What's a WorldCom Customer to Do?

While government probes, FCC, and WorldCom itself try to maintain services (and revenues), customers wait and wonder.

Stephen Chiger, Medill News Service

WASHINGTON-- Internet users should have little worry from WorldCom's financial woes, even though one of the company's divisions owns as much as 70 percent of the Internet backbone.

Even if WorldCom files for bankruptcy--which its executives expect to determine within weeks--customers of the second-largest long-distance carrier and major Internet provider need not fear their service will vanish, according to analysts.

"I think the chances of [Internet] service stopping to work are very unlikely," said David Neil, a Gartner vice president who estimates a 60 percent chance that WorldCom will file for bankruptcy.

Last month the telecommunications company blindsided the already shaken investment community by announcing it improperly accounted for $3.9 billion in expenses, creating misleadingly high corporate earnings.

Close Watch

Congress is inquiring, customers are wary, and even the Federal Communications Commission is poised to step in. Although the FCC has no auditing function beyond ensuring a telecommunications company adheres to its regulations, the FCC is helping other government agencies probe WorldCom's financial practices, FCC chair Michael Powell said after the FCC's monthly meeting here Tuesday. The U.S. Securities and Exchange Commission and a few Congressional committees are investigating.

"I don't think a significant disruption of service is imminent" for WorldCom's Internet and long-distance services, Powell said. Even if WorldCom files for bankruptcy, "I don't think it will be a critical situation for consumers," he said.

The FCC's primary responsibility is to ensure consumers and businesses are not left without service in situations such as these, Powell noted.

"Ensuring continuity of service for consumers is our highest priority in the wake of the troubles facing many companies in the telecommunications industry today," Powell said in a letter this week to Representative Edward Markey, a Democrat from Massachusetts.

In fact, some analysts question whether WorldCom can maintain reliable customer service in the wake of recent corporate layoffs.

"I just don't see how the workforce can see a reduction by one-third and still see the quality of service... that they did before," Neil said. The company has laid off about 25,000 employees so far this year, he added.

"A miracle would have to happen for [layoffs] not to affect customer service and support," said Lisa Pierce, an analyst with Giga Information Group.

Relying on the Net

WordCom's saving grace may require maintaining the viability of UUNet, which operates many of the major arteries that carry Web pages and e-mail. It's one of WorldCom's most profitable business units, generating $4.7 billion in Internet access and hosting revenues in 2001, TeleGeography analyst Alan Mauldin said.

"What sets [UUNet] apart is they have so many connections to so many other networks," Mauldin said. He noted that UUNet connects with over 3400 networks worldwide, more than twice as many as Sprint or AT&T.

"We believe that if [WorldCom Chief Executive John] Sidgmore has any say at all, he's going to try to hold on to UUNet," Giga's Pierce said. Sidgmore was previously CEO of UUNet, which WorldCom acquired in 1996.

Internet networks have enough unused space that any WorldCom problems would likely have little effect, Pierce said. "If something terrible were to happen to UUNet, another company could step in," she added. That's what happens in emergencies or when a network has problems.

WorldCom will want to hang on to UUNet simply to keep its profits, said Frank Dzubeck, president of Communications Network Architects, an industry analysis firm. Companies that provide both voice and Internet services find "much better profit margins in the data side of the house," he said.

Customer Caution Urged

Analysts suggest consumers should familiarize themselves with their current phone and Internet providers and have an alternative ready if things go sour.

"Joe PC User should find out from his local Internet service provider who his backbone ISP is," Pierce said, suggesting that users investigate backup options. However, many local ISPs already use more than one backbone provider for their connections.

"It's a standard practice among ISPs that you don't want to have all your eggs in one basket," Mauldin of TeleGeography said.

Pierce added that although WorldCom and other cash-strapped service providers may offer great rates, consumers should be vigilant about the quality of service they receive.

"[For] anyone who is using a provider that has greater stability, price should not lure them to someone who is having difficult times," she said.

Dzubeck said now isn't the time for WorldCom customers to leave the company, but suggests they might want to consider their options if the firm files for bankruptcy.

Shrinking Pains

Accounting discrepancies notwithstanding, WorldCom's financial plight is not new to the telecommunications industry. Companies have become used to razor-thin margins, the analysts said. This incident indicates a faltering sector.

"The whole entire industry has been having a tough time," Gartner's Neil said, pointing to recent bankruptcy filings by Global Crossing, Williams Communications Group, Teleglobe, and KPNQwest, among others. Some broadband service providers didn't survive tough times last summer.

Experts blame a variety of causes: the entry of regional carriers into the long-distance market, the growth of wireless services, flat-fee pricing schemes, and overbuilding a communications infrastructure that isn't as highly used as expected.

Cara Garretson of the IDG News Service contributed to this report.