news media gave enormous coverage to some aspects of the telecoms problems of the past decade, especially the bankruptcies and mergers. In June 2002, Red Herring, commenting on the recent demise of PSINet and 360Networks, reported that “More should follow’ and lead to “A massive wave of consolidation.”[595] More than a year earlier some were predicting a similar trend in the satellite market. On 16 April 2001, Stephanie Chénard predicted: “Clearly what has happened to the Internet is not going to be without consequences in the satellite sector.”[596] On 24 September 2001, Teresa Foley predicted: “A year from now, the satellite landscape will be transformed. With an unprecedented number of companies being broken up, bought sold and being privatized, there are sure to be some notable winners but also some mighty losers.”[597] These were prophetic words.

 

As a first step to understand why satellites have become so important it is useful to recall that in 1990 when Teledesic developed its vision of Low Earth Orbiting (LEO) satellites there was talk of creating an “Internet in the sky.” The vision was rhetorically attractive: “Teledesic will support more than 1 million simultaneous connections at 2M bit/sec each - the equivalent of 128 million simultaneous voice conversations at 16K bit/sec each.” Indeed, at a time when the World Wide Web itself had less than a million users, this sounded spectacular. In retrospect, it was hardly a solution for everyone in a world with a population of 6 billion.

 

Another part of the Teledesic vision was to become “the first local phone company with global presence.”[598] That was in 1991 more than five years before Concert, Worldcom, Global Crossing and other players began to speak of local-global as a key strategy. Teledesic was the brainchild of Craig McCaw (who sold McCaw Wireless to AT&T in 1994) and Bill Gates. AT&T had a 12% stake in Teledesic.[599]

 

Like railroads and telephones, satellites were traditionally a domain requiring such large investments that they were typically funded by governments.[600] The past five years have seen major changes. If we accept KKR’s[601] remarks cited earlier, the strategy would be simple. Make valuable assets look worthless. Push them into bankruptcy and then buy their undervalued assets for a fraction of their true worth. This seems to have happened with too much consistency to be co-incidental. More disturbing was how some of the same companies and the same equity firms, which were active in the telecoms debacle, reappeared in the satellite saga. In light of the elaborate context that was emerging, the question needs to be asked if what seemed as two events (telecom problems and satellite crisis) were in fact part of a unified strategy.

 

A simple and perhaps simplistic analysis would have suggested that the new deregulation and liberalization rules unleashed extraordinary winds of change which caused many ripples in all areas of telecommunications both on earth and in the heavens. Another hypothesis might have been that AT&T, which had focused on building and owning its infrastructure; effectively outsourced the hardware so that they could focus on software and services. But the battle of the skies was so big that it made even AT&T and Microsoft look like relatively small players. So another hypothesis would be that a few very big players saw this as their chance to control the communications chain. James Bond films with megalomaniac media moguls in Tomorrow Never Dies (1997) and killer satellite schemes in Die Another Day (2002) explored such scenarios. Did the latest wave of convergence integrate reality and fiction?  Or had James Bond become a whistleblower? 

 

A more refined version of this same hypothesis would have suggested that this new quest led to two camps of contenders: one peaceful and civilian, led by firms such as General Electric and General Motors (Hughes); the other with a military dimension led by Lockheed, Boeing and Grumman. If so, the great game now entailed the age old struggles of War and Peace. As usual, before reaching conclusions, it is best to review the evidence although, once again, study of all the details would be far beyond our scope. We shall limit ourselves to a dozen or so major players in the field, provide a few key facts and focus on developments of the past four years.  Here our diary approach using specific dates becomes particularly useful in order to see how major decisions followed each other in the course of a few weeks or months at a time.  

 

Teledesic

 

Teledesic was founded in 1990 by Bill Gates and Craig McCaw with a $9 billion vision: 

 

Teledesic would upgrade the world's telecom infrastructure in one fell swoop. ...

In the old paradigm, telecom satellites were like mainframe computers. Perched in geosynchronous orbits 22,000 miles above the ground, they required expensive user terminals with large dish antennas….

In the new paradigm, satellites are more like PCs. They are smaller, less expensive and may one day be mass-produced. Because they always are moving in relation to the ground, a fleet is required to ensure continuous service. But it’s worth it: LEO satellites are accessible to small businesses and even individuals….The original design called for a whopping 840 satellites. In conjunction with prime contractor Boeing, Teledesic has reduced its satellite configuration to 288 satellites.[602] 

 

On 9 July 1999, Teledesic LLC, the broadband satellite venture backed by Craig McCaw (30%), Bill Gates (20%), Alwaleed (16%), AT&T (12%), Boeing and others, completed a major launch contract with Lockheed Martin and signed a system agreement with Motorola to build its satellite communications network.[603]

 

Iridium

 

The only operating satellite phone company at the time was Motorola’s Iridium satellite constellation: “During 1998, the last satellites of the 66+ satellite Iridium constellation were launched into orbit. These LEO communications satellites are the backbone of the Motorola and Iridium LLC satellite project boasting voice, data, fax, and pager transmission capabilities from any point on the planet to any other point. The satellites all reside in circular polar orbits and are spaced around the planet in order to provide full Earth coverage at all times.”[604] Within a month of Gates’ Teledesic-Boeing agreement, in the first week of August 1999, Iridium filed for and in 2000 it went bankrupt.[605]  On 1 October 2001, Iridium was bought by General Dynamics.

 

ICO Global Communications  ICO-Teledesic

 

ICO was a UK based company with Hughes as its prime contractor: “ICO will consist of 10 operational spacecraft with 2 in-orbit spares in a 45 degree inclination orbit.  Hughes Space and Communications will design, manufacture, and launch the ICO satellites.”[606] CIO had raised over $3 billion in financing. Two weeks after the Iridium bankruptcy filing, on 27 August 1999, ICO Global Communications went bankrupt.[607] Teledesic then merged with ICO: i.e. on 24 July, 2000, Craig McCaw invested $1.2 billion in ICO; called the new firm ICO-Teledesic; named former Cable and Wireless Executive, Greg Clarke, the new CEO,[608] and announced an IPO within six months, which was subsequently withdrawn on 19 March 2001.[609]

Five days earlier, on 14 March, 2001 ICO-Teledesic and Ellipso Inc had agreed to collaborate and help stabilize the mobile satellite industry. The Ellipso project included the “The Boeing Company, the Harris Corporation and L-3 Communications.”[610] This was the same Harris Corporation encountered earlier (§ 5), (that had direct links TO Jeb Bush, implicated in helping a more powerful brother), that helped the Defence Research and Engineering Network (DREN) go to the Baby Bells rather than Worldcom, (one of the last straws that triggered Worldcom’s bankruptcy).

As part of this agreement, ICO-Teledesic Global “proposed mergers of New ICO and Teledesic with ICO-Teledesic Global: “Building on its core capabilities of high-quality, mobile voice services, New ICO will also offer wireless Internet and other packet-data services. Boeing Satellite Systems, the world's leading satellite systems provider, is building New ICO's satellites.” [611]

This was separate from Teledesic’s global broadband satellite communications network.By 2002, Teledesic was scheduled to start launching. A new CEO and Chairman appeared, the by now almost familiar, Admiral Bill Owen, an advisor of Secretary of State Donald Rumsfeld; a CEO of the Vote Here Company; who had also been CEO of SAIC. In April, 2004 Owen went on to become the President and CEO of Nortel Networks. Lack of connections was clearly not a problem. With the support of individuals such as Craig McCaw, and Bill Gates and the presence of companies such as such AT&T money or power should not have been obstacles. Even so, by November 2004, Teledesic had collapsed. Pessimists would insist that the plan never even got off the ground.  

 

Globalstar

 

In 1991, a division of Ford Aerospace founded Globalstar. “The mobile system for Globalstar satellite phones is a Low Earth Orbiting (LEO) constellation consisting of 48 orbiting satellites which are 700 miles above the earth. Globalstar's satellites relay the calls to ground bases gateways which connect the call to the public phone network. This provides customers with voice and data service from virtually anywhere to everywhere.” [612]

 

At the time Iridium went bankrupt in 1999, it seemed that Globalstar, a Loral-backed company, was in better shape.[613]In 2000, Globalstar entered an alliance with Globalcom, which was also linked with Iridium and Inmarsat. On 18 November 2001, Globalstar was preparing for bankruptcy[614] By 18 February 2002, Globalstar had announced it was bankrupt.[615] On 21 November 2003, the court approved the acquisition of Globalstar by Thermo.[616] By April 2004, Thermo Capital bought the bankrupt Globalstar satellite phone service.

 

Comsat

The advent of the Russian Sputnik in 1957 prompted the US to found Comsat in 1962 “as the US representative and shareholder in international satellite operators Intelsat and Inmarsat.”[617] By 1965, Comsat “developed and managed Early Bird, the first commercial telecommunications satellite in western history, sent into orbit in 1965 in collaboration with NASA….in 1969, when Apollo 11 carried the first men towards the Moon, the entire world was able to see the enterprise live on television - through Early Bird transmissions - called into service for the occasion.”[618] When the Kennedy administration conceived the Communications Satellite Act in July 1961, that led to the Comsat satellites, they wanted someone else than AT&T to take the lead. Hughes stepped in, took the company public. AT&T soon had a 29% stake in Comsat. 

            Lockheed Martin

Lockheed Martin Corporation was an important player in the satellite field from the outset especially through its Lockheed Telecommunications Systems. In 2000, LockheedMartinIntersputnik, a joint venture with Intersputnik and the operator of the LMI-1 satellite, closed its London office.[619] On 7 August 2000, Lockheed bought Comsat Corporation. This entailed: 1) Comsat Global Communications; 2) World Systems 3) Comsat Digital Teleport, Inc. (CDTI). Five months later, in February 2002, “Citing overcapacity in the telecom industry and deteriorating economic conditions in Latin America, Lockheed Martin said it will exit the telecom business.” [620] 

On 21 March 2001, it announced that it would sell Comsat Mobile Communications to Telenor, whereby it became Telenor Satellite Services.[621] On 30 May 2002, Lockheed Martin “announced that Intelsat, Ltd. will acquire Lockheed Martin's World Systems and Comsat Digital Teleport, Inc. (CDTI), businesses.”[622] This had occurred by 26 November 2002.[623]

            Comsat International

Comsat International, founded in 1990, provided data and voice services to corporations and telecommunications carriers in major Latin American markets, including Argentina, Brazil, Colombia, Mexico, Peru and Venezuela. It employed some 470 personnel in the U.S. and in six Latin American countries.[624] It was acquired by Lockheed and then shed.

In our discussion of the telecoms problems we noted the efforts to create new networks by Esprit Telecom Group, which merged with Global Telesystems Group in 1998 shortly before both went bankrupt. It is interesting to note that Walter Anderson, the founder and Chairman of Esprit, went on to become 1) Chairman of Teleport UK Ltd. (Satellite Communications); 2) Chairman of U.S. WATS; 3) Chairman of WorldxChange (Telecom Services and then became 4) Senior Advisor of Comsat International.[625]

Meanwhile, H. Brian Thompson, who began was an executive vice president of MCI (1981-1990); chairman and chief executive officer of LCI International (1991-1998); vice chairman of Qwest (from June –December 1998), became the new chairman of the board of Comsat International. On 1 September, 2004,Comsat International, Inc. ("Comsat"), a full-service provider of voice and data communications throughout Latin America, announced it had acquired Vicom Ltd.:

a provider of satellite services and metropolitan fiber circuits in Brazil, from Net Servicos de Comunicacao S/A. ("NET"). Under the agreement…Comsat has acquired 100% of the outstanding shares of Vicom, as well as use of certain fiber optic infrastructure owned by NET….[626] Via multi-year IRUs on the Global Crossing regional fiber ring, high-speed international connectivity was launched in Brazil, Argentina, Peru and Venezuela. At the same time, domestic fiber connectivity was laid in Brazil and Argentina including metropolitan fiber networks deployed in Buenos Aires and Sao Paolo.[627]

 

Hence in the past four years, Comsat Corporation, which had been a US government satellite system linked with the intergovernmental Intelsat and Inmarsat systems, was bought by Lockheed and then split up into a number of private companies, at least one of which is run by individuals linked with the telecom bubble burst through companies such as GTS and Esprit. GTS, it will be recalled was one of the pieces of Soros’ puzzle, in the quest to control European networks. The quest for superstructure or heavenly infrastructure was clearly becoming connected with the quest for earthly infrastructure both underwater and underground.     

Viasat 

Viasat began in 1986 with three people. It grew mainly through government systems and military contacts. “In April, 2000 the company acquired the satellite networking business of Scientific-Atlanta, adding the SkyRelay VSAT and Skylinx DAMA satellite networking product lines, the Satellite Ground Systems gateways and satellite antenna systems business, and a worldwide sales and service organization. Then in mid-2001, ViaSat acquired the VSAT products group of Lockheed-Martin Global Telecommunications, now known as our Comsat Laboratories division.”[628]

Loral and Lockheed

The Loral name had also been linked with satellites for over 40 years. Between 1972 and 1996, Loral grew from a $7.5 million to a $15 billion company.[629] In 1996, Loral merged with Lockheed.[630] Loral Space & Communications was created in 1996 when Loral Corporation sold its defense and systems integration businesses and formed one of the world's largest satellite manufacturing and satellite services companies.” The company had three divisions:

1) satellite services business formed “by acquiring assets from AT&T in March 1997 and Orion Network Services in 1998, and rapidly established Loral Skynet, which manages and operates our Satellite Services business, as one of the world's leading satellite operators.”[631]

2) Space Systems/Loral (SS/L) “designs, manufactures and integrates satellites and space systems. SS/ L-built satellites have achieved over 1000 years of cumulative on-orbit experience over its 40-year history”.

3) 56% ownership of XTAR, a joint venture between Loral and Hisdesat Servicios Estrategicos.[632]

 

On July 15, 2003, it was announced that “Loral Space & Communications Ltd. filed for Chapter 11 bankruptcy protection while Boeing Co. took a $1.1 billion charge on operations and said it would exit the commercial space business. Loral said it was preparing to sell its commercial satellites to Intelsat as part if its Chapter 11 filing.”[633] That same day Loral agreed to sell its six North American Satellites to Intelsat.[634] On 1 November, 2004 the same Bernard l. Schwartz who had been head of Loral was involved in another billion dollar bankruptcy.[635]

 

Inmarsat

 

In February 2002, when Lockheed announced that it was leaving the telecom business,   Lockheed stated that it would “retain parts of its Global Telecom subsidiary, but sell its large stakes in Intelsat, Inmarsat and New Skies NV.”[636] Within two years Inmarsat, Intelsat and New Skies were bankrupt.

 

Inmarsat claimed that it “was the world's first global mobile satellite communications operator….Formed as a maritime-focused intergovernmental organization….Starting with a user base of 900 ships in the early 1980s, it now supports links for phone, fax and data communications at up to 64kbit/s to more than 210,000 ship, vehicle, aircraft and portable terminals. That number is growing at several thousands a month.” In 1999, Inmarsat became a limited company.[637] In 2002, Inmarsat faced bankruptcy. In December 2003, Apax Partners and Permira Advisers acquired Inmarsat.[638] This was the same Apax Equity that partnered in acquiring Intelsat, was involved in the Vivendi breakup and made bids for Springer Verlag and Hollinger. It seemed as if a small group had their eyes on something much, much bigger than the acquisition of bits of dysfunctional media empires. As was reflected in title of recent book: there were global dreams of a new world order.

 

Intelsat

 

Intelsat began as an intergovernmental organization in 1964. In 1966, “Cable & Wireless' first satellite earth station was built on Ascension Island as part of the Apollo space project…. By 1995 Cable & Wireless operated 66 main earth stations in the Intelsat Global Network - more than any other company.”[639] In February, 2002, Intelsat merged with Loral.[640] Also in 2002, it postponed its Initial Public Offering (IPO). When Loral went bankrupt in July, 2003, it sold its satellites to Intelsat. In February 2004, Intelsat announced that it would make its IPO by 30 June, 2004.[641] On 11 May 2004, Intelsat applied to acquire licences of Comsat.[642]In May 2004, Intelsat also asked “Morgan Stanley and Merrill Lynch & Co. to explore possible acquisition offers.[643] In August 2004, Zeus Holdings advised by Apax Partners and Permira Advisers with Apollo Management and Madison Dearborn Partners acquired Intelsat. [644]

 

New Skies

 

New Skies Satellites based in the Netherlands was one of the four fixed satellite companies with a truly global reach. On 26 February 2002, New Skies and Intelsat announced an agreement to expand their service in the Atlantic Ocean region.[645] By 2003 they too were bankrupt. On 18 July 2004, they were acquired by the Blackstone Group.[646]

 

MSAT

 

In 1990, TMI Communications (Ottawa), and American Mobile Satellite Corporation (Reston, Va.), signed contracts with Hughes and Spar Aerospace Ltd. of Canada in 1990 to build satellites. In 1995, this became the North American mobile satellite system (MSAT). By 1999, MSAT, Inmarsat, and Iridium had become linked through International Satellite Services.[647] Possibly because of its strong Canadian base this was one of the only satellite networks that did not go bankrupt.

