Legal Battle Ended for AT&T, MCI

By Ron Miller

AT&T and MCI have agreed to end their legal battle over whether MCI passed on fraudulent call-routing charges, as AT&T had alleged in lawsuits against the formerly-named WorldCom, which is emerging from bankruptcy as MCI.

The two companies announced Monday they had settled the dispute, which arose while MCI was negotiating with regulators and creditors to emerge from bankruptcy protection with a much lighter debt burden than when it entered. As part of the deal, MCI has reportedly agreed to forego about $120 million in charges against AT&T.

The companies said the agreement includes resolution of AT&T’s call routing claims against MCI and MCI’s dismissal of its contempt of court motion against AT&T. Financial terms of the settlement were not disclosed.

At the time of the MCI settlement, AT&T also announced it had settled an outstanding lawsuit with Onvoy,
a small Minnesota telecommunications company that provided call-routing services for MCI.

“AT&T is pleased with the resolution, which fully addresses the
interests of AT&T’s shareholders,” said Jim Cicconi, executive vice president and general counsel for AT&T.

“This resolution is good for our creditors as well as both companies overall. It allows us to better focus on the common good of the industry — fostering healthy competition and serving our customers,” said Stasia Kelly, MCI executive vice president and general counsel.

AT&T had filed the lawsuit in federal district court in September against MCI/WorldCom and ONVOY. The complaint, which was also noted in a bankruptcy court filing, accused MCI/WorldCom and ONVOY of “orchestrating a scheme called the ‘Canadian Gateway Project,’ in which they worked with other telecommunications companies to reroute MCI customers’ domestic phone calls through Canada to deceive and defraud AT&T into paying hefty termination fees for terminating calls to high-cost independent telephone companies in the U.S.”

In addition, AT&T also alleged that MCI/WorldCom schemed to force AT&T to pay access fees directly to MCI/WorldCom.

MCI denied the charges at the time, and filed a contempt of court charge against AT&T. It also said it no longer uses these types of call-routing services.

The settlement agreement requires the approval of the bankruptcy judge in charge of the MCI case.

The two companies may have ended their legal wrangling over the call-routing issue, but their rivalry is very much in play.

For example, MCI announced today that it is deploying a new Ultra Long Haul (ULH) Dense Wavelength Division Multiplexing (DWDM) optical network, which it called the industry’s first major deployment of its kind.

ULH is capable of supporting OC-768 core capacity with transmission speeds up to 40 Gbps — four times faster than what is being deployed by service providers today, MCI said.

AT&T countered with its own response to the release, noting that as far back as February 2002, it had announced its first steps in deploying an intelligent optical network, which today consists of smart optical switches in 115 locations in the U.S. and 10 locations in other countries. In addition, AT&T said since 1999, it has deployed an
optical network capable of supporting OC-768 traffic.

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