An Imploding Telecom Sector Tests Darwinism
Washington, which gave birth to telecommunications competition 25 years ago, is now leading that industry toward its Darwinian climax.</br></br>A ruthless restructuring has moved into its final phase in the past 10 days as three local telecom companies threw in the towel, starting what is projected to be the biggest industry implosion since real estate developers took down the savings and loan industry a decade ago.</br></br>E.spire Communications Inc. of Herndon has filed for Chapter 11 bankruptcy protection. Metrocall Inc. of Alexandria says it may have to do the same. PSINet Inc. of Ashburn is trying to avoid it, but isn't given much chance by industry insiders. More local companies are lined up behind them.</br></br>Each of these companies was set up to serve a different piece of the telecommunications market. E.spire was into local and long- distance voice. Metrocall sold wireless paging. PSINet's specialty was high-speed Internet services. Stockholders of this trio of companies have seen $14 billion in stock market value wiped out. Investors stuck with $5 billion worth of high-risk, high-yield "junk bonds" issued by the companies are expected to collect only pennies on the dollar for their debts.</br></br>These are the first victims of an epidemic that by some estimates could wipe out more than a thousand telecommunications providers in the next few years.