 

Teleglobe

 

Teleglobe, initially a subsidiary of Bell Canada Enterprises (BCE) was a major Canadian player on the world scene both in terms of undersea cables and satellites. In 3 May 2001, Williams Communications revised its broadband agreements with Teleglobe.[648] On 15 May 2002, Teleglobe went bankrupt. By February 2003, there was a new private company run by Mr. Liam Strong. From 1997 through mid-2001, he had served as the President and Chief Executive Officer of MCI Worldcom International (global voice communications carrier).[649]Cynics would be prone to suggest that those with experience in telecom bankruptcies were particularly useful in cases with satellite bankruptcies.

 

Panamsat

 

In 1989, Panamsat began as a small startup satellite company in Homestead, Florida. “Panamsat was the first private international satellite company connecting Europe and Latin America to the United States. Panamsat grew by expanding their fleet of satellites. In 1995, Panamsat became a part of Hughes Electronics.”[650] As indicated in our discussion of the equity firms (§ 9), by 2001 Panamsat was in trouble. By June 2004, Carlyle worked directly with KKR to buy Panamsat and “split” the results 27% and 44% respectively.

 

Eutelsat

 

Eutelsat was founded in the 1970s and grew into an international satellite operator that “broadcasts more than 1,300 TV channels and 700 radio channels to nearly 110 million homes in Europe, the Americas, Africa, and Asia. With 22 satellites, it provides Internet, multimedia, and corporate services and mobile voice, data, and tracking services.”[651] In July 2001, Eutelsat was privatized. By February 2003, Eutelsat’s largest investor was Lehman Private equity with 20.48%; Eurazeo at 19%, BT at 17.5% and De Agostini at 10.8%.[652] In December 2003,[653] both Intelsat and Panamsat were offering to buy Eutelsat.[654] In 2004, one of the largest investors in Eutelsat was Telecom Italia with a 20% stake. Eutelsat did not gone bankrupt as such but did become a private firm. In 2004, its nine member board included two senior partners from the American Equity firm, Lehman Brothers. 

 

AT&T

 

At first sight, AT&T played only a marginal role in these momentous changes. We noted earlier how AT&T was active in satellites through Telstar in 1962. The act establishing Comsat required that they leave the field. A decade later they were back in the satellite business. When the Teledesic venture appeared on the horizon, AT&T immediately took a 12% stake.

 

In March 1996, AT&T invested $137.5 million for 2.5% of DirecTV. The two companies announced plans for joint marketing efforts. In March of 1997, AT&T sold its satellite interests to Loral. In June 1997, C Michael Armstrong, made waves at Hughes for his introduction of DirecTV. By 20 October 1997, Armstrong was Chairman and CEO of AT&T.[655] On 9 December, 1997, less than six weeks after the hero of DirecTV had become CEO of AT&T came a surprise announcement:

 

The telecommunications giant did a 180-degree turn on its move toward direct television yesterday when it withdrew its equity stake in DirecTV, a unit of Hughes Electronics. The two companies ended a marketing agreement in which AT&T would distribute the DirecTV direct-broadcast television service and digital satellite system (DSS) equipment through AT&T.[656]

 

By all appearances, AT&T, which had introduced one the fist satellites in 1962, had sold off its satellites in 1997 and exited from the one partnership that gave it a foothold in the emerging Direct Broadcast world. Or so it seemed. In fact, the situation was more complex. To understand the bigger picture we need first to outline the history of Primestar and Echostar. This will take us back to three familiar players: General Motors, Boeing and General Electric.

 

Underlying the great upheavals in the industry there may well have been a more fundamental struggle of military versus civilian interests. In 1995, it looked as if the civilian interests might win. These were championed by Democrat Al Gore and senior democrats such as Congressman Barney Frank. Indeed the dot.com bust, the telco bubble burst, and the satellite crisis could be seen as three manifestations of a deeper crisis, whereby military might was seeking to replace constitutional and legal foundations of government and everyday life. If so, the defeat of Gore in 2000 and the defeat of Kerry in 2004 could be seen as marking the defeat of civilian interests and an ascendancy of military priorities.    

 

Primestar

 

Primestar was founded by the five big cable companies Comcast, Continental Cablevision, Cox, TCI and Time Warner. In 1991, Primestar launched its first medium­ powered Ku­band service. In 1994, it introduced a nationwide digital TV service via a medium­ power Ku­Band satellite. It also unveiled plans for transition to high­ power Direct Broadcasting

 

TCI Satellite Entertainment                     37%

Time Warner                                         30%

AT&T                                                   10%

Comcast                                               10%       

Cox Communications                               9%

General Electric                                       4%

 

Figure 11. The main owners of Primestar and the percentage of their holdings.

 

Satellite (DBS) operations in 1996. By the end of 1994, Primestar had shipped 350,000 units and had approximately 250,000 subscribers. In 1997, Primestar moved its service to a new medium-power satellite. This increased its capacity to a total of 160 channels. The rise of cable companies and the rise of satellite communications emerged in tandem.

 

In 1999, Hughes Electronics and DirecTV announced their “agreement with Primestar Inc., to acquire the 2.3 million-subscriber Primestar direct broadcast satellite medium-power business and Tempo high-power satellite assets in two transactions valued at approximately $1.82 billion.”[657] On the surface, General Motors, through its subsdiary, Hughes, had now acquired one of the key players in the American Direct Broadcast scene.   

 

Meanwhile there was a Primestar Partners L.P. which had a number of members, including TSAT, Time Warner Satellite Services, Newhouse, Cox, Comcast, MediaOne (formerly Continental) and GE Americom. On 11 June 1997, this group entered into an agreement to combine the assets of Primestar Inc. with American Sky Broadcasting (ASkyB)[658] owned by Rupert Murdoch. The ASkyB Project also entailed MCI, which joined with Newscorp (for $682.5 million) in plans to “broadcast over 200 channels across the nation.” In 1998, Primestar ended its plans to work with ASkyB. [659] 

 

There were six main owners of Primestar Partners (figure 11). Initially, AT&T had only a 10% stake. But as we have noted, within three years AT&T had acquired TCI and Comcast.  This gave it at least a 57% stake. In addition, AT&T controlled a section of Time Warner so its stake was well over 60%.[660] In simple terms, AT&T’s seemingly unusual, sudden entry into the cable field was also an invisible re-entry into centre field of the civilian, satellite communications, in which it had been a great pioneer. Some would intuit that by selling off its official satellite interests, AT&T provided an excellent distraction as to its real plans. Of course, it could simply have been due to a change of management. If so it would have been strange that the same C. Michael Armstrong would destroy AT&T’s bonds which he himself had laid while he was CEO of Hughes only a year earlier. 

 

               Echostar

 

Hughes had founded DirecTV and now owned Primestar. In the US, there was one other serious player in the Direct Broadcast Satellite (DBS) game. In 2002, General Motors Corporation, Hughes Electronic Corporation, EchoStar Communications Corporation attempted a $25.8 billion merger which was blocked for regulatory reasons.[661]

 

On 22 December 2003, the News Corporation (Murdoch) paid 6.6 billion for a 37% stake purchase in Hughes Electronic Corporation, General Motors Corporation, United States Trust Company of New York.[662] As a result, DirecTV, previously known as Hughes Electronics, became a division of Fox Entertainment Group in 2003.[663]  On the surface it looked as if the three major systems in the US, Primestar, DirecTV and Echostar had all been sold to foreign interests and that General Motors and its subsidiary had left the satellite business entirely.  

 

Hughes under its new name of DirecTV now had an 11 member board which had “six independent directors, including Neil Austrian, former President and COO of the National Football League; James Cornelius, Chairman of Guidant Corp.; Charles Lee, Chairman of Verizon Communications Inc.; Peter Lund, former President and CEO of CBS; and John Thornton, Co-President of Goldman Sachs.”[664]What was noteworthy was how the “independent” directors also reflected the interests of direct competitors: e.g. CBS, the new name for Westinghouse Electric, now officially part of Viacom. Verizon, as a Baby Bell, was linked with AT&T. James Cornelius was also a director of Hughes Electronics. 

 

               General Motors-Hughes

 

The story of Direct Broadcast Satellites is more complex. So too is the story of General Motors’ connections with Hughes and we need to examine both in a little more detail. The years between 1976 and 1980 saw the beginnings of satellite television through the advent of a) Home Box Office (HBO); b) Turner Broadcasting System (TBS); c) Christian Broadcasting Network (CBN, later the Family Channel) and d) the request by Comsat/Satellite Television Corporation “to construct a Direct Broadcast Satellite (DBS) system.” It also saw the rise of two organizations. One was the Society of Private and Commercial Earth Stations (SPACE). A second was the Direct Broadcast Satellite Association (DBSA). SPACE had represented primarily the manufacturers, distributors, and retailers of DTH systems. DBSA was comprised of companies such as RCA Americom, AT&T, Hughes, Comsat, and USSB -- all of which were interested in high power DBS. On 2 December 1986, these two organizations merged to found the Satellite Broadcasting and Communications Association (SBCA).[665]

 

One of champions of DBS in the years to come was Senator Al Gore. In 1991, Senator Gore introduced cable legislation. In 1992, President Bush, Sr. vetoed the Cable Act. Congress overturned the president’s veto. The new legislation guaranteed “access to satellite delivered cable programming services by alternative multi-channel video providers such as DBS operators.” In the next years Senator Gore worked for the Satellite Home Viewer Improvement Act (SHIVA), which President Clinton signed in November 1999. By 2001 that legislation was attacked by the new administration.

 

In I983, Hughes Communications launched Galaxy I, the ­first satellite dedicated to cable TV distribution. In 1985, General Motors acquired Hughes Electronics. In 1992, Hughes announced its own DirecTV DBS project.[666] In December, 1993, Hughes launched the first of three satellites designed to broadcast 150 channels of TV across the United States to homes equipped with small satellite dishes.[667]

 

Meanwhile, there were many changes in the military. Between 1979 and 1986, military spending had doubled. The fall of the Berlin Wall and the end of the Cold War in the period 1989-1991 had changed attitudes towards military spending. In 1993, the then Secretary of Defense, Les Aspin, urged top industry officials “to consolidate or go out of business.” Observers noted that these trends explained “many of the mergers and buyouts that have occurred in the last decade.” In 1995, a group of experts[668] issued a warning about what they called the Military-Industrial Squeeze:

Despite the talk of surpluses, there is simply not enough money available to the federal government to fund all the programs on its wish lists. Budget gimmickry is a sophisticated art on Capitol Hill these days, but hiding every excess as an “emergency measure” won’t work forever. In the years to follow Americans will have to make hard decisions about acceptable levels of military spending versus investments and spending in non-military areas like social security, education, housing and healthcare. 

By 1995, Hughes had come to a crossroads. An article of 10 December 1995, raised the challenge as a question: “Can defense firms go commercial?” There were two accounts of what happened next. One was that Hughes merged with Raytheon (1997).[669]  The other was that it led to a “single blockbuster restructuring…built around the sale of defense operations to Raytheon Co. That left El Segundo, California- based Hughes a ‘pure play’ in satellite communications.” Hughes executives maintained “that the transformation required four years of extremely complex finance work to target manufacturing assets for sale, and to apply some of the $17 billion in proceeds toward expanding Hughes's much smaller, high-growth satellite communications ventures.”[670]

 

For the next five years this image of Hughes as a now civilian company remained. By 1998, slightly more than four years after launch, DirecTV announced that it had reached 4 million subscribers. Hughes also began consolidating as if it were still a military company. In 1998, Hughes Electronics a) made a $1.5 billion alliance with America Online Inc.; b) it bought U.S. Satellite Broadcasting (USSB) for $1.3 billion in cash and stocks. This allowed Hughes to combine its DirecTV programming with USSB’s premium movie broadcasts, and increased DirecTV’s total channels from 185 to 210. In 1999, Hughes and DirecTV also acquired “the 2.3 million-subscriber Primestar direct broadcast satellite medium-power business and Tempo high-power satellite assets in two transactions valued at approximately $1.82 billion.” [671]

 

We noted that in the late 1970s the Direct Broadcast Satellite Association (DBSA), had five major players: 1) RCA Americom; 2) AT&T; 3) Hughes; 4) Comsat and 5) USSB. By the late 1990s Lockheed Martin had acquired the AT&T holdings via Loral and in 2000, Lockheed also bought Comsat. Meanwhile, as we have seen, General Motors/Hughes had taken over USSB as well as DirecTV and Primestar. Instead of capitalizing on this wonderful collection, General Motors sold all its assets in Hughes to Boeing.

 

On January 13 2000 Boeing and Hughes Electronics Corporation announced that Boeing would acquire Hughes' space and communications business and related operations for a value of $3.75 billion in cash. As a result, Hughes Space and Communications Company, Hughes Electron Dynamics, and Spectrolab, Inc., in addition to Hughes Electronics' interest in HRL, the company's primary research laboratory became part of Boeing's newest subsidiary, Boeing Satellite Systems, Inc.[672] This meant that all these civilian efforts were again in the hands of two of the main military contractors: Boeing and Lockheed.

 

For almost a year it seemed as if the Hughes momentum would simply go on. In April 2001, Hughes acquired DirecTV Broadband Inc. Then on 13 December 2002, Hughes announced it would close its high speed Internet service.[673] In 2004, Hughes Electronics renamed itself DirectTV Group, which owned the largest direct broadcast satellite serving 12 million television viewers in the U.S. and 1.5 million in Latin America. By this time DirecTV Group Inc. owned Panamsat. Soon after Panamsat went bankrupt. As we have seen, on 20 August 2004, a $4.1 billion acquisition gave Kohlberg Kravis Roberts & Co a 44% stake and the Carlyle Group a 27% stake in Panamsat.[674] A short time before both Intelsat and Panamsat were sold, there was a mysterious mechanical failure which led to a considerably lower bid. The Lord’s Prayer had spoken of things “on earth as it is in heaven.” The pattern of important assets suddenly going bankrupt only then to re-emerge seemed to prove that the reverse could also be true.

 

               Boeing

 

When the so called merger with Hughes first took place in 2000, Boeing executives were very enthusiastic about synergies:

              

This transaction will boost Boeing's space and communications revenues and earnings by more than a third and will provide for significant future growth. It will be accretive to earnings per share in its first full year of operations, 2001. The Hughes businesses, which anticipate 1999 revenues of $2.3 billion, when added to Boeing's space and communications operations, will initially create an entity with annual revenues approaching $10 billion. ‘Boeing intends to be number one in space.’ This acquisition is a significant step forward in executing our goal of becoming the industry leader in integrated, space-based information and communications,"[675]

              

As we have seen, the next two years brought an enormous amount of bankruptcies. There were various others such as GE Logistcomm’s GlobalWave and Orbcomm Vantage. These should have cleared the way for Lockheed and Boeing to triumph. In November 2001, the US Air Force awarded Lockheed and Northrup Grumman a contract for up to $2.698 billion to begin the System Development and Demonstration phase of the Advanced Extremely High Frequency (Advanced EHF) program. Within three months, in February 2002, Lockheed stated that it was leaving the telecom business.[676]By 15 July 2003, Boeing announced that it would leave the commercial space business.[677] As usual this was not quite the whole story.

 

GE (General Electric) Americom

Of the original founders of the Direct Broadcast Satellite Association (DBSA) founded in the 1970s there was only one that was not taken over by Lockheed or Boeing, namely, the Radio Company of America’s American Communications Inc. better known as RCA Americom which, it will be recalled was a subsidiary of General Electric (GE), which also owned NBC, Vivendi etc. Americom. claimed that it was they that partnered with Primestar to create the first U.S. direct to home (DTH) home satellite service. “Our equity interest in this service underscores our commitment to exploring new applications for DTH satellite technology.”[678] One of their websites claimed much more:

With Home Box Office we developed the first satellite-delivered channel to cable systems. Prior to our innovations, home cable TV subscribers were receiving their signals from ground-based antennas that HBO had mounted. Our work helped create the distribution superhighway that now also carries entertainment and sports services such as The Discovery Channel, Nickelodeon, MTV and the Madison Square Garden network; and news and information services, including the ABC, CBS, CNN, PBS, PaxNet and NBC networks. In 1997 we launched AMC-2 and AMC-3 to add more capacity to this highly successful satellite distribution service.

In December 2004, a search for GE Americom on Google took us to the website of Lockheed Martin Space Systems. “About the company” took us Lockheed Martin Space Systems which, we learned was an enterprise built by “heritage aerospace companies including Lockheed, Martin Marietta, RCA, GE and Loral. These space age pioneers have joined forces to blaze a new trail in serving and protecting our world at the dawn of the new millennium.”

A click on commercial systems revealed that GE Americom was but one of a long list that includes Asiasat, Chinasat, Echostar, Inmarat, Intelsat, Iridium, Korea Sat, LMI-Lockheed Martin Intersputnik, New Skies, and at least ten others. It was wondrous to see how a company, which announced it was leaving the telecom field had, within less than two years,  conveniently managed to acquire a majority of the satellite systems from the commercial field just after they all went bankrupt. One could of course attribute all this to fruits of liberalization: proof that the competitive spirit was now sky high. Meanwhile, in the midst of the telecom bubble burst and satellite bankruptcies a merger took place. 

