MCI/WORLDCOM SAYS INTERNAL REPORT SHOWS NO ACCESS CHARGE FRAUD

AT&T’s claims of access charge fraud were made “solely for competitive gain,” MCI said: “AT&T’s filing… is designed to cause [MCI/WorldCom] competitive and commercial harm by falsely accusing it of misconduct at a time when the company is poised to emerge from bankruptcy.” The company added: “Stripped of overheated rhetoric, what AT&T describes is perfectly legitimate conduct known as ‘least cost routing.'” MCI/WorldCom said its report was based on its own analysis and a preliminary review by the law firm Gibson, Dunn & Crutcher. MCI/WorldCom said it was working on a more complete review to supplement the preliminary version.

Among charges denied by the internal MCI/WorldCom report: (1) MCI’s contract with Onvoy, a Minn.-based carrier that allegedly helped ferry MCI calls to Canada to avoid paying access, was “completely legal and commonplace.” AT&T contended that Onvoy helped MCI/WorldCom in a scheme to switch calls to AT&T’s network, but MCI said there wasn’t anything “remotely illegal” about Onvoy routing domestic traffic to Canada. It told the judge: “Onvoy operates network facilities in rural areas in which [MCI/WorldCom] typically has no facilities. The purpose of that contract was to deliver calls placed by [MCI/WorldCom] long distance customers to these rural areas.” MCI said it “took specific contractual steps to assure that no deception could take place.” (2) “AT&T’s assertion that the routing of domestic traffic through Canada by Onvoy was [intended to deceive AT&T] is absurd.” MCI/WorldCom said there would be nothing illegal about routing calls through Canada if such action did occur. (3) It’s not true that MCI avoided access charges or that AT&T wasn’t fairly compensated for terminating traffic: MCI/WorldCom “paid Onvoy to terminate the calls and, by its own account, AT&T has been paid by Bell Canada for its termination services pursuant to its contract with Bell Canada.” (4) No classified govt. traffic was routed through Onvoy.

MCI/WorldCom told Judge Gonzalez: “Nothing better illustrates the cynical nature of AT&T’s filing [with the bankruptcy court July 28] than its complaint that [MCI/WorldCom] was ‘improperly routing domestic calls through Canada. AT&T knows that routing domestic calls through Canada is entirely legal, because AT&T itself recently and successfully advocated before the [FCC] the same routing practices it now claims are improper.”

MCI/WorldCom told the judge that it had contracted with Onvoy to carry traffic to independent telephone company areas not served by MCI/WorldCom. Because MCI/WorldCom’s network doesn’t extend to every local company switch, it often has to lease facilities to carry the traffic from the edge of its network to a local switch, the company said. Sometimes those facilities are leased from the local telephone company, sometimes from independent companies like Onvoy, MCI/WorldCom said. It said the contract didn’t specify that Onvoy carry calls to Canada but “telephone companies route their traffic not as the crow flies but in the most economical manner possible.” Onvoy carries about 0.5% of MCI/WorldCom’s access traffic so the savings realized from the Onvoy contract versus what MCI/WorldCom would spend to terminate traffic directly to independent phone companies is about 0.02% of MCI/WorldCom’s total telecom expenses, it said: “If the programs and activities AT&T challenges were to cease tomorrow, it would not have a material impact upon the feasibility of the [reorganization] plan.”

Meanwhile, the Wall St. Journal reported Mon. that AT&T had been accused by companies in Alaska and Mexico of engaging in the same kind of access charge avoidance tactics as MCI. One of those disputes, with Alaska’s General Communications Inc. (GCI), has been raging before the Alaska Regulatory Commission (ARC) for several years (CD June 27 p12). AT&T had sought to classify its prepaid calling card calls as interstate, thus avoiding intrastate access charges. The ARC in June ruled it had jurisdiction over AT&T’s prepaid calling card services and thus the carrier had to pay intrastate access charges on such calls within points in Alaska. The FCC is looking at an AT&T petition on the same issue -- whether prepaid cards are interstate because they offer information such as ads and thus aren’t subject to intrastate access charges (CD June 30 p6). Filing in that proceeding in June 26, GCI said the issue was particularly important in Alaska where access costs were pooled and carriers paid according to market share. “If a carrier reports fewer intrastate access minutes, it pays a lower percentage of the bulk bill,” GCI told the FCC, so if AT&T’s petition were granted, “AT&T would pay a lower share of the bulk bill and other carriers, like GCI, would be forced to pay a greater share.”

The other company, Telefonos de Mexico, said both AT&T and MCI sometimes slipped calls from the U.S. to Mexico disguised as data or Internet calls to avoid international settlement rates that were levied on voice calls, according to the newspaper. AT&T has countered that it did nothing wrong in Mexico and only engaged in least cost routing.

AT&T strongly denied its actions could be considered similar to the allegations against MCI. There’s a difference between AT&T’s “bargain shopping” for lower rates and MCI’s “shoplifting,” a spokeswoman said: “To claim that everyone in the industry engages in efforts to lower their access costs is a true statement. However, MCI has not simply been shopping around for the best deal. Instead they have concocted an elaborate scheme, shipping voice traffic originating with the customers and routing it… onto the AT&T network.”