MCI moves ahead while fighting back

Editor’s Note: You may have noticed that we have changed the name of this newsletter from “Internet Services” to “ISP News Report.” It’s a small change, but we feel it helps describe the kind of information Denise Pappalardo passes along every week. Denise will continue to provide news and analysis about the Internet access industry, including the latest moves by the ISPs and the industry related standards and regulations that are emerging. We hope you’ll continue to enjoy this newsletter. Thanks for reading!

Despite new accusations of fraud and allegations of the mishandling of sensitive government traffic, MCI’s settlement with the U.S. Securities and Exchange Commission was approved last week.

The U.S. Bankruptcy Court for the Southern District of New York approved the agreement, which includes a $500 million cash and $250 million stock payment to the SEC.

MCI pointed out that this settlement clears up all claims by the SEC for the company’s fraudulent accounting practices of the past, which total $11 billion.

“Today’s ruling represents a key milestone as MCI moves toward emergence from Chapter 11 protection… We look forward now to completing our confirmation hearing and emerging from Chapter 11 protection,” said Stasia Kelly, general counsel at the carrier in a printed statement issued by MCI.

Although the SEC settlement is a step in the right direction, the carrier spent much of last week fighting back against AT&T’s claims that it is rerouting traffic through Canada in an effort to avoid paying local access fees.

MCI filed a motion with the bankruptcy court last week saying that AT&T’s accusation “is designed to cause [MCI] competitive and commercial harm by falsely accusing it of misconduct at a time when [MCI] is poised to emerge from bankruptcy.”

The carrier went on to say later in the week that not only is it not illegally using least-cost routing to avoid access fees, it in fact doesn’t legally or illegally reroute traffic through Canada. MCI went further, stating that AT&T has been accused of “improperly routing traffic through Alaska and Mexico.”

It seems that this fight is going to get worse before it gets better. If MCI illegally rerouted traffic to avoid certain fees, the FCC needs to come out and say that’s what has happened, and MCI will need to be fined for doing so.

The FCC is investigating these charges, along with the Department of Justice and other government groups. But until an unbiased report comes out we are all left to speculate the carrier’s guilt or innocence on these latest claims.