               SES Global

 

On 16 April 2001,GE American Communications Inc joined forces with the Société Européenne des Satellites SA (SES Astra), of Luxembourg. The union resulted in SES Global. As one reporter noted: This shifted “the power structure of the industry overnight.”[679] SES Global claimed to be:

 

“the world's leader in global satellite communications.”[680] “Located in prime orbital slots and covering the earth's landmasses, the spacecraft fleet which are fully owned by SES Global include the ASTRA satellites in Europe and the Americom satellites in the Americas. SES Global also has interests in and partly owns Sirius, AsiaSat, Nahuelsat, Star One and Worldsat.”[681]

 

SES Global acquired the Americom satellites from General Electric in 2001. General Electric Capital remained one of the major shareholders of SES Global. On 20 December, 2002, an Ariane 5 successfully launched Astra-2D, GE-8 and LDREX from CSG, Kourou, pad ELA 3. The satellite was jointly owned and operated by GE Americom and AT&T Alascom.[682] Miraculously, AT&T, which had sold off: a) its cable interests; b) its wireless interests and c) all its satellite interests was now back in the business it had helped start almost four decades earlier. And miraculously, Lockheed, which had announced its departure form the business that same year, was involved once more in building civilian satellites. So too was Boeing. In April 2004, SES Americom announced that it would acquire the bankrupt Verestar satellites.[683] On 1 December, 2004, SES Americom formally acquired Verestar.[684]

 

In 1986, at the height of the Cold War US military spending was $365.3 billion. By 1994 that had diminished by 21% to $288.1 billion. In 2001, the Pentagon requested a budget of $293.3 billion, which was scheduled to increase slowly to $331.7 billion in the next five years. Then came September 11, 2001. By 2002, the official military budget was $396.1 billion. The War Resisters League argued that the real figures were much higher: that for 2005, current military spending would be at $536 billion; that the wars in Iraq and Afghanistan would cost an extra $50 billion and that past military costs in terms of Veterans’ benefits and national debt amounted to another $349 billion. Their claim was that of the $1,926 billion of federal funds available for 2005, 49% was going to military activities; 33% to human resources; 13% for general government and only 6% for physical resources. Our concern was not with the details, but with the big picture. These estimates suggested that military expenditures were now double what they were at the height of the cold war in 1986.

 

In our analysis of developments in telecommunications and especially multimedia (including telephony and Internet) we noted how a very small number of companies dominated the scene, especially AT&T (and its Baby Bells), General Electric, General Motors and IBM. We noted that the three major military contractors: Lockheed/Martin, Boeing and Grumman/Northrop were encroaching on these developments. We noted also the recurrence of a small number of equity firms, especially Carlyle, Parsons, Cinven and a handful of others. Our study of the satellite crisis has brought us back to the same players. We saw how some individuals moved elegantly from the military to telecommunications to satellites. These parallels were so striking that worries about the two crises being connected and even possibly staged, were too persistent simply to go away.

 

Our study of the historical context of these developments made it clear that the so called crises of 2000-2001 had their origins in the early 1990s and that their roots went back to the 1950s and sometimes earlier. In some senses, the hype surrounding overambitious new companies, which then went bankrupt, brought a sense of the déja vu. As we repeatedly noted, however, the companies that went bankrupt were not the ones with little to offer. They had the most valuable assets, which were forced into an undervalued state such that others could acquire them.

 

We mentioned that many of the mergers and buyouts occurring in the military between 1985-1995 were due to the gradual retreat of the Cold War. Since then the same trend shifted to the civilian world. On the surface, this meant that General Motors/Hughes, Lockheed and Boeing retreated from the civilian/commercial world. In practice, however, something more sinister happened. Under the guise of liberalization and deregulation, hundreds of billions of taxpayers’ monies, which were invested in both terrestrial communications (telephones) and satellite communications were privatized; reduced to a fraction of their true value and fell into the hands first of a small number of equity firms and then often ended in the hands of a few military contractors. Conspiracy theorists saw this as one big plot. More sober minds assured us that it was really only a number of plots. Some consultants re-assured us that this was evidence of a fickle market climate which arises in truly free countries.   

 

The pioneers of the Internet painted a magnificent vision, partly rhetorical, about a new era of communications via the Internet, which would improve our health; further business, and transform our education. This was the e-version of healthy, wealthy and wise. The mergers and bankruptcies described above revealed that there was afoot a second vision that focused only on money “at all costs.” In the movie Jerry McGuire (1996) this spirit took the form of: “Show me the money.” The rhetoric of the fast track business became nothing counts, but the bottom line. But those who focussed only on this financial bottom line forgot the fallout, in a literal sense, of their actions. If persons lost confidence in their employers; if they no longer believed in their companies, then one day companies no longer worked as they should; it would not be business as usual and there could well be a more serious bankruptcies.

 

In this second vision, there might be nothing to die for in the happier sense, but everything to fight for, to struggle for. One could be tempted to call it an e-Scrooge vision, but that would not catch another dimension of the trend whereby military terms were marching into our everyday conversations: where persons “shot aggressive glances,” “fired volleys of invective” and instead of engaging others simply “fired” them. In a world where executives were armed to become corporate warriors in hostile takeovers, there was a danger that this second vision, which claimed to be based in sober realism and cold facts (warm facts are very hard to find these days), was gaining the upper hand, was threatening the promises of the original visionaries; was being reflected in the political turmoils of the day. What had begun as an American dream was threatening to become a global nightmare.

 

Accountancy Firm   Company                                  1999 income in billions

 

1. Andersen (Accenture)        Enron, Qwest, Global Crossing Merrill Lynch[685]16.2

2. Deloitte & Touche              Adelphia[686]                                                           10.8      

3. Ernst and YoungCedant, Computer Associates Intl.                         12.5

4. KPMG                              Xerox                                                                   12.2

5. Price Waterhouse (now IBM)                                          Allied Irish Banks    17.5

Total                                                                                                                    69.00

 

Figure 12. The Big Five Accountancy Firms in 2002, companies concerning which they are being investigated for malpractice and related banks.[687]  

 

               12. Finance 

 

To understand why the situation became quite so serious, it is important to go back to the books, in this case, the bank books. We saw that the major American telephone companies were linked with carrier equipment companies, computer companies, content holders, home entertainment companies, satellite companies and military contractors through a nexus of connections to achieve a new approach to media. Under the name of convergence this uni-lingual, uni-cultural vision, entailed many billions and potentially trillions of dollars. Ultimately this was only about one third of the story. There were two other arenas that made the modern world go round. There was finance (consultancy, accountancy, auditing, banking, insurance) which, as we have seen (figure 6) also experienced convergence. Finally, there was energy with parallel trends. So in the very big picture there were key three sectors 1) media; 2) finance and 3) energy and at a global level there was convergence not only in but also between each of the three sectors.

 

               Consultancy Firms

 

When telcos, satellite companies and multimedia companies wished to expand and/or engage in takeovers, mergers or bankruptcies they invariably required the money of banks and equity firms as well as the advice of consultancy firms, which were typically also accountancy and auditing firms and they required the support of the bank and insurance companies. We traced the great consolidation in these consultancy firms.

 

As might be expected these were closely involved with telcos, computers and the Internet. Unfortunately, they were also directly involved in irregularities concerning accounting. Andersen was linked with Qwest and global Crossing concerning discrepancies; Deloitte and Touche with Adelphia;[688] Ernst and Young with Computer Associates International and KPMG with Xerox. By 2003 all of the big five were being examined for irregularities and questionable practices (figure 12).[689] Though conflict of interest within the Big 5 stemmed in part from ‘in house’ temptations, subsequent revelations suggested that the companies’ roles were less neutral in their advice than they might have appeared at first sight.

                                                                                                                                                        

In 1999, the combined earnings of the big five amounted to some $69 billion.[690] In 2003, these became the big 4, (with consulting branches, cf. Accenture, Bearing Point, Deloitte Consulting and CapGeminiErnst and Young), with earnings of some $62 billion.[691] From a global viewpoint these were modest sums of money. Striking, however, was how the activities of the major consulting/accountancy/auditing firms extended far beyond bookkeeping. We noted, for instance, that PriceWaterhouseCoopers was one of the competitors of SAIC in winning a $543 million military contract for e-learning.

 

Meanwhile, computer companies such as IBM and consulting companies such asAndersen, in their new guise as Accenture, were engaged in providing visions of e-government.[692] There were even cases where consulting firms, which audited government accounts, claimed that these were no longer open to regular auditing checks, thus raising to a new level the age-old problem of who inspects the inspectors. From this, there arose a sense that high finance, high politics, and high military were somehow above or beyond the law (cf. § 13). There were of course more subtle minds: if one could convince everyone that these were times of emergency, then emergency actions could be seen as lawful, even if they fell outside the usual framework of the law. Interestingly enough these subtle minds assumed that the regular law continued to apply to everyday citizens, in regular times and in emergencies.

 

Banks

 

Banks were very much engaged in the telecom sagas. An article in Business Week explained some aspects of the dimensions in play:

 

Banks issued more than $320 billion in loans to the telecom industry between 1999 and 2001…The trouble began after the Telecommunications Act of 1996, which started a $1.3 trillion avalanche of lending by investors and bankers eager to finance a host of upstarts that would supposedly take on Verizon Communications (VZ ), AT&T (T), and other established carriers.[693]

 

Not only did the banks suffer great losses from what turned out to be shaky investments, they were sometimes also directly implicated in the irregularities surrounding those investments. For instance, in the case of Enron, in addition to Andersen, at least eight US banks were directly implicated: 1) JP Morgan Chase; 2) Citigroup; 3) Merrill Lynch; 4) CSFB; 5) Lehman Brothers; 6) Bank of America; 7) Vinson & Elkins and 8) Kirkland & Ellis.[694] Serious evidence that Citigroup’s Salomon Smith Barney and Grubman deliberately misled investors and profited therefrom was discussed in the news.[695] Enron, was a particularly complex case. Companies such as Level 3, linked with Verizon (and Verisign) had close connections with Enron as did SAIC, via Entergy.As an example of the complexities a former lawyer from Vinson and Elkins, who worked on the Enron case, was subsequently nominated for one of the highest legal posts in the national administration.

 

As with consulting firms, there were many mergers of banks such as CitiBank and Travelers.[696] In some cases, there seemed to be a nexus of links between telcos (e.g. Qwest), carriers (Global Crossing), energy companies (Enron), accountancy firms (Andersen), and investment firms (Carlyle Group).[697] One example was Gemplus, one of the leading companies on smart cards specifically with respect to mobile access to Internet. Gemplus, which had the Texas Pacific Group as chief investor, appointed Alex Mandl, to a leading position but omitted to report that he had also been working for the CIA.[698] Mandl was also a director of Viasystems,[699] a “leading worldwide independent provider of electronics manufacturing services, or EMS, primarily in the telecommunications and networking industries.” To counter the influence of Verisign, in July 2004, Gemplus joined with Sofipost, Sagem, Bull, l’Imprimerie nationale and Euro-Information to create a new company called Infrasec.[700]

 

Another example of the complexities involved was Cambridge Display Technologies (CDT), a British firm, which received investments from Esther Dyson and was subsequently bought up by Hillman Capital Corp. Gerald Paul Hillman, managing director of that company wrote about President Musharraf on September 11 2001.[701] He was also a member of the Defense Policy Board, which advised the secretary of defense of the United States. Such links between high finance and military interests were evident elsewhere. For instance, Marsh Inc. claimed to be the largest re- insurance company in the world.[702] It was notable that the tragic events of September 11 2001, wiped out more than half a billion dollars in Gerling Global’s re-assurance company in a single morning, but did not really affect Marsh seriously. On 12 June 2002, Paul Bremer left his position with Kissinger Associates to become Chairman and Chief Executive Officer of the Crisis Consulting Practice of Marsh. He was subsequently appointed as the US “governor” of Iraq.[703] Some claimed that these appointments were mainly to assure the interests of companies such as Halliburton and groups such as Carlyle.[704]

 

               Other Sectors 

 

Meanwhile, the irregularities extended beyond telcos and media firms to other fields. For instance, there were similar irregularities in the pharmaceutical field: a $1 billion error with Bristol Myers Squibb and a $12.4 billion error with Merck.[705] If this applied equally to other key investment areas such as biotechnology and nano-technology then the game was much bigger than was initially suspected.[706] As the venerable, U.S. Senator Everett Dickson put it so eloquently: “A billion here, a billion there, sooner or later it adds up to real money.” How many citizens were aware that the combined corporate and consumer debt in the US rose from 5 to over 12 trillion dollars in the 12 years from 1989 to 2001? [707]  

 

Perhaps even more disturbing was that these irregularities extended to the government itself. Officially, the cases of companies overcharging the government were in the millions. For instance on 13 March 2001, Lockheed Martin agreed to pay back $10.5 million in an overcharge case.[708] On 27 August 2003, Lockheed Martin agreed to pay back the air force $37.9 million.[709] On 9 June 2003, Northrop agreed to pay back $111 million in an overcharge case.[710] The top 100 false claims settlements since 1986 amounted to $12 billion.[711] Some said that these were only the small ones that got caught, as opposed to the ones that got away. In the year 2000, the “the federal government could not account for $1.3 trillion at the Department of Defense (DoD), as well as hundreds of billions of dollars at other government departments and agencies.”[712] Some claimed that these sums were much higher: that there were over $6 trillion missing.[713]

 

Whether there were merely a few billions or several trillions missing is the kind of question that was traditionally, and probably always will be, of great interest to the Internal Revenue Service (IRS). For our purposes such statistics were only of interest insomuch as they confirmed that the dot.com bust of 2000 and the telco crisis of 2001 were but a small part of something vastly larger. The 201 mergers in US insurance companies in the first nine months of 2001 were another indication of major change as was the trend for traditionally solid mutual companies such as John Hancock to convert to publicly held stock companies.[714] Paradoxically, as assets from public sphere (railroads, telecoms) went increasingly into the private sphere; what had traditionally been private companies moved increasingly to the public sphere in the sense of the stock market, which had none of the stability of the old public assets. 

 

To be sure, the US alone was not alone in terms of irregularities. After all, scandals were invented in Europe long before America was discovered. Hollywood generated considerable entertainment, and at least as much profit, by showing how scandals helped the fall of Rome, while the actions of a Prime Minister in modern Rome confirmed that such abuse of power by heads of state was much more than historical fiction.[715] Even so, such irregularities throughout this system pointed to a crisis in consulting, bookkeeping, accountancy, auditing, investing, consulting, banking, insurance, indeed the entire financial infrastructure. Underlying these irregularities was a deeper crisis of integrity and trust. They also confirmed that these problems extended far beyond the media sector. They extended to energy, another crucial ingredient of an information age. 

 

               Energy

 

Some obvious links between new media and energy sectors such as electricity and oil were examined earlier (§7). They suggested that the pipelines of communication in the computer, telco, and satellite fields were becoming inextricably linked with the pipelines of energy. The largest computers in the world (Sandia, Los Alamos, Lawrence Livermore), were supported by the Department of Energy (DOE). Oil, gas and other energy sources were fueling the new frontiers of communications in more senses than one.[716]In this context, nanotechnology was something much more than a general trend towards miniaturization. It was part of a conscious plan to control the future of production especially in the domain of energy. As a director at one of the US labs put it recently: “The intellectual challenge presented by environmental steward-ship is at least as great as that presented by the Manhattan Project in the 1940s and the space race in the 1960s and 1970s – and so is the potential payoff.”[717]

 

Rather than accepting that the US depended on other countries for oil, some believed that the US could simply “go in”[718]and arrange the destiny of other nations in the name of fighting terrorism. This was a vision linked with small circles within the CIA, traditionally infamous for their almost covert operations, which had the attractive feature that official members of the government could plead ignorance or at least plausible denial of the company’s actions. Observers have rightly been worried by recent evidence that the inner circles of visible, government were taking a more hands on approach to these invisible areas of the special agencies. 

 

In the James Bond film the World is Not Enough, the plot involved a competing Russian and American oil pipeline. In the film, the US pipeline won the day. In real life, the Russian pipeline existed and the American one was unfinished. Meanwhile a gas pipeline from Turkmenistan through Afghanistan was planned by Bridas (now BP Amoco) and then found competition by Unocal from Texas.[719] In this context, SAIC’s increasing interest in BP was possibly more than a co-incidence.[720] Pessimists noted that while one of the overt reasons for the war on terrorism was to permit oil and gas pipelines to work, a more covert reason was to gain control of the world’s energy sources.

 

Those who tended towards conspiracy theories painted much more disturbing scenarios. The website of hereinreality.com noted that the law firm involved with the pipeline in Afghanistan was Baker and Botts. The firm’s senior partner, James A. Baker, was in the thick of these oil deals also entailing Texas oil companies, linked with the present administration, which worked with the Taliban. We encountered James Baker earlier (§ 9) as a member of the Carlyle Group trying to persuade Kuwait to cancel Iraq’s debt as the personal envoy of the president. He had extensive ties to Enron, Global Crossing and Arthur Andersen. He also led the campaigns of the last four Republican presidents. On September 11, 2001 he was reported to have watched the attacks from the Ritz Carlton Hotel with the Bin Laden family.  

