Financial experts told House members Thurs. that govt. interventi...

was important for FCC to strongly enforce competitive rules. At hearing before subcommittee of House Financial Services Committee, Legg Mason Managing Dir. Blair Levin said failure in telecom sector wasn’t same as Enron scandal. “There’s a difference between misleading investors and what we're facing in the telecom sector,” which is business models that didn’t work, Levin said. “There is a distinction between deliberately misleading investors and guessing wrong,” he said. Danger is that if you “punish” well-meaning telecom entrepreneurs, no one will want to invest in new technology in future, Levin warned. Paul Glenchur, vp, Schwab Capital Markets, predicted that as “shakeout” occurred in telecom sector, companies with best business models would emerge and market would respond favorably. “The healing process will take time,” he said. Best course is to let market act, Glenchur told Domestic Monetary Policy, Technology & Economic Growth Subcommittee. Govt. intervention can create uncertainty which can be bad for investment, he said. “The capital markets are brutal and are forcing discipline on the market,” Glenchur said. Bryan Mitchell, CEO of MCG Capital, said “there is a proclivity to overinvest and markets do correct.” He said he was particularly concerned about govt. actions such as Tauzin- Dingell bill that he said seemed to artificially interfere with telecom sector’s development. Glenchur said several factors contributed to telecom sector’s downturn, including “land rush mentality” of investment community and demise of dot-com business, which was big customer base for telecom providers. In addition, need to build out networks required new telecom companies to assume great deal of debt and “the economic slowdown worsened the situation,” Glenchur said. Asked by Rep. Maloney (D-N.Y.) whether Congress could do anything to restore investor confidence, Mitchell said problems with telecom industry involved “investor indifference and dissatisfaction” because they weren’t making money rather than questionable financial dealings. Subcommittee hearing was aimed at both energy and telecom industries, with energy segment dealt with in separate panel. Asked by Rep. Grucci (R-N.Y.) whether Congress could help small companies better compete against big telcos, Levin said telecom “really is a big player game” because it takes lot of capital to build out big networks. Although hundreds of new companies formed after Telecom Act, big players were ones with staying power, he said, “and we just have to accept it.”