EXPERIMENT NO: 02

AIM : Case Study based on Technology Infrastructure based Covad

In 1996, three enterprising executives decided to leave their job at Intel and form a company that would take advantage of an opportunity provided by the recently enacted Telecommunication Act of 1996. The law eliminated the monopoly that local telephone companies had held and allowed others companies to offer telecommunication services to businesses and Individuals in what has been the local telephone companies protected service areas. Since the goal of the company was to offer converged voice and data services, the founder named the company Covad. During its first two years, the company became a solid regional company in the San Francisco Bay and the Silicon Valley area that sold internet access to businesses and ISPs. Its ISPs customer provided DSL access to smaller businesses and residential customer. But the internet boom is in full swing, in 1998, Covad hired U.S West senior vice president Robert Knowling to take the company to the next level. Over the next 2 years Covad raised more than $ 2 billion from stocks and bond offering and expanded into 98 metropolitan areas throughout the country. By the end of 1999, it had more than 200,000 customers, including AOL, MCI, and some of the fastest growing regional ISPs in the country. It was following the lead of its main competitor, NorthPoint Communications (featured in this chapter’s Learning from Failures feature), and pursuing a strategy that included rapid expansion using external funds. In 2000, Covad’s largest customers, the ISPs that sold internet access to smaller companies and residential users, stopped paying their Covad bills because their customers were disappearing. The Internet bubble had burst. Covad had expanded too fast and was in serious trouble. It had put all its investors’ money into equipment and