 

With such reality as a storyboard, Ian Fleming’s successor could have had a field day writing the plot of a future James Bond adventure: The director of Specter conceives of a villainous plot to take control of the world’s oil supplies. To do so directly would hardly be in keeping with the specter approach. So the new head of the US intelligence agencies is contacted on the pretext that America has an opportunity to acquire the vast oil supplies they have long been trying to obtain. The plan seems simple. The US indirectly pays an Arab (Bin Laden) to give them instructions how to deal with the Middle East. Posing as a terrorist Bin Laden gives regular tirades which are coded instructions for the next stage in the game. The world that thinks the US is chasing the terrorist but in fact the accomplice posing as a terrorist is a paid accomplice who is also pulling the strings. At a critical moment the plan starts to go awry. The initial plan to gain control of all world’s oil, is transformed into a horror scenario where the US would need indirectly to destroy Arab resources to maintain the upper hand.  Enter James Bond…. One could easily see that the film would need several sequels.

 

To return to the everyday world: In 2003, the Yukos Oil Company was valued by U.S. investors at $40 billion. On 26 November, 2004, CNN reported that it was now worth $3 billion and explicitly suggested that it could be run from abroad since its daily operations had already been outsourced to companies such as Schlumberger and Carlyle. In light of the bankruptcies in the media field, it was easy to see a pattern: Insist publicly that a valuable asset was really worthless and then buy up that asset to make priceless profits. By coincidence, Yukos was also due to be privatized. One could almost have predicted that there would be buyers from abroad in the audience. On 19 December, CNN announced that the sale had gone to a little known company Baikalinvezt for $9.3. billion. They did not mention that there were two other partners, an equity company, First Venture and Infocom, with less Russian names. The lucky buyers had acquired the assets for $30.7 billion less than the value CNN had listed 12 months previously. 

 

               Paradoxes

 

The war in terrorism in Afghanistan entailed other paradoxes. By ousting the Taliban (who were supported by the CIA[721]), the US re-instated Afghanistan as the producer of 70% of the world’s heroine production and as such increased the sources for the funding of terrorism.[722] We were constantly told about the need for free discourse and it was entirely laudable that the National Science Foundation (NSF) was now sponsoring a Virtual Agora Project via Carnegie Mellon University “to develop and test software that would enable large numbers of citizens to use the Internet more effectively to learn about, deliberate and act upon community issues.”[723] Ironically, the same NSF was also involved in the kinds of technologies that pointed to a future sketched in films such as Minority Report

 

Meanwhile, the communications media were directing our attention elsewhere. They told us of a new corporate fraud bill in Congress and of an office for global communication to enhance the US image. They told us about accountancy problems in the millions (Enron, Qwest) or bankruptcies of a billion here and there. They said very little of ever expanding military budgets, whereby over 40 billion dollars of taxpayers money were planned to redesign the Internet to meet the needs of the secret services rather than everyday citizens. They were almost silent about annual military budgets in the hundreds of billions and big time projects such as the Joint Strike Fighter of over $1 trillion.

 

The financial slumps and potential economic crises were not limited to a few media firms or telephone companies. They involved all three sectors. The new great game was about media, investment and energy. Or as the insightful Shaykh Dr. Abdalqadir as-Sufi put it:

 

Consider groupings of power barons divided into three camps: Commodities (of which the primary is oil), Finance, and Media. These are the imperialist forces and national governments have no greater importance than their role as focal command points. This can be clearly observed in the current tragedy where the issue is uniquely petrol, and the role of the media is to underline it as a military response to a terrorist outrage, while the end result is to hand over a country to the bankers in a world where Aid is itself a militant form of invasion.[724]

 

Trust 

 

Yet, for all the importance of oil, finance and media, the true crisis lay elsewhere: not so much with material goods or companies, but with the problem of trust and integrity. This crise de conscience from the country of reality checks threatened to affect the future of the world. As George Soros pointed out:

 

Foreign capital is fleeing the United States in the wake of as yet not fully realized scandals that will according to Fox News on July 6, take an estimated $600 billion out of the U.S. stock market this year. One of the many smoke alarms triggered by this is the fact that the US economy needs an estimated 1.5 trillion per year in new foreign investment to remain solvent.[725] 

 

While the media continued discussions about the symbolic event on 11 September, 2001,[726] there was very little discussion about the possibility that the US government had prior knowledge;[727] that it possibly welcomed the event.[728] There were attempts to link this event with a number of anthrax[729] incidents (attacks) until it became clear that the source was a military lab (probably in the US) and that recipients such as Senator Tom Daschle[730] were at odds with the government in power.

 

A war on terrorists was launched. Critics observed that the quest to emancipate countries from veils, was itself a thinly veiled attempt to control markets as a means of controlling their oil. For some this seemed a win-win situation. A quick attack helped the military industry; quick control of oil fueled the economy. The aftermath of the attack was a boon to the building industry and a haven for contractors and consultants to help with new infrastructure and new ways of doing things. As long as one took full control, and could determine directly who the consultants and contractors would be there seemed to be no problem. From the calm of far away places such as Casablanca, such a vision for virtual government seemed like an ideal blueprint. It intertwined the military, business and investment. It seemed an ideal combination of money and power. 

 

At the same time, such reasoning pointed to something more disturbing than what General Eisenhower once called the military industrial complex. The makers of the blueprint may have thought that by supplementing warfare with distance-government, they could decide on the destinies of cities and even whole countries from the comfort of their offices without the bother of hot sands and heated debates. Alas, missing from the blueprint were some other details. In November 2004, the Lancet, one of Britain’s leading medical journals, provided serious evidence that over 100,000 civilian lives were lost in Iraq during 2003-2004. Pointing fingers at others for being terrorists in the absence of real evidence was unconvincing. Doing so, while committing what amounted acts of torture and genocide invited outrage not only from the survivors but the entire world community.    

 

The outrage was not really against Americans as such, but rather against a small group with disproportionate power, who were giving America a bad name. The concept of puppet-dictators, where small groups, often generals, ruled from behind the scenes, was well established. Was there a danger that there could also be puppet-democracies, where small groups followed a private agenda even if the figurehead was man of the year?  There was concern about the numbers of innocent victims who were being killed. But the outrage of the international community was also about something else; something that went much deeper than headcounts of numbers killed or injured or statistics about how many dangerous weapons were destroyed. The real outrage was about a distortion of reality: particularly with respect to religion.

 

In its long history Europe had, of course, often experienced religious strife, religious persecution and even religious wars. But these were counted as dark moments and were the exceptions to a brighter vision. The European tradition had confirmed that tolerance was a wiser path. In its great moments, as at the court of Roger II in Palermo, Muslims, and Jews worked harmoniously and creatively with Roman and Orthodox Greek Christians. There were other such moments in Toledo, Granada, and Segovia. Cities such as Amsterdam became famous for maintaining such a spirit of tolerance in the midst of a French revolution and even in the thick of the World Wars. The deeper lesson was that different religions, different beliefs, different views could exist in parallel as long as one agreed on basic rules of acceptance of one another. In a sense these were the positive results of over three millennia of learning to live together.

 

Now a small group, acting in the name of America, proposed a radically different approach.  Their model assumed that differences needed to be eliminated; that differences of religion were sources of conflict, not only between individuals, but in the clash of civilizations. Their model proposed naïve oppositions of peace-loving Christians “pitted” against war-loving Arabs.  Their militant stance posing as a Christian model seemed to have forgotten Paul’s letter to the Corinthians (1:13) that “love endures all things, love forgives all things.” It revealed complete ignorance of the Koran that asked Muslims to treat Jews and Christians alike as equals. Going uninvited to other countries to kill innocent women, children and many other civilians did not strengthen their case. The outrage of the international community hinged ultimately not just on the large numbers of innocent victims, but also on the enormous consequences this militant model pretending to be Christian could have on both Christians and Muslims. Insidiously, what posed as a war on Islam was equally a war on Christianity. If this was a modern version of the crusades it was being led by infidels. The world knew that this had little to do with everyday Americans and yet somehow everyday Americans had voted this group into power.   

 

According to the rhetoric, the enemy entailed terrorists, who were assumed to be foreign rather than American citizens. The so-called Arabic terrorist from Afghanistan who warned of terrorist attacks shortly before election time turned out to be a young man with an American passport and the rather un-Arabic name of Perlman. Like the American cartoon figure, Pogo, there was a growing realization that: “We have come upon the enemy and we are they.” The enemy was not outside but within. And like the war on drugs, flag waving and fighting with weapons were of little use in battling the fears within. A growing minority felt that instead of fighting those outside one’s country, it might have been helpful to “fight” for peace within one’s own country and especially within one’s own troubled spirit and the soul.  

 

In the past, the world looked to the US and Europe as champions of democracy and of universal rights of the majority.[731] There was always an unwritten law that those who laid claim to having the answers for others, led by example. The bankruptcies and financial irregularities suggested that it was not business as usual, that there were problems of infrastructure at multiple levels. Interventions and wars abroad undermined credibility and threatened others’ faith in those who claimed to come from the land of the free.

 

In the past, any intimation that a politician had lied typically forced them to resign. In the past years presidents and prime ministers were accused of lying on multiple fronts and yet they did not consider resignation. To begin to understand such paradoxes requires a detour into history and psychology to understand why America, like Goethe, had two guiding spirits (zwei Seele in einer Brust). We shall begin with notions of law to explore how a psychology of the “good guy, initially associated with the American West, shaped American definitions of difference, values and law into something very different than European world views. Understanding these differences and their consequences will help us to understand the deeper roots of what US citizens sometimes perceived as simple anti-American sentiments. They will also cast light on the immensity of the problems that have been set in motion by a small group of individuals acting in the name of a great nation.

 

13. Law

 

Writing in 1927, the American, Valentia Straiton, drew attention to the way in which different cultures brought into focus different dimensions: “The Egyptians were worshippers of Nature; the Greeks reveled in beauty; the Romans demanded law; and the Northern races reverenced courage.”[732] While acknowledging the thrust of this approach, Europeans would have insisted that law played a deeper and more universal role in their tradition. Yes, Rome’s empire evolved with an assumption that no individual was above the law. But at least since the time of Moses, there was a close link in Western culture between civilization and law. Plato’s Laws was one of his most important books. In the course of the centuries, Europe saw the rise of alternative legal systems, notably the French (Napoleonic) and the Anglo-Saxon (cf. Teutonic and Celt) codes. Even so, the basic idea of law as supreme remained paramount.

 

Although it entered nationhood in a spirit of revolution, the United States traditionally saw itself as sharing and building on the same Greco-Roman and Judaeo-Christian heritages as Europe. Anglo Saxon and Napoleonic law both had a deep influence. Before the days of law and order, there was an assumption, as in Europe, that law was the foundation of society. Although Bostoners sometimes threw out English tea, America embraced the great traditions of Anglo-Saxon law, complete with the models of lower and high courts. Or at least this was the prevailing view on the East coast.

      

            Psychology of the Good Guy

 

It was not always so in the all too often Wild West. This inspired a whole genre of cowboy movies. It also focused attention on a particular kind of hero, epitomized in figures such as the Lone Ranger or Zorro: where individuals, claiming to work for the right, took the law into their own hands, and sometimes killed and destroyed, without regard for local authorities and jurisdictions. If one was the good guy, the end justified the means. In the often chaotic climate of those times, order was above the law. In time, such cowboys moved to the cities where a new kind of urban cowboy emerged with names such as Superman, Batman, Spiderman, Spiderwoman and Catwoman. They began as comic strip figures and then moved to television programmes and later the film screens. In recent years such television heroes have more modern equipment and trendier names such as Knight Rider and Airwolf. Although the names changed, the basic attitude of the semi-lawless days of the Wild West prevailed. There was a notion that might is right.[733]Gradually this attitude spread throughout the country. Even at Harvard, a recent study suggested that countries with the most money made the most progress and hence implied that might might be right.[734] 

 

Parallel with this attitude of the good outside the law emerged another notion. To agree with someone was much more than to share the same view on a given topic. To agree with someone was paramount to being a friend. Those who agreed with one were friends and allies. Those who disagreed with one were enemies. Foreigners who disagreed with one became “enemy aliens.”

 

In this context, one’s beliefs were not merely a series of views one held now and might well change tomorrow. Beliefs became central to who one was perceived to be and thus became a key to acceptance in a community. This applied especially to religious beliefs. In certain fundamentalist groups this led to extremes, which others sometimes mocked and caricaturized. More insidious were milder versions, which somehow conflated themselves with the attitude to the good outside the law. On the surface, this meant that the Lone Ranger became an everyday citizen just as Zorro, Superman and Batman did in the movies. In everyday life, it meant that Maverick could become a name for the good guys. As long as these were private fantasies or personal styles there were no serious problems.

 

Indeed, for those who never left their little village this was an entirely understandable point of view. Unfortunately, it had an unexpected corollary: As a result of this attitude, we were all foreigners everywhere on earth except for our home, our ranch, or the very tiny space of the village where we began. Those who liked to travel soon found that mutual respect was an efficient way to escape being dinner of the cannibals and related less threatening scenarios. Unless we learned to accept others as equals, why should we expect them to do the same for us, especially when they often came from civilizations that were far older than our own? Cowboys did not need such niceties, cowboys that travel did. All persons that travel do. Even persons who don’t travel should.         

 

The rise of Ronald Reagan issued in a new era. Reagan confirmed that a hero in the movies could become a hero in real life. He also learned that gentle cajoling with words could be more effective in removing a Berlin Wall than bringing in the heavy artillery and mortar. At the same time, when the fantasies of a rancher from the West to become president became reality, there were more subtle problems. The traditions of personal values sometimes posed as those of a nation. As a result, those who agreed with America were friends: those who disagreed were enemies. Those of one’s own particular brand of Christianity were friends: those of other beliefs and creeds were enemies and members of evil empires. No wonder Americans were confused in Beirut, which once had well over a hundred sects of Christians living amicably with Arabs and Jews. 

 

In the Western vision that went to Washington, it was assumed that because “God is on our side”, one was clearly doing the right thing, even if those things did not quite fit in with centuries of laws. After all, it was a problem of living according to one’s own law. The laws of foreigners, those who were different, and were the enemy did not apply anyway. So a clear challenge emerged: assert American law for Americans[735] everywhere and deny the right of others to apply their laws under Americans at any time. Superman would have understood clearly: the International Court of Law in the Hague would have had and continues to have problems.  

 

The present administration continued the western influence on the White House. The so-called wars in Afghanistan and Iraq were therefore much more than attempts to fight terrorism and spread the influence of democracy. They were attempts, perhaps ingenuous, perhaps insidious, for some of the soldiers undoubtedly all too sincere attempts, to raise well-intentioned personal traditions of maverick actions of saving the day to the level of national policies, that were supposed to save the world. In the small towns of the West, this could be forgiven. In Dallas, it could be overlooked. But Bagdad was not a shanty town. It was a cradle of world culture, millennia before America was discovered by Columbus.   

 

What posed as a war on terror thus constituted actions that terrorized the rule of law. There was an implicit assumption that certain key individuals and ultimately the nations on behalf of whom they claimed to speak, were, or at least could pretend to be, above the law or, more precisely, outside the law, because these were times when emergency was a way of life. The congressional experts cited earlier had warned that “hiding every excess as an ‘emergency measure’ won’t work forever.” The present administration seemed to have proved them wrong.

 

Herein lay one of the reasons why the world was uncomfortable with America. It was one thing, at the level of individuals, to perceive a polarity, whereby persons who agreed with one were friends while those who disagreed were enemies. Translated into government policy this meant that those who disagreed with the government were unexpectedly seen as enemies of the state. In practical terms, this meant that any visitor to the United States, or the United Kingdom, could be held and imprisoned indefinitely without any documented evidence of wrongdoing. This was not the best incentive for world peace and love that the hippies had preached. Nor did it particularly encourage tourism.

 

Closer examination of this psychological notion of the good guy reveals that it had deep seated links with American definitions of diversity, and values as well as the law. Each of these deserve a brief explanation

 

Difference and Diversity 

 

Marshall McLuhan spoke of a global village. Part of this message was that we were now all connected as if all the world were a single village. The new media, especially mobile telecommunications media, were connecting persons everywhere. But the individual villages did not go away. This left open the question what one would wish or be able to communicate. 

 

In the section above, we outlined a psychology typical of the American West, whereby agreement on views determined friendship and community. In simple terms, this meant that sameness was a point of departure. Same became something almost sacred. In England, agreement was about an unstated consensus. In America, agreement became a key to being part of the same of the same group, which had vestiges of a clan. Hence the simple question “Do you agree?” came to mean something profoundly different than “Etes vous d’accord?”  or “Sind Sie einverstanden?” These related French and German questions were about decisions to do things together, without any assumptions about having the same views. At a political level Europeans had ententes, concordats, and concords, which were very far removed from agreements in the American sense. American agreements meant that the person was a “good guy,” “on our side” because they were ultimately “the same as us.” Ententes assumed and promised much less: they were decisions by two parties to work together, even if they probably had very different ideas and sometimes even if they despised each other. More friendly ententes were heartier and therefore called ententes cordiales.  

