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WorldCom says call-routing legal

WorldCom Inc, the second-largest US long-distance telephone company, rejected claims by competitors that its call-termination practices don't comply with legal and regulatory requirements.

AT&T Corp and other competitors claim that WorldCom evaded network-access fees. Such charges are intended to cause WorldCom "competitive and commercial harm by falsely accusing it of misconduct at a time when the company is poised to emerge from bankruptcy," WorldCom said in a New York bankruptcy-court filing on Monday.

Access-fee allegations by its rivals have disrupted WorldCom's plans to emerge from bankruptcy by October and fueled calls by competitors for the Ashburn, Virginia-based carrier to be liquidated. WorldCom's bankruptcy reorganization plan, which would change its name to MCI Inc, is scheduled to be considered in a court hearing in Manhattan next month.

WorldCom's filing came in response to papers filed last week by AT&T alleging that WorldCom fraudulently diverted long-distance calls to Canada, through telephone network operator Onvoy, Inc, to avoid paying local access fees that were instead paid unwittingly by AT&T.

AT&T, WorldCom's biggest rival, said it would file civil fraud and racketeering charges against WorldCom to recover the "untold millions in operating expense."

Other competitors, including SBC Communications Inc., have charged WorldCom with evading network access payments by disguising long-distance calls as local connections.

The AT&T charges followed public disclosure of an investigation by the US attorney in New York. Prosecutors are investigating allegations that Onvoy helped WorldCom avoid payments for using local-phone networks and have subpoenaed documents from the two companies.

Minneapolis-based Onvoy, which is backed by billionaire George Soros, has hired a law firm to conduct an internal investigation of the company's conduct.

"We're very confident to date in our position that there's nothing we've done wrong," Onvoy chief executive Janice Aune said in an interview.

"The people associated with this product are adamant that this is an ethical product, and it's being managed in that manner," she said of the company's employees.

In its papers, WorldCom said that its routing of calls through Canada is legal and claims that AT&T has defended the practice in front of the US Federal Communications Commission.

Proceeds from the service that WorldCom used to route calls through Canada account for less than 1 percent of Onvoy's sales, Aune said.

AT&T said WorldCom re-routed more expensive calls from rural areas in the US to a Canadian carrier, Manitoba Telephone Systems. Those calls were then routed back to the US through facilities owned by AT&T and Bell Canada that are reserved for international traffic, AT&T said.

Calls allegedly re-routed in this manner include calls from the US government, WorldCom's biggest customer.

"AT&T has a fiduciary responsibility to our shareholders when fraud has been committed against the company, and that's the reason for our filing," spokeswoman Claudia Jones said of the July 28 motion.

AT&T has until today to respond to WorldCom's latest filing.

WorldCom filed for Chapter 11 protection a year ago, seeking to reorganize, the largest such filing in US history, after disclosing it hid US$3.85 billion in network-access expenses by classifying them as capital investments. The company's accounting errors now exceed US$11 billion.
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