- The Washington Times - Friday, June 28, 2002

NEW YORK (AP) While the WorldCom financial crisis isn't expected to bring any sudden disruptions of its MCI long-distance service or vast Internet backbone network, many customers are checking other options nervous that the accounting scandal will lead to bankruptcy or worse.

Both Sprint and SBC Communications reported yesterday that sales inquiries have jumped since WorldCom revealed that it had failed to report $3.8 billion in operating expenses. Likewise, calls from WorldCom data customers seeking advice from the consulting firm Giga Information Group have risen sharply since the scandal was disclosed late Tuesday.

Hoping to head off any customer exodus that would complicate efforts to avert or navigate its way through bankruptcy, WorldCom has been "proactively reaching out to our customers to reassure them," said Debbie Lewis, a company spokeswoman. "This news has no impact on our cash flow or ability to serve our customers."

However, some experts said, the looming threat of bankruptcy and even the less likely prospect of lost service may prompt many of WorldCom's 20 million consumer and business customers to at least devise contingency plans.

"They're certainly fearful," said Lisa Pierce, an industry analyst at Giga, where calls from jittery WorldCom customers have "gone through the roof over the last 36 hours."

But realistically, she stressed, since WorldCom is hardly alone in terms of the industrywide financial meltdown, "Nobody's absolutely safe, so we've been recommending a risk-diversification strategy. We're talking about trying to reduce exposure, not eliminate it."

Although a bankruptcy reorganization would give WorldCom time to work through the crisis and restructure its hefty debt, the negative publicity of filing for Chapter 11 protection could spook customers even further.

"Bankruptcy does stop things in a way that enables you to sort out your problems. So if there's a company worth saving, there's a way to save it. But the one thing you can't do is stop customers from disappearing," said David Skeel, professor of law at the University of Pennsylvania. "People may look and say 'this company can't survive' and go elsewhere."

For an example of the worst-case scenario, one might look to Europe, where customers are fleeing KPNQwest, fearful the bankrupt company will run out of money and shut down its vast Internet network.

And then there's NorthPoint Communications, a smaller American company that went bust last year, cutting off 100,000 customers of its high-speed Web service.

But even in the unlikely event that WorldCom's financial crisis spirals into a full-blown collapse, it's doubtful that millions of MCI long-distance callers would suddenly find themselves disconnected. Nor is it likely that all the Internet traffic handled by WorldCom's UUNet backbone, which accounts for 29 percent of the capacity on the nation's busiest Web routes, would suddenly need to be rerouted.

To begin with, bankruptcy laws in this country tend to keep a major operation such as WorldCom's afloat long enough to rearrange its finances or sell off its businesses and assets in an orderly manner.

"There's much more of a bias toward reorganization in the U.S. system," said Mr. Skeel.

The bigger concern for customers could be shoddy service and temporary outages if WorldCom is forced to cut back too sharply on its staff and other spending. The company is planning to lay off 17,000 workers beginning today.

"It's unlikely the electricity will be turned off, but there are other ways that service can be adversely affected," said Miss Pierce. "There could be delays with service calls because of layoffs. One could have maintenance troubles because routine maintenance is not being done."

Among WorldCom's rivals, Sprint said yesterday its agents have seen a "substantial spike in calls, and are closing a majority of those calls into sales."

SBC, the phone company that offers long distance in five states, said it is keeping some of its customer-service centers open later to handle a 25 percent increase in call volume.

s from prospective customers.

AT&T, the biggest long-distance company with 50 million customers, declined to comment on whether its sales lines have been fielding more queries.

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