 

In Europe, understanding another viewpoint and sharing it were two actions. In America, they were typically assumed to be a single action. An American who asked: “Do you see my point?” assumed that if the other person could see, they would not only understand, but also have the same position about that point. Indeed, if there were a discrepancy between what one said (externally) and the viewpoint one had (internally), then one was being “insincere,” which was “a bad thing.” So Americans diligently ended all their letters with “Yours sincerely,” with only a few, such as Lionel Trilling, who were aware of the ironies of this allusion to the thinkers of Saint Cyr.

 

In Europe, any incident which could have disrupted a situation was invariably followed by assurances that things remained the same (German: Es ist mir egal); that it did not matter (French: Il n’y a pas de quoi) or that it was really nothing at all (French: De rien or Spanish: De nada which were closely related to the Italian: Non c’è niente).  None of these even alluded to having or sharing the same ideas. They were solely assurance that the situation, the relationship, or the matter at hand could continue in the same way. Americans, who assumed an equation between thought, word and deed, needed no distinctions between the three. Hence, Americans faced with potentially disruptive situations simply said: “No difference.” 

 

Americans typically saw differences as potentially negative. Accordingly, in human relations this implied that friends must “settle their differences” or else they would “need to go their different ways.” By contrast, when Europeans asked a colleague or friend: “Do you see the difference?” this was not to complain about an obstacle in a relationship, but rather to signal a deeper level of insight, which arose from seeing more differences, having a more differentiated view (positive), which arose from making careful distinctions. This had a long tradition. “Distinguendum est” was one of the key activities of scholasticism in the scholars quest towards a more transcendent understanding of the outer and inner worlds.     

 

In the European tradition the essence of friendship thus entailed that one saw and perceived positive differences, understood them and accepted the other person “warts and all” without any assumptions that one needed to “share the same ideas” in the sense of their being same as the friend. This seemed to promise less than the American notion of friendship but it meant that persons could have very different habits, could still be accepted and even be friends. It meant that one traveled searching for variations and differences rather than “more of the same.” Having something that was different became a virtue rather than a failing: one had a little je ne sais quoi.

 

The American quest for something the same led to a melting pot mentality, which was far from a European viewpoint, where difference, rather than sameness was the essence of one’s identity. In Europe, Vive la difference! had a deeper meaning. Hence, being Bohemian was one of many ways of being quintessentially European. In England, being an eccentric was a sign that one had arrived in society. In America, by contrast, being called an eccentric meant that one was on the edge of society and in danger of being an outsider. Hence, in America, those who were different were non-conformist, which was something on the borderline of being an American, and in times of McCarthyism was “proof” of being un-American.

 

Europeans assumed the existence of public and private dimensions in everything they did. In America, there was a greater tendency to relegate the public side to work and private side to the home. Americans turned their public side off: Europeans didn’t or did so much less. Meanwhile, Americans extended their notions about being the same to both the private and the public sphere. As a result they expected not only their friends to be “of the same mind” as they were, they expected them to speak the same language as they did. Hence Americans often dismissed as too different (negative) and ignorant Europeans and others who could not speak American English as well as they did.  By contrast, Europeans often dismissed as too ignorant and undifferent Americans, who could only speak English.

 

This extension of sameness applied to many dimensions. Americans who travelled expected their food to be the same. Hence, Americans defended McDonaldization in terms of efficiency, often meaning that they welcomed how it was never different. A hamburger is a hamburger, is a hamburger. Meanwhile, Europeans condemned McDonaldization for its homogeneity. On the surface the French phrase: Une rose est une rose, est une rose” had a repetition that seemed to praise its sameness, but was actually a paean to its uniqueness.

 

These seemingly superficial “differences” had profound consequences. Linguistically they meant that Americans chose uni- ore more precisely mono-lingualism, whereas Europeans chose multilingualism. Americans sometimes assumed that persons who had not mastered American were too different to be worth trusting. Europeans sometimes assumed that persons who had not mastered a few languages were too unaware to different world views opened by other languages to be worth knowing. Alas, some naïve American tourists sometimes mistook this for anti-Americanism, because for them, persons who did not seek their friendship were assumed to be “enemies.”

 

Architecturally, these seemingly superficial differences meant that American villages and towns generally looked the same. A corollary or implication of this approach was that one was less American to the extent that one was different and one was more “all American” to the extent that one was the same, and of the same view. This applied equally to food and architecture. All American towns really looked the same. Towns that looked different bordered on being “un-American.” An unexpected consequence of a fear of difference was an equally great fear of diversity.

 

In Europe, with its different assumptions, almost the reverse was true. A very European town prided itself on the extent to which it was different from neighbouring towns even if the next town was only five miles away. In Europe, because difference was a virtue, diversity became a central element of cultural expression. In Europe one went to McDonald’s in those rare times when lack of time made fast food a necessity; or as an experience every once in awhile just to be different, but for the most part McDonald’s was uninteresting. Why limit oneself to a burger with a single kind of cheese on a continent with thousands of cheeses? Why limit oneself to a “choice” between a Pepsi and Coke when one had a choice of thousands of wines? In Europe one ate and drank very diverse foods and drinks in extremely diverse architecture. One found very positive differences and much diversity. For this reason, while one could speak of un-American towns, there was no such thing as un-French towns; un-Italian towns, un-English towns. There were simply very French, very Italian and very English towns. 

 

Since difference was not a virtue in America, everything tended to sound, look and even taste the same. And when Americans went abroad they tended to stay in hotels where as much as possible was the same as back home. For this reason Americans liked Hiltons and Sheratons and Marriotts. By contrast, since difference was a virtue for Europeans they sought out everything that tended to sound, look, and taste different. When Europeans went abroad they typically stayed in hotels that were as different as possible as their usual homes: finding a hotel with a difference was something positive; something that made all the difference was positive. Admittedly there were also German tourists who took their sausages on vacation in Italy; or the British who brought their bangers and mash wherever they went. But “real” Europeans chuckled about these in the same way that they chuckled at Americans with shirts in clashing colours. Just as Americans prided themselves on the extent that they were basically the same, Europeans prided themselves on their lack of sameness, on their diversity. 

 

It would be naïve of course to pretend that Americans, the country famous for its extreme individualism, was incapable of differences. The subtle distinction was that in America, difference and, to the extent that it could exist in such a climate, diversity was a personal thing. One began at a public and social level with a commitment to sameness (and to a certain extent to conformity). Once one fitted into this norm one was accepted. That was why everyone, who was a US citizen, was first, and foremost an American. As an extra, an aside, almost as a luxury, one “did one’s thing:” wore bright shirts, long hair, or other costumes for which America became famous all over the world. Significantly, the norm was that one still tended to wear the same things. So America became the land of blue jeans and Levis. This led some Englishmen to quip that it was “the land of unlimited impossibilities where nothing was old as the new.” Underneath the diversity of personal expression, were many basics that were assumed to be shared with everyone. One spoke the same language, one basically did the same things. One wore the same costumes. That was how one knew that they were “one of us.” In England, and in Europe, a person’s apparel was never such a giveaway. Friends might appear in the strangest costumes, enemies in the most familiar ones.

 

Of course, all over the world friendship was about sharing things. But there were subtle distinctions. In America, as we have seen, friends were those who were the same as us. In England, friendship was intimately connected with experiencing things together. This did mean that one did the same things together, but left open that there could be vast areas in which the two friends were not the same. European friendship set out from another premise. Doing things together was fine but essentially friendship was about a complete trust in another person which had nothing to do with their being the same as the friend. On the contrary, it assumed that one’s fellow human was different, and friendship was ultimately a pact that one would explore differences together which were of course not the kind of differences that Americans felt needed to be resolved. Canadians, who were somewhere between the European and American models, accordingly developed their own versions of friendship. 

 

As a result, Americans typically saw deeper friendship as a confirmation of being the same; Europeans saw deeper friendship as a process of seeing more differences, more diversity and possibly even becoming more different as one grew. Of course, Americans who set out with a commitment to sameness still had a personal freedom which allowed them to do “their own thing”, sometimes with such reckless abandon, that they had no problem with the “differences” of Europeans. But given their radically different points of departure it meant that it was ultimately easier for Americans to be friends with Europeans, than for Europeans to be friends with Americans. Americans were only looking for persons who could be trusted because they were the same enough or at least appeared to be. Europeans were looking for persons who were deep and strong enough to explore and develop differences and who could be trusted when the two individuals dropped their superficial similarities and explored what lay beneath.

 

In the American case, the commitment to make difference a personal thing, and specifically linked to personal appearance, meant that there could be diversity of dress, including wild plaid shirts or hair styles, but it also meant that it went no further. In “all-American” towns, the architecture was basically the same; the built environment remained without diversity. That was a psychological root for what the world later called McDonaldization.

 

This psychology of sameness helped to define the nature of tourism in America.  Since towns followed the principle “if you’ve seen one, you’ve seen them all,” there was little incentive to create a tourist industry traveling from one picturesque town to another as one did in Europe. So tourism became defined largely by climate. Florida was a place one went for the winter to get away from the cold up North, not because the buildings were so fascinating. For Europeans in search of the different it meant that apart from some art collections in the cities, the real attractions were not in towns and villages but in the enormous landscapes of nature especially the parks of Utah, California and Colorado where uniqueness reigned untamed by dreams of sameness. 

 

Significantly, this did not mean that these towns and other expressions of sameness were static. On the contrary, since they were on the frontier, which was always expanding and growing, they were free to grow and change as long as they all changed together. This unleashed a great sense of freedom and dynamism into the built environment which led ultimately to important contributions in American architecture, especially in large cities, and especially in terms of individual buildings. The large cities, tried to remain true to the commitment of sameness of the earlier towns. This was one of the reasons why American cities revived the idea of grids from the Greeks so that all their cities had the same straight streets and the same concepts of square or rectangular blocks. Not by co-incidence, European architects such as Mies van der Rohe, who had the brilliant idea of extending the two dimensional grids of squares and rectangles into the three-dimensional environment, were very successful in this climate. As a result, although the great cities such as New York or Chicago had different landmarks such as a Chrysler building or even wild buildings by Canadians such as Gehry, their general feel was of a sameness that was fundamentally distinct from the differences in Rome, Paris, London, Berlin and other great European cities. 

 

There was also another fundamental difference between European cities such as Rome and American cities such as New York, which went far deeper than the obvious fact that Rome was older than New York, although it was related to this detail. Rome gained its name as eternal city partly because its citizens decided that there were some large bits of their city which were not open for change; even if those bits were sometimes literally in ruins. As a result, Rome could acquire buses, subways, modern buildings, but this was built around, above and sometimes even under an historical core, which one continued to study with all the tools of modern archaeology to keep alive the differences of earlier times.

 

This was very different from a New York, where history, which reflected difference, was necessarily relegated to buildings that reflected the personal expression of individuals. So the building that housed the Frick Collection became an historical monument, but there was no historical feel as in Rome or even an historical section (historische Viertel was a technical term in German not in American).

 

As their East and West Coast settlements and their shanty towns of the Wild West transformed themselves into the face of today’s skyscraper cities, Americans were obviously not blind to the great changes that were occurring. Often, with no little nostalgia, they looked back on the greater sameness that they had once enjoyed. The European response to this universal dilemma would have been to create historical areas, where one had buildings with dates. By contrast, America saw these as dated buildings, which meant they had to go. In Europe, history meant something stayed. In America, “It’s history” meant that something did not stay. It was replaced. Often this was the next modern building.

 

Walt Disney recognized that the nostalgia for the sameness that since had been eclipsed, reflected a deeper need, which could also lead to new business. Where a European would have tried to conserve or reconstruct an historical town of the past, Disney applied the ideal of sameness retrospectively. He constructed buildings that gave the impression of being the same as those in earlier towns of the West. Instead of trying to reproduce accurately town A to the exclusion of town B, he sought to reconstruct the sense and atmosphere of an old town. To choose any town would have led him back to the diversity of the European tradition. Choosing to build something that reflected any-town, he upheld the deep American commitment to sameness.   

 

Walt Disney’s genius was that he extended this approach to all three phases of time: Fantasyland (the past); Frontierland and Adventureland (present) and Tomorrowland (future). The four together became Disneyland. Subsequently the Epcot Center was devoted specifically to the future. On the surface, these Disney worlds catered to individuals. At an another level they controlled experiences, depersonalized them and threatened the very idea of truly “personal” experiences in the European sense. Ultimately, they were a vehicle for recreating the community sense of sameness that Americans vaguely remembered. For this reason it could appropriately be called Fantasyland rather than Historyland. Fantasyland took visitors back to a time when sameness was still intact. A Historyland would have taken them back to a time when differences with the present were painfully obvious.

 

On the surface, Disney had created a brilliant new form of entertainment that evolved into the notion of theme parks, which spread throughout the world. At a deeper level, they gave externalized the essence of the American commitment to sameness, which was a central starting point for their approach to values and culture. Sociologists have rightly noted that McDonaldization and Disneyfication were related: they were two methods to capture and express the essence of the American psychology. Both addressed the quest for sameness. McDonaldization did so for the present and especially with respect to food. Disneyfication extended this to past, present and future.

 

As long as countries had clear borders all this made “little difference.” Europeans saw that in America they did things differently and that was fine. Europeans could see this as just an another example of diversity. But once the advent of new media led the values of one country to go beyond their home borders it was another story. Or to combine the American commitment to sameness with a Spanish flavour: it changed the whole enchilada

 

A deep seated American psychology of sameness, which inspired McDonalds and Disney, was creative in an American landscape, where it inspired great examples of personal expression.  But once this psychology moved from a personal level to the level of national policy an imperialism of values began to loom. Canadians responded by contrasting an American “melting pot” culture with their own commitment to multiculturalism. Hence Toronto became a city where persons from at least 72 countries maintained their own cultures in terms of language, food and religions. Parts of the city had bilingual signs in Canadian and Chinese; other parts had bilingual signs in Canadian and Greek. This solution introduced diversity mainly into the level of experience and less into the level of architecture.

 

When this personal American psychology of sameness became part of an American policy that was consciously exported to Europe and around the world, the first response was a gut reaction that one did not want to have other countries dictating their values and culture interfering with the home front. This led to the well publicized protests that became associated with meetings of the G8, the World Bank, the World Trade Organization and indeed all those organizations which were associated with globalization. These protests were described as anti-Americanism but were really a more general protest against other countries who tried to extend their values and their rules beyond their own borders. Within Europe, sensitivity to this general problem had led the European Union to keep culture out of the forefront of its activities. (Admittedly, there was a small directorate on Culture but it ranked number 22 out of 24).[736]

 

Only when the American quest for sameness which allowed personal expressions of individuality crossed the Atlantic, could Europeans begin to understand that this was something profoundly different than the diversity that lay at the core of their values. Cultural diversity became a topic. America produced individuals but it did not foster diversity. Formalizations of the psychology of sameness as McDonaldization/ Disneyfication (henceforth, M/D as a tribute to American acronyms) principle went further. They undermined and threatened the central principles of what it meant to be European.

 

The M/D principle ultimately did away with history: a trend reflected in the Harvard Professor, Fukuyama’s End of History. This was incompatible with a European tradition of a cumulative building on the past. The M/D principle seemed to foster individualism. But a more subtle level, because its quest was sameness it treated the whole world, individual persons and objects alike, it terms of the things they had in common, rather than bringing to light their uniqueness. In this sense, the M/D principle favoured universals over particulars (i.e. it was more Platonic than Aristotelian). Europe, assumed both universal and particulars. The M/D principle was a method for persons to become individuals while learning to become the same, to fit the norm, to become normal. Those who were not normal enough were crazy. That was why psychiatry and mental hospitals were much more popular in America than in Europe.

 

By contrast, the European programme was to begin with a framework to assure that persons had a modicum of things in common and then help them learn to become different. That was why Europeans began with classes to familiarize them with basics of citizenship. Therafter, they were encouraged to become as different as they dared – assuming of course that remained within the bounds of the law. This produced a lot of individuals who might sometimes seem happily crazy at carnivals, but far less mental patients. The American system boasted more freedom for individuals, but it was an individualism that too readily threatened to be become a-social or even anti-social.  Ultimately, Europe’s approach to differences and diversity offered much more generous borders to the human psyche, whereby a social sense combined with individualism could grow in tandem.         

     

These fundamental differences between the American M/D principle and the European quest for diversity affected all areas of activity, even foreign affairs. Americans typically assumed that only those who spoke English were worth speaking to: Europeans typically assumed that until they had learned the foreign language in question it was they who were not worth talking to. When American looked beyond their borders, they immediately measured them by indicators which were the same as their own. As a result, the CIA World Factbook was an excellent source of information and statistics concerning factors shared with America: e.g. the countries’ population; their physical, especially their energy resources. But it told almost nothing about things these other countries had which made them unique: e.g. about their libraries, their art collections etc. By contrast, Europeans’ studies of other countries distinguished themselves by revealing unique things about other cultures, often things the persons in that country had forgotten about themselves. Hence, it took a Frenchman, Champollion, to decipher hieroglyphs and re-open the world of Egyptian culture. Other Frenchmen, such as Pelliot and his colleagues at the Ecole de l’Extrème Orient (Hanoi), had re-opened to the world the wonders of Khmer architecture that had reached their pinnacle in Anghor Wat.     

