Subject: [NEXTEL-1] Market Turbulence Forces Out Fec's Fiber-Optic Subsidiary

From: Marcel <[email-masked]>
Date: Wed, 20 Nov 2002 11:21:20 -0500

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=34514992&ID=cnniw&scategory=Business+and+Finance&

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Market Turbulence Forces Out Fec's Fiber-Optic Subsidiary

Source: Palm Beach Post

Publication date: 2002-11-07

Arrival time: 2002-11-20

Epik Communications, one of the major sponsors of an Internet hub
for South Florida, is getting out of the fiber-optic network
business, the company said Wednesday.

The hub, an Internet crossroads where carriers can connect with
other parts of the country and world, is in place. Orlando-based
Epik is selling its assets and its parent, Florida East Coast
Industries, is taking a $146 million, or $4.02 a share, charge
against earnings in the third quarter. It will keep enough network
capacity to serve its customers.

"This has been a turbulent time for the telecommunications market
and a source of disappointment for us," FEC Chairman Bob Anestis
said. "Epik's long-lived assets have very little market value."

St. Augustine-based FEC, which among other things operates the
Jacksonville-to-Miami railroad, lost $147 million, or $4.04 a share,
in the third quarter, compared with profit of $2 million, or 5 cents
a share, a year ago. The company reported revenue of $64 million,
compared with $66 million for the third quarter 2001.

At the beginning, Epik's strategy seemed sound.

In 1999, it spent $350 million to bury fiber-optic cable under
the land where FEC has its railroad tracks, in a way double-dipping
from the same resource. It also connected its network to undersea
cables in Boca Raton so customers such as AT&T and Nextel could send
Internet traffic to other continents.

Three years ago, Epik championed a network access point, or NAP,
for South Florida that Internet companies hoped would boost the
region's reputation as high-tech friendly and bring more businesses
and potential Epik customers to the state.

But a year later, the Internet and telecom bubbles burst, and
companies in both markets stumbled. An overall market downturn
followed and many communications and fiber-optic network firms
closed or filed for bankruptcy protection.

Companies that had built data networks to meet a raging demand
for Internet services are now fighting a capacity glut and belt-
tightening by customers.

"It really was the perfect storm," said Jeff Kline, co-founder of
the InternetCoast, the grass-roots group that first suggested an
Internet hub for South Florida. "In the economic downturn, tech
stocks were hit the hardest. Then you had 9/11."

Another Florida carrier and NAP sponsor, FPL Fibernet, is staying
in the business but last month halted its network expansion across
Florida and laid off workers. It sees demand returning first from
carriers who want to reach consumers in cities such as Boca Raton
and West Palm Beach.

"There's still a (Internet) choke point in the small metro
areas," President Neil Flynn said.

The promise of the NAP is still materializing. Its operator,
Terremark Worldwide Inc. of Miami, lost $8 million, or 4 cents a
share, for the quarter ended June 30. However, it now has 75
carriers attached to it and expects to ride out the uncertain
economy.

"We sort of operate like a utility," said Terremark spokeswoman
Sandy Gonzalez-Levy. "Even the companies that are in bankruptcy have
to serve their customers and still have to be connected."

[email-masked]

Publication date: 2002-11-07

© 2002, YellowBrix, Inc.

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