WorldCom – Monumental Good and Bad Effect on Communication

WorldCom helped bring about the biggest change in history to the way we communicate. Bernard “Bernie” Ebbers founded what would become WorldCom in 1983 in Clinton, Mississippi. Initially, the company started as the small long-distance reseller, LDDS. LDDS stands for “Long Distance Discount Services.” Bernie expanded its operations through a series of acquisitions. WorldCom became one of the largest telecommunications companies in the world. It had a market capitalization of more than $100 billion by the year 2000.

Climate of the Marketplace

When Bernard Ebbers formed his company LDDS (later WorldCom) in 1983, the deregulation of AT&T was already underway. In 1982, the US Department of Justice settled an antitrust lawsuit against AT&T. They had previously held a monopoly on the telecommunications industry in the United States. As part of the settlement, AT&T agreed to divest its local exchange service operations and to allow other companies to enter the long-distance telephone market.

This deregulation created opportunities for new companies like LDDS/WorldCom to enter the telecommunications industry and compete with established companies like AT&T. LDDS/WorldCom grew rapidly through a series of acquisitions. They took advantage of the deregulated market to expand their services and gain a foothold in telecommunications.

Trailblazer MCI

MCI Communications Corporation, commonly known as MCI, had been one of the first companies to use microwave towers to bypass AT&T’s long-distance telephone lines.

The company was founded in 1963 as Microwave Communications, Inc. It later became one of the major players in the telecommunications industry, competing with established companies such as AT&T.

John D. Goeken, who had previously worked for Motorola, founded MCI. He had experience in the telecommunications industry. Goeken had the idea of using microwave transmission to bypass AT&T’s long-distance telephone lines and provide an alternative long-distance service. In 1969, the company changed its name to MCI Communications Corporation. It began providing long-distance telephone service between Chicago and St. Louis using its microwave towers.

MCI’s success stemmed from its innovative use of technology to provide telecommunications services. In addition to microwave transmission, the company was an early adopter of fiber optic technology, which allowed for faster and more reliable transmission of data. MCI also developed a number of new services and technologies, including the first commercial email service in 1983.

Combining Competitors

MCI and WorldCom were competitors until 1998. WorldCom acquired MCI in a merger that created a major player in the telecommunications industry. By that time, both MCI and WorldCom had been using microwave transmission and other technologies to provide long-distance telephone services for several years. However, MCI had a head start in the industry, having been founded in 1963, while WorldCom (then known as LDDS) was founded in 1983.

WorldCom Timeline

WorldCom’s ownership changed over time through a series of mergers, acquisitions, and bankruptcy proceedings. Here is a brief overview of the major ownership changes:

1983: WorldCom is founded by Bernard Ebbers and other investors as LDDS Communications.

1995: LDDS acquires Williams Telecommunications Group and changes its name to LDDS WorldCom.

1998: WorldCom acquires MCI Communications in a $37 billion deal, becoming the second-largest telecommunications company in the US.

2002: The WorldCom accounting scandal is uncovered, leading to the resignation of CEO Bernard Ebbers and the filing of bankruptcy.

2004: WorldCom emerges from bankruptcy and changes its name to MCI.

2006: Verizon Communications acquires MCI for $8.5 billion, and MCI becomes a subsidiary of Verizon.

Scandal

in 2002, WorldCom became embroiled in a financial scandal that would eventually lead to the company’s downfall. The company had been engaged in fraudulent accounting practices, which involved inflating its revenues and profits by misreporting expenses. This was done through a series of accounting maneuvers that were designed to hide the company’s true financial performance from investors and regulators. A couple of courageous whistleblowers were Cynthia Cooper, who was vice president for internal audit department, and Gene Morse, another auditor.

In June 2002, the Securities and Exchange Commission (SEC) began an investigation into WorldCom’s accounting practices. The investigation revealed that the company had overstated its earnings by more than $11 billion over a period of three years. The SEC filed charges against WorldCom and several of its executives, including Bernard Ebbers. This was in the same timeframe as Enron and Arthur Andersen.

Bernie

Ebbers was born on August 27, 1941, in Edmonton, Alberta, Canada, and passed away on February 2, 2021, at the age of 79.

Ebbers grew up in a working-class family and worked a variety of jobs before entering the business world. He attended the University of Alberta and the University of Mississippi, where he earned a Bachelor of Science in physical education and a Master of Business Administration, respectively.

In 1983, Ebbers founded LDDS Communications, which later became WorldCom, with a group of investors. He served as the CEO of WorldCom from 1985 to 2002, during which time the company grew rapidly through a series of acquisitions.

Ebbers resigned as CEO in April 2002, and the company filed for bankruptcy in July of that year.

In 2005, Ebbers was convicted of securities fraud, conspiracy, and filing false documents in relation to the WorldCom scandal. He was sentenced to 25 years in prison but was granted a new sentencing hearing in 2019 due to a change in sentencing guidelines. He was sentenced to 14 years in prison in 2020 and was released from prison due to health reasons in December 2020.

The Fallout

The WorldCom scandal had a major impact on the telecommunications industry. This led to increased regulatory scrutiny and a loss of investor confidence.