Posted on 07/22/2002 1:12:17 PM PDT by HAL9000
Honorable Michael K. Powell
Chairman
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
Dear Chairman Powell:It is widely anticipated that WorldCom will file for bankruptcy in the near future.1 The United States Telecom Association (USTA), on behalf of its members, wishes to express its concern about the significant financial injury to the telecommunications industry, the customers it serves, and the nation’s economy if the Federal Communications Commission (FCC) fails to take appropriate actions to ensure that this and other bankruptcies do not lead to a state of crisis in the telecommunications industry.
In this respect, any actions by the FCC should be designed to serve two equally important goals. First, any customer disruptions as a result of this or other bankruptcy filings should be kept to a minimum. Second, and equally important, the FCC should take affirmative steps to ensure that WorldCom’s impending bankruptcy does not undermine the financial stability of other carriers that provide services to it, and that such supplying carriers have adequate assurances that they will be paid for those services. By the same token, it is critical that the FCC not take any actions at the expense of, and causing increased exposure for, other telecommunications service providers.
As you well know, the nation’s telecommunications infrastructure is extraordinarily interconnected and interdependent. Thus, WorldCom’s bankruptcy would likely affect, either directly or indirectly, every domestic telecommunications service provider in the United States, and their customers. As the FCC responds to a WorldCom bankruptcy, it must be mindful of how its actions will impact not only WorldCom and its customers, but other carriers and their customers as well.
ILECs intend to fulfill their obligations to continue providing services under the bankruptcy laws. They should not, however, collectively be forced to absorb hundreds of millions of dollars of costs each month for interstate access, intrastate access, and the provision of UNEs, in order for WorldCom to continue to provide service, without adequate assurance of payment. In addition, the FCC will need to find a mechanism to address the impact of WorldCom’s potential unpaid contribution to Universal Service. And if the FCC should intervene in a WorldCom bankruptcy proceeding, it must do so with an explicit acknowledgment of the fact that the FCC’s telecommunications policy priorities do not, and should not, preempt the rights of creditors and service providers under the Bankruptcy Code.
In order to address such concerns, USTA asks the FCC to implement, as quickly as possible, the following five steps, which if adopted will ensure that the interests of all telecommunications carriers and their customers are fairly balanced.
1. Preservation of Rights in Advance of a Bankruptcy Filing
The FCC should allow supplier carriers to take reasonable measures to assure that they will receive payment for the services they provide, and to protect themselves before problems occur, by approving tariff changes to protect those companies that provide interstate services to connecting carriers. USTA also recommends that supplier carriers be permitted to secure adequate deposits from those connecting carriers for which there is a demonstrable financial concern (e.g. bad payment history, lower debt rating, etc.). Finally, USTA recommends that supplier carriers be able to bill all carrier services (including usage) in advance when financial circumstances warrant. No FCC policy or rule should implicitly or explicitly deter supplier carriers from taking such prudent steps to protect their interests.
2. Preservation of Rights in Bankruptcy
The best way to ensure that all consumers who are connected to our nation’s telecommunications system continue to receive services is to ensure that supplier carriers that maintain service to bankrupt carriers get paid. Bankruptcy courts generally recognize that suppliers and utilities that continue to provide service during the pendency of the bankruptcy are entitled to advance payment or other assurance of compensation. While the FCC rightly supports the maintenance of service to customers of bankrupt carriers, in the long run this public interest goal will be served best if the FCC advocates equally strongly for payment to carriers that provide service to a carrier-debtor in bankruptcy.
3. Recovery of Interstate Uncollectibles in Bankruptcy
If supplying carriers are unable to recover extraordinary debt owed to them by WorldCom or another interconnecting carrier, it is reasonable to allow them to pass on at least a portion of such large new costs to their customers. Thus, the FCC should provide a clear mechanism for the recovery of non-collectible charges as a result of the bankruptcy. For example, the FCC could allow recovery through the exogenous cost mechanism in its price cap rules or through a limited waiver of those rules. In the case of rate of return carriers, the FCC should allow an adjustment in rates to account for this factor. The FCC also should encourage state regulators to take similar actions with respect to intrastate services.
4. Recovery of UNE Uncollectibles in Bankruptcy
Likewise, the FCC should make clear that its pricing rules require that carriers providing unbundled elements be allowed to include a compensatory factor to recover non-collectible UNE charges.
