Inside WorldCom's Billing Blunders

By Baselinemag  |  Posted 2002-03-14

Four years after telecommunications giant WorldCom acquired long-distance sibling MCI for $34.7 billion, the company continues to face significant hurdles in providing large customers with a single, accurate bill for its services.

While billing is a challenge for all top-tier telecommunications companies—a situation aggravated by mass mergers and the growing number of Internet, paging, computer and voice services a company can now offer—some analysts and business customers say WorldCom, which must bill for $35 billion in annual revenue, gets the dubious honor as possibly the worst offender.

"It's a nightmare," laments a WorldCom sales representative who asked not to be identified. Typically, the representative estimates, clients who spend at least $25,000 a month are overbilled an estimated 75% of the time.

The sales rep says their commissions are also hard to compute and often backlogged because billing is so hard to track. That's why he and some of his colleagues shrugged their shoulders when the company launched an investigation in three of the company's branch offices in February after an order-booking scandal broke in Arlington, Va.

In this case, employees were accused of making more than $4 million by billing for sales already posted by other divisions. The company's counsel told the Wall Street Journal the problem was limited to "a few bad apples," who apparently took advantage of the accounting system.

On March 11, a little more than a month after the commission scandal broke, the Securities and Exchange Commission asked WorldCom for information on its 2000 accounting procedures and loans to officers. The investigation includes examining information relating to sales commissions and disputed customer bills.

For at least one chemical company's technology director, who oversees $4 million in spending annually on voice and data services, WorldCom isn't doing enough. The company gets 200 bills a month written in 30 different formats, and more often than not, they include erroneous charges.

"It's horrible," says the director, who requested anonymity. "I need an army of accountants to go through the bills," that include charges for services from UUNet and CompuServe, both bought by WorldCom.

Casey Letizia, communications manager for a national credit organization, canceled his contract with WorldCom last March and moved to Sprint. "We were billed wrongly," says Letizia, whose company spends $15,000 to $20,000 a month on long distance. "Of course, that's standard."

Robert E. Morrison, president of the Morrison Group, a consulting firm that specializes in helping companies manage telecommunications contracts and does some management work for WorldCom customers, just laughs when he describes the bills he sees going to corporate customers. "The average bill that's five inches thick takes us two hours to understand. WorldCom takes me double or triple that. It's a lot."

A Complex History

Why so thick? The original WorldCom, known as Long Distance Discount Services, was founded as a long-distance call-reselling company in 1983. In 1992, LDDS contracted its billing systems out to global technology services company Electronic Data Systems. During the 1990s, WorldCom acquired more than 60 companies, expanding its local and long-distance services but rapidly increasing the complexity of its billing systems. WorldCom, for the most part, focused on landing business accounts of under $20,000 a month.

Meantime, MCI had set its sites on multi-million dollar Fortune 500 network deals that required hundreds or thousands of data and voice lines and a more complex billing system, which the company built itself.

After the merger, WorldCom split its business into two main systems—which insiders call "legacy MCI"—for big corporate accounts, and "legacy WorldCom," for small- to medium-sized business customers. EDS was charged with moving MCI's smaller business customers to the WorldCom legacy system, which EDS manages.

The move was necessary because WorldCom's system was only designed to handle the accounts of smaller business customers, not complex corporate accounts, says Frank Dzubeck, president of Communications Network Architects, in Washington, D.C. The entire process took about two years, says Dan Zadorozny, an EDS client executive who worked on the project. He says EDS fixed many outstanding billing problems MCI clients had—such as ensuring that the correct price was charged for the correct service—even before the migration to the WorldCom system.

Nonetheless, the two systems have never been integrated. So customers may receive separate bills for existing data and voice services from each of the main systems. In addition, they may get separate bills from any of nine additional minor legacy billing systems left over from earlier business acquisitions. All told, WorldCom can't yet promise a single, unified bill to customers.

"We do our best to give them a consolidated view if they have bills on the old account," says Michael Marcellin, WorldCom's director of eCRM product marketing.

Dzubeck says WorldCom's best isn't enough. He says the company needs to invest in one billing system."They need to bite the bullet," he says. And soon.

Unifying Billing Systems

It takes time to migrate records and convert data:

  1. Don't move too fast
  2. Make sure the company's account managers understand what you are doing
  3. Fix existing billing problems before moving customers over to a new system
  4. Test, test, test before going live
  5. Make sure the data on new bills is exactly the same as on bills from prior systems

Source: Electronic Data Systems