By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
One morning in July he starts to cry and can't stop. There is no money left; he has sold or hocked nearly everything he owns and is still $30,000 in debt. Gone are his two cars, his two boats, his 401(k) savings, his dignity. One layoff followed the next--first at Fujitsu, then at WorldCom, then at a start-up that went belly-up. Suddenly at 33, Ted Woods, a man who thrived on structure, is in free fall. It wasn't supposed to be like this, not after he worked his way up from telecom installer to engineer, through the boom years, the brutal 15-hour-a-day years--to prove he was better than the next guy. He is Ted Woods, third-generation Air Force, not some recovering crack addict or psychotic street person conversing with God on his celestial cell phone. Yet he is just as homeless and just as broke as some of the more familiar residents of The Samaritan Inn, a shelter in McKinney. It is here that he will seek refuge from the chaos caused by the meltdown of the Telecom Corridor. It is here that he will finally hit bottom.
John Bennett unloads a flatbed full of sweet potatoes that had been donated to God's Food Pantry the day before by a farmer in Grand Saline. Moving quickly on this hot September day, Bennett breaks a sweat as he sorts the sweet potatoes into crates and wheels them into the Plano pantry and the grateful arms of its gregarious co-founder Bobby Glenn Taylor. Volunteering at the pantry somehow justifies those frequent times when Bennett must accept a handout himself--whatever it takes to keep his wife and three girls from going hungry. Bennett, a former Alcatel project manager, has two master's and three undergraduate degrees. Yet at 40, he has been unemployed for 15 months and if not for living life on the cheap and some now-and-again work as an information technology consultant, his family might be on the streets.
Walter Jenkins (not his real name) has just fulfilled his car-pool obligations by dropping his children off at school. He grows jealous of those stuck in rush-hour traffic, jealous because they have a job and he doesn't. Returning to his Plano home, he braces himself for his morning ritual: booting up his computer, checking his e-mails and searching the Internet job boards for work. Twenty-three years in the IT world working for Nortel and a variety of high-tech firms, and he is either overqualified or unqualified for what's out there. It's not uncommon for him to send out 50 to 60 résumés a week, and not uncommon for him to hear back from no one. But it's his job to find a job, and he spends five hours a day browsing the Web, e-mailing recruiters, networking with business acquaintances who just might know somebody who knows somebody. What choice does he have? Like so many in the telecom boom, he has lived beyond his means. Now with the bank threatening to foreclose on his house, he filed for bankruptcy. Hated like hell doing it. Hated the stigma. Hated even more the feeling of despair that drove him to it.
Beneath the headlines of the technology bubble bursting and the NASDAQ numbers crumbling, beneath accusations of flagrant fraud and salacious greed stemming from the WorldComs and the Global Crossings and whoever else is revising their earnings statements under penalty of law, lies the personal wreckage of those unfortunate employees drawn in by the mania of boom, then coldcocked by the anemia of the bust. Much of the body count has amassed in Richardson, the home of the Telecom Corridor and the birthplace of the telecom revolution.
The corridor became a huge draw for equipment providers, among them mammoth multinationals such as Nortel, Alcatel and Fujitsu. These are the vendors for telephone service providers--carriers like AT&T, WorldCom and SBC, which demanded the latest, fastest upgrade for their Internet, voice and mobile networks. It was here in the mid-to-late '90s that telecom engineers and managers were treated like draft picks, receiving signing bonuses, new cars and stock options, whatever it took to lure them away from other companies. It was here that venture capitalists poured money into start-ups, believing that nothing could stop the exponential growth of the Internet. It was also here beginning in late 2000 that layoffs hit the hardest when demand stopped and supply didn't. The Richardson Chamber of Commerce estimates layoffs in the corridor's major telecom companies at around 15,000, which seems remarkably low. But even if accurate (the Chamber is the resident booster for the Telecom Corridor and holder of its registered trademark), these numbers only tell part of the story.
The rest can be found in bankruptcy court in the Eastern District of Texas and forfeiture proceedings at the Collin County Courthouse and ubiquitous for-sale signs posted in the yards of Frisco tract mansions. It can be found at North Texas Food Bank and the Network of Community Ministries in Richardson and The Samaritan Inn in McKinney where demands on social services are straining resources. Each organization identifies a new kind of client, one who is seeking services not because of addiction or mental illness or domestic violence, but because of job loss. Some of the same people who once donated to these charities are now asking for their help. They need assistance with overdue mortgages, electric bills and oppressive credit card debt. They are older and more educated but have no idea how to secure entitlements. They may have lost their health care, their savings, their spouses, and in a culture where you are your job, they may have also lost their identity. All their lives they had bought into the system and done what was expected: gone to college, gotten married, raised a family. No one ever told them this might happen, which makes them deny for too long that it is happening or obsess for too long over the imponderable "Why me?"
All the pieces were already in place: In the beginning, there was just Ma Bell (AT&T), who did it all. She built, owned and installed your phone, which only came in black. She provided your long-distance service and serviced your local calls as well. She was a stodgy, government-regulated monopoly and might have stayed that way forever, if not for a start-up long-distance carrier named MCI, which maintained its technical headquarters in Richardson. It located its engineers here to be close to Collins Radio, which supplied MCI with telephone switching equipment, since AT&T clearly wouldn't. Instead, Ma Bell chose to sue MCI, whose legal success buoyed the Justice Department to proceed with its own lawsuit--this one resulting in the breakup of AT&T in 1984 and the rebirth of its regional "Baby Bells" as independent entities. The settlement gave AT&T long-distance rights, while conceding local phone service to Southwestern Bell and its six siblings.
From divestiture, deregulation and some earlier litigation came competition, as hundreds of new long-distance service providers sought equipment from hundreds of new equipment providers. "New companies came into the marketplace with a lot of excitement, a lot of money and a lot of gadgets," says Dr. Stan Kroder, associate professor of telecommunications management at the University of Dallas. The basic black phone turned white, red and cordless. Faxing came into fashion, and it wasn't just the neighborhood drug dealer anymore who had a pager or a cell phone. Optical fiber was replacing copper wiring because it could transmit more information at higher speeds. And these were just some of the innovations in voice communications. The Internet brought with it its own technological wizardry in moving data. Not only were computers wired to homes and offices across the country, but also the build-out of vast data networks was making e-mailing, telecommuting and online shopping a 24/7 reality. Bandwidth--the networks' capacity to transmit information--was accelerated by broadband, which would give us the speedier Internet access of DSL and cable modems.
Dot-coms were in bloom as everybody saw opportunity online, but no one could figure out how to make money out of it. Of course, that didn't matter. Not to telecom and data equipment providers who had fiber to lay, switches to build and broadband to connect. After all, the Internet was growing at a mind-numbing rate of 1,000 percent a year, or at least that's what the experts were saying. What was needed was faster, better, smaller and more of it, so phone rates could come down and customer demand and stock prices could go up.
"There was this euphoria in the marketplace," Kroder says, "and it made executives think, 'We don't know how long this is going to last, but we have to take advantage of it. We have to grow. We have to add sales force. Everything is pointing up.'"
MCI was a magnet for the Telecom Corridor, attracting within its field telecom equipment companies that built out the rapidly expanding networks of telecom service providers. "What typically happens when an industry expands is that all the players want to be near each other," says Dr. Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas. "It may have been a historical accident, but we wound up with the largest cluster of telecom employees in the country." The Richardson Chamber of Commerce might argue the corridor grew more by design than accident because it was largely responsible for promoting the benefits of the city to the rest of the world. From Canada came Nortel Networks, from France came Alcatel and from Japan came Fujitsu Network Communications.
Ted Woods became an installer at Fujitsu, tearing out antiquated copper lines and replacing them with fiber-optic cable. Much of what he learned, he learned on the job, which was fine with Woods, who considers himself a hands-on guy who drove himself harder than any boss might have demanded. "Because I didn't have a college degree, I had a lot to prove," he says. "I would work 15-hour days. Since the military, I've never needed much sleep." Driven by changing technologies and the thrill of competing within a Japanese corporate culture that honored structure as much as he did, he worked his way from installer to technician to engineer, from $8 an hour to $15 an hour to $80,000 a year. On the job by 5:30 a.m., he ate three meals a day at his desk, mostly fast food from the nearest Sonic. He gained nearly 100 pounds as his weight ballooned to 270.
The life had its perks, most of which came in the form of toys. Not ready to buy a house, he says, he spent his money on a new Lexus for his wife, a new Ford pickup for himself. Then there was the bass boat and the flat-bottomed boat and the Jet Ski and the motorcycle and the dirt bike. And the sophisticated home office that kept him wired to work. He stored his whole business life on his laptop, every e-mail and voice mail, every work order and memo. "I guess you could say I am obsessive about detail," he says.
Headhunters would call him almost daily, searching for engineers to fill the burgeoning demands of the boom. They tried to lure him with the promise of stock options and salary hikes at companies such as Enron and Qwest and WorldCom. But for him, it was always about the work. "I was the happiest I have ever been at Fujitsu," he recalls. "I wanted to stay there the rest of my life."
Fujitsu would have other plans.
Jenkins had been working as the chief operating officer for a small telecom-consulting firm, but took a pay cut to join Nortel. "I figured I would be exchanging dollars for job security in a large company." He came heavily credentialed and thick with experience, working in the Dallas IT industry since his first job at Texas Instruments in 1980. "I moved here for a girl [whom he would marry and divorce], and computer programming was the only job I could find where I could make a decent wage," he says. Jenkins was making far more than that--$145,000 a year--at the consulting firm, building a comfortable life for himself, his second wife and children ("Three of mine, two of hers, one of ours," he says). His four-bedroom home and three cars were modest by Plano standards, but they created enough debt for him to jump at Nortel's offer after the consulting firm closed its doors because of irreconcilable differences between its partners.
At Nortel, he worked with a new breed of telecom service providers called CLECs (competitive local exchange carriers) that were created by the Telecommunications Act of 1996 to compete with the ILECs (incumbent local exchange carriers, mostly the old Baby Bells). Congress figured competition had worked so well for long-distance carriers, sparking innovation and lowering rates, that it could do the same for local phone service. Hundreds of carriers seized on this opportunity, which granted them the rights to use the incumbents' phone lines to compete for new customers. The business possibilities seemed limitless.
"Nortel was positioning themselves to be the dominant supplier to the CLEC industry," Jenkins says. "New carriers needed the kind of equipment that Nortel manufactured to build out their networks." Not only did investment capital pour into CLECs, Nortel and others would underwrite generous loans to them, selling them millions of dollars in fiber and switches on credit. "It just crossed the line of common sense," Jenkins says.
Problem was, the demand for CLECs' services never materialized. "What had worked for long distance didn't work for local service," Kroder says. "Incumbents like Southwestern Bell had lots of satisfied customers, and the CLECs, unlike long-distance start-ups, couldn't offer a cheaper product. The economies of scale just weren't there." The result was massive business failures, bankruptcy and a glut of repossessed and unused telecom equipment back on the market at bargain prices. Telecom equipment manufacturers were stuck with bad debts, stagnant inventories and big losses.
Telecom companies just got ahead of the rest of us and thought that everyone would continue to upgrade infrastructure and buy the next killer application--the next big thing that would cause the industry paradigm to shift and make them the most efficient, the most technologically advanced, the coolest. It didn't help that telecom vendors saw business orders skyrocket because of Y2K angst, charting their business futures based on this once-in-a-millennium anomaly. It didn't help that the phenomenal 30 percent annual growth in the wireless phone industry began to level off. Or that the next killer app didn't happen. Or that September 11 did.
Until the first round of layoffs at Nortel, "everyone was in denial," Jenkins says. "The downturn was so huge and so sweeping and so fast, no one wanted to believe it." They chose to think it was a mild adjustment. Department after department, however, was getting downsized, right sized, optimized--first the deadwood, then the inexperienced, then the nonessential. A paralysis seized employees who were at once terrified of being laid off yet fearful of being the last one out the door. "There are a dwindling number of jobs out there, and those who got laid off first were at least better positioned to compete for them," Jenkins says.
Most of the CLECs he worked with were filing for Chapter 11 bankruptcy protection. "It didn't take a rocket scientist to figure out they couldn't afford to pay me to sit around and do nothing." He didn't want to leave Nortel, but he figured he had little choice.
In mid-July 2001, he secured a job in the Dallas office of a Denver telecom consulting firm listed in the Denver Business Journal as fastest-growing private company in Colorado. Six weeks later, his entire group at Nortel was "optimized."
He considered himself one of the lucky ones--at least, he did then.
It wasn't enough that he held undergraduate degrees in electrical engineering, music and German, or that he had received a master's of telecommunications from Michigan State University in 1996. To get to the top of the telecom food chain, he figured he needed an MBA. Times were good when Plano-based DSC Communications, a telecom equipment provider, offered him financial assistance to attend grad school, a perk and one of the reasons he decided to work for the company in the first place.
The job market was hot; he had his choice of offers, but DSC was competing fiercely for European carriers, and Bennett's fluency in German and desire to travel clinched his decision. He became a project manager, eventually pushing DSC's wireless infrastructure in both Germany and France. "I was in my element," he says. "The telecom industry was exploding and DSC was hiring 80 to 100 new employees a week."
To become a dominant player in their market, telecom companies set upon a feeding frenzy of mergers and acquisitions. Aggressive WorldCom gobbled up 50 or so smaller long-distance companies and merged with MCI, acting on the questionable assumption that two companies together could operate more efficiently than they could separately. "Everyone was buying up everyone, paying way too much and taking on far too much debt," Kroder explains. "We were blinded by our 'irrational exuberance.' Many of the executives running these companies had never even seen a downturn." Wall Street rewarded these mergers by inflating stock prices, but these valuations didn't reflect how hard it was to merge two corporate cultures with differing styles and infrastructures.
In 1998, Paris-based Alcatel, enhancing its presence in the Telecom Corridor as well as eliminating a tough competitor, bought out DSC Communications. Alcatel soon began consolidating operations, combining departments and ridding itself of product lines, all of which heightened a sense of insecurity among its employees and made John Bennett's decision that much easier. He quit his job, devoting his energies to getting his MBA. He did it to save his marriage, his family and himself.
SMU would be expensive, but he and his wife were never big spenders, and in the end he would be more marketable to the telecom sector with master's degrees in both telecommunications and business. Because his Plano home had a manageable mortgage and he had no outstanding debt, he didn't panic. He still had two small revenue streams: his side Internet business and the occasional church performance where he would sing and sell his Christian contemporary CDs.
A deeply religious man, he was convinced God would provide. So would the career placement center at SMU, he hoped.
"It wasn't a very structured merger [MCI and WorldCom]," Woods says. "Their systems didn't talk to each other and neither did their engineers." It was his job, he says, to find out what infrastructure existed in the field. What he found was millions of wasted dollars being spent on new optical fiber networks, which were being laid next to dark fiber--piping placed in the ground but never connected. "There was so much turnover during the heyday of the telecom boom, engineers left projects before completing them," he says. "And [the projects] were hard to find because the tracking system was so chaotic."
It didn't surprise him when WorldCom filed for bankruptcy protection in July after racking up $46 billion in debt and allegedly concealing $7.2 billion in expenses. It also didn't concern him. Six months after he arrived at the service provider, its stock price plummeted and he was laid off again. This time he had no 401(k) savings, no stock options and nothing to break his fall. In June 2001, he found work as an engineer with Costa Southwest, a small Dallas-based telecom equipment distributor, but the bust had settled in and orders were drying up. The industry had overbuilt in anticipation of massive traffic that never arrived.
"How much excess bandwidth do we have?" repeats telecom business analyst Melanie Swann. "Let's just say enough to transmit billions of libraries of Congress all around the world every second."
By January 2002, Costa was out of business and Ted Woods was out of a job. Again. He flooded the Internet with his résumé, but no telecom jobs were to be had. He decided to take anything, just so he could support his family. Immediately he found two jobs: one at a Wal-Mart close to his Wylie home; the other as a stocker in a Garland liquor store. He doesn't remember much about either, though he does recall the mind-numbing depression that slowly crept over him, how unchallenged and uncertain he felt.
He shut down emotionally and stopped speaking with his wife altogether. The bank repossessed her Lexus, his Ford pickup and bass boat. He began selling off all their "toys" to pay bills, which piled up despite his efforts. The last toy he pawned was his laptop, but he kept its hard drive, the repository of his work history. With the computer gone, however, it felt as though he had no way to access his life.
Overwrought, he says he couldn't sleep at night, his mind racing from one anxious thought to the next. One day in July, all the repressed anger, frustration and shame came rushing forward in an uncontrollable gush of tears. Throughout the morning and well into the afternoon, he was inconsolable, his head throbbing, his heart pounding, his breakdown complete.
Since he had no health insurance, his wife rushed him to the emergency room at Parkland hospital; his blood pressure was perilously high at 240 over 190, his heart rate 160. After stabilizing him, doctors said he had suffered a major anxiety attack. He would need bed rest, medication and psychiatric help to get him through this crisis.
Richardson clinical psychologist Terry Parsons says his practice now includes an increasing number of former telecom workers. "The accumulation of loss from layoff after layoff can be overwhelming," he says. "Anxiety is just the way we scare ourselves. When someone gets laid off, they may be paralyzed by the fear there is no way to regain what they once had."
Many of Parsons' recent referrals have come from the Network of Community Ministries in Richardson, a nonprofit group that provides emergency assistance with food, medical bills and housing. "In late spring, volunteers were reminded that they were going to see a different kind of client," says the Reverend Kurt Friederich, network board chairman. "They might have a nice house, two car payments and they are suddenly laid off. With résumé in hand, they have stood in every job line they can, and now they have gotten notice that they are two months behind on the mortgage and Richardson is going to shut off the water. Never did they ever imagine themselves in this position."
After Woods was released from Parkland, he had no money left. Evicted from their apartment, his wife and son moved in with her parents in Denison. But their house was too small and the imposition too great, so he stayed in the nearby Texoma Inn. Living on bologna sandwiches, he found odd jobs raking leaves, cutting grass and painting houses. What little he made, he gave to his wife; he was told his application for government aid--food stamps, Section 8 housing, Medicaid--was premature because he made too much money during the preceding two years. In September, the day-labor jobs dried up, and he couldn't pay the weekly rent at the motel.
He was homeless, destitute and convinced he had little choice but to find a shelter.
At 43, with 23 years in the information-technologies sector, he began the thankless search for a job in a jobless market. Because he drew a six-figure salary, he was overqualified for anything entry level. Because he worked as a "high-end consultant," he was unqualified to be a hands-on systems engineer. Each day he would hit the Internet job boards and come away frustrated. Certainly there were executive networking groups holding lunch meetings, but he chose to work his own connections, which proved fruitless since many of his past business associates were also unemployed.
"Good friends of mine have been out of work for more than a year," he says. "A couple are selling cars, another is flipping burgers, another is doing software consulting, which basically means he is sitting at home waiting for the phone to ring."
This was the first time since high school that he had been unemployed, and it was causing him to question his own abilities. "I had always taken my career for granted. If you get the rewards long enough, you come to expect them as your due."
Overwhelming debt is a great equalizer. "Like everyone else, we were already spending right up to our means," he says. He burned through what little savings he had. His stock options at Nortel were worthless. He had $60,000 worth of unsecured debt and $30,000 worth of new car loans, none of which he could afford to service. His three cars went back to the bank, and if not for two vehicles he borrowed from his father-in-law, he would have no transportation.
He calls his decision to file for bankruptcy "a no-brainer." It was the only chance he had to save his house from foreclosure. Not paying his obligations was something he wasn't proud of. It was also something that was becoming more prevalent in Collin County, where many of the more affluent telecom workers live.
The Collin County Clerk's Office anticipates a record number of foreclosures this year--a 57 percent increase over last. Property tax delinquencies in Collin County are up more than 21 percent over 2001. Bankruptcy filings in the Eastern District of Texas (which includes Collin and Denton counties) are up 6 percent over last year. "Our numbers are up more than 30 percent over the last two years," says attorney Scott Lemke, a partner in the McKinney firm of Lemke & Pederson. "The triggering event that puts our clients into bankruptcy is income interruption--layoffs."
Anyone from the telecom industry is suffering from a double hit: They are laid off and nobody wants them. Their assets are gone, their stocks have tanked. They hope to sell their homes or refinance them, but the top-end housing market is sluggish and banks generally don't refinance homes when their owners are out of a job. "The people we are seeing now are what I call the truly desperate," attorney Jan Pederson says. "They have tapped out every resource, and they are still not working."
For Jenkins, filing for bankruptcy was humiliating (and the reason he did not want his real name used in this story). But it did bring him to church for the first time in years, and it drew him closer to his children as he became Mr. Mom, driving car pool and working on projects for the Plano PTA. "There is an arrogance and a complacency when things are going well," he says. "It's pretty humbling when you are forced to the conclusion that your situation is not only as bad as you thought, it's worse than you ever dreamed it could be."
Fifteen months of rejection and unanswered job queries caused him "constant battles with self-doubt," he says. But Bennett was resilient, and he managed to patch together an income from whatever sources he could find. "I don't say no to any work," he says. "In July, I painted a garage. I fix people's computers. I will sing for food."
He receives $50 a week from his church as its music minister. The church has also tapped its benevolent fund to pay the $800 repair bill when his '79 Volkswagen van broke down. He doesn't know how he could weather this crisis, if not for his firm religious beliefs and his unflinching austerity program.
"We never go out to dinner, don't even get pizza delivered," he says. He and his wife only buy clothes at thrift shops, and hand-me-downs are then recycled from child to child. They don't rent videos from Blockbuster, instead checking them out for free at the Richardson Public Library. Their '92 Corolla runs just barely, without heat and air conditioning. He and his wife plan "zero-cost family adventures" for their daughters--ages 10, 6 and 2--seeking out free concerts, new playgrounds and lakeside picnics. "My kids are fine; they really are," Bennett says. "My oldest, bless her heart, at night when we pray together, she is always asking for a bigger house and a new van."
Somehow they manage to make the mortgage payment every month; carrying no credit card debt helps. But there have been weeks when Bennett has to rely on God's Food Pantry in Plano because "it was our only food," he says. His ethics won't allow him to take food for free. Once a week, he volunteers at the pantry, sacking groceries and stacking cans for the hungry, who now include people like himself. Pantry co-founder Bobby Glenn Taylor cites a startling increase in the number of former telecom workers who regularly frequent his pantry. "Of the 7,000 clients we feed every month, at least 500 of them were laid off from jobs associated with telecom," Taylor says. It doesn't help matters that the demand for food keeps rising because of the economic downturn. "Food donations are only up 2 percent over last year," says Jan Pruitt, executive director of the North Texas Food Bank, which supplies food to 222 agencies in a nine-county area. "But distributions are up more than 18 percent. We just can't keep up at that rate."
Bennett finally received his MBA in August 2001. "I thought with an MBA, I could finally reach my ultimate goal of being the guy in charge. Now I have more modest goals: getting food on the table, making sure the mortgage is paid and the cars keep running."
They prayed about it and his family agreed: If John Bennett got the job with Deutsche Telekom, they would move to Bonn, Germany. If nothing else, he had an interview; the Germans would be calling at 10:30 a.m. sharp. He tries to remain upbeat, optimistic. It's the only way to survive the times. It was a long shot, answering an ad from an international online job board, but he fit the job requirements to the letter: MBA, fluency in German, background in international wireless support. He has done his homework; he understands their business model; he even worked with the same carrier during his tenure at Alcatel. His mellifluous voice should sound impressive even in German. He stares at the phone. It's 10:30. It doesn't ring. Thirty minutes go by and still nothing. Quickly, he e-mails his German contact, but the call doesn't come. It's enough to test his faith.
Late into the night, champagne is flowing at Walter Jenkins' house. It's cheap champagne, but champagne nonetheless. He found a job, or rather the job found him. A stroke of luck, really. He started October 7 doing business development for a telecom software supplier. When the offer came, his feelings soared from worthless to elated. No longer would he have to worry about losing his home. The bankruptcy and the job would give him a fresh start. It was a "tremendous rush," he says later. "But there is a sobering part." He was only out of work for three months, but what about those less fortunate than he was, people unable to find work for a year, two years, people in breadlines or on the dole, bright, talented people who got caught up in the meltdown through no fault of their own? "When your mom told you life isn't fair," he says, "this is what she was talking about."