CWA ADVOCATES WORLDCOM DISSOLUTION

WorldCom's cult of derision just gained some new followers. This time, the Communications Workers of America and its 700,000-member-strong labor base is calling for WorldCom's head. But unlike the carrier's other industry critics, the union isn't just spouting rhetoric. It's going after WorldCom's business by lobbying the government to cut off the carrier's lucrative federal contracts.

The CWA last week headed up a coalition of labor and advocacy groups in requesting that the General Services Administration deny WorldCom all federal government contracts — the source of an estimated $2 billion of WorldCom's $35 billion annual revenues.

While the GSA gave no indication whether they would consider the request, the move would severely damage the carrier's business. WorldCom would not only lose one of its biggest customers, it would be limited in its dealings with other companies that use federal money. Such a blow could kill WorldCom, which is exactly what CWA President Morton Bahr and his ad hoc consortium want.

“The last thing we need is for WorldCom to emerge from bankruptcy debt-free to continue its predatory practices,” Bahr said. “We support it being broken up and its parts being spun off or sold to more responsible companies. MCI was a viable company before WorldCom gobbled it up, as was UUNet.”

While the CWA is the industry's largest labor advocate, it is also in the unique position of not representing any of WorldCom's 63,000 employees. The CWA has attempted unsuccessfully on several occasions to unionize WorldCom and MCI before it was acquired. Bahr, however, said the issue isn't payback but an effort to save jobs in the industry overall. WorldCom's fraudulent business practices were major contributors to the telecom fallout, which has forced hundreds of thousands of telecom employees out of work, Bahr said. He added that WorldCom's divisions could thrive independently or under the supervision of other carriers.

WorldCom, however, doesn't buy it. Before the CWA held its press conference, the carrier counterattacked, saying that because much of the CWA's membership consists of Bell company employees, the CWA is merely acting as the Bells' lapdog. WorldCom General Counsel Michael Salsbury accused the union of trying to shield its membership from competition.

“CWA's sole interest stems from its cozy relationship with the Bell companies, whose stated goal is to prevent WorldCom from emerging from bankruptcy,” Salsbury said in a statement. “If this effort by the CWA were successful, the only winners would be companies seeking to retain 100 years of monopoly control. The losers would be innocent WorldCom workers and the millions of consumers who are finally enjoying a competitive alternative to the monopolies.”

Other industry sources agreed that Bell regional operating companies were behind the CWA's actions. While all of the RBOCs denied having taken any direct lobbying action against WorldCom, they have certainly made every effort to publicly criticize the carrier and block its emergence from bankruptcy. Verizon Communications CEO Ivan Seidenberg is perhaps the most vocal WorldCom critic, and he has railed against what he considers WorldCom's special treatment in bankruptcy court. At an analyst conference in Washington, D.C., last month, Seidenberg said he expected a debt-free WorldCom would emerge from bankruptcy only to start a price war to repair its sullied reputation.

But the Bells have stopped short of publicly calling for federal charges against WorldCom or lobbying the government for any direct action against the carrier.

“[WorldCom has] done enough on their own,” a BellSouth spokesman said. “It's such a hot issue in D.C. that they don't need any help from us lobbying it.”

Part of the problem, however, may be that RBOCs have little recourse. The Bells have been pushing for changes in bankruptcy laws, but any change to Chapter 11 codes would not retroactively apply to WorldCom.

While all four RBOCs and numerous other carriers are on WorldCom's list of creditors, they have little or no say in the bankruptcy court proceedings. Ahead of the carriers are lenders and bondholders owed billions, and bankruptcy judges give little credence to the opinions of creditors with a vested interest in seeing its debtor shut its doors, said Bill Rochelle, a corporate bankruptcy attorney for the New York firm of Fulbright Jaworski.

“All RBOCs and ILECs seem to be developing an alliance against any telecom company filing for Chapter 11,” Rochelle said. “They're trying to oppose their efforts to re-emerge any way they can. What's so unusual about this situation is that in most cases, creditors want bankrupt companies to emerge so they don't lose them as customers. In telecom, though, your customers are also your competitors and for the RBOCs, their competitive situation is much more important to them than any future revenues they could generate off these companies.”

The RBOCs demonstrated that strategy as soon as WorldCom filed for protection. One of the first motions entered in court sought to extend WorldCom's credit for utilities so it could continue operations. Such motions are routine, Rochelle said, but the RBOCs launched a heated campaign to deny the credit and demanded deposits for any services. If they had succeeded WorldCom would have been driven out of business immediately, but the court overruled them.

“Other companies that have gone through the bankruptcy process have had to provide deposits and adequate assurances of payment,” said Walter McCormick, president of USTA. “Why shouldn't WorldCom? No one should be put in the position where they have to provide service to WorldCom for free. We say cut them off because at some point, they're going to take down the rest of the industry.”

The best hope for the growing legion of companies wanting to kill off WorldCom, however, lies outside of bankruptcy courts and at the Department of Justice. Any criminal indictment against WorldCom would bring the Chapter 11 process to a grinding halt. While several of WorldCom's executives have been indicted, they are no longer with the company, giving the carrier a chance to claim it has a clean slate. However, if the DOJ's investigation brings charges against the corporation itself, WorldCom is in much bigger trouble. No judge would approve a company's bankruptcy plan with the possibility of a federal conviction hanging over its head, Rochelle said.

And if it were convicted, the CWA would get its wish. No entity convicted of a felony is permitted to do business with the federal government or receive federal funds.

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With additional reporting by Glenn Bischoff and Toby Weber in Chicago.