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WorldCom Ad Raises Hackles

Light Reading
News Analysis
Light Reading
11/25/2002

It’s not that WorldCom Inc. (OTC: WCOEQ) is lying, exactly -- but it may not be telling the whole truth. At least that's what Sprint Corp. (NYSE: FON) has to say about its bankrupt competitor’s latest advertising campaign.

The campaign, entitled "WorldCom Wants You to Know," features a chart of FCC-reported outage numbers, showing that WorldCom had far fewer outages than six of its competitors. From October 2001 to September 2002, the ad states, WorldCom had only seven reported outages, while Qwest Communications International Inc. (NYSE: Q) had 13, Sprint had 14, BellSouth Corp. (NYSE: BLS) had 18, AT&T Corp. (NYSE: T) had 19, SBC Communications Inc. (NYSE: SBC) had 23, and Verizon Communications Inc. (NYSE: VZ) had 29.

"Throughout our restructuring, network reliability has never been and never will be an issue for our customers," says the ad, which is expected to run for five weeks.

Yesterday, Sprint published its own press release, also based on FCC-reported outages (see Sprint Has Fewest Outages). The numbers cited in this release, however, showed that Sprint, in fact, had the fewest long-distance outages this year, as well as for the previous six years.

Why the different results? The key word here, according to Sprint spokesman John Polivka, is long distance [actually, that's two words]. The problem with the WorldCom ad, he says, is that it doesn’t mention that WorldCom is the only company on the chart that doesn’t have local operations. A fairer comparison, he insists, is therefore between the carriers’ long-distance network outages.

In its release yesterday, Sprint reports having had two outages on its long-distance network from the beginning of the year through last week, while it claims that its two closest competitors, WorldCom and AT&T, reported five and 15 outages, respectively.

"Local phone operations stand a larger chance of having an outage," Polivka claims; the WorldCom campaign "is just misleading." He says there's a lot more wire in the ground in the local networks than in long distance. Sprint, he says, has 1.2 million strand miles of cable in its local networks, compared to only 34,000 fiber miles in its long-haul network. "There’s more chance that someone will dig and knock out the network [in local]," Polivka says.

In addition, Polivka says, not all outages are comparable. "Not all outages are alike. They vary in severity," he says, alluding to the major outage on WorldCom’s UUNet backbone last month. "Our Internet backbone has not gone down. If you ask who has the most reliable network, we believe Sprint does."

"We stand by the disclosure in our advertising," says WorldCom spokeswoman, Claire Hassett.

"It’s entirely possible that Sprint’s claims are true," says Peter Cohan, an analyst with Peter S. Cohan & Associates. The main issue here, however, is why Sprint finds it necessary to attack the WorldCom campaign. "A company operating in bankruptcy is a threat to companies not operating in bankruptcy because it doesn’t have the debt."

AT&T, too, is upset with WorldCom's advertising techniques. The carrier hasn’t gone as far as issuing a press release to counter the WorldCom ad, but company spokesperson Dave Johnson insists the use of FCC numbers is misleading. "[These numbers] have never been considered a reliable way to measure network reliability," he says, pointing out that FCC reports occur only after more than 90,000 calls have been blocked and the outage has lasted for more than 30 minutes. "The larger the carrier, the more traffic there is to block."

Instead, Johnson says AT&T considers defects per million a good way to measure network reliability. Using this measure, AT&T tracks how many calls out of 1 million were not completed on the first attempt. "99.992 percent of [AT&T] calls go through on the first attempt," he says.

— Eugénie Larson, Reporter, Light Reading
www.lightreading.com

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fiber_r_us
fiber_r_us
12/4/2012 | 9:17:53 PM
re: WorldCom Ad Raises Hackles
Perhaps WCOM didn't accurately report all of their outages either... Naw, they would never mislead the public through marginal reporting to the government...
achorale
achorale
12/4/2012 | 9:17:51 PM
re: WorldCom Ad Raises Hackles
All things considered, this is a smart marketing move.

Irrespective of whether the numbers are true, or properly interpreted, by citing FCC numbers wcom forces its competitors into the defensive: wcom has a short concise message, i.e., less outages, look at the FCC numbers. Competitors need to get into long explanations on why this is not necessarily true, which always leaves a sour aftertaste
light_geeking
light_geeking
12/4/2012 | 9:17:49 PM
re: WorldCom Ad Raises Hackles
Ads on outage comparison may not have as much punch as one might think, especially for those competitors who don't have anything to hide. Here's why I think. If I am a major Service Provider customer, I will look at the quality of service I have been receiving from my incumbent provider. I will not switch providers if the service has been good.

However, on the other hand, this may be a smart ploy by WorldCom to keep their existing customers from defecting to competitors, as the competitors of WorldCom may be using the FUD factor including scaring those existing WorldCom customers about potential for increased outages from a near bankrupt provider.

Talk (or should I say) ads are cheap. Its the real service that will ultimately keep those existing WorldCom customers stay put or switch.

Another thing to realize is that with economy being soft and there being imbalance between supply and demand, service provider business (especially long distance) has indeed become a commodity business and becoming more so with RBOCs allowed to participate in that segment. So seeing increased advertising intensity is to be expected.

lg
SweetOldWorld
SweetOldWorld
12/4/2012 | 9:17:47 PM
re: WorldCom Ad Raises Hackles
I'm not so sure of this. For a company that has had credibility problems, is it such a smart thing to be found skirting the edge of the truth on its ad campaigns? Every new "restatement" of earnings from WCOM has added to its discredit.

Now its ad campaigns are even less trustworthy than what people normally expect ads to be?

-s
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