Every time MCI appears to be sorting itself out, a new calamity hits. AT&T has filed an objection to MCI’s pending emergence from bankruptcy that is based on charges that MCI has illegally routed calls to avoid paying millions of dollars in access fees. In response, the General Services Administration wants to bar MCI from federal contracts, which could cost the struggling carrier billions of dollars and perhaps its ultimate viability.
What’s going on?
It’s kind of like nailing Al Capone for tax evasion. Even if (as I believe) MCI is guilty, call-termination regulations are notoriously Byzantine, and exploiting loopholes is somewhat of a parlor game among telcos. Furthermore, while “millions of dollars” sounds like a lot of money, it’s a few hours of operation for a large telco.
The underlying issue has more to do with an almost-universal resentment against the apparent disparity between MCI’s behavior and the company’s punishment. If “recklessly and dangerously mishandling a company” was a crime, MCI’s former executives would be guilty.
That crime dwarfs the current round of fraud charges: Shareholders lost billions. The careers of thousands of MCI employees were injured or ruined, as were those of managers at other telcos – notably Sprint and AT&T – who reportedly lost bonuses and even jobs because of their inability to keep up with MCI’s supposed “results.”
Yet MCI appears to be getting away almost scot-free. With its debt reduced by bankruptcy and its infrastructure and customer base more or less intact, the company actually is better positioned competitively than are some rivals. So the current round of accusations and charges look almost like de facto justice: a way to punish MCI for the larger crimes that the courts can’t or won’t address.
However, AT&T executives aren’t paid to implement justice (de facto or otherwise). They know that the access-charge issue is so minor as to be effectively a red herring. You can bet that deep in the heart of AT&T exists a business case showing that for every X dollars invested in the lawsuit, AT&T will reap Y dollars in return. For as long as AT&T can prolong the uncertainty facing its rival, MCI will continue to lose revenue – a certain percentage of which will go to AT&T.
Is this a good thing? It is if you’re AT&T. It might not be if you’re an IT executive whose viable telco options just shrank by one. And if AT&T succeeds in its apparent endgame, MCI might go away entirely. I don’t see how network executives are served by reducing the competitiveness of the telco market.
I’m not defending MCI, and I’m emphatically not defending its former managers, particularly ex-CEO Bernie Ebbers and ex-CFO Scott Sullivan. (I’d like to see them both put away for years.) But using the current round of fraud charges as a justification to dissolve MCI is like taking a blowtorch to a mosquito – it’ll probably work, but the collateral damage might be high.
