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As scandal dies down, MCI fights for a comeback

With two years of scandal and bankruptcy proceedings coming to a close, the company--legally known as WorldCom--is launching new services in an effort to rebuild.

MCI, legally known as WorldCom, rolled out two new services this week, as it tries to rebuild its business and its reputation, after two years of scandal and bankruptcy proceedings.

Since 2002, MCI has been fighting to put itself back together. The company has been mired in one of the biggest corporate fraud scandals in American history. In July 2002, it filed what has become the largest corporate bankruptcy case in the United States ever.

Now, as the company's former CEO, Bernard Ebbers, is indicted on federal fraud charges, and the company prepares to emerge from bankruptcy later this spring, it has announced a slew of new services to demonstrate to shareholders and customers that it is serious about staying in the telecommunications game.

Earlier this week, MCI announced two new initiatives. The first is a new service-level agreement (SLA) plan that addresses denial of service (DoS) attacks. These attacks occur when a network is flooded with millions of data packets, crippling Internet Protocol routers and content servers. The company has also expanded its VoIP (voice over Internet Protocol) offering to include access via its virtual private network (VPN) service.

"Both announcements are important, because they show that the company is continuing to deliver new services that customers value, even before it has come out of bankruptcy," said Lisa Pierce, a research fellow at Forrester Research. "But at the end of the day, their success hinges on what happens, once they are finally out of bankruptcy."

MCI said its new SLA would guarantee responses to DoS attacks

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within 15 minutes of receiving a trouble ticket submitted to its customer support center. The SLA, which will be offered free of charge, is being applied across all MCI Internet Protocol services, including dedicated and remote Internet access, IP VPN and Internet co-location sites.

The company claims to be the first carrier to develop and implement anti-DoS network tools and techniques. But it won't be the last. Its biggest rival, AT&T, said it is already testing its own DoS-fighting tools. And it plans to launch a new service within the next few weeks.

Security experts have been critical of Internet service providers for not doing more to fight against DoS attacks, which flood networks with millions of packets and cause content servers and IP routers to crash or freeze up. The recent spate of viruses and worms that have circulated through these attacks has forced some carriers to look more closely at security issues.

"If you look at what has been happening in the marketplace with all the worm and virus attacks, it has severely impacted our customers," said Joyce Van Duzer, a spokeswoman for AT&T. "It's a natural evolution for us to add these kinds of features to our services."

Aside from beefing up its security features, MCI has also expanded its VoIP offering for business customers. The company will now offer VoIP over its

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VPN service, which is based on a technology called MPLS (multiprotocol label switching).

MCI has offered a corporate VoIP service called MCI Advantage since 2001, but this is the first time it will offer it over its MPLS infrastructure. The new addition will enable companies that traditionally used frame relay and ATM networks to transition to a fully converged IP network, according to MCI. Because the underlying technology is MPLS, the service promises to provide VoIP customers with improved quality and better security.

MCI is also partnering with BroadSoft, a hosted PBX (private branch exchange) service provider. Through this relationship, MCI will offer a fully managed VoIP package, eliminating the need for corporate customers to purchase and maintain their own PBX equipment.

Again, MCI is not the only carrier offering these services. AT&T has also announced that it would offer VoIP over MPLS VPNs. Van Duzer said the company plans to roll out the service by next quarter.

Despite MCI's attempts to get back on track, some analysts are still skeptical. Patrick Comack, an equities analyst with Guzman & Co., said the cards are stacked against MCI.

Not only must it compete with other long-distance providers such as AT&T, but it must also compete with the regional Bell companies, who are bundling their local services with long-distance offerings. The Bells are also introducing new security and VoIP services. MCI also must combat emerging technologies like wireless, as more consumers abandon their traditional wireline long-distance services in lieu of mobile plans.

MCI and other long-distance carriers suffered another blow this week, when the U.S. Court of Appeals for the District of Columbia struck down rules the Federal Communications Commission established that provide access to incumbent carriers' voice-switching networks. SBC Communications has already indicated that it plans to renegotiate fees for using these facilities in its coverage area.

"MCI is under the gun, with so many negative forces against it," Comack said. "They've still got a very rough road ahead of them. The only recourse I see is to sell the company."