  

Armchair internationalists at Harvard, such as Huntingdon, writing of The Clash of Civilizations and the Remaking of the World Order, argued in a new way that religion was the root of all evil; that different religions were at the root of inevitable new clashes. Earlier we noted how this assumption completely overlooked fundamental Christian and Muslim tenets towards humility, love and respect that were far removed from the militant American’s misinterpretation. By now, we are in a position to ask, Socratically, whether, in terms of ideas, the real source of conflict might ultimately have nothing to do with the Middle East? The Middle East just happened to be where the oil is. In terms of beliefs and ideas, the debate was not about religion. At the deepest level, it was ultimately a secular misunderstanding arising from two very distinct approaches to difference: 1) a notion of difference as something negative whereby differences needed to be resolved; 2) a principle of difference as something positive that inspired variety and diversity.

 

In the simplest terms this was an opposition between sameness and diversity which threatened to become a conflict between American sameness versus diversity in Europe and the rest of the world. If so, the so-called potential clash of civilizations had nothing to do with unseen terrorists. Ironically, it stemmed from America’s assumptions and ideals of sameness becoming translated from the sphere of personal expression, where they were liberating, to the realm of national policy, where they posed a threat to the sovereignty of all other nations; where they challenged the cultural traditions of persons everywhere; where they posed a spectre of a uni-lingual, mono-cultural narrowness that threatened cultural diversity.

 

 If the Remaking of the World Order were truly a remaking of the world in the image of American sameness in accordance with their M/D principle, it would lead to a world disorder and threaten the future of civilization. These concerns were “nothing personal” against Americans. They were not anti-American as such. They simply resisted the hubris of any country that assumed its rules should apply to everyone else: and that everyone else should have nothing to say, especially when everyone else happens to be 96% of the world’s population.   

 

This basic problem of sameness/diversity which was the source of misunderstanding became clouded because the champions of the American side were a small group who presented a very one-sided view of the story. A small group, preaching in the name of Christianity, took a militant stance that contradicted the peaceful ideals of both Christians and Muslims. This small group, speaking in the name of democracy, acted in the manner of an oligarchy. This small group, claiming that they were defending freedom, systematically eroded the freedom of both individuals and nations, in striving themselves for an ultimate privileged freedom which would even be free from constraints of law. Under the pretext of a lofty ideal of free trade, this small group urged others to remove all walls and barriers to trade, while themselves living in gated communities and condoning the building of walls between Palestinians and Jews. Old America had once shocked and inspired the world with their idea that persons should honestly say what they thought and live accordingly. The so-called representatives of a new America were giving America a bad name because they were not “as good as their word” and their actions were for personal gain rather than for the greater glory. This face of new America had made its personal idiosyncracies into national policy and were making the public good of their nation into a source for personal idiosyncracies of a less noble kind. This was why the world was increasingly puzzled, and sometimes angry: not with all Americans but with this mis-representation of at almost half --some said more--  of the population that had democratically voted for a different path.

 

To return to McLuhan’s image of a global village: it meant that Americans sought to communicate what they thought was the same; whereas Europeans tended to share the different things they had discovered. This was not to say that an American with a developed sense of personal expression could not communicate with Europeans. But it did mean that often, even when speaking about simple things such as agreement, they often talked past each other.

 

            Values

 

We just saw how seemingly simple decisions about sameness and difference could have profound implications for the way one saw, heard, tasted, even touched and felt the world. These distinctions were essential ingredients of a country’s culture. One could try to define these characteristics nationally, as America did. Or one could define these characteristics at a variety of levels, nationally, regionally and locally. Some countries such as Germany emphasized the role of regional identities (Länder). Then there were countries such as Italy where, notwithstanding rumours that Jerusalem laid claim to being the navel of the world, every village thought of itself as the centre of  the world, and some places such as Foligno even called themselves such (The town sign states: Foligno. Centro del mondo).  The decisions a country made in this respect, were one dimension of its values.       

 

Related to this was the extent to which one believed the state should have a say or any say in such matters. Hence, traditionally each country made its own decisions about the extent to which they wished to have a welfare state; to what extent they wished to have social security and a social safety net. Ultimately these were the choices that molded society, affected their culture and influenced the extent to which countries were or were not different. Europe was traditionally more concerned with society as a whole: America was always famously individualistic: magnificent if the individual achieved their dreams, a life of bag people if things “didn’t work out.” At the level of everyday work there was a further dimension. Traditionally one’s employer lived in one’s own town. If there were problems on the side of employer or employee, one met for a chat and discussed how things could be resolved. How one did this varied from country to country.

 

Altogether the combination of these different attitudes and different ways of doing things; the extent to which one assumed honesty in doing things; constituted a country’s values and contributed to its culture, which also varied in terms of the different kinds of expressions to which one gave special attention (e.g. fine arts such as painting, sculpture or performing arts such as music, theatre, dance). Countries existed, their boundaries existed, partly to ensure that the values of a country could be fostered within the borders of that country. When one crossed boundaries one knew the rules changed. If one did not like the rules and expressions of that country one simply did not go there. One went back to that beach in Italy or that hut in the Austrian alps instead. At one level it was all straightforward. 

 

            New Media and Unintended Exports of Values 

 

One of the most complex and unstudied dimensions of new media entails the ways that they are transforming what was, until recently, a stable landscape of clearly defined borders. Admittedly wars sometimes changed the borders of some countries, but for the most part such irregularities had usually been sorted out by the time of next vacation.

 

New media and the global market transformed these relations. Many contemporary employees never saw their real bosses. The employees might well be in Europe while the boss at the head office might be in America. As a result, the decisions of the head office in America had many repercussions. From the viewpoint of the head office, in a world where the next billion dollar merger counted, it took the effects of thousands of jobs, to achieve significant savings for the decision makers. In this context the piddling amounts of a worker’s salary became insignificant to the decision makers. And yet, for the individual, the absence of each of those insignificant, piddling salaries amounts, made all the difference to the life of that person and their families. When these cuts happened with reckless abandon there were more losses than the obvious material ones. More subtly they also cut away at persons’ sense of self esteem; at their/our sense of humanity, at our confidence in government and law; in our trust of governmental and social systems.

 

As we have noted, decisions about when one fired someone were intertwined with assumptions about one’s values. As long as this happened within the borders of one’s own country, this produced no unexpected results. The new global context of business meant, however, that decisions America made about its economy immediately had repercussions around the world: loss of jobs and earnings were the obvious consequences. More insidious and more dangerous was how these economic decisions made in America were closely bundled with a whole series assumptions about the social system as a whole: for instance, to what extent workers should have compensation, insurance, health benefits, pensions, rights; to what extent the employer was committed to looking after employees’ lives as opposed to simply reimbursing them for x hours of work per week. In other words every so called economic decision of an American executive concerning offices beyond the borders of America, was much more than a simple extraterritorial application of economic principles. Insidiously, it was also an intervention, albeit often unintended, in the value systems of the other country.  

 

When the decisions of an executive in America could wipe thousands of jobs on countries outside America, these decisions tacitly threatened to impose America’s social values on those countries. As a concrete example, in December 2004, when General Motors, headquartered in Detroit, Michigan felt a slump in the economy, 10,000 workers in Germany working for Opel (also owned by General Motors) woke up one day to find that they had lost their jobs. Similar patterns were seen around the world.

 

Such examples suggested that the physical entry of armed forces into Afghanistan and Iraq was but one example of a more disturbing invasion: a metaphysical imperialism, not simply of businesses that wanted to make new money in old markets, but also, almost invisibly, assumed that they could determine others’ ways of doing business, of values and their lack.

Tragically, American’s who had been trained in a culture of sameness; who began with assumptions that agreements were with friends who “were the same,” seldom even suspected that there could be such problems. Ironically, those who were astute enough to sense the tensions, given their values and their training, would immediately be inclined to fear they had encountered unexpected anti-Americanism in persons whom they now thought they had mistakenly thought were friends.

 

Aside from mutual incomprehension, these actions threatened much more than the jobs of the next few thousand who “needed” to be fired to make the next merger “worthwhile.” They undermined and are undermining centuries of ways of doing things; of traditions, of culture, and could threaten the very fabric of civilized life. In this scenario, there was something much more frightening and dangerous than unpredictable terrorists who might in extreme cases hijack a bus, train or plane or blow up an occasional building. The real fear lay in overenthusiastic mavericks who thought they were saving the world and in the process wreacked much more havoc than the trails of their so-called smart bombs and heavy artillery suggested.          

 

               Civil or Military  

 

We cited the warnings of experts in 1995 that funds were limited. The escalation of military budgets and focus on short term gains made that situation worse. As long as such decisions affected only those within the borders of their country, there was little reason for re-action or action, even if one felt personally and saw to it that things were done differently in one’s own country.

 

But with the new media and unintended exports of values, the world was suddenly a different place. In the past, foreign secretaries and ambassadors had kept their eyes on exports and imports, on the balance of physical trade. Now imbalances of invisible values loomed as dangers potentially greater than imbalances of physical goods. If country A suddenly became extremely militaristic, this could have severe consequences for education, health and indeed the entire social infrastructure of a country. Comtemporary Zimbabwe was sometimes cited as an example. But given invisible exports of values, unintended or not, what had traditionally been politely referred to as the domestic affairs of a country, suddenly became the often unwanted affairs of its neighbours. And if country A happened to be America, then the repercussions of decisions on the home front, suddenly had consequences for the whole world. Decisions in Washington about a military-industrial complex, or about a military-industrial squeeze, were decisions that not only affected the way Americans dealt with their taxes, government, value and culture. It affected the whole world.

 

In the past years, even the richest countries of the world suddenly found themselves talking about eroding pensions; about less secure positions; about abandoning traditional notions of a welfare state where everyone was assured a decent life. As national security became a daily mantra, personal security was being eroded on a daily basis in terms of human rights; in terms of jobs, benefits and pensions. There were cuts everywhere and especially in health, social services and care. In most cases these decisions were not because countries had decided consciously that they wanted to change their values or their culture. The invisible invasion of values from beyond their borders was forcing them into corners that went against the grain.

 

Also in December 2004, on BBC, there were glimpses how even the pensions of senior servants, the bowler-hatted mandarins of Britain, were finding their futures compromised by models and schemes from across the pond. This was not just because a Labour government had suddenly turned on the Mandarins who ran their country behind the scenes as civil servants had always done. It was, some would argue, because, at some point, America’s choices and decisions in terms of civil society or militarism were having consequences around the world. In the old days, presidents were famous for phrases such as “The buck stops here.” In a global village, an electronic world which, in some senses, had no borders, the buck no longer stopped here/there with the president. If he picked up the tab he also passed it on. If he spent too much on military parties, we all found ourselves “footing the bill.”     

 

Daily Life or Emergency as Daily Life

 

Related with this also were more subtle problems: that the quest to declare a state of emergency as a part of everyday life implied that everyday life in the old sense was no longer possible. If it existed there would be no emergency. Unwittingly, sometimes unwillingly, and yet inevitably, persons found, often post facto, that their civil rights were being eroded and taken away. In the Hollywood movie, Enemy of the State (1998), a prominent politician found themselves murdered because they refused to endorse a new Telecommunications and Privacy Bill. In real life, in 2004, a new Telecommunications Act was passed which said nothing about privacy in the title but had many implications for privacy between its covers.[737] In December, 2004 a new Intelligence was signed. These documents were symptomatic of a trend whereby what were effectively decrees for emergencies were silently becoming part of what we thought were our normal lives. Traditionally the world would have rightly dismissed such developments in America as their problem. But in an interconnected, electronic world where their assumptions and decisions about privacy affected persons in other countries, and indeed sometimes affected them more than American citizens, there were very serious reasons for international concern.

 

Europeans, who were perfectly willing to be tolerant about Americans deciding what they did when they were home alone, were increasingly concerned that such ongoing cries of Clear and Present Danger were more than vaguely reminiscent of the dangers faced by the boy who cried wolf once too often. They also marveled as a disturbing paradox unravelled. On the one hand, it became technically illegal to openly criticize the government or discuss overtly anything relating to terrorism. At the same time Hollywood produced film after film about one horror scenario after another. Freud would probably have noted that the suppression of conscious fears in everyday life, inevitably recurred in subconscious and unconscious ways. If Hollywood represented America’s unconscious, then Freud would be one person who did not have to worry about losing his job for lack of work.   

 

Beside the Law

 

In the old days, it was entertaining to watch the adventures of the Lone Ranger and his loyal Indian assistant, Tonto (often without stopping to think that this was a Spanish word for “blockhead,” “daft,” “fool” or “simpleton.” It was all very harmless. The maverick, good guy always caught the bad guy with the predictability that a Mountie always “got their man.”

 

The new media have changed such times forever into nostalgic memories. In the new world, the overt actions under the cover of emergency measures undermined much more than the habits of a single country. It tried captured soldiers from various countries on a base in Guantanamo Bay as “enemy combatants” to circumvent the Geneva Convention re: prisoners of war and to avoid constitutional rights, which those individuals would have had if they were tried on US soil. In December 2004 we learned that the CIA had special variants for special treatment in Gauntanamo Bay. The press mentioned this and focused on the irregularities of one Bagdad prison. But the media, on the whole, were very quiet about the existence of at least ten more such detention places, two of them on board large US ships, where the Geneva Convention played little or no role at all.

 

Meanwhile, the US put pressure on Belgium to abandon its internationally binding laws for those who committed acts against humanity. It refused to be subject to the world court in The Hague. It went further by blocking aid to the 35 countries, which refused to guarantee US citizens abroad immunity from the international laws of the world court.[738] Implicitly, the US claimed to be above the law, which was also the title of a Hollywood film (1988), a book by David Burnham (1996),[739] a television series (2000)[740] and more recently a music CD.Explicit allegations of acting above the law have been leveled at the President,[741] the Vice-President,[742] the US Treasury,[743] bounty hunters[744] and organizations such as Alcohol.edu.[745]

 

On 11 November 2004, the President of the United States nominated Alberto Gonzales to become the next Attorney General of the United States. This legal counsel worked in Texas for the legal firm, Vinson and Elkins that defended the Enron Corporation’s scandals; and was implicated in the Carlyle Group and Halliburton’s activities. The same man was said to have advised the President on means of circumventing the Geneva Convention.[746] The strategy for so doing was to paint an elected President with the title of Commander in Chief as if he were a Churchill. A significant difference was that Churchill consistently urged for a humane end to the conflicts in those darkest hours of a real war and never suggested breaching basic rules of the Geneva Convention. Such attempts to circumvent the law by someone nominated to a central position in the legal system proved a grave cause for concern.   

 

There were some reasons for optimism. The law, which stands for eternity, had a reputation for being slow and for frequently being behind with respect to events of the moment. Dickens reminded us that such moments in the eyes of the law could sometimes take many years in the lives of mortals. And yet, although justice is symbolized as a blind woman, she saw what happened. In 2004, the Supreme Court ruled that the treatment of prisoners in Guantanamo Bay, contravened the Geneva Convention and were therefore unacceptable. Partly out of solidarity because of its special status with the US, the United Kingdom also imprisoned foreign “suspects” without clear evidence recognized in courts of law. On 15 December 2004, the Law Lords from the highest judiciary level voted that such imprisonment was illegal and that holding individuals as prisoners for three years without due process was also unacceptable. 

 

Law above Order or Law and Order

 

In light of all this, the economic crises of the past few years emerged as something much more profound than another dip in the ever fluctuating markets, which led from a dot.boom to a dot.bust. The losses in financial terms were linked with a crisis in trust, honesty and integrity, whereby the primary institutions of capitalism were called into question: banks, insurance companies, consultancy firms. This was compounded by a more subtle trend whereby America invaded some countries physically with their troops and others metaphysically by imposing their values, their ways of life, everywhere. When this high road was accompanied by evidence of irregularities even in the legal system it opened very great dangers. Europeans, who have literally seen barbarians banging at the gates, would say that calling in question the basis of law and trust, potentially called into doubt the future of civilization.[747]  While America passed radical bills to maintain law and order, there were more than a few in Europe and around the world who felt a need to assert more enduring values where law and order gave way to a state where law was once more above order.

 

Europe and America have always been different. Europe was the old father who had made many mistakes. America was the young rebellious son. Europe often looked tired and pessimistic. America had the verve and optimism of youth. Europe moved more slowly but was steady. America moved more quickly but was often a little too fast. Our story of telecoms, satellites and the Internet offered a case in point. Europe was multilingual. America claimed to be mono-lingual, even though there were many who spoke Spanish, Italian Chinese, Korean and other languages, even native ones. Europe insisted on cultural diversity: America strived for a melting pot which pretended that everyone in the US was American and still gave free range to many expressions of traditions. No one doubted the common roots of Europe and America or their mutual respect as when France gave a statue of liberty as a symbol of esteem; or when America helped out in Europe’s infelicitous wars. For all their differences both Europe and America shared a common Christian heritage. One would have expected Europe to represent the Old Law and America to represent the New Law almost as two testaments to a common heritage.

