What was the planned strategy of Level 3 Communications in the late 1990s? Ans.
To offer low-priced fiber-optic network that covers connections to major cities in the US focusing on the internet traffic for service providers and corporations. The plan starting from gathering funding from investors to build up a high capacity fiber-optic network that linked major cities in the US, then cut prices to attract major users of the networks including corporations, Internet service providers like AOL and traditional telecommunications companies.
Why was Level 3 Communications able to raise so much capital? Ans.
Because the business that Level 3 Communications were entering seemed to be promising in the view of investors. 2.1
A study in 1997 showed that the internet traffic was growing at 1000 percent a year expecting huge demand while supply side; the fiber-optic capacity, was still small. 2.2
The investors also had confident in Mr. Jim Crowe who started the ideas (eg. Mr. Walter Scott; an Omaha-based construction billionaire, he saw Crowe as a strategic visionary). 2.3
Investor sees the opportunity in the new business and wanted to be the first.
Was that strategy unrealized, or is it still part of the intended strategy of the firm? Ans.
The strategy was realized but not successful as firstly expected. The fund was quickly gathered by a many investors, other than Crowe and Walter Scott Jr., a legendary investor like Warrant Buffet also funded the project. The high capacity fiber-optic network was built. The price was low but it does not bring customers as much as expected. This was because Level 3 communications were not the only one who saw the opportunity. There are a lot of companies invested in the fiber-optic network business and build up capacity. The capacity was later on more than demand and pulled the price down without any effort in intentionally cut the price. The company was almost into bankruptcy but it could avoid that and then the...
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