MCI Communications Corporation (originally Microwave Communications, Inc.) was an American telecommunications company headquartered in Washington, D.C. that was at one point the second-largest long-distance provider in the United States.
MCI was instrumental in legal and regulatory changes that led to the breakup of the Bell System and introduced competition in the U.S. telephone industry. Its MCI Mail, launched in 1983, was one of the first Email services and its MCI.net was an integral part of the Internet backbone.
The company was acquired by WorldCom in 1998.
Contents
History
Founding
MCI was founded as Microwave Communications, Inc. on October 3, 1963, with John D. Goeken being named the company's first president. The initial business plan was for the company to build a series of microwave radio relay stations between Chicago, Illinois, and St. Louis, Missouri. The relay stations would then be used to interface with limited-range two-way radios used by truckers along U.S. Route 66 or by barges on the Illinois Waterway. The long-distance communication service would then be marketed to shipping companies that were too small to build their own private relay systems. In addition to the radio relay services, MCI soon made plans to offer voice, computer information, and data communication services for business customers unable to afford AT&T's TELPAK service.
Hearings on the company's initial license application between February 13, 1967, and April 19, 1967, resulted in a recommendation of approval by the FCC.
On June 26, 1968, the FCC ruled in the Carterfone case that AT&T's rules prohibiting private two-way radio connections to a telephone network were illegal. AT&T quickly sought a reversal of the ruling, and when the FCC denied the request, AT&T brought suit against the FCC in the United States courts of appeals. The FCC's decision was upheld, thus creating a new industry: privately manufactured (non-Bell) devices could be connected to the telephone network as long as the manufacturer met interface standards.
In 1968, William G. McGowan, an investor from New York with experience in raising venture capital, made an investment into the company large enough to pay all outstanding debts and create a cash reserve. McGowan received a seat on the board of directors. Microwave Communications of America, Inc (MICOM) was incorporated on August 8, 1968 as an umbrella corporation to help build a nationwide microwave relay system.
Licensing and build-out
On October 28, 1968, Hyrum Rex Lee became an FCC Commissioner and MCI began a series of submissions including a proposal for a low-cost educational television network designed to show MCI as being more flexible to public needs than AT&T. While MCI was performing this lobbying, the President's Task Force on Communication Policy issued a report recommending that specialized common carriers be allowed free access into the private line business.
On 14 August 1969, the FCC issued a final ruling on Docket 16509, MCI's licensing request to begin building microwave relay stations between Chicago and St. Louis. By a decision of 4-to-3 MCI was licensed for operation. This ruling was quickly appealed by AT&T, and after a denial of the appeal by the commission, AT&T filed a civil suit with the United States courts of appeals to have the ruling overturned.
The company then began to form subsidiary corporations and file applications with the FCC to create microwave relays between other city pairs. Between September 1969 and February 1971, 15 new regional carriers were created, allowing for interconnection between several major cities in the United States.
In July 1969, MICOM purchased a participating interest in Interdata, an independent regional carrier that was applying to build a microwave relay chain between New York City and Washington, D.C.
MCI began selling data transmission services to paying customers on January 1, 1972.
To pay for the microwave transmission and relay equipment needed for build-out, MICOM began a series of private stock offerings in May 1971. In July 1971, MICOM was restructured into MCI Communications, and the company began the process of absorbing the regional carriers into a single corporation.
MCI became a public company via an initial public offering on June 22, 1972, trading on the National Association of Securities Dealers Automated Quotation System (NASDAQ) under the stock ticker MCIC.
In early 1971, MCI and Lockheed Missiles and Space Company created a joint venture which was the first company to request FCC authorization as a Specialized Common Carrier using satellite-based communications; satellite service would save the company from building thousands of miles of terrestrial network facilities. A year later, Comsat Corp. entered the venture which was renamed CML Satellite Corp. In need of cash, MCI sold its share of the venture to IBM in 1974. Lockheed also subsequently sold its share to IBM. IBM and Comsat brought in Aetna as a third partner and renamed the company Satellite Business Systems (SBS). IBM later acquired the remainder of the company and sold it back to MCI in March 1986 for $376 million in MCI stock.
Purchase by WorldCom
BT made an offer to purchase the rest of the company in November 1996 for $22 billion. In October 1997, GTE, now a part of Verizon, made a bid to purchase MCI for $28 billion in cash. WorldCom offered $34.7 billion in stock, higher than either the BT or GTE offers, which was accepted by MCI on November 10, 1997. On September 15, 1998 the transaction was consummated and the merged company renamed MCI WorldCom. Two years later, the "MCI" part was dropped.
Following a
major accounting scandal, WorldCom filed bankruptcy in 2002 and the company was renamed MCI Inc. upon its exit from bankruptcy in 2003. Before then, however, many executive posts were taken over by holdovers from the old MCI. After the name change, one of those executives said, "We're taking our company back."