MCI WorldCom and now Bernie Ebbers are gone, but the ethics lessons remain

Amid all the headline news over the past few weeks – COVID-19 virus, stock market hitting all-time highs and then experiencing the largest one-week decline in history, the impeachment of President Donald Trump, and others- one story of a remarkable person did not get due attention. Mr. Bernie Ebbers, the “telecom cowboy”, co-founder of WorldCom and former CEO of MCI WorldCom (aka MCIWorldCom) passed away on February 2, 2020. While we enjoy the benefits of the Internet by using Uber or Lyft to return home from a late night outing or chatting with friends on Instagram or WhatsApp, we could perhaps learn a thing or two by revisiting the key role Bernie Ebbers and WorldCom played in the development of the Internet.

In June 1993 I was recruited to join Tellabs, Inc., a telecommunications equipment provider, in Lisle, Illinois. At the time Tellabs had recently released its TITAN? 5500 digital cross-connect system, a device that switched high speed communication signals through its SONET (Synchronous Optical Network) switch core. WorldCom was one of the early customers and subsequently TITAN? 5500 became a key part of the national telecom network and was in the central offices of nearly all major telecommunication service providers. Almost every phone or internet connection passed through one or more TITAN? 5500s during its heyday in the nineties.

In September 1998, as the Internet was growing rapidly, WorldCom acquired MCI, one of the largest telecom service providers at the time. The merged company, MCI WorldCom, owned a big chunk of the core of the Internet with four major Internet backbones and five network access points. Estimates at the time indicated that Internet connections through WorldCom-MCI would account for more than 60% of Internet revenue. Half or more of the ISPs would have to connect to the Internet backbone through MCI WorldCom. Bernie Ebbers, who stood out among flamboyant CEOs during the go-go nineties, was exalted by the media with headlines like “The New World Order: With his daring bid for MCI, Bernie Ebbers seeks to build WorldCom into a new kind of telecom empire” (Bloomberg, October 12, 1997).

Many equipment providers, including Tellabs, looked to customers like Verizon, AT&T, and MCI WorldCom for data on Internet growth as they planned new products. MCI WorldCom was particularly important for vendors like Tellabs because of the key role it played in the Internet Core. Based on reports that Internet traffic was doubling every couple of months, equipment vendors developed products to help the telecom service providers deal with this massive traffic growth. During the heydays of the late 1990s and into 2000 Tellabs invested significant resources in developing TITAN 6700, a MEMS (micro electro-mechanical system) based core optical switch to help Sprint, MCI WorldCom and other customers handle this huge traffic growth in the core. The Titan 6700 was designed to monitor and track 10 terabits of traffic or 80 million simultaneous Internet calls at any given time, and do it in the optical domain without performing optical-electrical-optical conversions. Sadly, over the next few years, it became clear that the Internet traffic, while growing, was far from doubling every few months. With the bursting of the internet bubble in 2000-2001 and the 9/11 terrorist attacks, the telecom industry imploded and products like the TITAN 6700 went to the telecom product graveyard. It became clear that this optical switch was way ahead of its time, and was written off, with significant economic impact as many people lost their jobs. Other vendors had similar stories of discontinued products.

MCI WorldCom filed for Chapter 11 bankruptcy on July 22, 2002 late Sunday, for a then-record $11 billion accounting fraud. In May 2004 federal prosecutors charged Mr. Bernie Ebbers with nine felonies including conspiracy, securities fraud, and making false statements with securities regulators. In his defense Mr. Ebbers made a remarkable statement during the trial, saying “To this day, I don't know technology, and I don't know finance or accounting.” Bernard J. Ebbers was sentenced to twenty-five years in prison and Judge Barbara S. Jones, who handed down the sentence, said that "Mr. Ebbers' statements deprived investors of their money". She further added that "it seems clear to me that Mr. Ebbers was a leader of criminal activity in this case."

With his passing, the curtain has come down on the once-legendary telecom company and its star salesman and showman. Assets of MCI WorldCom were eventually gobbled up by other companies. The communications network has evolved, the mobile IP-based networks are enabling new applications and features, and Verizon and AT&T, two companies that were considered stodgy and old-tech about to be destroyed by the new-age wonderkids like MCI WorldCom are stronger and still connecting with customers.

Business leaders and managers would do well not to emulate the example of Mr. Ebbers but rather heed the message from the late Mr. Michael Birck, a co-founder and former CEO of Tellabs. I was once in a meeting with Mr. Birck prior to making a sales call on a customer with our sales team. Just a few days earlier, Mr. Pierre Suard, chairman of Alcatel, a French engineering giant and a competitor of Tellabs, had been arrested for forgery, corruption, and fraud. After our meeting, I asked Mr. Birck about business ethics and his thoughts on the Alcatel story. Mr. Birck, a highly ethical and caring business leader, gave me sound advice - “Gopal, we all know the line between right and wrong. I suggest you don’t come close to it.”

#telecommunications #Worldcom #Internet #ethics #accountingscandals #falsedata #businessethics #telecomsupplychain #business

Image from Wall Street Journal / Reuters