Broadband believers: committed investors are keeping Level 3 afloat, but recent deals draw a caution flag from analysts.

• Author: Luzadder, Dan
• Position: Broomfield-based telecom carrier's strategy

As James Crowe walked across the conference stage of the Arizona Biltmore in Phoenix on Jan. 9, his steps echoed loudly off the stage floor against a nearly silent, subdued room of telecommunications executives and analysts. Crowe is chief executive of Level 3 Communications, and his 37-minute talk about the Broomfield-based telecom carrier's strategy, services and its position in its marketplace, about his company's latest financial maneuverings and about the future of network services drew only two questions at its end--both brief, and both tinged with a hint of skepticism. In response, Crowe quipped, "We are either consistent or boring, depending on how you view us." "We haven't changed our view since we started the company in 1997, we believe, and have believed since that time, that network services and our customers' needs are all converging around a single market protocol, an Internet Protocol."

Crowe's full techno-speak-laced talk about opportunities in soft-switches, changing telephone circuit systems, voice and data networks covered some well-worn territory about broadband expectations that has been Level 3's pitch for most of the past decade. Crowe's predictions of an exploding interest in voice and music access and the advent of making cheap telephone calls over the Internet, as well as a much ballyhooed instant Internet access to video--what he called the "800-pound guerilla" of network traffic--drew only polite and scattered applause.

No press coverage followed the meeting.

Yet despite the tepid response to Crowe at the 16th annual Citigroup telecommunications conference last month, and despite a financial stew the fiber-optic network carrier has cooked up for itself--heavy debt, declining revenues, overcapacity and a puny stock price--investors in the company, from U.S. Bank Corp. to Barclays Bank PLC, are apparently still finding its offerings a dish to savor. The steam rising from the pot, however, is creating a healthy skepticism about the company's future among analysts and other industry observers.

"This company has a core group of believers and investors who feel that pure IP networks are the wave of the future, and they have put a lot of money into a future that has yet to materialize," said telecom analyst Tom Friedberg, who until recently covered the company's every move. "There is no doubt that Level 3 and companies like them are on the cusp of bandwidth demand. The problem is that prices have declined quicker than...