Allegiance Telecom went public just 15 months after it was founded. Its leaders had done this before. Royce Holland had co-founded MFS Communications, and Thomas Lord had been a telecom banker at Bear Stearns. The Telecommunications Act of 1996 let new carriers rent pieces of the Bell networks and sell service in their own name. Allegiance set out to do that in big cities, starting with small and midsize businesses.

A Team From MFS

Holland and Lord founded Allegiance in Dallas in April 1997. They raised money from private equity firms and planned to enter many of the largest U.S. markets at once. The model was simple. Put switches in each city, lease the last stretch of copper from the local Bell, and sell a bundle of local calling, long distance, data and internet service. Small business owners would get one bill and one company to call, often at a lower price.

Bundles, Debt and XO

Allegiance priced its IPO at $15 a share in July 1998 and sold more stock in 1999 and 2000. Building a network in each city took heavy borrowing. When the telecom bust hit, many rival carriers failed, and lenders lost patience with the rest. Allegiance and its subsidiaries filed for Chapter 11 in May 2003 in New York. XO Communications bought its operations out of bankruptcy in 2004.

Cover: The Standard Bearer, Turned to Left, Hendrick Goltzius. Art Institute of Chicago, public domain. Chosen for a standard bearer (allegiance).