Just days after WorldCom's bankruptcy, Verizon asks federal regulators to let it demand deposits or cash up front from network customers as a financial safeguard. Will it set a trend?
The telephone and high-speed Internet service provider said it is looking for some future safeguards considering WorldCom went into bankruptcy owing Verizon $121 million.
"It is critical that the government not exacerbate the situation by preventing us from taking the kind of reasonable protective steps that would be available to companies in any other industry under these circumstances," said William P. Barr, Verizon executive vice president and general counsel.
Verizon asked the Federal Communications Commission for permission to require security deposits from carriers using their network or even payments in advance. Verizon is also asking the FCC to "defend the right of carriers" to take part in bankruptcy proceedings involving other long distance companies. Long distance carriers are generally excluded from making claims in these kinds of cases, Verizon said in its FCC filing.
Despite some reports that indicated Verizon may ask for a rise in "tariffs," the company did not ask the FCC for permission to raise the amount it charges other long distance companies needing to route a call over Verizon's network.
Verizon, the parent company of wireless carrier Verizon Wireless, is the second long distance carrier to ask for a change in the way it charges for time other long distance carriers spend on their own network. SBC BellSouth has also asked permission to demand a two-month security deposit from carriers that seem to be in financial trouble.
The moves are sure to be followed by similar requests from other long distance carriers, who routinely charge each other "tariffs" whenever a long distance call travels over their network. That could trigger higher rates charged by most long distance companies as they seek to make up for the extra costs they incur.
The FCC now has 15 days to approve or reject the submission.
WorldCom, with 60,000 employees and operations in 65 countries, filed for bankruptcy protection just a few days ago. It said it aims to emerge from Chapter 11 in about nine to 12 months. The bankruptcy does not include its international operations.
The company, which has more than 20 million customers and transmits half the world's Internet traffic, said it would have access to up to $2 billion in debtor-in-possession funding to keep operating, maintain its network and pay employees under the bankruptcy reorganization.
The Clinton, Miss.-based company on Monday received approval from the U.S. Bankruptcy Court for the Southern District of New York for $2 billion in debtor-in-possession funding to keep the company operating while it reorganizes.