As accounting worries rattle Wall Street, some telecom investors are checking the rearview mirror and wondering what might be gaining on them.

Wednesday's questions focused on the books at Qwest Communications ( Q), which slipped 6.7% in heavy trading that made it the Big Board's second-most active stock. Now some investors are saying a $300 million purchase of network assets from Enron last fall may not be all it was cracked up to be.

Qwest, a Denver-based Internet and local phone-service provider, agreed in September to pay $300 million for Enron Broadband Services telecom assets, consisting mostly of a stretch of network between New Orleans and Salt Lake City. But in the wake of the latest chapter of telecom tumult, the value of Enron's dark-fiber route -- simply the raw cable strung underground between the two cities, without equipment to transport traffic -- is in question, observers say.

Analysts and bandwidth traders alike say they find it difficult to estimate the value of unequipped-network assets, or so-called dark fiber, given the turmoil in a market and the overabundance of network property available at auction. But two former Enron executives familiar with the Qwest deal say the route was worth a fraction of what Qwest paid, and that Enron was more than pleased to find any buyer at the time. Just two months later, a cash-starved Enron filed for bankruptcy protection.

While it's hard to judge the value of dark fiber, it's safe to say it is well below the value of usable capacity, which exists in great surplus today. And during 2001, the value of wholesale usable bandwidth fell some 90%, says Friedman Billings Ramsey analyst Susan Kalla.

A Qwest representative said people's estimates are merely conjecture and added: "As company policy, we don't speculate on things like the market value of dark fiber."

Asking Questions

But that doesn't change the fact that investors are increasingly probing for further surprises from the troubled telecom sector since the collapse of broadband provider Global Crossing and the demise of Enron's broadband service division. Among the key issues are how much value the blockbuster deals made late last year can retain in today's market, and whether companies such as Qwest might need to take charges to bring the book value of their assets in line with fair value in today's market.

Of course, even that's not a simple task, considering the lack of demand for unlit fiber. "They should write it down, but what do they write it down to?" says Ron Banaszek, director of TFS Telecom, a New York bandwidth brokerage that trades capacity for domestic and international markets. "One thing's for sure -- if you are a debtholder, you are looking at a bid of nearly zero for network assets at auction right now."

During the Internet buildout of the late 1990s, network builders found themselves scrambling to buy or swap capacity with rivals to fill in network gaps. As a result of that rush, a number of telcos are carrying bubble-valued network capacity into a harsh postbubble market, observers say. "We have so much more bandwidth than we need," says Banaszek.

At the height of the Internet boom, of course, there was no such thing as too much capacity, says Banaszek. But now those days are long gone, and prices reflect a more pessimistic world view.

"A few years ago, when everyone was building for the Internet revolution, no one stopped to say how much of this wonderful world of communications would survive," Banaszek says. "The market can't sustain a zillion suppliers -- who were they supposed to be selling to?"
Senior writer Peter Eavis contributed to this report.