"It is the best of times. It is the worst of times. Why the best of times? Technology has never been more vibrant. Why the worst of times? Markets are moribund. Enterprise markets are moving slowly or not at all, and the carrier market is dead in its tracks and retreating.

"There is no clear enemy to fight. In 1997 through 1998 the enemy was Y2K. It was the impetus to rob our current systems to pay for the future. When that retreated there was a new enemy: Amazon.com. We had to Webify all of our applications. By 2001, we realized that Amazon.com was not a real danger.

"Now spending has retreated again. In 1999, 300 [competitive local exchange carriers] were funded. Venture capital firms had overfunded. By January 2001, we realized that only one-quarter of them would survive. I see venture financing tightening because there's not going to be the absolute big payoff like before. Venture capital firms used to take mistakes public.

"Traditionally, there are two ways to improve [financial] performance. No. 1 - Cut costs. No. 2 - Build new applications. Right now, we are in cost-cutting mode."

"A time is coming when we will all want a complete data network, where voice is just another application. We should get rid of our voice network as soon as we can. Carriers will still carry voice traffic, except we will be driving prices down.

"There's at least a 30% chance that 2002 will be as bad as or worse than 2001. Everyone thinks that this is the bottom, but that may not be the case. My indication is buying patterns, and I talk to buyers all the time. I use this analogy: In sky diving, the most dangerous act is to jump out of an airplane without a parachute and have a friend jump out with a parachute to catch you. The companies with the parachutes ÷ Cisco, JDS Uniphase, Corning, Marconi, Siemens ÷ can't catch 6,000 companies jumping out of planes."

"A lot of things are big and important: Web services, the semantic Web, [a World Wide Web Consortium initiative that lets computers understand the intent of user queries], but the thing I am really excited about is 802.11. The industry has underestimated its potential. It was focused on as an alternative to ripping out walls and putting in Category 5.

"Three major things tell me this is the next big thing. One is that it's unregulated spectrum. There's no [service provider] middleman. It's a technical specification, and if you follow the specs it works. The other is that the range is bigger than people think. Take a Pringles can and $6.45 worth of parts, and you can make this antenna. So the range isn't 300 feet, it's miles. Third is the social factor. People really want to be connected all the time. This is one of those disruptive technologies. Sure, there are 100 reasons why this isn't going to work, but I see these things being solved.

"Another thing that's been underestimated is instant messaging. The industry is still missing that it's not just ‘chat.' It's the creation of a back channel that allows people to multitask. The productivity of this is really big."

"2001 was a year in which the industry saw the promise of open standards. 2002 needs to be the year of execution to take advantage of open standards.

"Linux . . . people ask me, how do we know this isn't a fad? There's an easy test. Talk to computer science students. Ask if they think Linux is going to be around and they'll say, `What are you kidding? Of course.' And then go to the online bookstores and count the books. This idea of open source ÷ people have a lot of myths. Free has nothing to do with it. [When] people don't have to wait for a vendor, they can work on things. The track record is really good."

"We have to get busy with integration across back-end systems. People expect end-to-end solutions ÷ not just ‘Click here to buy,' but ‘Click here' to do whatever it is that may be part of the relationship that the person has with this organization.

"And we really need digital IDs. . . . that's urgent. People have all these IDs and passwords but even when using secure sites, the password and ID go in the clear over the Internet. What we need is to log on to our digital certificate and allow it to negotiate with the Web server. My hope is that in 2002 we'll get unanimity across the industry and a sense of urgency to get that in place. Passport, Liberty, VeriSign are not the answers. It has to be an industry answer ÷ a distributed Web of trust."

"In 2001, IP went beyond a technique for [an internetwork] and became a global communications standard. For example, the mobile network marketplace standardized around something called 3GPP [3rd Generation Partnership Project], a consensus that in the next 18 months IP will be the common protocol spoken across all mobile networks and mobile operations. Another thing, the physical plant . . . has largely been laid. Much of the globe is now physically connected or in reach.

"In business, the new rules are the old rules. Fundamentals, innovation, value creation, value delivery, profitability, cash and cash flow have returned to their rightful prominence. The industry is much more prudent with its spending practices. Investment is still fundamental to the technology business, but the key is to [invest while] balancing the fundamentals. Easy to do one, hard to do both. Only those that can do both will win."

"Our network is more complex than I could have envisioned a few years ago. You still have the challenge of doing it better and faster, but also cheaper.

"Cycles have changed again. We're back to the problem with client/server, but now it's Web stuff. Everybody's trying to entice you to get into something, and . . . you're not sure how all that stuff plays together.

