Anthony J. Pennings, PhD


The Spreadsheet that Fueled the Telecom Boom – and Bust

Posted on | October 24, 2019 | No Comments

“I had built a model in an Excel spreadsheet that translated what our sales forecast was into how much traffic we would expect to see,” he says. “And so I just assigned variables for those various parameters, and then said we can set those variables to whatever we think is appropriate.”Tom Stluka, Worldcom 1997 [1]

By the mid 1990s, telecommunications infrastructure was at the center of the world’s attention. The Internet and its World Wide Web were taking off. Cable TV began to offer broadband services. Satellite signal power shrunk dishes to a few meters. Mobile telephony also showed promise. In the wake of the Telecommunications Act of 1996 and the 1997 meeting of the World Trade Organization (WTO), investors poured some US$2 trillion dollars into the telecommunications industry.[2]

This post explores the story that an employee at WorldCom, a major telecommunications company that later became part of Verizon, formulated and propagated a spreadsheet that projected a major growth period for the Internet. It created a media conversation that heavily influenced the flow of investment capital into the telecommunications sector.

I’ve written previously about the impact of the digital spreadsheet on modern society. It has become what I call an techno-epistemological tool that creates meaning and cognitive trajectories of analysis and action. These worksheets combine words, numbers, lists, tables, with quantitative tools and formulas that structure information and suggest decision paths and scenarios. This case of the spreadsheet that changed the telecommunications environment of the 1990s operated initially within the WorldCom operation. Then it produced results that diffused throughout the telecommunications/Internet industry and investment community. The story became a bit of an urban myth, but that only points to its rhetorical value as it circulated through the technologically-driven economy of the 1990s “Bull Run” era.

The Bull Run

Interest in telecommunications intensified in the late 1980s with the emergence of contending “information superhighways”. Fiber optic cabling, multi-protocol routers, and ADSL broadband connections promised new services for both traditional cable and telephone companies. Mobile telephony and some data services like Gopher also started to become viable.

The privatization of the Internet in 1992 and invention of the World Wide Web’s hypertext protocols a few years later made “” companies feasible. The IPO of Netscape, famous for its radical web browser, marked the start of the dramatic “dotcom” investment boom of the bull run. People bought PCs or Macs, hooked to a modem, dialed into a local ISP, and “surfed the web.”

WorldCom was at the center of that investment boom, but many telecommunications firms benefited. Money also flowed into new companies like Enron, Global Crossing, Tyco, and Winstar, as well as traditional telecommunications companies like AT&T and the “Baby Bells” of the time (Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell, US West). WorldCom emerged in the 1990s as a a significant growth company as it expanded from a long-distance provider to a major Internet Service Provider (ISP).

WorldCom started with long-distance telephone services after the breakup of AT&T but continued to expand through mergers and acquisitions. It acquired telecom competition pioneer MCI and became the largest ISP in the world after its purchase of backbone provider UUNET. Although WorldCom would end in accounting scandals, bankruptcy and ruin, and its CEO sent to prison, they inadvertently (or not) sparked the dramatic investment boom in telecommunications.

The Spreadsheet Model/Meme

In 1997, when he was an employee of WorldCom, Tom Stluka created a “best-case scenario” for the Internet’s growth on an Excel spreadsheet. Tom Stluka was an engineer for UUNET, a popular Internet service provider (ISP) that was taken over by WorldCom in 1996. He regularly developed estimates for data traffic based on a spreadsheet model he created.

Stluka’s CEO, Kevin Boyne, would often encourage Stluka to increase his forecast. Boyne wanted his suppliers of fiber optics and other new telecom equipment to increase their production so that supplies of the glass conduits and routers would be sufficient, and prices driven lower due to an abundance of supply. Boyne contended that the Internet was doubling in size every 100 days. So Stluka created a spreadsheet that validated these best-case scenarios for the Internet’s growth.

The spreadsheet story was revealed in a CNBC television news show, “The Big Lie: Inside the Rise and Fraud of WorldCom,” by their news analyst David Faber. Edward Romar and Martin Calkins explained:

    The so-called “big lie” was promoted by citing an internally developed spreadsheet developed by Tom Stluka, a capacity planner at WorldCom, that modeled in Excel format the amount of traffic WorldCom could expect in a best-case scenario of Internet growth. In essence, “Stluka’s model suggested that in the best of all possible worlds Internet traffic would double every 100 days” (Faber, 2003). In working with the model, Stluka simply assigned variables with various parameters to “whatever we think is appropriate.” (David Faber, 2003)[3]

The “doubling meme” started to become popular in the telecommunications industry to the point where it began to drive investment. In the wake of the “irrational exuberance” comment by Alan Greenspan, the telecommunications industry began forecasting its growth according to this spreadsheet model. Bernie Ebbers at WorldCom soon echoed the forecast as did new AT&T CEO Armstrong. The proliferation of tech-related magazines such as Red Herring and Wired inspired enthusiasm in the latest tech environment and the Holy Grail of Internet growth. Business news channels such as CNBC and the ill-fated CNNfn also promoted telecom stocks.

Bubbles Burst

The spring of 2000 saw the end of the “new economy.” A lot of investment money had gone into companies offering services on the Internet. Every IPO it seemed, such as was met with hordes of cash. NASDAQ, the online trading environment for technology stocks, reached a high of over 5000 in March, but the next month, prices began to fall. By the time the Bush administration settled into their new offices at the White House less than a year later, it had declined by over 3000 points. The NASDAQ continued to fall while the Dow-Jones Index of 30 established corporations climbed even higher, surpassing the 11,000 mark again in February 2001.

