Telecoms open fire on MCI as new allegations surface

ASHBURN, VA: MCI's reputation - and now perhaps its existence - is once again on the line, this time due to allegations that the company defrauded its competitors for a decade.

ASHBURN, VA: MCI's reputation - and now perhaps its existence - is once again on the line, this time due to allegations that the company defrauded its competitors for a decade.

The accusation and subsequent investigation just adds to MCI's (formerly WorldCom) woes, as the company struggles to emerge from a Chapter 11 bankruptcy, caused by a nearly $12 billion accounting fraud.

After initial reports of the new investigation surfaced, AT&T, Verizon, and SBC all accused MCI of working with local phone companies to reroute phone traffic, making long-distance calls look like local calls. This would have helped MCI avoid paying access fees to its competitors.

Each of these companies has a vested interest in preventing MCI from ever emerging from bankruptcy. SBC's CEO even appeared on the business news channel CNBC, where he accused MCI of this questionable practice.

While no wrongdoing has been proven, the suspicion of fraud has already done further damage to MCI's already battered reputation, says Lisa Pierce, a research fellow with the Giga Information Group.

"To recover from that, everything they do needs to be as transparent and rapid as possible," said Pierce. "They've taken some steps to make that happen.

"They've also seemed defensive in some of their statements," she added. "They shouldn't say anything that seems defensive. They should simply say they are cooperating with the investigation, and keep quiet. Because anything else they say could be misinterpreted."

Because the accusations are mired in the esoteric language of the telecommunications industry, and are thus hard to explain, MCI will need to be consistent and positive in its statements, without falling back on arcane jargon, explained Bryan Van Dussen, a director with the Yankee Group, a telecommunications research firm.

For their part, AT&T and Verizon representatives denied they had developed a PR strategy to attack MCI.

Yet Larry Smith, president of the Institute for Crisis Management, said the allegations could help divert public attention from any difficult business issues those companies are facing. He also said that MCI needs to be proactive in its public defense.

The company should have appointed an "anticipator," said Smith, someone with an institutional history who doesn't need to make decisions on a day-to-day basis during a crisis, but anticipates any and all issues that could arise.

"You need to anticipate how audiences are going to react to this kind of news," said Smith.

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