"The cost of hardware is going down, but [the cost of] software is going up. If [my] hardware guys look like they're doing wonderful, [my] software guys are getting killed ÷ it's costing them three times as much as it used to.

"I'm concerned with the operating systems. [We'd like vendors] to think about the life cycle that we go through. We went from where we couldn't get anything to now we're locking the door, telling them we don't want any more. [They release a new one] every 18 months. We won't put it out when it's first available because the first six to nine months, [the vendor is still] debugging it. We can't roll out to 2,000 buildings in a year. We won't even have completely deployed an operating system when it comes off maintenance ÷ the vendor is already concentrating on [a new version]."

"The big thing I saw over the last year or so is the telecom shake-up. We've had cases where vendors have gone out of business . . . where you use one vendor, but they are using another's facilities. There isn't an area that is not affected ÷ voice response units, call centers, voice, cellular. Even when we have a managed service, we seem to spend more time managing it. Our concerns are stability, reliability, security. We not only need bigger bandwidth, but [also] to make sure it's reliable bandwidth.

"[I examine financials] all the time. One of our primary vendors was in questionable financial shape and I met with the president on three or four occasions last year. I'm concerned that when they are pressed, they will reduce the service I need ÷ provisioning, response to problems and stability. With our volumes, we can't afford a slowdown. I know some of our vendors are in a little bit better shape today than they were last year."

"We're seeing a lot of play with wireless. We [deployed in March] GPRS [General Packet Radio Service] in Germany. That will replace Modicom [our mobile data service]. GPRS is working with our handheld computers and is something we'll look at domestically this year.

"We're also testing Wi-Fi and Bluetooth in some of our facilities. Those are going to improve our performance. We've been using wireless for a long time, we're just doing some new things, and we have new devices [such as wearable scanners that prove Bluetooth and 802.11 can work together].

"You'll see more of Linux coming out. We've been kicking the tires on Linux for the past year or so. If Microsoft pushes you to buy a new license, and you're talking 200,000 devices, you have to look at some alternatives."

"For the Internet, 2001 was not a bad year. The Internet kept working and growing. For instance, in the Sept. 11 time frame, the Internet was a major information medium. This points out how much the Internet has become integrated in our daily lives.

"One of the forces in 2001 was a massive movement toward IP telephony. For one thing, the ITU [International Telecommunication Union] realized that this was going to happen. I wouldn't say it agreed the movement is a good idea, but the ITU is trying to cooperate with the IETF and with the industry. We're managing to cooperate, and that's encouraging. We've even had [shared] working groups where the resulting documents were published as an IETF request for comment and as ITU specifications/recommendations."

"We're now seeing a more mature industry with more rational expectations . . . and we are adjusting to a different dimensionality. We're talking gigabits where we once talked kilobits. [But] one of the bones of contention last year was quality of service [QoS]. We still haven't sorted that thing out. It is one of my hopes for 2002 that we manage to get standards into place that make QoS possible and rational. We have proposed solutions that have enormous costs for the providers, and we have proposed solutions that have very high management complexity.

"Getting back to one big network is my wish for 2002. We are at a stage where people are trying to fragment the network for their own benefit . . . there's Microsoft .Net and other variants of the closed network or the controlled network. I hope we come out of [2002] with the understanding that we need openness."

"We were guilty of selling to dot-com companies, taking that growth and extrapolating it. The biggest goal that the industry missed in 2001 was growth. If you go back 16 months and look at every company's projections ÷ they just got them wrong. There were fundamental mistakes, euphoria over the myth of this new economy.

"The public infrastructure was possibly overbuilt. It all relates to [overestimating] growth. In the communications world, they've got a lot of unused infrastructure that over time will be used, but that has caused incredible complexity. If you're a carrier, do you really benefit by an increase in mobile? Maybe not in the short term. It's going to take away your core revenue."

"I don't think we're going to see a V-shaped recovery, but we are starting to bounce along the bottom. We'll see some increase in spending toward the latter part of the second half. The No. 1 goal for 2002 is to get your house in order. One of the reasons our stock price has increased over the last 12 months is that we've demonstrated how we've increased gross margins each quarter, [improved] cash flow per operations and reduced inventories dramatically. We had flat revenue ÷ but when you assume that 80% of our business was dot-coms, that's a pretty good achievement.

"We'll also see more linkage between the [applications] and the network, not just by products like ours but with technology from server vendors. In the server world, the latest architecture is blade servers. That's similar to the architecture built by network companies such as Cisco ÷ it's a network chassis ÷ and some of the applications are identical. The server world still sees functionality as No. 1, and for the network world speed and throughput [are priorities], but there's more merging there."