By Richard Mullins
Democrat and Chronicle

(Sunday, February 3, 2002) -- While the bankruptcy filing of Global Crossing Ltd. puts more pressure on the dream of becoming "Telecom Alley," new state data show that the Rochester telecommunications market continues to grow.

The number of jobs at local telecom companies has risen to 5,400, and total payroll has reached more than $360 million compared with $109 million in 1990, according to the Center for Governmental Research. Some companies, including Choice One Communications Inc., expect to hire more workers this year.

"Telecommunications is a promising market for us but not the dominant industry here," said Cliff Milligan, a senior researcher at CGR. "If we do lose one or two companies, we will not suffer the impact that Buffalo saw when their steel mills shut down."

Wall Street analysts now make a regular habit of looking for signs of potential bankruptcy at start-ups, and many telecom companies face the same issues, said Glen Waldorf, an analyst at UBS Warburg in New York City.

"The basic dream is intact, with competitors taking market share from larger monopoly phone companies," Waldorf said. "The question is how many competitors are able to do that and how quickly can they get to survival?"

Companies in the telecom marketplace are feeling the pressure.

"It's hard, even for Choice One, which executes well each and every single quarter," said Thomas Morabito, an analyst with McDonald Investments. "But for (other) companies with some missteps along the way, it's extra challenging."

For 2002, several Rochester-area telecom companies said they were sticking to their business plans, with some adjustments.

• Choice One, which now employs about 1,800 workers, plans to hire 100 to 130 more people this year, half of them in the Rochester area, executives said.
  Because Choice One sells service directly to phone and data users, it "is on the opposite end of the spectrum" from Global Crossing, said Choice One Chairman Steve Dubnik.
  He said Choice One is picking up customers in cities such as Syracuse as other companies either go bankrupt or leave markets. By early 2003, the company expects to be profitable, including all expenses, said spokesman Ythan Lax.

• PaeTec Corp., a privately held company that employs 950 nationwide and 350 in the Rochester area, saw its sales grow to more than $200 million in 2001, said Keith M. Wilson, chief financial officer.
  "Revenue was strong this year, margins continue to be strong," he said. "I do think the dislocation in the markets gives people pause for concern when they consider a new service provider, so we work with them on that."
  Now, Wilson said, sales people commonly show the company's financial statements to customers, hoping to prove PaeTec will stay in business.
  By the first quarter of 2003, Wilson said he expects PaeTec will turn profitable.

• Mpower Corp. in September said that it "can no longer affirm that its business plan is fully funded." It hired an adviser to evaluate ways to improve its balance sheet.
  McDonald Investments' Morabito said Mpower has large cash reserves but also significant debts. "Some kind of restructuring is very likely," he said.
  Because the company plans to release quarterly results next week, officials at Mpower declined to comment on company financial matters.

• Fibertech Networks LLC and American Fiber Systems Inc., which both build fiber-optic networks around cities, have begun doing more work beyond selling access to phone companies. Now they also sell to specific companies with several locations in a particular city.

Problems at companies such as Global Crossing "prove we should not trade one big bet for another big bet," said Tom Richards, chairman and chief executive of RGS Energy Group and a founder of the new economic development group Greater Rochester Enterprise.

"Our history is relying on one industry and almost one company. I would have been happy if telecom would have gone on forever but we still would not have wanted to accept telecom as the answer even if it had not encountered this downturn."

As for jobs in the telecom sector, CGR's Milligan said, "Telecom may not be doubling anymore, but even if it's $50,000 to $60,000 per job, that's still a good industry to have around."