• United States

AT&T and MCI kiss and make up

Feb 23, 20043 mins

AT&T and MCI announced Monday that they have settled their sizable list of disputes in a multifaceted agreement.

MCI filed a motion with the U.S. Bankruptcy Court in the Southern District of New York this week for approval of the agreement that puts call routing, UNE-P and contractual arguments between the telecom giants to bed. 

The most public disagreement came to light last summer when AT&T accused MCI and its partner Onvoy of illegally routing calls through Canada to avoid paying access fees to AT&T. 

AT&T then filed a civil law suit against MCI claiming fraud and racketeering, and MCI followed up with a contempt of court accusation.

Experts speculated in August that AT&T could have lost $10 million to $100 million if MCI was guilty. Despite the potential losses — and guilt, real or perceived — AT&T is cutting its losses. 

After AT&T’s accusations became public, MCI halted all least-cost routing practices according to MCI CEO Michael Capellas. Although MCI maintains that its practices were legal, it wanted to distance itself from the scandal.

Both carriers have agreed to drop their separate court actions, with prejudice, three-days after the court approves their settlement agreement.

AT&T separately announced today that it has also settled its dispute with Onvoy. AT&T says it is keeping that agreement confidential.

In addition to the dispute over call routing, the carriers have been arguing over how much each was owed for telecom facilities and services. AT&T says MCI owes it in excess of $100 million while MCI says AT&T owes it approximately $220 million, according to court documents. 

The agreement filed today wipes away much of each carrier’s claim, except for all services that were delivered but not invoiced after Oct. 10, 2003. The agreement says that each carrier will invoice all such services and pay the other party in full. Neither carrier commented on the significance of the Oct. 10 date at press time. 

The carriers’ UNE-P disagreements are even more complicated. The motion says there is “significant contractual dispute between AT&T and (MCI)” over UNE-P provisioning before January 2004, when the carriers signed a two-year contract that both could live with. 

AT&T and MCI have agreed that all UNE-P invoices from Oct. 10 to Feb. 10 will be calculated based on two contracts the carriers drafted in 1996 and 1998.  Each carrier will issue credits for overpayments if necessary within 60-days of the court’s approval of the agreement. 

All UNE-P services that have not been invoiced will be invoiced and calculated on the January 2004 contract. This contract also stipulates that AT&T is to pay MCI $3 million within three days of the court approving the agreement. 

Exactly what the $3 million covers is not clear and neither carrier would comment at press time.

The motion states that the overall agreement “is the product of extensive arm’s length negotiations, is fair and reasonable under the circumstances and in no way unjustly enriches (either carrier.)”

The bankruptcy court has scheduled a hearing on March 2 to rule on the agreement.