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Filing Won't Leave Californians in the Lurch

Telecom: Even if MCI parent WorldCom failed, government policies should protect consumers from an abrupt loss of service.


For years, the biggest challenge WorldCom Inc. and MCI faced was persuading consumers to switch long-distance companies.

Now, the toughest job may be persuading them to stay.

The bankruptcy filing on Sunday by WorldCom and its MCI subsidiary is sure to spook some customers, who number as many as 20 million. But consumer advocates say the filing alone doesn't justify finding a new long-distance company.

For starters, WorldCom executives pledge that service will continue without interruption, saying they have lined up lenders to keep the business going while the company reorganizes under the protection of U.S. Bankruptcy Court.

Of course, just a few weeks ago WorldCom said it had enough money to last through the year. Then the company's reserves evaporated as suppliers demanded to be paid upfront, putting the company in a cash crunch.

Even if WorldCom failed, though, state and federal policies should protect customers from an abrupt loss of phone service. The Federal Communications Commission requires phone companies to give 30 days' notice before they terminate service, and FCC Chairman Michael K. Powell has said he won't hesitate to stretch that period if needed.

Typically, residential and small-business customers use WorldCom's MCI service only for toll calls. Switching to one of the many alternative long-distance carriers is a simple task that can be accomplished with a single phone call or online session.

About 600,000 customers have signed up for more extensive service from MCI in the last three months, a new "neighborhood" package that includes local service as well as long-distance calls. The Californians in that group, at least, are protected by state policies that call for a smooth transition to alternative carriers when a local phone provider goes belly up, said Michael Shames, executive director of the Utility Consumers' Action Network, an advocacy group based in San Diego.

"Consumers should be comfortable that if they sign up for MCI, they're not going to be left in the lurch," Shames said.

Potentially the riskiest WorldCom product for consumers, he said, is prepaid calling cards. But if WorldCom couldn't honor those cards, buyers might be able to collect refunds from the retailers that sold them, Shames said.

Several consumer advocates already have established Internet sites to dispense advice and information to worried MCI customers. Rich Sayers, known best for his extensive long-distance comparison charts, set up an MCI-related Internet site for residential customers: The Telecommunications Research and Action Center also posted tips for MCI customers on its Internet site,

WorldCom's extensive network, which stretches across six continents, provides the electronic thoroughfare for more than 20% of the long-distance calls in the U.S. and half the world's e-mail. Its lines carry more long-distance Internet traffic than those of any other company, and its network supports the world's largest Internet provider, America Online.

The company's network also provides high-capacity local lines to businesses in 84 metropolitan areas, including Southern California. Those business customers would face the most difficult transition if WorldCom's network shut down, because their phone and computer systems would have to be connected physically to another company's lines. Long- distance customers, by contrast, can switch to another provider by sending instructions electronically to their local phone network's switches.

Still, WorldCom's network and services are duplicated around the globe by competitors. That's one of the problems for long-distance firms: Competition is so extensive and intense that their products have become commodities.

WorldCom's financial troubles haven't appeared to trigger an exodus from MCI's service, Shames said. But one of the biggest question marks for WorldCom customers will be whether customer service deteriorates as the company slashes costs.

Last month WorldCom started laying off 17,000 employees, or more than 20% of its global work force, with the cuts coming from divisions across the company.

Said analyst Lisa Pierce of Giga Information Group, a technology research firm: "With all the layoffs at WorldCom, there is real concern about the potential degradation in network quality, getting billing disputes resolved, service repairs. Those are quite legitimate concerns."

Company executives insist that they will be able to maintain the quality of service, and they have extended more generous guarantees to assure business customers. Consumers and small businesses receive no such guarantees from MCI, however, and in California, Shames said, his group receives more complaints about MCI's phone service than that of any other company.

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