FCC chairman doubts stoppage in WorldCom services

by Cara Garretson

July 16, 2002 —

Despite the distinct possibility that distressed telecommunications giant WorldCom Inc. may enter bankruptcy soon, the chairman of the U.S. Federal Communications Commission (FCC) said he doesn't foresee an interruption in the company's long distance and Internet services in the near future.

"I don't think a significant disruption of service is imminent," said FCC chairman Michael Powell during a press conference following the commission's monthly meeting here Tuesday morning. Even if the company goes into bankruptcy "I don't think it will be a critical situation for consumers," he said.

The chairman's opinion was formed in part by a visit to New York just days after WorldCom announced it would need to restate its financials for 2001 and the first quarter of 2002 due to accounting discrepancies totalling nearly US$4 billion. There, FCC officials visited with the investment community, bond-rating agencies, banks, and chief executives of other telecommunications companies. "I left with greater confidence that WorldCom is not about to go into cardiac arrest," Powell said. "We continue to stand guard."

The FCC's primary responsibility to consumers and businesses is to ensure they are not left without service in situations such as these. "Ensuring continuity of service for consumers is our highest priority in the wake of the troubles facing many companies in the telecommunications industry today," Powell said in a letter to Representative Edward Markey, a Democrat from Massachusetts, dated Monday.

Given the gloomy financial outlook for telecommunications companies -- WorldCom's stock was trading near $1 before the company announced the accounting debacle, the chairman noted -- Powell raised the possibility of the FCC gaining more authority to protect consumers from breaks in service. In his letter to Markey, Powell asked Congress to extend the commission's authority to "impose discontinuance requirements on other carriers and services within our jurisdiction."

While the FCC is not a civil or criminal enforcement agency and has no auditing function beyond examining a telecommunications company's adherence to its regulations, it is working with other government groups to help in their probes into WorldCom's financial practices, Powell said. The U.S. Securities and Exchange Commission (SEC) and a few Congressional committees are investigating WorldCom.

The commission has no evidence that other telecommunications companies may have improperly pumped up earnings statements in the face of financial pressure, Powell said, although he would not rule out the possibility. "There could be more... I don't think we know yet," he said.

Also at Tuesday's meeting, the FCC extended the deadline that wireless carriers face in providing customers with number portability, which is the ability to keep the same phone number when switching from one wireless provider to another, or to turn an existing wireline phone number into a wireless phone number. The commission voted to extend that deadline, originally set for November 24, 2002, by one year. This marks the third time that the number-portability deadline has been pushed back, though FCC officials said they intend for it to be the last.

The commission also adopted rules regarding how telecommunications companies are allowed to use and share customer information. Telecom companies and third-party agents acting on their behalf will be allowed to use individually-identifiable information, such as a customer's phone usage, who they call, and what services they subscribe to, on an "opt-out" basis. This means consumers must be given the opportunity to block such usage, but will not be asked if they approve of the practice.

As for telecommunications companies selling consumer information to unaffiliated third parties, consumer consent must be expressly given, the commission decided. This practice is referred to as "opt in."

The FCC is currently seeking industry comment on how it should rule regarding the use of information from customers whose telecommunications carriers have gone out of business or have filed for bankruptcy protection.

IDG News Service