Research by Andrew Odlyzko, a mathematician who went to the University of Minnesota’s University of Minnesota’s Digital Technology Center and of the Minnesota Supercomputing Institute after working at AT&T, challenged the meme.[4]

    To be fair, says Mr Odlyzko, Internet traffic did grow this quickly in 1995 and 1996, when the Internet first went mainstream. But since then, he estimates, annual growth has settled down at around 70-150%, a far cry from the 700-1,500% trumpeted by WorldCom. The myth of 100-day doubling, however, refused to die.[5]

Rival telecoms companies such as Global Crossing and Qwest tried to adjust to the contrived projections, leading to the “Bad Apple” accounting scandals and telecom crash that rocked the US economy in the immediate years after 9/11. Many companies believed the meme or at least thought that they had to respond accordingly. They soon resorted to “capacity swaps” and other accounting tricks to boost their sales numbers to inflate earnings to compete with what WorldCom was reporting. Capacity swaps are the exchange of telecommunications bandwidth capacity between carriers that is accounted as revenue despite no exchange of currency.

The Fall of WorldCom

The telecommunications industry soon went into steep decline. The first revelation came with the meltdown of Enron, an energy company that embraced the Internet and bought and built 18,000 miles of fiber optic network. One of its schemes in an interesting but futile attempt to create a trading environment for bandwidth as it had for natural gas spot contracts. But it was too little, too late and would soon wind up as the largest bankruptcy in history.

As the WorldCom case would show, many companies started to engage in illegal accounting techniques after the markets faltered. In late June 2002 CNBC reported that WorldCom had been discovered to have accounting irregularities dating back to early 2001. Nearly US$4 billion had been illegally documented as capital expenditures. WorldCom had registered $17.79 billion in 2001 “line cost” expenses instead of the $14.73 billion it should have reported. The result was that it reported US$2.393 billion in 2001 profits instead of showing what should have been a $662 million dollar loss.

Shares dropped quickly. Although the stock had already fallen from its 1999 high of $64 a share to just over $2, it soon dropped to mere pennies before the stock stopped trading. Other companies such as Qwest and Tyco further reduced the vestiges of the general public’s confidence in the stock market, and particularly its telecommunications companies.[6]

The Telecom Crash

The stock markets continued to decline as new corporate scandals were revealed.The “Dow,” representing mainly the stalwarts of the old economy, would maintain its strength during the Bush administration’s early years. It would dip below, but return to highs over 10,000 intermittently until the summer of 2002 when the corporate scandals were exposed. Bush’s SEC chief, Harvey Pitt, failed to gain the confidence of investors and eventually resigned.

By July 22, 2002, over $7 trillion of stock values had dissipated. The Wilshire Total Market Index fell from $17.25 trillion on March 24, 2000 to $10.03 trillion on July 18, 2002. Telecommunications services, which had accounted for 7.54% of the Wilshire Total Market Index at the end of March, 2000; saw its total value fall to only 3.63%. Information technology fell from 36.2% to 15.01% and even Microsoft saw its market capitalization fall from $581.3 billion to $276.8 billion.

Finally, Congress passed the Sarbannes-Oxley Bill in August of 2002. The legislation enacted strict new accounting rules for publicly traded corporations. Accountants, auditors, and corporate officers were required to follow stringent record-keeping requirements and CEOs had to sign off on their company’s books. The stock price fall abated, but at a cost of trillions of investor dollars from IRAs, mutual funds, individual investments, and pension funds.


My research on spreadsheets mainly focuses on the productive aspects of this transformative technology in the financial and administrative spheres and not so much on the problems that may occur with their misuse, either on purpose or by mistake. But the expose by CNBC on Worldcom was extraordinarily interesting in that it showed how the power bestowed on quantitative and forecasting methods, and in this case, utilized with spreadsheets, can circulate throughout an industry and gather media attention and take on a life of their own. The “doubling meme” quantified and justified by the WorldCom spreadsheet accelerated over-investment in the telecommunications capacity needed for the Internet.[7]


[1] Quote from Faber, David. “The Rise and Fraud of WorldCom.” NBCUniversal News Group, 09 Sept. 2003. Web. 22 June 2017.
[2] BUSINESS WEEK, (2002) “Inside the Telecom Game”. Cover Story, August 5, 2002. Pp. 34-40.
[3] Quote from Romar, Edward J., and Martin Calkins. “WorldCom Case Study Update.” Markkula Center for Applied Ethics, Santa Clara University, The references to Faber,2003 are from the CNBC television expose The Rise and Fraud of WorldCom. 8 September 2003.
[4] Coffman, Kerry, and Andrew Odlyzko. “The Size and Growth Rate of the Internet.” First Monday, A Great Cities Initiative of the University of Illinois at Chicago University Library., 5 Oct. 1998,
[5] Quote from “The Power of WorldCom’s Puff.” The Economist, The Economist Newspaper, 18 July 2002.
[6] An article by John Duchemin about Tyco on the Honolulu Advertiser’s website. It chronicled the travails of the Tyco telecommunications hub in Wai’anae. The 38,000 square foot center went unused when the telecom market collapsed. August 13, 2002.
[7] A good discussion of the doubling meme can be found in The Great Telecom Meltdown by Fred R. Goldstein, p. 72.



AnthonybwAnthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.


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