 

Instead, as we have seen, recent events pointed to a different turn. Since the days of Rome, Europe for all its mistakes, had one unshakeable assumption: that law is at the basis of everything and that no person, no matter how important or mighty is above the law. This assumption lay at the basis of national law, transnational law, international law and of the World Court in The Hague. This principle was shared by each of the individual countries in Europe and is emerging as a cornerstone of the new European Union, even though forming of a new European constitution has brought to light how difficult are serious attempts to amend such laws as jurisdictions change.  

 

Now a personal tradition, claiming that some individuals are above and/or beyond the law has tried to impose itself as national policy and dictate the rights of others elsewhere around the world. The Lone Ranger had artistic licence that was different from heads of state. It would be prudent if this remained so. Else there would be a great danger that the ideals of law in Europe and the East found themselves opposed to those who would have us believe that they are more important than kings, emperors and the cumulative wisdom of three millennia of civilized life. If the contrasts between Europe and America were couched in these terms, the distance between the two sides could increase such that even Moses could not part the waters, or heal the rifts. We can only hope that America’s own strong traditions in law will recognize that this is one drift, which could complicate unnecessarily our views of the Atlantic and the great nation that bridges its shores with those of the Pacific.

 

14. Conclusions

 

We showed that the large telephone companies played a key role in the rise of the Internet and continue to do so. We found that the so-called dot.com bust and the telecom bubble burst of 2000-2001 were part of something that began much earlier and is still continuing. We noted that the evolution of the original ARPAnet to an Internet was seen by some as leading to an Interspace, whereas others foresaw a Total Information Awareness system or even a Global Interplanetary Internet. We saw how the rise of the Internet in the past half century was about a shift from analogue to digital communication, which implied, ultimately, that all our categories of telephone companies, television companies, cable companies, satellite companies, Internet companies were outmoded. This enormous shift was one underlying reason for the endless mergers and bankruptcies of the past decades which came in the wake of a shift from Information and Communication Technologies (ICT) towards Universal Convergence Technologies (UCT). It also explained why visions of the Internet spread from e-military and e-science to e-business, e-learning and ultimately, to e-everyday life.  

 

Our story was about understanding who the main players are in this enormous shift. We discovered that in the United States the usual suspects were five civilian firms (AT&T, General Electric, General Motors, IBM and Microsoft) and three military contractors (Lockheed, Boeing and Grumman). We showed that they dominated developments in a) telecommunications, 2) Internet and new media and c) satellite systems. We discovered that a handful of equity firms –often working in tandem-- and banks were also active in these fields and recurred with surprising regularity in the bankruptcies and mergers. 

 

We examined more closely the usual explanations for the bankruptcies: glut in the market; irregularities in accounting and fraud; a supposed lack of investment money; problems of competence and viability; effects of convergence and simple over-ambition. We established that these could not explain the phenomenon. Even less could they explain two paradoxes. First, the companies that went bankrupt were not those with nothing to offer. Often, as in the case of BBN, they had the best possible credentials. Second, almost immediately after these companies went bankrupt they re-emerged, phoenix-like, and carried on as successful enterprises. This led us to seek deeper reasons.

 

We learned that the rhetoric of a smooth shift from monopolies to deregulation and liberalization was somewhat more complicated than was often suggested. A few of the very big players seemed to keep growing. Visions for global domination had not disappeared. We saw also that the great losses of the past years affected very specific bits of the market and that from a global viewpoint a very different picture emerged. At that level there was no downturn in growth of the Internet or telephony. The news media had focused on details involving a few billions at a time. They forgot to tell us that the telephony market brought in $1.37 trillion in 2004 alone (figure 8); that in 2002 the number of mobile phones exceeded the number of fixed line phones: that there were more than 1.3 billion of each in 2004, and that, in the four years since the dot.com bust, the Internet grew by more than 600 million users. In a world of over 6 billion persons, where global markets entailed well more than one trillion dollars in transactions daily, it was vital that we looked to a much bigger picture.  

 

We discovered that energy companies and the military played a more central role in these developments than was usually acknowledged. Indeed, we perceived competing civilian and military visions and also a trend in recent years for the military version to gain the upper hand. We suggested that these contests between military and civilian visions offered deeper insights into the real causes of the so called dot.com bust and telecom bubble burst which dominated headlines in 2000-2001.

 

In addition to the perennial quest of companies to earn money, we saw a trend to use funds and resources from the public sphere for the private sphere; that equity firms, consulting firms and banks played a role in this process; that this trend was intertwined with military interests and was linked with the executive branch of a public government administration, which in turn had their own private stakes in these developments. The examples of satellite systems and two start-up firms served as cases in point. We saw also that these concerns were intertwined with a quest for energy. Indeed, whereas the newspapers typically spoke of convergence only in terms of new media, we suggested that the new media were now interlinked with finance and energy; that there was convergence in all three areas and also convergence between these areas. 

 

We found that such convergence brought many problems in their train. Some of these were obvious: e.g. problems of restructuring. But when we delved to search for deeper reasons for recent conflicts we discovered that the cause might lay in a misunderstanding between a quest for sameness which saw difference as negative, and a quest for diversity which saw difference as positive.  

 

In conspiracy theories, everything could be blamed on an evil fiend or secret societies working behind the scenes. Hollywood had shown how this can be caricaturized for a spectrum of entertainment ranging from James Bond and Lara Croft to Austin Powers. Our story was not nearly so simple. In our story, there was no single villain. On the surface, it had all the appearances of being anything but a conspiracy. Indeed, some believed that it had all the semblances of democracy and economic freedom in action. True optimists insisted that recent events merely manifested the wonders of capitalism in all its glory, speaking of fickle markets the way one would speak of a seductive lady friend. Not all were convinced. 

 

In movies, such as the Pelican Brief (1993) it took only a single document to shake a government. Even on the BBC, it took only a few e-mails to remove a Home Secretary in December 2004. In real life, much more was obviously required. If this were a murder mystery, we would only have reached the point in our story where Poirot observed that no dead bodies had been found, only dead companies and numerous jobs that were killed. He would have made a list of the usual suspects, but would not even have decided yet if this were a civil inquiry or a criminal investigation. There would be many exciting chapters left before he reached his predictably brilliant conclusions. When the appropriate bodies such as the FCC, IRS, FBI, CIA, NSF, NSA and the ever growing Homeland Security have done their jobs  no doubt many exciting chapters could follow, perhaps many exciting books.

 

Our book, however, was neither a next installment of Bond, nor a murder mystery in the traditions of Poirot or Holmes. Our real concern lay elsewhere: with fundamental problems, basic trends and underlying principles. The changes that are happening are long term. They take decades and centuries with consequences that are irreversible. Yet we live in a world where the major means for understanding such changes and indeed our main means of affecting these changes focus only on the bottom line for this fiscal quarter, on the sound bite, the so-called events of the moment. Our media, our politics and our industry are focused on short sighted moments in a world where long term visions are our only hope for sustainable survival. Our regulatory bodies are designed to address individual media in a world where these individual media have become part of a much more complex whole. Whether we call this by old terms such as Information and Communication Technologies (IST) or new terms such as Universal Convergence Technologies (UCT) is insignificant. The buzzwords are ultimately uninteresting: the process is occurring whether we have names for it or not.

 

The basic infrastructure for the railroads, telegraph, radio, television took decades to establish. The telephone was invented in 1860 by Antonio Meucci, Alexander Graham Bell took the credit, and yet it still affects only about 20% of the world’s population. By 1897, Karl Ferdinand Braun had invented the Cathode Ray Tube (CRT) oscilloscope, the forerunner of television and yet it was well past 1950 before this became an everyday medium, even in the United States. By 1934, there were ideas for what we today call the Internet, but it was not until the 1990s that this began to affect millions of persons.    

 

Today we need a new infrastructure that will integrate radio, television, Internet in a single framework. The rhetoric of the moment has translated the old slogan of liberté, égalité, fraternité into the new mantra of liberalization, deregulation, and privatization. Our study has suggested that this may be too simplistic.

 

Traditionally, governments focused on the public good (not for profit, enduring concerns) and industry focused on individual gain (for profit, ephemeral concerns). Is it not dangerous when one conflates these two goals? Is it not perilous when those voted democratically to defend the public good, are engaged by and in agendas, which further private profits and personal gain? At what point does privatization of public goods become a contradiction in terms; a conflict of interest and interests? What happens when military contracts play an ever more central role in civilian infrastructure? What institutions or at least measures are in place to assure us that the resulting products will serve citizens and not simply be self-serving for a military which inevitably has other agendas? Is this why conflicts of interest become replaced by interest in conflicts?           

 

In the past, governments focused on peace and the military focused on exceptional times when there was war. Today some heads of state think of themselves as commanders in chief of governments, which are formally not at war. Government, which should be concerned with enduring stability, and the military, which is concerned with temporary instability, have become intertwined. Is it wise that those concerned with pressing dangers of the moment define our infrastructure for the next century? Is it prudent that those concerned with emergency training become actively involved in our everyday education?  Are we only training our youth to be soldiers to fight for the moment or are we instilling in them the enduring values that will lead to future generations?  

 

Governments focused on the activities and legislation needed for everyday life, while a legal system attended to a framework that ensured proper limits to all action, civilian and military. If law were no longer the basis for action, then actions would become simply a matter of power. This might sound attractive, but if it were true it would mean ultimately that there was no legal difference between a dictator and a president. Without law there is no legitimacy that goes beyond the brute force of might is right. It is laudable to call for democracy. But if world decisions were carried out in terms of representative numbers, then the US would suddenly be an uninteresting minority. Small, almost insignificant countries which only lead the world in growing flowers, respect the powers of law. That is why, building on the traditions of Grotius and many others, they helped create an International Court in their country: not as a show of power, but rather to show that there is something above all the illusions of power and money.

 

The Bible and the Koran, which are the bases for Christians and Muslims respectively, were very clear in warning us that those who lose their humility are also losing their humanity. Small groups, which make militant claims and moves in the name of their peoples, in the name of God against Allah, would to well to recall this and to read their sources so that they too can become sources of harmony.   

 

The news media have warned us of the material consequences of the stock market slumps.  Our book has drawn attention to a non-material level, where this has led to a crisis in trust, and a potential crisis in concepts of democracy and freedom everywhere. At this level, the crisis is one of faith, in a sense of honesty and integrity, in both the secular and the sacred spheres ,[748],which are a basis of law and ordered society. If we are not careful, there may no longer be a world, within which to build our open and sustainable structures. The big picture is ultimately about there being a future picture. That picture must offer equality of access to information and knowledge for all, guaranteeing their integrity and free circulation. In cannot be limited to get rich quick schemes for a few well placed individuals and groups. This is a real challenge for anyone whether they call themselves leader or commander in chief. This is a challenge on which America’s bold claims and actions will be judged. Perhaps, this is also a challenge where older civilizations such as Europe and Asia could point a way towards a more balanced future.

 

This book has no quick answers and certainly no magic solutions. Its purpose was simply to show that the dot.com bust and the telecom bubble were about something much more profound than a couple of events which have been linked with some serious traffic accidents one fine day in September of 2001.    

 

Maastricht  21 12 2004

 

 

 

Appendix 1: Forbes Statistics about the top telecommunications companies of the World 1997- 2004.

 

 

1997

rank

company

country

industry

revenues ($mil)

9

Nippon Telegraph & Telephone

Japan

telecommunications

78,321

31

Deutsche Telekom AG

Germany

telecommunications

41,916

70

STET-Soc Finanziaria Telefonica

Italy

telecommunications

26,263

78

British Telecommunications

UK

telecommunications

23,695

95

BCE

Canada

telecommunications

20,658

138

Telefonica

Spain

telecommunications

15,838

192

TELEBRAS-

Brazil

telecommunications

12,426

198

KPN-Royal PTT Nederlands NV

Netherlands

telecommunications

12,163

254

Cable & Wireless

UK

telecommunications

9,599

278

DDI

Japan

telecommunications

9,024

348

Telefonos de Mexico

--

telecommunications

6,935

 

1998

rank

company

country

industry

revenues ($mil)

9

Nippon Telegraph & Telephone

Japan

telecommunications

77,019

35

Deutsche Telekom AG

Germany

telecommunications

38,956

64

France Telecom

France

telecommunications

26,853

73

British Telecommunications

United Kingdom

telecommunications

25,671

76

Telecom Italia S,p,A.

Italy

telecommunications

25,140

81

BCE

Canada

telecommunications

23,971

88

Mannesmann Group

Germany

telecommunications

22,546

125

Telefonica

Spain

telecommunications

16,140

137

Royal KPN NV

Netherlands

telecommunications

15,285

148

TELEBRAS

Brazil

telecommunications

14,661

212

Cable & Wireless

United Kingdom

telecommunications

11,491

252

DDI

Japan

telecommunications

9,604

320

Telifonos de Mtxico

--

telecommunications

7,673

524

Tele Danmark AS

--

telecommunications

4,624

618

Olivetti Group

Italy

telecommunications

3,882

645

SK Telecom

South Korea

telecommunications

3,692

691

Japan Telecom

Japan

telecommunications

3,356

723

Singapore Telecommunications Ltd

--

telecommunications

3,191

742

Portugal Telecom

--

telecommunications

3,083

753

Telefonica de Argentina

--

telecommunications

2,997

755

Hellenic Telecommunication Org

--

telecommunications

2,976

759

Kokusai Denshin Denwa

Japan

telecommunications

2,974

 

 

 

 

1999

 

industry

revenues ($mil)

11

Nippon Telegraph & Telephone

Japan

telecommunications

75,997

35

Deutsche Telekom AG

Germany

telecommunications

39,701

66

British Telecommunications

United Kingdom

telecommunications

28,030

69

France Telecom

France

telecommunications

27,405

75

Telecom Italia S.P.A.

Italy

telecommunications

26,186

85

Alcatel

France

telecommunications

23,637

98

Mannesmann Group

Germany

telecommunications

21,190

105

Telefonica

Spain

telecommunications

19,452

110

BCE

Canada

telecommunications

18,507

178

Cable & Wireless

United Kingdom

telecommunications

13,135

210

Telstra Corporation Ltd

Australia

telecommunications

11,452

245

DDI

Japan

telecommunications

9,737

269

Telefonos de Mexico

--

telecommunications

8,564

280

Royal KPN NV

Netherlands

telecommunications

8,308

324

Korea Telecom

--

telecommunications

7,261

329

Swisscom AG

Switzerland

telecommunications

7,215

423

Vodafone Group Plc

United Kingdom

telecommunications

5,555

455

Tele Danmark Group

--

telecommunications

5,072

523

Tele Norte Leste Participacoes

Brazil

telecommunications

4,445

568

Olivetti Group

Italy

telecommunications

4,139

662

Embratel Participacoes SA

Brazil

telecommunications

3,447

665

Telefonica de Argentina

--

telecommunications

3,436

675

China Telecom

--

telecommunications

3,401

677

Teleglobe

Canada

telecommunications

3,389

688

Japan Telecom

Japan

telecommunications

3,344

 

2000

rank

company

country

industry

revenues ($mil)

enterprise multiple

8

Nippon Tel & Tel

Japan

telecom

97,658

7

48

Deutsche Telekom

Germany

telecom

35,859

18

64

British Telecom

United Kingdom

telecom

29,566

12

66

Olivetti Group

Italy

telecom

28,517

--

70

France Telecom

France

telecom

27,532

17

90

Alcatel

France

telecom

23,276

23

91

Telefonica

Spain

telecom

23,209

9

160

DDI

Japan

telecom

14,300

13

200

Vodafone AirTouch

United Kingdom

telecom

12,438

--

232

Telstra

Australia

telecom

11,023

10

248

Korea Telecom

South Korea

telecom

10,365

8

250

Telefonos de Mexico

Mexico

telecom

10,232

7

262

Cable & Wireless

United Kingdom

telecom

9,831

21

264

BCE

Canada

telecom

9,648

6

284

Royal KPN

Netherlands

telecom

9,232

15

362

Swisscom

Switzerland

telecom

7,049

10

446

Kdd

Japan

telecom

5,597

--

479

Tele Danmark

Denmark

telecom

5,195

11

506

China Telecom

China

telecom

4,970

38

573

Japan Telecom

Japan

telecom

4,395

38

622

Telus

Canada

telecom

3,986

4

655

SK Telecom

South Korea

telecom

3,768

36

713

Telefonica de Argentina

Argentina

telecom

3,401

6

718

Tele Norte Leste

Brazil

telecom

3,376

6

719

Hellenic Telecom

Greece

telecom

3,364

9

 

 

