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Letter from Level 3 CEO Jim Crowe to George Gilder, publisher of the Gilder Technology Report
BROOMFIELD, Colo., November 16, 2000 – Level 3 Communications Inc. (Nasdaq:LVLT) today released the following letter from Chief Executive Officer James Q. Crowe to George Gilder, publisher of the Gilder Technology Report:
November 16, 2000
Mr. George Gilder
Gilder Publishing
Monument Mills
174 Front Street
Housatonic, MA 01236
Dear Mr. Gilder:
In your November 9, 2000, edition of the Gilder Technology Report, you indicated that you had removed Level 3 from your "Telecom Technologies" list. This is, of course, your prerogative. However, I do have two reactions to the report, which I wish to share directly with you. The first is that I believe that there are a number of serious factual errors in your report, which you will want to research and if you agree with me, correct in a future report.
Some of these errors include:
You state that 360Networks "has lit 10,000 of its 20,000 route miles with 160 Nortel(NT)/Avanex(AVNX) waves at 10 Gbps per second." We understand that such equipment will not be available until late 2001 and thus no service provider could have lit a network with Nortel equipment operating at that capacity.
You state that 360 has announced a new system from NKF Kabel that uses compressed air to insert "mini ducts" in already filled fiber conduits. We understand that the product must be installed in empty conduits. This means companies wishing to use the product in long haul applications must have empty conduits along the whole length of their networks.
Today, we believe that there are only twelve empty nationwide conduits and Level 3 has eleven of them. Neither of the companies you cite as potential beneficiaries of the technology has continuous empty conduits along the length of their networks and thus would, at best, have a "patch quilt" implementation.
You state that "Level 3 understood that pricey optical fiber is cheaper than inexpensive copper. But so far, it has failed to grasp the new paradigm. That light is cheaper than fiber." This is incorrect. We have said over and over that optical technology, i.e. light, is key to our future success. However, we also believe that fiber is a key part of optical technology, not a separate technology, as you seem to imply. In fact, we believe that the best economics are achieved by the proper combination of wavelengths of light, bit rate and spacings between expensive equipment sites.
In order to achieve unit cost reductions for transmission capacity, we have designed our network with multiple conduits to deploy successive generations of fiber to exploit improvements in transmission electronics. Optimizing transmission electronics to exploit specific generations of fiber optic technology provides transmission capacity on the new fiber more cost effectively than deploying new electronics on previous generations of fiber.
Wendell Weeks, Executive VP of Opto-Electronics for Corning, Inc., a premier supplier of both fiber and optical components made the point: "Fiber and opto-electronics are proving to show the highest price performance improvements in telecommunications. The lowest unit costs will be achieved by optimally combining these two technologies."
Similarly, Anil Khatod, President of Optical Internet for Nortel, Inc., a premier provider of optical systems said: "Both fiber and opto-electronics are rapidly improving. The lowest unit cost results from the optimum combination of these two technologies." This is the reason that we have built a multi-conduit network. We want to be able to employ the best combination of fiber and opto-electronics not at just one point in time, but over the long term.
In addition to these points, there are a number of other factual errors in the report, which we would be happy to work with you to correct. My second reaction to your report is to challenge you -- as a technology analyst who I am sure values objectivity and credibility -- to disclose any economic interest you may have in companies that you pick and pan.
As you know, you invited me to speak at your investor conference held November 15-17 in South Carolina. At the time you issued the invitation, you made no mention of any payments to be made. Subsequently your organization solicited a $100,000 payment to act as a sponsor of the conference. Based on these discussions, I and my staff believed and still believe that the payment was a prerequisite to my speaking at the conference. As a result I withdrew from participating in the event. However, the larger issue is clearly conflict of interest.
I believe that you, like any credible analyst, should disclose facts, which, if public, would help your readers to understand any potential conflicts of interest you may have. You took a preliminary step in this direction by disclosing in your report that: "Mr. Gilder and other GTR staff may hold positions in some or all of the stocks listed." However, I believe that this statement does not go far enough. The full details of any payments made to your organization by companies about whom you subsequently make public and putatively objective judgments should also be disclosed to your readers. If these payments do not influence your judgment, you should welcome such disclosure.
This seems to be a clear opportunity to provide the kind of fair disclosure, which investors deserve. This is especially true for someone like you who is in a position to influence financial decisions made by a substantial number of investors. Mr. Gilder, I urge you to both address the factual errors in your report and to disclose the details of any payments made to your organization by companies whose technologies you review and judge. I hope you will agree that fairness requires no less.
Sincerely, James Q. Crowe
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT), an international communications company, operates one of the largest Internet backbones in the world, connecting 180 markets in 18 countries. The company serves a broad range of wholesale, enterprise and content customers with a comprehensive suite of services including: Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, voice and voice over IP services, content delivery and media distribution services. These services provide the building blocks to enable Level 3’s customers to meet their growing demands for advanced communications solutions. The company’s Web address is www.Level3.com.
"Level 3 Communications,” "Level 3," the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein may be trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements that we make in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to our ability to: successfully integrate acquisitions; increase the volume of traffic on our network; defend our intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of our debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
