•  
  •  
 

Document Type

Article

Publication Date

6-2006

Publication Citation

58 Federal Communications Law Journal 613 (2006)

Abstract

WorldCom's disclosure of billions of dollars of financial fraud on June 25, 2002 challenged the Federal Communications Commission ("FCC") in several major ways. The FCC proclaimed its commitment to enforce its rules to protect consumers against service discontinuance as well as the priority of rooting out corporate fraud. The FCC's rules required WorldCom to file accurate financial information and to show that it had financial and character qualifications necessary to hold FCC licenses. Despite numerous related proceedings and other actions in 2001 and early 2002, the FCC had not detected nor deterred WorldCom's fraud. After the disclosure, WorldCom continued its landline and other core services. Although there were allegations that WorldCom violated the FCC's rules by filing false financial information, the FCC did not take enforcement action against WorldCom and did not tighten its regulations related to such financial fraud. This article will examine the reasons for the FCC's regulatory treatment of WorldCom, its failure to prevent the WorldCom debacle, and the absence of any shift in its regulatory posture in the WorldCom aftermath. Four partial explanations for the FCC's responses involve the actions of the Securities and Exchange Commission and Justice Department, downturn in the telecommunications industry, long-range deregulation by the FCC, and political accountability.