You’ve got to love our industry. We can’t even do bankruptcy right.

When I hear about a bankruptcy, I think of some poor soul who has lost everything and needs to get a job bagging groceries. Or maybe his wife has left him and he’s started hitting the sauce.

Not in telecom. In telecom we’ve invented a whole new style of bankruptcy: The Club Med School. You wrangle with a few debt-holders, take a slap on the wrist from some prosecuters, pay a small fine...

It's like visiting the Telecom Spa. Take a few weeks off, play some golf, and come back with a squeaky clean balance sheet that can beat the crap out of anybody competing with you on price.

That’s about what’s happening at places like WorldCom/MCI/Whatever (see WorldCom Plans Re-Emergence). Or 360networks Inc. And Global Crossing Holdings Ltd. No, not all these bankruptcies are done deals. And there have been some minor differences. But generally they’re all the same – former losers given a new lease on life. (see Court OKs GlobalX Reorg Plan, Tyco Declares Dividend, Williams Bolts Out of Bankruptcy , and 360networks Restructuring Approved).

There’s only one problem with this picture of bankrupty: These companies have failed. They’ve lost. Why should they be rewarded with springtime-fresh sheets? Call it “Survival of the Weakest.” They should be flogged and put to rest.

The saddest thing of all about this phenomenon is that the primary cause of our current depression has always been excess supply and poor pricing power. There have been too many businesses chasing too few customers. The field needs to be thinned… not reinvigorated . Now we’re stuck with more competition, not less (see The Post-Chapter 11 Hangover ).

So what of these “new” companies? Are they any better than their previous incarnations? There are early signs that the “new” WorldCom/MCI is shaping up as another disaster: The company has already overpromised on its first revenue cycle (see MCI Cuts Revenue Outlook). As F. Drake Johnstone of Davenport & Co. LLC puts it: "In my estimation, their original guidance was far too aggressive... and they're being impacted by the Bells entering consumer long distance."

Will things get better? I’m hoping they will. But they would certainly be getting better faster if we let companies like WorldCom go out of business. Innovation does not come out of bankruptcy court. Large, forgiving bankruptcies such as those being engineered today aren’t good for business. They increase the price competition, rather than relieve it.

Let the assets float – force somebody to buy them from the bondholders. The assets are useful, that’s for sure, but the companies aren’t. The companies are dead wood.

— R. Scott Raynovich, US Editor, Light Reading