Lynn also downplayed the benefits of filing for Chapter 11. He noted that under Chapter 11, a company must operate in a fishbowl environment--with courts, a trustee, and creditors monitoring their every move. Lynn noted that the stigma of bankruptcy is extremely relevant, as management must fight to regain the trust of customers and shareholders. While Lynn stated that bankruptcy was not intended as a penal statute, he emphasized that it was intended for honest debtors.

Shing Yin

As Senior Analyst in Network Traffic and Revenue Analysis with the telecommunications consulting firm RHK, Inc., Yin offered a market analysis of the WorldCom bankruptcy and assessment of its competitive advantage if it was to emerge from Chapter 11. Yin presented his work and that of Dr. John Ryan, Chief Analyst at RHK, entitled, "Four Reasons WorldCom Should Go Out of Business".

RHK's report asserts that WorldCom's own actions have led to its financial downfall and that WorldCom's absence from the market would not have a negative impact on the telecom sector. The four reasons WorldCom should go out of business, according to Yin and Ryan are:

1. WorldCom's poor operations and alleged malfeasance should be punished, not rewarded. Rescuing the company hurts its honest competitors, sending a dangerous message to the market.
2. The political reasons for rescuing WorldCom are misplaced. Primary justification is job preservation, but rescuing WorldCom will only displace jobs at other firms.
3. Saving WorldCom will only prolong the industry's capacity glut. Other IXC's should have no problem absorbing WorldCom's traffic.
4. There may be more rot to find at WorldCom. Additional disclosures of $3.3B in accounting errors, then $2B+ since initial announcement; more may follow.

Yin concluded that a restructured WorldCom would be operationally inefficient and would lag behind its competitors. Consumers, in turn, would not reap the benefits of any drop in overall prices.

Janice Aune

As President and CEO of Onvoy, Inc., a leading Minnesota telecommunications provider, Aune presented the perspective of an industry player who has been affected by the WorldCom fallout. Onvoy, like many other telcos, is part of what Aune called a "Telecom Ecosystem," in which the actions of each interrelated player (including global carriers, aggregators, regional carriers, and local carriers) affects all others.

Aune described the specific predicament of Onvoy, which as a "provider of essential services," must continue to provide services, even when a customer is unable to pay. At the same time, in its relations with WorlCom under Chapter 11, Onvoy is not deemed a "critical vendor" and, thereby received low priority for pre-filing obligations. Had Onvoy not been ahead of schedule on its own financial recovery, Aune was certain that the WorldCom debacle would have forced Onvoy to close its doors.

Aune explained that Onvoy's experience was that some major carriers that filed for Chapter 11 did come back from bankruptcy and did severely undercut prices. In an already distressed telecom market, she added, such actions create a domino effect and make true competition nearly impossible. Aune concluded that she is extremely troubled that filing for Chapter 11 has become so commonplace in the telecom sector and certain companies considered it a part of their business strategy. She noted that legislative and/or regulatory changes are needed to address this problem.

Todd J. Zywicki,

As an Associate Professor of Law specializing in bankruptcy and contracts at George Mason University School of Law, Zywicki focused his presentation on the evolution of the bankruptcy system and how traditional ideals surrounding the process have changed. His presentation helped to explain why bankruptcy has lost its stigma and what might be done to make it a more effective system.

In contrast to the traditional view of bankruptcy as a public process, Zywicki noted that the WorldCom case demonstrates the recent trend toward making it more of a private endeavor, as a bargaining between creditors, shareholders, and others involved. Zywicki also noted that WorldCom should not be evaluated under the auspices of the traditional bankruptcy model, as its existence or demise in the interrelated world of telecommunications will have an enormous impact on the other firms that share the same space. Zywicki echoed Janice Aune's previous comments, highlighting the fact that WorldCom is an integral member of the telecom ecosystem and this bankruptcy case will have an enormous impact on the rest of the players in the telecom industry.

Zywicki suggested that restoring the public nature of the bankruptcy process might also restore its effectiveness. This could be accomplished, he offered, through such means as increasing the role of trustees, extending the SEC's influence while minimizing that of bankruptcy judges, rethinking the Department of Justice's merger strategy, and examining possible legislative fixes. Finally, while bankruptcy may not be designed as a punitive measure, Zywicki addressed the sentiment surrounding the issue, concluding that, "Bankruptcy today is a fairly painless procedure—maybe we would all feel better if it hurt just a little?"