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7/28/2003
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AT&T: MCI Diverted Government Calls To Canada

The carrier suggeted in a filing with the U.S. Bankruptcy Court in New York that its rival was placing national interests at risk.

NEW YORK (AP) -- Long-distance giant MCI avoided paying access fees to local phone companies by diverting calls to Canada--including calls placed by the State Department and other government agencies, AT&T Corp. charged Monday.

AT&T said it was alarmed by the practice and suggested in a court filing that MCI was recklessly placing national interests at risk. AT&T said it had evidence calls were being diverted as recently as Monday morning.

The claims were made by AT&T in a filing in U.S. Bankruptcy Court in New York, which is considering efforts by WorldCom Inc. to emerge from Chapter 11 bankruptcy protection. WorldCom, brought down by an $11 billion accounting scandal, is adopting the name of its MCI long-distance division in a bid to clean up its image.

Federal prosecutors are also investigating accusations by rival carriers and former MCI executives that the company defrauded other telephone companies of hundreds of millions of dollars.

The investigation centers on whether MCI masked long-distance calls as local calls, and diverted others to Canada, to avoid paying special-access fees to local carriers across the country. The probe was first reported over the weekend by The New York Times.

MCI did not return a call for comment. But the company said over the weekend that its competitors were simply trying to throw up roadblocks to MCI's emergence from bankruptcy.

AT&T said it found evidence of MCI diverting calls to Canada dating back to July 2001. The company said it had conducted tests on its lines in the past two weeks to confirm the activity.

AT&T accused MCI of carrying out a coding process that shifted calls to a local carrier in the Midwest, then to a local carrier in the Canadian province of Manitoba, then to Bell Canada and back to the United States on AT&T lines. Bell Canada has a long-standing agreement to send its U.S.-bound calls to AT&T lines.

The company said MCI's routing deceived AT&T into believing the calls had originated in Canada--forcing AT&T to pay the high local access fees.

AT&T said MCI diverted calls placed by the State Department, one member of Congress, the U.S. Postal Service, the Library of Congress and the U.S. Agency for International Development. The company did not name the member of Congress.

MCI officials have "demonstrated their willingness to play fast-and-loose with our national interests to line their pockets with cost savings from local telephone tariffs they dodged," AT&T said in its filing.

AT&T did not directly allege that MCI had compromised national security, saying only that it was alarmed by the practice.

Diverting calls to Canada would not necessarily have made them more prone to eavesdropping, said Berge Ayvazian, a telecommunications industry analyst with the Yankee Group.

He said secure calls are usually protected by scrambling devices on phones at either end of the call. But phone companies sometimes make arrangements for secure lines--and transferring calls off those secure lines could pose a risk.

"If WorldCom knowingly routed calls of that nature outside the United States, subjected them to security problems, that would be a big concern," he said.

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