The most significant external threats to MCI have to do with competition and reputation. Three distinct threats can be identified.
Competition on products. The fact that MCI's finances have been under control of bankruptcy officials has meant that the company has not been able to devote resources to new-product development. Emerging out of Chapter 11 "make[s] a healthy balance sheet a priority over running the company's business" (Knight, 2003). Consequently, competitors may be better positioned than MCI to introduce new and better products or exploit new opportunities.
Industry overcapacity. Telephone-industry deregulation in 1983 and the high-tech telecommunications industry boom of the 1990s transformed the telephony marketplace. But the enormous rise in the number of businesses and individuals with wireless, cellular, and wired telephone networks was far overmatched by the installation of equipment. Knight sums up the problem:
There are thousands of miles of fiber-optic cables buried in the ground that have never even been hooked up. Thousands of computers and switches to handle phone calls and Internet traffic are sitting idle. Many of the companies that laid that cable and bought that hardware have gone out of business, but the networks they built are still there. As long as all that excess capacity exists, it will be difficult for any companies in [the] business to make reasonable profits (Knight, 2003).
Unfavorable publicity. The fact that the reason for MCI's restructuring was a multibillion-dollar fraud has never left discourse of its bankruptcy. Former employees and investors have criticized "efforts by the Securities and Exchange Commission (SEC) to let WorldCom off the hook with no meaningful penalty" (Marcus, 2003). An Internet site titled boycottmci.com cites the loss of 30,000 WorldCom jobs and more than $4.4 billion in pension funds, plus some $11 billion worth of accounting "mistakes" and an estimated $176...