What the bankruptcies of WorldCom, Global Crossing, Williams Communications, Enron, etc. prove is that bankers and other moneymen have rigged the stock market against small investors ("Inside the telecom game," Cover Story, Aug. 5). The small investor accepts the responsibilities of bankruptcies with none of the information available to the lenders. It should be the other way around. Bankers and bondholders should be on the hook for three-quarters of the damage.
Not too long ago, you reported how, after the 1996 deregulation of telecom, one congressman was overheard saying to another: "Now that we've given everything to both sides, wonder how long it will be before we have to revisit this decision." In short, it was botched. The example, of course, had been set in the 1984 deregulation, when billions of worthless AT&T assets were shuffled under the rug, and financial fraud got its official blessing as the foundation of the telecoms of the future. In the interim, we've seen nothing but business plans that could not work. Neither the competitive local exchange carriers nor the digital-subscriber-line providers had the means to control the quality of the last mile, and they were eaten up with service problems, causing customers to go back to the local carriers--who played a waiting game.
Now, we routinely have service problems that we used to laugh at when we saw them in the Soviet Union in the 1960s. Nobody is responsible for anything anymore, and two botched deregulations are the fundamental cause. The Grubmans & Co. just acted it out.
Rogier van Vlissingen
The simplistic article by Catherine Yang, "Powell of the FCC: Fiddling while telecom melts?" (Washington Outlook, Aug. 19-25) relies on the unquestioned assertions of a handful of critics and presents a one-sided view of a Federal Communications Commission allegedly unengaged in the challenges facing the industry. Nothing could be more wrong.
The article describes only the concerns of a distinct minority of the Senate Commerce Committee at a recent hearing. It fails to mention the actions we have taken, fully set out in my testimony, to grapple with the regrettable number of bankruptcies and to address the long-term health of the industry. The article ignores the six critical steps, also set out at the hearing, that I believe are necessary for the sector to recover.
Our numerous actions have been successful in preventing disruption in service for consumers and in smoothing the transition to new services. At the hearing, I identified areas where additional authority was needed and made proposals for Congress to take action. Ms. Yang omits to mention that Senator Ernest F. Hollings (D-S.C.), chairman of the committee, endorsed my call and pledged to work with us.
Furthermore, I am bemused that the FCC's weighty agenda is criticized precisely because it remains on course in the current storm. Ms. Yang and others regularly confuse the accounting scandals with more secular and endemic economic problems in the telecom sector, which surfaced two years ago. The Commission anticipated, at that time, the need to develop policy responses that would aid in restoring sound economic foundations for growth in the sector. Now, more than ever, it is clear such regulatory reform is essential for the health of our economy. President Bush, for one, expressly endorsed this view and our efforts at his recent economic forum.
This story disappointingly did little more than give voice to a few detractors, and fails to even attempt to provide a fuller exposition of what I and the FCC are doing to respond to these troubling times for the telecom sector.
Michael K. Powell
Editor's note: On Aug. 16, Powell announced he would seek a moratorium on plans to roll back the FCC's financial disclosure requirements and reiterated he would ask Congress for authority to impose stiffer fines and penalties on companies that violate the agency's rules. Silver Standard Resources Inc. has yet to mine silver from the projects in Argentina, Australia, Bolivia, and the U.S. that Gary Weiss refers to in "What to bet against" (BusinessWeek Investor, July 1 in some editions). Many of these properties, however, are mines that the company bought and closed because of low silver prices. The reference to never having struck silver is inaccurate.
Silver Standard has been in the resource industry for 54 years. It produced silver and operated profitably from 1947 to 1958, at its first mine, the Silver Standard Mine in central British Columbia.
The 15,000 shareholders of the company who hold long positions believe, as does management, that silver prices will improve, enabling the company's projects to pay off.
Robert A. Quartermain
Silver Standard Resources Inc.
Vancouver While we were pleased to find Nescaf? among "The best global brands" (Special Report, Aug. 5), we must take exception to the description you supplied.
In the first place, Nescaf? is not "cheap": As the world's leading coffee brand, it commands prices higher than those of competitors.
Second, a growth rate of 6% in 2001 does not exactly indicate that the product is losing favor with consumers, especially since coffee consumption overall rose only 2%.
Vevey, Switzerland As the largest outside shareholder of Amazon.com Inc., we have the most to lose from reporting practices that undermine the company's credibility. Your story, "Amazon is all grown up, except for its accounting" (Information Technology, Aug. 5) implies there is some issue with its accounting. There is not. Timothy J. Mullaney calls for Amazon to drop pro forma disclosures, but this would be a mistake. The aim is to supplement, not replace, reports required by generally accepted accounting principles (GAAP).
Like every other company, Amazon.com reports its results under GAAP. It provides additional disclosures that it believes will help investors to understand the reality that the accounting conventions are trying to capture. It was the first to provide a full reconciliation of pro forma results with GAAP, just as it was the first technology-driven company to announce it would expense stock options--both in keeping with best practices.
Investors are free to ignore the disclosures if they so choose. We think more disclosure, not less, is better. There is nothing about the use of pro forma numbers that by itself does or should damage credibility. Perhaps the first company to make extensive pro forma disclosures was Warren Buffett's Berkshire Hathaway Inc. No credibility problem there!
We think Amazon.com, a leader in online retailing, is establishing itself as a leader in honest reporting and responsiveness to shareholders. Perhaps that's why its stock is up 25% this year, while the Nasdaq is down 35%.
Legg Mason Funds Management Inc.