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Rita McGrath

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August 25, 2005

Dysfunctional Competition at WorldCom

A fascinating article in Fortune (August 8 2005, p. 32) details the mass destruction of the telecommunications industry perpetrated by the fraud at WorldCom (now MCI). During its heyday it’s (illegally) efficient cost structure drove competitors crazy – to the point that competitors such as AT&T fired tens of thousands of people and eventually went into a deadly competitive tailspin.Not only that, but today’s MCI, post-bankruptcy and with a nice clean balance sheet seems poised to do even more damage to its competitors, most of whom are bearing the burden of significant debt. Capitalism depends on everyone playing by the same rules. The MCI story is a disturbing lesson of the helplessness of those rules in an age of intangible assets and underpowered enforcement.

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