Bloomberg, 8 16: MCI WorldCom Could Lose Clients in Network Failure (Update3)
quote.bloomberg.com
MCI WorldCom Could Lose Clients in Network Failure (Update3)
MCI WorldCom Could Lose Clients in Network Failure (Update3) (Adds AOL comments, staring in the
4th from last paragraph.)
Clinton, Mississippi, Aug. 16 (Bloomberg) -- MCI WorldCom Inc., which said it will lose revenue because
of a 10-day breakdown of its high-speed data network, also may see some of its corporate customers
leave for AT&T Corp. and other rivals.
The Chicago Board of Trade, Complus Data Innovations Inc. and other MCI WorldCom data network
customers said they're considering switching companies. AT&T, Qwest Communications International
Inc., Frontier Corp. and others are calling MCI WorldCom's customers in the wake of the failure,
customers said. ``Customers are calling us,' said Darrell Sagehorn, director of data marketing at AT&T.
He said ``tens and twenties' have signed up for services.
The network began to fail Aug. 5, when MCI WorldCom added new software from Lucent
Technologies Inc. Many of MCI WorldCom's corporate customers had network failures over the next
nine days, and the CBOT Friday had to suspend electronic trading. The exchange said it's considering
legal action. ``Lucent has acknowledged full responsibility' for the failure, said Bernard Ebbers, chief
executive of MCI WorldCom, the No. 2 U.S. long-distance phone company. ``We will see a very slight
downtick in revenue.' He declined to say what compensation MCI WorldCom may seek.
Ebbers said his company will give the CBOT, America Online Inc. and some 3,000 other corporate
customers 20 free days of service to compensate for the failure. The network, a nationwide system of
phone lines, is used by companies, municipalities and organizations to transmit data and e-mail and
provide Internet access.
MCI WorldCom said the so-called frame-relay network was working yesterday after being shut down for
repair Saturday. The company removed the new Lucent software. Neither company has determined
exactly what caused the problem.
Last quarter, revenue from data services including frame- relay was $1.79 billion, accounting for 22
percent of MCI WorldCom overall sales.
MCI WorldCom fell 1/4 to 78 7/16. The company's shares fell as much as 8.5 percent while the
network was down. Lucent shares rose 1/2 to 66 3/8 and have risen about 3.3 percent since Aug. 5.
Costly Mishap
The Chicago Board of Trade'S directors may discuss the network debacle at a meeting tomorrow. The
CBOT is considering legal action and switching to another company, said Katie Spring, a CBOT
spokeswoman.
MCI WorldCom operates four corporate data networks, and Lucent provides software only for the one
that failed. Lucent, spun off from AT&T three years ago, has been trying to win a bigger portion of MCI
WorldCom's business. ``We're working diligently to resolve the problem' that caused the failure, said Bill
Price, a spokesman for Lucent, the world's largest phone-equipment maker.
Customers
Other MCI WorldCom customers said they will consider switching to another network. ``Ebbers and
senior management are concerned about customers and are talking to them about all the issues
regarding network failures and service interruptions,' said Linda Laughlin, an MCI spokeswoman.
Glenn Seidman, director of technical services at Complus Data, an MCI WorldCom customer, said he's
been contacted by AT&T, Frontier, Qwest and four other data network companies. Hawthorne, New
York-based Complus, a manager of parking-violations records for police departments, couldn't send or
receive data on the network at times last week. ``WorldCom has neglected their responsibility to
provide reliable service and they have not restored my trust in their network,' Seidman said. ``This was
a very long time to be down.'
Seidman, who spoke with Ebbers Friday, said he hasn't decided yet whether he will switch to a
competitor and is seeking less than $1 million in compensation.
CBOT, AOL
The CBOT, the largest U.S. derivatives exchange, and a provider of access to futures based on U.S.
Treasuries, stock indexes and grains, resumed its electronic trading yesterday.
CBOT uses MCI WorldCom's networks to connect its so-called Project A terminals
worldwide with its trading system in Chicago, enabling members to trade 22 hours a day, six
days a week. Project A accounts for 1 million contracts a month, or about 5 percent of the
exchange's total.
A total of 180,000 fewer contracts than average traded over the seven days that Project A was down,
spokeswoman Spring said.
America Online said the outage affected dial-in Internet- access numbers used by about 10 percent of
its customers, said spokesman Andrew Weinstein.
AOL put notices about the problem on its service's main screen. Most subscribers affected by the
outage could dial into AOL's service using alternative phone numbers. For those members in towns
with just one access number affected by the MCI outage, AOL provided a free 1-800 dial in number,
Weinstein said.
Communities affected by the MCI outage included towns such as Kissimee, Florida, and Slidell,
Louisiana, Weinstein said.
AOL declined to comment on its relationship with MCI WorldCom given the network's outages. |