2001

rank

company

country

industry

revenues ($mil)

enterprise multiple

9

Nippon Tel & Tel

Japan

telecom services

103,276

6

52

Deutsche Telekom

Germany

telecom services

37,718

16

69

France Telecom

France

telecom services

31,025

12

72

British Telecom

United Kingdom

telecom services

30,214

25

83

Olivetti Group

Italy

telecom services

27,746

5

92

Telefonica

Spain

telecom services

26,244

10

197

Japan Telecom

Japan

telecom services

13,259

9

214

BCE

Canada

telecom services

12,184

8

222

Korea Telecom

South Korea

telecom services

11,970

6

232

Telstra

Australia

telecom services

11,708

9

254

Telefonos de Mexico

Mexico

telecom services

10,833

5

262

Cable & Wireless

United Kingdom

telecom services

10,509

9

283

Royal KPN

Netherlands

telecom services

9,724

6

331

Swisscom

Switzerland

telecom services

8,345

8

441

Telia Group

Sweden

telecom services

5,901

15

474

TDC Group

Denmark

telecom services

5,512

7

2002

rank

company

country

industry

revenues ($mil)

enterprise multiple

8

Nippon Tel & Tel

Japan

telecom services

93,360

5

41

Deutsche Telekom

Germany

telecom services

43,229

7

51

France Telecom

France

telecom services

38,502

8

76

Olivetti Group

Italy

telecom services

28,649

5

80

Telefonica

Spain

telecom services

27,787

8

84

BT Group

United Kingdom

telecom services

26,409

9

178

BCE

Canada

telecom services

14,018

7

188

Japan Telecom

Japan

telecom services

13,619

7

209

KT

South Korea

telecom services

12,351

5

228

Carso Global Telecom

Mexico

telecom services

11,181

3

246

Royal KPN

Netherlands

telecom services

10,500

8

249

Telstra

Australia

telecom services

10,469

9

307

Swisscom

Switzerland

telecom services

8,578

9

359

Cable & Wireless

United Kingdom

telecom services

7,369

14

416

TDC Group

Denmark

telecom services

6,195

7

425

mmO2

United Kingdom

telecom services

6,122

12

458

Telia Group

Sweden

telecom services

5,537

9

468

Chunghwa Telecom

Taiwan

telecom services

5,389

6

484

Portugal Telecom

Portugal

telecom services

5,124

8

 

 

 

2004

 

 

Rank

Name

Country

Sales Rank

Profits Rank

Assets Rank

Market Value Rank

11

Verizon Communications

United States

27

15

72

22

26

SBC Communications

United States

73

9

115

26

28

Nippon Tel & Tel

Japan

16

85

87

57

74

BellSouth

United States

175

66

212

64

76

BT Group

United Kingdom

127

35

238

129

162

BCE

Canada

351

121

442

176

167

Sprint FON

United States

295

64

432

311

168

Telstra

Australia

421

96

503

85

185

China Telecom

China

490

89

435

241

206

KT

South Korea

340

123

452

443

255

Alltel

United States

559

199

619

255

285

Singapore Telecommunications

Singapore

741

244

572

247

296

Swisscom

Switzerland

479

378

812

179

324

Chunghwa Telecom

Taiwan

821

155

740

274

363

Deutsche Telekom

Germany

51

--

94

49

376

France Telecom

France

65

--

111

56

403

Telefonica

Spain

146

--

176

55

409

TDC Group

Denmark

671

345

766

628

426

Carso Global Telecom

Mexico

374

626

608

869

427

Portugal Telecom

Portugal

794

538

736

411

439

AT&T

United States

85

--

210

245

452

Olivetti Group

Italy

122

--

142

346

548

Royal KPN

Netherlands

399

--

406

212

568

Qwest Communications

United States

277

--

345

520

586

OTE

Greece

936

526

992

752

 

 

 

 

 



Notes

[1]Lawrence Lessig, “Innovation, Regulation, and the Internet,” The American Prospect, Issue Date: 0.0.00.

See: http://www.prospect.org/print/V11/10/lessig-l.html. John Naughton, A Brief History of the Future: From Radio Days to Internet Years in a Lifetime, New York: Overlook Press, 2001.

[2] Robert Cannon, “FCC and the Internet. Thirty Five Years of Unregulation,” INET 2002, Arlington, June 2002. 

[3] If one thinks in terms of the seven layers of the International Standards Organisation (OSI/ISO), then the telcos focussed on layers 1 and 2 with some activities in layers 3-4, whereas the Internet community focussed on higher levels (5-7).

[4] See: http://www.iptel.org/info/. Cf. Igor Faynberg and Hui-Lan Yu, “Internet Telephony,” INET 2002 Tutorial, Arlington, VA, June 18 2002. 

[5] Henry Kissinger, “Now, back to defining a new world order,” International Herald Tribune, 6 November 2004. See:  http://www.iht.com/articles/2004/11/05/opinion/edkissinger.html

[6]In a sense one could go back much further.Scholarship requires access to sources and equipment. These were traditionally in memory institutions (libraries, museums and archives) and laboratories. The invention of microfilm (1900[6]), which led to the founding of University Microfilms (1938, now Proquest), marked a first step away from direct dependence on physical presence at fixed repositories of memory institutions and labs.

Sarah Allen's Weblog, “Historical perspective on links and trails,” December 28, 2003. See: http://www.ultrasaurus.com/sarahblog/archives/000097.html
Frederick Seitz, ”The Cosmic Inventor, Reginald Aubrey Fessenden (1866 - 1932),” Transactions of the American Philosophical Society Held at Philadelphia For Promoting Useful Knowledge, Volume 89, Pt. 6, 1999. See: http://www.radiocom.net/Fessenden/. Cf. Welcome to the Reginald A. Fessenden - ARS  'W1FRV' (first radio voice)
Marshfield, Massachusetts Where the world's first radio voice broadcast took place...

On Proquest. See: http://www.fact-index.com/p/pr/proquest.html

[7] Paul Otlet. See: http://www.sims.berkeley.edu/~buckland/otlet.html. Ron Day, “Paul Otlet's Book and The Writing of Social Space,” Journal of the American Society for Information Science, 48(4) (1997), pp.310-317.  It was reprinted in: Historical Studies in Information Science, edited by Trudi Bellardo Hahn and Michael Buckland.  (Information Today), New York: Wiley, 1998, pp. 42-50. 

See: http://www.lisp.wayne.edu/~ai2398/newpage4.htm 

Cf: http://www.lis.uiuc.edu/~wrayward/rayward.html

[8] Mundaeneum. See: http://www.mundaneum.be/

[9]Translated by the author from the original French cited on the Mundaneum website at http://www.mundaneum.be/content/mundaneum/histoire9.html:

Bientôt la télévision sera un problème essentiellement résolu, comme il l'est déjà scientifiquement, l'image se reproduit à distance, sans fil. On peut imaginer le télescope électrique, permettant de lire de chez soi des livres exposés dans la salle "teleg" des grandes bibliothèques, aux pages demandées d'avance. Ce sera le livre téléphoné".

[10] The sketch dated 1948.06.15 from the Otlet Archive at the Mundaneum in Mons is being published by Charles van den Heuvel, “Visualising Organisations and Organising Visualisations. Otlet’s Sketches for a Synthesis of the Sciences in a European Context and the WWW,” Science in Europe – Europe in Science: 1500-2000- Maastricht, 4-6-Nov. 2004.

[11] Among the earliest pioneers of the Internet was a Frenchman, Louis Pouzin, who is:

best known for his work as the inventor and advocate of "Datagrams", later extended and renamed connectionless communication, as the basic mode for the transmission of packets in a network. His ideas in this area paved the way for a new thread of thought on how to manage resources in networks, resulting in several major innovations, including today's ATM networks.
Pouzin introduced the Cyclades computer network project and was honoured with Jon Postel as a joint winner of the 1997 SIGCOMM Award.  Cf. Pouzin, Louis,ed., The Cyclades Computer Network: Towards Layered Network Architectures, North Holland Publishing Company, New York, 1982. This book is Volume 2 of a monograph series of the international council for computer communications. For an Annotated Bibliography [re: Cyclades Network].
See: http://www.cs.utexas.edu/users/chris/nph/CYCLADES/lam/Cyclades/Bibliography/CycladesBibliography.htm. Cf. Louis Pouzin. Le "père" du réseau Cyclades, Autrans ‘98 Interviews, Autrans, 10/01/98 :

“Louis Pouzin…a été Directeur des Projets Pilotes à l'INRIA, où il a conçu et dirigé le développement du réseau d'ordinateurs CYCLADES, comprenant le premier réseau de commutation de datagrammes.”

   See: http://www.inria.fr/actualites/colloques/1999/COLLOQUIUM990119-fra.html.

   See: http://www.acm.org/sigcomm/award-detail/postel-pouzin-detail.html

For Pouzin’s recent work 
   See: http://www.isocfrance.org/edito/index.php?ID=865

[12]  See: http://www.thocp.net/biographies/davies_donald.htm. The Internet: Jesper Vissing Laursen, Past, Present and Future - Internet & WWW History.

   See: http://www.vissing.dk/inthist.html#10.

[13] See: http://isservices.tcd.ie/general/iss_annual_reports/HEAnetTimeline.pdf

[14] Peter T. Kirstein, “Early Experiences with the ARPANET and INTERNET inthe UK.”

   See:  http://www.cs.ucl.ac.uk/staff/jon/arpa/internet-history.html.

    Cf.   http://www.cs.ucl.ac.uk/staff/P.Kirstein/.

[15] Peter Kirstein, personal communication.

[16]  Bruce Sterling, “Short History of the Internet,” The Magazine of Fantasy and Science Fiction, February 1993, Cornwall, CT, Science Column #5: "Internet."
    See: http://www.forthnet.gr/forthnet/isoc/short.history.of.internet
For another useful timeline see:
http://isservices.tcd.ie/general/iss_annual_reports/HEAnetTimeline.pdf

[17] Dominic Pinto has kindly noted: “it was the (wartime related ?) impetus in Bell Labs as much as anything else which drove development of semi-conductors, by way of transistors, and all the people involved in Colossus........ A lot out of PO labs at Dollis Hill, and Tommy Flowers..Martlesham Labs inherited that legacy…. There's still a sense of not invented here syndrome, and stuff has to be redone (as it was in the past) to meet BT (formerly BPO) requirements. Prestel may have been a world first, and an antecedent for graphic interfaces, if not hypertext, and there was considerable development of optical switching and optical components, following on from the fiber optic research, exploited in conjunction with duPont - but not on any sufficient scale.”

[18]  See: http://ftp.arl.mil/~mike/comphist/eniac-story.html

[19] Vannevar Bush would seem to be related to the current president of the US.

[20]  See: http://kerryr.net/pioneers/shannon.htm

[21]  Cf. Norbert Wiener, The Human use of Human Beings, 1950. Reprint London: Eyre and Spottiswoode, 1954. Reprint, New York: Da Capo, 1988 etc. 

[22]  See: http://www.digitalcentury.com/encyclo/update/shannon.html

[23] Claude Shannon's  “A mathematical theory of communication'' was first published in two parts in the July and October 1948 editions of the Bell System Technical Journal.

     See: http://cm.bell-labs.com/cm/ms/what/shannonday/paper.html.

[24]  John S. Quarterman, “Revisionist Internet History,” Matrix News, 9(4), April 1999,

     See: http://www.mids.org/mn/904/large.html

[25]  See: http://www.ietf.org/rfc/rfc0681.txt?number=681

[26]  See: http://www.mids.org/mn/904/large.html

[27] See: http://www.ketupa.net/liberty1.htm

[28]  See: http://www.lesk.com/mlesk/. In the 1990s he worked on a large chemical information system, the CORE project, with Cornell, OCLC, ACS and CAS.

[29] See: http://www.upenn.edu/heia/people/bio/lesk.html

[30] See: http://www.cise.nsf.gov/iis

[31] See: http://www.canis.uiuc.edu/schatz.html

[32]See: http://www.canis.uiuc.edu/projects/interspace/proposal/Previous%20Accomplishments.html

[33] See: http://athos.rutgers.edu/~cwm/NetStuff/Human-Nets/Volume8.html

[34] See: http://www.canis.uiuc.edu/projects/telesophy/letter_from_William_Arms.html

[35] See: http://www.asis.org/asis-95/Schatz-Keynote/

[36]See: http://www.att.com/history/history5.html. The site

http://www.att.com/corporate/restructure/history.html is no longer available.

[37] In 1993, AT&T also acquired McCaw Cellular for $11.5 billion, to place it “squarely in the fast-growing cellular services market.”  

     See: http://www.att.com/history/history4.html  .

[38]  See: http://www.research.att.com/info/Lab/15

[39]  See: http://www.research.att.com/info/Lab/21

[40]  See: http://www.research.att.com/info/Lab/33

Lucent’s 8 key internet products are:

1. Bell Labs ICAP Client Library

2. Bell Labs Internet Service Engine (ISE)

3. Safe file transport tools for the Internet (Cget, Cput, and Stage)

4. Lucent Personalized Web Assistant

5. NSBD (Not-So-Bad Distribution)

6. RMTP (Reliable Multicast Transport Protocol)

7. Tardis

8. VENUS (Virtual-circuit Enhanced Network Usage Simulator)

    See: http://www.bell-labs.com/project/

[42]Clay Shirky's Writings About the Internet, Economics and Culture, Media and Community, Open Source: ATT and Cable Internet Access, 11/4/1999. 

    See: http://www.shirky.com/writings/att_cable.html

[43] See: http://www.idate.fr/an/cle/chron/chrTel/index_3a.html

[44] See: http://www.idate.fr/an/cle/chron/chrTel/index_3a.html

[45] See: http://www.havi.org/

[46] See: http://www.upnp.com/UPnPdemos/image.htm

[47] See: http://vehand.engr.ucf.edu/handbook/Chapters/Chapter63.htm

[48] See: http://roland.lerc.nasa.gov/~dglover/sat/telstar.html;

           http://www.ieee.org/organizations/history_center/milestones_photos/rocket.html

           http://www.larrysworld.com/articles/historypc.htm

[49] See: http://www.lucent.com/press/1199/991116.cob.html\

[50] Yukari Iwatani, Reed Stevenson, “Une alliance avec AT&T renforce la stratégie mobile de Microsoft,” Boursama, le 01, 08, 2002.

     See: http://www.boursorama.com/international/detail_societes_intern.phtml  ?news=897795

     See: http://www.wapsight.com/info/2002/08/01/113528.html

[51]  See: http://www.att.com/news/0791/910730.pda.html

[52]  See: http://www-1.ibm.com/services/globalnetwork/

[53]  See: http://www.ecommercetimes.com/perl/story/1377.html

[54]  See: http://www.nwfusion.com/news/2000/0225attibm.html

[55]  See: http://www.ecommercetimes.com/perl/story/4208.html

[56]  See: http://www.aspstreet.com/pr/a.taf/idpr,16170

[57]  See http://www.siliconvalley.com/mld/siliconvalley/2997058.htm

[58] See: http://news.com.com/2100-1023-947139.html.

[59] Dean Takahashi, “The Accelerator,” Red Herring, July 2002, pp. 37-40.

[60] See: http://www-1.ibm.com/servers/eserver/pseries/solutions/success/earthgrain.pdf

[61] The full story of AT&T is much more complex than this introductory sketch. It would include how AT&T took over John Malone’s TCI in 1999 or $54 billion, then disbanded it in 2001 after which it became Liberty Media with the second largest number of shares in Murdoch’s Newscorp (18%), 4% in AOL and its hands in numerous German media companies.

    See: http://www.ketupa.net/liberty.htm.

[62] Some see more difficulties with AT&T. Cf. Robert Metcalfe, The Unauthorized

    Biography of the Baby Bells & Info-Scandal, New Networks Institute, 1999.

    See: http://www.newnetworks.com/toc.html.

[63] Some observers feel that this extends to positioning towards an Ipv6 environment and IP everywhere – even though the U.S. appears playing a low profile game on this at present, watching the Chinese watching the Japanese watching the European Union search for sustainable development projects on the back of IPv6 as a priority. 

[64] See: http://www.rednova.com/news/display/?id=73740

[65] See: http://www.att.com/home.html

[66] See: http://www.cabledatacomnews.com/best_of/bocdn5.html

[67] See: http://www.ketupa.net/liberty1.htm

[68] For further speculation : John M. Higgins, What Does John Malone Want? Liberty chairman’s News Corp. ambition is anything but a takeover,”Broadcasting & Cable, 11/22/2004. See: http://www.broadcastingcable.com/article/CA482080.html?display=Money+Talks&referral=SUPP

[69] See: http://www.ketupa.net/liberty1.htm

[70] In 1982 the Control Video Corporation (CVC) set out to start the new GameLine. In 1984 BellSouth loaned CVC $5 million to try a home subscription service called Masterline.

[71] See: http://iml.jou.ufl.edu/projects/Fall2000/McAtee/

[72] See: http://www.idate.fr/an/cle/chron/chrTel/index_3a.html

[73] See: http://www.ecommercetimes.com/story/19108.html

[74] See: http://www.att.com/news/2002/08/21-10750

[75] See: http://www.ketupa.net/time.htm

Cf. Since the historic merger of America Online and Time Warner two years ago, the company's stock has declined 70 percent, wiping out some $200 billion in market value.

    See: http://news.zdnet.com/2100-9595_22-981075.html

[76] See: http://www.guardian.co.uk/business/story/0,3604,1342876,00.html

[77] See:  http://www.ketupa.net/murdoch3.htm

[78] See: http://www.ketupa.net/murdoch.htm

[79]Colin C. Haley,AT&T Expands News Corp. Deal,” dc.Internet.com, July 14, 2003.  

    See: http://dc.internet.com/news/article.php/2234571

[80] See: http://www.ketupa.net/murdoch3.htm

[81] http://www.brainyencyclopedia.com/encyclopedia/m/me/metro_goldwyn_mayer.html

[82] “C. Michael Armstrong,” Business Week, 14 June 1997.

    See: