Recession Over? Not So Fast Says Beleaguered Qwest CEO

"I don't think you'll see a lot of dazzling moves in this industry in 2002," he said. "This is not going to be a year for innovation; it's going to be a year for creating value, and sticking to the basics."

Although encouraged by his own company's recent efforts to shore up its financing and by recent, positive economic news, Nacchio expects to see continued short-term volatility in the telecom sector. He expects to see additional bankrucptcies in the next 12 months and he worries about another dive in the capital markets once earnings for the first quarter from various companies become known.

"Most people would argue that CEOs are lagging economic indicators because we tend to be behind where the economic cycle is," he said. "If you talk to most CEOs in this country, they will tell you that what you see on CNBC, Fox Business News and that is all hype. None of us believe the economy is coming out of this as strong as people say it on television.

"Most people will tell you all the economic indicators are going right. But I'm still from Missouri on this one: I want to see it happen in terms of how people are buying things. So, I don't think we should approach the year believing there's a lot of wind in our sails--for your companies or ours--in terms of how you're planning to grow."

For its part, Qwest will spend capital "in a low percent compared" to the rest of the industry for the next two years. The reason is simple, he said. The industry has taken on too much debt, which is one reason why he's launched a "deleveraging strategy" at Qwest. While still under pressure from the economy and still downsizing its business, Nacchio told partners that he doesn't think they need to worry about financial issues with regard to Qwest. Others, he's not so sure about.

"Two thousand years from now somebody's going to be digging in Nebraska and they are going to say 'What the hell is all this glass doing underground?' And they are going to come up with all kinds of issues," he said. "But most of that stuff is never going to be used. It's going to be there. It's dead on arrival. Not only are equity holders losing all their money in these companies, but you're seeing bond holders lose money, [too."

In his wide-ranging remarks before solution providers, telecom agents and VARs in attendance, Nacchio addressed several issues head-on, including his frustration with the media (he says it falsely creates the image Qwest will become insolvent), dissatisfaction with the cable industry's monopolies, the growing threat of cyberterrorism and the unstable economy.

Nacchio spared few in his remarks. In addition to journalists, he groused about those who file frivolous lawsuits against his company.

"We get sued on both sides of an issue," he said. "We get sued for saying things and we get sued for not saying things on the exact same issue."

Nacchio also expressed frustration with those who continue to question his company's finances.

"Even though we are not Arthur Andersen, we are expected to be," he quipped, noting that he has people in Washington testifying. To what end, he's not sure.

"I think there's an 'Enronitis' issue going around the country right now," he said. "Everybody is kind of guilty until proven innocent. It's like France, instead of the U.S. where you're innocent until proven guilty. But I think all of us will come through that fine.

"I'm not saying there're aren't some people in some companies who may have done bad things or some things were on the edge. We don't think, certainly, we have. I don't think you need to worry about that."

Qwest's challenges aside, Nacchio earnestly tried to persuade partners that they had made the right choice aligning with Qwest. He said the company is the prototype for where the industry is headed in the next 24 months. With local and global reach, circuit switch to IP services, plus voice and other capabilities, Nacchio said Qwest is better positioned than RBOCs, global telecommunications giants and even new telecom carriers with deep assets but modest sales.

"I'm going to bet that in about 24 months, more companies will have the distribution of products and the distribution of assets that we have in Qwest," he said.

As for partners, Nacchio conceded he did not know off the top of his head what goals his lieutenants have set for revenue contribution. But from a philosophical standpoint, he sees the channel as "a manifestation of Qwest to a customer" and thus believes that partners have great opportunities and responsibilities with regards to Qwest customers.

Today, the business partner program is part of the national business accounts organization. The channel program represents approximately 20 percent of that business. For Qwest to meet its overall objectives, the channel sales contribution must grow, Qwest executives said.

One way they might grown, Nacchio pointed out, is if they seize upon one unexpected trend that he has studied of late. That's the number of enterprise organizations who are moving off the Internet and back onto private, data architectures using optical private lines to better protect themselves from cyberterrorism and other threats.

The conference here in Denver runs through Thursday.