Posted on 07/02/2002 9:02:55 PM PDT by Bayou City
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THE CLINTON DEAL THAT KILLED MCI By: Dave Franklin When Ronald Reagan's deregulation of the phone companies broke up "Ma-Bell", it was MCI that not only brought real competition to the long distance market but also helped establish what America depends on as modern telecommunications. Today, having been raided by WorldCom in 1998, that major center of innovation and competition has fallen apart along with an economy it supported. |
In the 1970s and early 80s, long distance phone calls were an expense that average Americans tried to avoid. So much so that middle class telephone conversations were cut short to keep the phone bill down.
As the first nationwide alternative for long distance service, MCI gave Americans a choice and the competition drove per minute cost of long distance calls down to a reasonable level. AT&T had no choice but to trim their costs and cut prices. A lengthy phone call from one coast to another became something average people could afford, thanks to MCI.
And long distance phone calls weren't the only thing that MCI gave to America.
By the late 1980s, MCI offered the first prominent commercial e-mail service as "MCI Mail" long before the average person ever heard of an Internet. MCI's Electronic Data Interchange became a nationwide venue for e-commerce before "B2B". And other services like fax broadcast, a credit card processing network, and low-cost wide area networks (WAN) laid the foundation for a "new economy". This author knows the value of such innovations because I've had my hand in each one of them as an engineer for MCI.
In 1997, after MCI made what should have been a minor strategic error by overreaching its efforts in local phone markets, Clinton's stock market bubble opened the door for overpriced paper to purchase the nation's second largest communications provider. WorldCom, a company with market capitalization far exceeding assets, laid out the 35 billion-dollar buyout plan that would be approved by Bill Clinton's FCC and Justice Department.
MCI was forced to sell its internet assets to Britain's Cable and Wireless so the company could adopt a temporary moniker in the name "MCI WorldCom". Before it was taken over by WorldCom, MCI's major customers were listed directly in Fortune's one hundred and five hundred top businesses. Those multi-million and multi-billion dollar accounts required quality and reliability in the services they had purchased and they had come to depend on it from MCI.
But WorldCom had become a mess as it acquired scores of small companies through buyouts. It was poorly managed and considered a "bottom feeder" in the market, with a basic strategy of going after business customers ignored by the big three providers - AT&T, MCI and Sprint. The quality it offered was nowhere near that of the big three and the largest buyers of telecommunications service would soon find out their network had been put on a leaky boat.
But the country didn't notice a beginning of the end to "irrational exuberance" of the 1990s.
Ten months after the MCI takeover deal was closed, America experienced a nationwide ten-day outage in one of WorldCom's data networks. The failure in its frame relay service (a type of wide area network) was so severe that it made the evening news on all three major networks. Such interruptions are the kind that not one major business customer can tolerate. The tune was called for dismantling one of America's finest corporate assets when MCI was laid on its deathbed.
It is difficult to quantify how much the buyout of MCI by WorldCom has impacted the falling stock market over the years. But there can be no question MCI was a keystone of what we now call the "new economy".
One of the MCI's senior Vice Presidents, Vint Cerf is considered to be the "father of the Internet" having established its most fundamental technology known as TCP/IP. Cerf stayed on with MCI WorldCom after it sold "InternetMCI" to Cable and Wireless but his contribution to the company was limited as legacy WorldCom insiders took charge in key positions.
By 1998, WorldCom had completed its purchased of MCI for $37 billion worth of stock priced then at $52 per share. Before trading was halted Wednesday on Nasdaq, WorldCom stock was being sold for $0.83 per share. That means the Clinton, MS company managed to buy our nation's second largest long distance provider for what is now worth about $500 million.
As its CEO quit after "borrowing" $366 million from the company and WorldCom's new chief executive announced they had hidden $3.8 billion in expenses from the public, the company's Chief Financial Officer was fired and one of its senior Vice Presidents resigned. Off market trading after the announcement had WorldCom's stock at a low of nine cents per share. Seventeen thousand more people are losing their jobs in addition to the tens of thousands who have been laid off earlier this year.
What this writer realized in November 1999 when I resigned from my job as a data service manager has now become clear to the public. WorldCom never contributed anything to the companies it bought. Like Clinton, it just drained them of the sustaining energy necessary to survive. And the headlines today represent one example of a con game played out over and over in markets, when worthless stocks were used to siphon trillions of investor dollars. WorldCom's downfall is a bell tolling for Clinton's 1990s economic boom.
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Dave Franklin can be reached at:dfrankli@patriot.net
Published in the July 8, 2002 issue of Ether Zone.
Copyright © 1997 - 2002
Lawyers did not apparently inform these companies, nor these companies' other agents, that the constructions were improper and/or illegal and/or unlawful.
Lawyers --- self-interested for the large pay from these companies --- failed their oath, failed their impressions and remonstrations of integrity, and failed integrity.
Yet they avoid accountability.
Then some idiot MCI salesman kept calling me. He would not take "no" for an answer until I told him that I'd track him down and kick his ass if he called again.
MCI. Personally, I say good riddance.
What stinks is that the Dems will blame President Bush for this, and most sheeple will swallow hook, line and sinker. Slick Willie walks away scot free... yet again.
They already are, and of course, Bubba is laughing his hiney off, and Al Gore is using it in his campaign which has already begun again!
Remember, Al Gore was supposed to win in 2000. If he did win, they would be able to prop up the house of cards a little bit longer, at least long enough to siphon off a few more billion before it all came tumbling down.
-PJ
Thanks for posting. I was 13 years at MCI. It makes me laugh to read the news today because I've been telling anyone who would listen that Worldcom was a criminal enterprise since the merger first was finalized.
I have good news. Most sheeple democrats remember losing their 401k retirements in the waning months of the Clintons. They know GW is not the culprit and they are not forgetting.
People and sheeple see GW's administration cracking down on corporate malfeasance, and that is a good thing. People and sheeple want some payback. So GW is doing just fine in their eyes.
Where GW can fall in trouble is if he doesn't get people and sheeple feeling once again that America is a safe place to be. People, sheeple and kids are still having the jitters, nightmares and pessimistic moments about the future. That psychology affects everything, economy, investments, spending. We'll all have to wait and see.
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