The Tangled Web Of Fiber Optics Lines & Gates

sdirector writes "Monday, super investor Warren Buffett jolted the nearly prostrate telecom industry by leading an investment of $500 million in Level 3 Communications ... Buffett's investment could set in motion a complex web of relationships and -- if you play it all out in just the right way -- put Bill Gates in charge of every fiber-optic line in the USA." The actual article itself is pretty interesting reading. Update: 07/12 08AM GMT by C :The link was broken, it has now been fixed. Sorry about that.

Comments

What would happen?

[Anonymous Coward]

Obviously, the slashdot crowd is anti-gates. We all imagine Gates reaching into our pocketbooks with Montgomery-Burns-like limp-wristed glee. It would cost the end user a lot of money - that's what monopolies are about.

I gotta figure that close a marriage of "the network IS the computer" would produce some interesting output, however. Yeah, yeah, so online free music would go away. For this discussion nobody cares about online content delivery. It's old news everybody talks about.

What kind of wacky new tech would something like this spawn? In Gates' mind is echoing the quote from the "Net-Nexus Seoul" article: "(We) wanted to focus on interaction. And what is more interactive than games? We made this market. We made new sectors. American media companies were just using online capacity to distribute offline media."

Gotta wonder what we'll see. Something has gotta make us give gates that nickle and get the 666 tattooed on our arms...

Adam

Telecommunications Consolidation

[panaceaa]

The telecommunications industry is definitely ripe for consolidation. There is just too much bandwidth and too much telecom competition for any company to be very profitable. The article predicts that L3, with Warren Buffett's investment, will buy up the assets of WorldCom and Qwest to consolidate their customer bases, reduce costs, and lower competition. Since Gates has a relationship with Buffett, and current investments in L3 and WorldCom assets, he will be in a powerful position in the telecom industry after the mergers go through. But he'll still only own about 5-10% of L3. Then the article goes completely off a limb and states:

Gates could approach Buffett to buy it all. Gates would own the Internet.

This is stupid. If Gates (or probably Microsoft) wanted to own telecom, he could just buy it now at lower prices. He has enough money to buy L3, Qwest and WorldCom now. Why would he wait for consolidation to occur, the market to improve, and the price of these companies to probably triple?

Sure, Gates could own the infrastructure. But if he was still interested in infrastructure, why did he stop investing in MSN? Over the past few years Microsoft has abandoned most of its infrastructure projects and focused once again on software. And the Qwest/L3 investments are years old, back when MS cared about MSN.

Saying that Gates is trying to buy the telecom industry is just flamebait. There's nothing recent to suggest that he's trying to do that.

Re:Telecommunications Consolidation

[The Cat]

too much ... competition

Yeah. Too much competition. Shame.

Like too much democracy, or too much freedom.

sigh...

Re:Telecommunications Consolidation

[panaceaa]

It's definitely good for consumers to have too much competition. But hey, when have Warren Buffett and Gates cared about consumers. They just want to make money. And you make more money in a heavily competed industry by bringing companies together, taking away redundant assets and services, and (unfortunately) removing customer choice.

There's a post about 10 above mine about Gates liking monopolies, so he'd probably like to make a telecom monopoly too. It's funny, but it's so true. But the root of it is that you can make more money with less competition. That's business. You just have to be careful not to piss off too many consumers or make a scene while doing it. (Something Microsoft hasn't been good at recently.)

Call me Paranoid...

[DarkHelmet]

But there was a story on Slashdot about an Editorial on The Pulpit in regards to the death of TCP/IP. Robert Cringley's article puts forth the idea that Microsoft wishes to banish the protocol in favor of its own non-anonymous, proprietary system.

If Bill Gates owned every single piece of fiber in the US, it's definately a step in that direction. Perhaps even the only thing preventing a standards change now.

You can find the article here:
http://www.pbs.org/cringely/pulpit/pulpit20010802. html

Re:The Internet exists outside America

[The AtomicPunk]

Yeah, and Level 3 and UUNet are global companies, in case you haven't noticed.

Nothing like some knee-jerk US-bashing.

Re:Why?

[truthsearch]

WHY would he need Buffett to come in and buy them first? Why didn't he just buy the stock earlier this week?

It's not that simple. (I work for an investment firm but I AM NOT SPEAKING ON THEIR BEHALF, SO DON'T LET THEM SUE ME, BOSS.) It seems I could walk into the market and buy all the stock that's for sale by a few companies. But it's not that simple. Large trades are automatically tracked by the market (e.g. NYSE has a department with lots of computers checking what's up). Huge purchases can be instantly blocked pending an investigation. Plus remember that only stocks which are being offered can be bought. If 51% of a company's investors aren't selling their stock, Bill could only buy 49%.

Plus on top of all of that, if the board is against a majority purchase of stock (51% or more) it's called a hostile takeover. It's legal, but angers investors and employees, plus the board might be able to sue to buy stock back. But if Bill's in with a huge investor, he'll face no arguments from inside the company. He can also then slowly move in, rather than buy everything at once, preventing regulation flags from being raised by the SEC.

So basically it's a lot more complicated than you might think. Although I agree that this probably isn't a conspiracy. Buffett saw a good deal and took it. Anything now that happens with Bill probably was not planned.