5. Cure Requirements
It is settled law that the FCC should reconcile its policies under the Communications Act with federal bankruptcy law. Thus, the FCC should make clear that that the Communications Act of 1934, as amended (Act), does not preempt the Bankruptcy Code, and that carrier-suppliers have the same rights as all other service providers to a “cure” of outstanding indebtedness on existing service arrangements that are assumed (and assigned) during the course of the bankruptcy. Indeed, while some carriers have tried to game the interplay between telecommunications law and bankruptcy law to avoid this obligation, the simple fact is that the right to a cure expressly exists both under the bankruptcy code itself and under carriers’ individual tariffs.
Further, throughout the bankruptcy process, the FCC should encourage timely notice to interconnecting carrier customers. To ensure a smooth transition, the FCC should clarify when a carrier is required to provide notice to its customers of possible impairments of service. Moreover, when a carrier intends to sell or auction its assets, it is typically not known whether the purchaser will wish to take assignment of the debtor’s existing service arrangements. Thus, USTA recommends that when a carrier files under Chapter 11 and initiates an auction of assets, it should have to inform customers of a possible discontinuation of service. Similarly, upon filing a motion for sale or acceptance of a purchase agreement, a carrier should be required to inform its customers that it will cease or transfer operations when the sale is complete. The same should be true when a bankruptcy is converted from one under Chapter 11 to one under Chapter 7.
In addition to implementing the foregoing five recommendations specific to bankruptcy proceedings, USTA believes that it is imperative for the FCC to resist suggestions, in anticipation of a possible WorldCom bankruptcy filing, that it set aside proceedings that are equally important to the continued health and stability of the telecommunications industry, including the UNE Triennial Review, its Broadband dockets, and pending and future section 271 applications. The FCC must bring such proceedings to a close as quickly as possible. They are of utmost importance in stimulating future investments in the telecommunications industry, job creation, consumer welfare, and our nation’s technology leadership.
While a WorldCom bankruptcy would be of a magnitude not before experienced by the telecom industry, USTA believes that the FCC’s paramount responsibility is to lessen the magnitude of the aftershocks on consumers and the entire United States telecom industry. Thus, USTA would appreciate a meeting with you to further discuss our recommendations at your earliest convenience.
Sincerely,
Walter B. McCormick, Jr.
CC: Commissioners Copps, Abernathy, Martin
FCC Chairman Michael Powell will probably support this.
First, the title is very misleading! The USTA represents thousands of telephone companies, not just the Bells. Verizon, CenturyTel, etc.
Secondly, what would you have these telcos, who are owed billions of dollars do? Just 'write it off'? Should they also be forced to continue to allow WorldCom and others that go under to have access to their networks without a promise of payment or advance payment? If you were a businessman, would you continue to send goods to a customer who couldn't pay the bill?
And what is the USTA actually asking? They are not asking to surcharge Joe Blow's local phone bill, are they?
And if they were, how would that be any different than when any other unregulated business sustains losses? They recover through various means, including passing the cost along to their customers.
Is it fair for anyone to have to pitch in when they were not a WorldCom customer? Maybe not, but our government, in all its wisdom, forced the Bells and others to sell access to their networks, built with their own billions and billions of dollars to these companies who are now going under, due to mismanagement, etc. YOU, OTOH, as a private businessman get to do business or refuse to do business with whomever you please. Why shouldn't local telco's ask for relief when government mandates result in them, their employees and their shareholders being taken for a ride?
I know this will please you to no end, but did you see what the WorldCom bankruptcy has done to the other telecom stocks?
You act like the Bells, and all the other USTA members this request covers, had any choice in the matter. What would happen to any local company who refused access to their networks? 'Credit' was not granted. A service was mandated by the FCC. There is a big difference.
If they don't pay their bills, sure. Then, instead of the same scumbag executives being allowed to ride Worldcom out of bankruptcy and getting huge salaries and bonuses again, the company would be forced to break up, with each newly spun-off company given new leadership and a fresh accounting sheet. Then they should be forced to provide service. But as long as UUNet and MCI are part of Worldcom and aren't paying their bills, it just turns them into parasites with a blatant anti-competitve advantage: Everybody else has to pay the USTA companies for their services, while Worldcom does not.
If I ran a company that provided any service to a Worldcom unit, I'd give them an ultimatum: You have 30 days from the date of this letter to pay up in full, or at least set up a payment schedule that would insure full payment eventually, or they're getting completely cut off from my phone lines on day 31. I would then send out letters and emails to every single one of my customers telling them that I had given this ultimatum and explaining why. I don't care if it's technically illegal or not. If I can get a few million customers to start harassing members of Congress or the FCC to stop forcing them to pay for the greed of Worldcom execs, then the FCC will eventually be forced to relent.
You and me both. I use my cell phone more than my home phone anyway.
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