Broadbandits

Malik, a technology journalist, covers the telecommunications bubble of the late 1990s and its collapse, which destroyed several hundred billion dollars of capital and produced the largest bankruptcies of the period.

The central mechanism was a supply forecast that was wrong by orders of magnitude. The industry operated on a claim, repeated by executives and by government officials, that internet traffic was doubling every three months. That figure originated with WorldCom and was never verified. Actual traffic growth was substantial but far lower. On the strength of the forecast, carriers including Global Crossing, Level 3, Qwest, WorldCom and dozens of others raised enormous debt and laid fibre optic capacity across oceans and continents, most of which was never lit.

Malik covers the accounting that sustained it, particularly the capacity swap transactions in which carriers sold each other equivalent amounts of capacity and each booked the sale as revenue while capitalising the purchase, which inflated reported growth across the industry simultaneously. He covers the individual executives, the banking relationships, the analyst conflicts and the specific frauds that produced criminal convictions.

The book is contemporaneous journalism written shortly after the collapse and it is angry. It is not a technical account of the industry and the reference has not verified all its specific figures. Its value is as a documented case of an entire industry raising and destroying capital on a single unverified statistic, and of the accounting technique that made the resulting revenue growth appear real.