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Mailbag: Debating MCI’s financial viability

Mar 22, 20042 mins

* Your views on whether MCI could still be viewed as a financially viable company

I set off a firestorm a few weeks back with a column that defined a Tier 1 ISP as a carrier that owns or controls the majority of its network infrastructure and provides market-leading service level agreements.

In that column, I quoted Brownlee Thomas, principal analyst for global telecom services at Forrester Research, as saying that to be considered a Tier 1 ISP, a carrier also must be organizationally stable and financially viable. She said a Tier 1 ISP did not have to be a top performer, but that it must be a consistent performer with revenue that is flat if not growing.

As an aside, Thomas said she considered MCI to pass this financial viability test because fraud caused its bankruptcy proceedings rather than problems with its products or services.

“MCI still has a very robust and reliable network,” Thomas argued.

Some of you haven’t been shy in telling me that you don’t agree with Thomas. I received several persuasive e-mails arguing that corporate buyers must consider MCI’s fraudulent behavior before signing a contract with this carrier.

“There’s the question of whether you want to do business with a company that committed fraud,” argues a network manager with an educational institution. “Are you going to trust the billing? Trust them to keep promises?”

Another reader asks: “In what universe is there the concept that fraud and business performance are mutually exclusive? MCI/WorldCom’s inflated business performance was due to fraudulent recording of expenses…and so there was not a true reflection of the instability of their business plan. In my book, that’s sub-par business performance AND fraud.”

Good points, I must admit. But it’s also true that the entire ISP industry has struggled to come up with a viable business plan. Few ISPs are profit-making ventures. So how do you assess the financial viability of one ISP when the whole industry is in trouble? We’ll discuss financial viability in the ISP industry in more depth in our next newsletter.