Electronic signals are transformed into light waves and moved along fiber cables. The technology has advanced spectacularly. In 2000, the capacity of the same fiber-optic strand has multiplied about 32,000 times. The answer is not simply that some stock prices rose to unrealistic levels. When technology changes, no one knows what will succeed.
Some big investments fail.
Too many sellers may also be chasing too few buyers. Dozens of new companies offer network services to businesses and homes. But prices are so low that revenues from voice services still exceed data's. Only four of the 40 large U.S. network operators we surveyed showed positive free cash flow. Discouraged investors are now retreating, and as they do, investment spending will slacken and, possibly, drop.