WorldCom's troubles could become problem for customers

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As WorldCom heads into bankruptcy, many Twin Cities businesses using its services are getting nervous.

"I'm fortifying our backup plans," said Bryan Packer, information technology director of Midwest Auto Parts Distributors of St. Paul. He has contracted with another vendor for a spare high-speed line. "That way if WorldCom tanks, we still have the capacity to do business."

Worldcom is a leading supplier of data and phone services to businesses. Its UUNet subsidiary routes half of the world's e-mail and is the largest Internet backbone provider. But because WorldCom hid nearly $4 billion in costs in an attempt to look better than it was, the company faces charges of securities fraud, and it filed for bankruptcy Sunday.

While most companies are drawing up contingency plans, some have had enough and are ditching the company, said Nita Singh, president of Maple Grove-based American Business Communication (ABC), a telecommunications consultant. Her company helps businesses figure out their telecom needs and then negotiates contracts with telecom providers.

WorldCom has had billing problems in the past, and for some customers this was the final nail in their coffin, she said.

But for companies that are undecided, "we've been telling them to just hang on," she said last week.

That's because service is not just an issue with WorldCom. "None of the phone companies is doing a bang up job," Singh said.

"It's really rare, really rare" that a customer's billing statements reflect the negotiated rates, she said: about 90 percent of her client's billing statements have mistakes. ABC audits heaps of clients' bills on a regular basis.

Packer said billing is his biggest problem with WorldCom. It takes up to three months to fix an error, he said. The varied pricing and discount structures are confusing, too, which is why he contracts with a consultant to help him figure out the best rate for his needs.

In addition, as a result of all of layoffs, telecommunications companies have eliminated "dedicated service": a single representative with primary responsibility for a particular business account. "Suddenly, [our clients] are all having to call 800 numbers," Singh said.

Which is another reason ABC has been busier than ever -- instead of the client waiting on hold, ABC waits, she said.

But these days, WorldCom's representatives have been diligent in staying in touch with customers and telecom consultants such as ABC. "They're doing everything to keep us up to date," she said. The company also is offering new and renewing customers the option to cancel their agreements within the first 180 days following the effective date of the pact.

That contractual out, which expires July 31, has been criticized by the financial community, but Packer said he finds it comforting and is likely to renew his contract when it expires.

The fact is, WorldCom's network isn't going to disappear, said Cheryl O'Brien, president of Technology Management Corp., a telecom consultant based in Shorewood. It's too big and too powerful.

But her clients are wondering if WorldCom's service is going to be reliable with a slimmer workforce; and if there is a takeover, how smooth will the handoff be?

Like ABC, Technology Management Corp. is negotiating for spare high-speed data lines with a second carrier such as Broadwing or Sprint for all its clients that have WorldCom service.

Packer said the backup line is essentially insurance, something that he's not likely to use, but prudent to have.

For clients that are in the process of selecting a new vendor, WorldCom is out of the running, even though its pricing list is fabulous, O'Brien said. Companies with less than a year on their contracts are seeking new vendors six months earlier than usual to find out what the prices will be. That way AT&T and Sprint -- which have been wooing WorldCom customers -- will have to offer competitive prices, she said.

O'Brien also has started adding client protection clauses to contracts. The telecom vendors have always expected a specific "commitment level" from businesses, but because these contracts were written when no one ever dreamed that one of the three big companies would go belly up, no client protection has ever been included, she said. Now she adds to all of her clients' contracts: "You hit Chapter 11, we have the right to walk."

Star Tribune

-- Anonymous, July 23, 2002


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