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Fallout: distrust, uncertainty
By LOUIS HAU If you get your long distance through MCI, you needn't worry about the line going dead during your next call to cousin Claire in Cincinnati. Telephone industry experts predicted no immediate problems for customers of MCI even though it's owned by WorldCom. After admitting to massive accounting fraud, WorldCom, the nation's second biggest long-distance provider behind AT&T, is likely to seek bankruptcy protection. But that is unlikely to disrupt the company's day-to-day long-distance operations in the near term. Even Enron and Global Crossing -- two other notorious examples of creative accounting leading to bankruptcy court -- continue to operate. "Consumers probably wouldn't feel an impact," said Chuck White, vice president of marketing and business development for TNS Telecoms, a unit of market research firm Taylor Nelson Sofres. "MCI will continue to provide service." Gene Kimmelman, Washington director of Consumers Union, which publishes Consumer Reports, also counseled restraint among nervous customers. "When there's an enormous wildfire out West everything goes up in flames and the result is a rubble," he said. "But when a company implodes like this, there are significant valuable assets that remain when the dust settles. There is a very strong long-distance and data network here that will not disappear overnight. So there's no reason to do anything immediately." But jitters over MCI's health are likely to result in customer defections over the coming months to other long-distance carriers. That's good news for AT&T, Sprint and so-called Baby Bell companies, such as Verizon, which are offering long-distance services in a rapidly increasing number of markets, including Florida. If MCI starts hemorrhaging customers, it will provide a welcome bit of relief for other long-distance carriers, which have been clobbered by the ever-expanding use of wireless services and e-mail. "New customer acquisition (at MCI) is going to plummet dramatically," said Nancy Kaplan, a telecom consultant for Adventis Corp. of Boston. "The question is, how long can they hold onto their existing customers." Any deterioration in MCI's customer service is likely to have an immediate effect on its consumer and small-business customers, two markets where plan-switching happens regularly, Kaplan said. Larger businesses might be slower to defect from MCI because they typically buy a package of voice, data and networking services from their long-distance carriers, which require elaborate transitions. Mark Cooper, research director of the Consumer Federation of America, is skeptical about MCI's ability to maintain service at current levels, given WorldCom's plans to lay off 17,000 employees. "If an MCI cable gets cut, which happens every day, and you have half as many trucks to roll out there to fix it, it's going to take longer to fix it," he said. "If you have a billing question and there's half as many operators answering the phone, it's going to take longer." -- Information from the Washington Post was used in this report. Louis Hau can be reached at hau@sptimes.com or (813) 226-3404.
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From the Times Business report
From the AP
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