WorldCom and Congress
Before Congress flees the Potomac heat with a law tightening federal rules on corporate governance, it should reflect on its own role in history's largest bankruptcy.
The Titantic-sized sinking of WorldCom's $41 billion empire on Sunday has many origins, but one of them is the 1996 Telecommunications Act that failed to end a monopoly grip by the "Baby Bells."
For all of WorldCom's faults, such as shady accounting and miscalculation of demand for Internet broadband, WorldCom and the other upstart telecom start-ups in the crazed Net-rush of the late '90s didn't stand a chance to get in on a crucial link: that last mile of Internet connection to consumers' homes. The political power of the Bells on Congress made sure of that.
And WorldCom was barred from growing too big through acquisitions even though it faced AT&T, Japan's NTT, and Europe's teleo-polies.
Though Washington's pre-election mood right now is toward more regulation, a little counterintuitive political leadership should lead Congress and the Federal Communications Commission to open up more competition in the industry. That would likely revive investor enthusiasm for telecom stocks and boost the Dow.
Badly done deregulation, as California darkly discovered in its electricity markets, can have enormous consequences for the economy. The mistakes of the 1996 Act helped short-circuit the job-creating gains of innovation and higher productivity in high-tech companies.
Dozens of dotcom and telecom companies that have gone under didn't exist 10 years ago when the Internet hit the public. Congress must learn it can't presume it knows the techno-future and then try to guide it. Nor should it listen so intently to the biggest donors to its campaign coffers.