The History of MCI (Microwave Communications, Inc.)

 

The history and aftermath of MCI. A work in progress. Parts borrowed from Wikipedia and other sources.

Overview

MCI Communications Corp. (originally Microwave Communications, Inc.) was a telecommunications company headquartered in Washington, D.C. that was at one point the second-largest long-distance provider in the United States. It is now a division of Verizon Business.

MCI was instrumental in legal and regulatory changes that led to the breakup of the monopoly of AT&T Corporation and introduced competition in the telephone industry. It also had an early commercial presence on the Internet. The company was acquired by WorldCom (later called MCI Inc.) in 1998. Due to a large scandal, it declared bankruptcy and eventually broke itself from WorldCom ownership.  It never fully recovered and eventually sold to Verizon in 2006.

MCI was founded as Microwave Communications, Inc. on October 3, 1963. 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.

The Carterfone Case

The infamous Carterfone case in 1968 that allowed interconnections between private systems and the AT&T phone network was instrumental for MCI as it was able to eventually commercially compete with AT&T for long distance.

In 1969, the FCC allowed MCI to start building a microwave rely between Chicago and St. Louis. 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.

Illinois Bell refused to interconnect an MCI long haul interstate circuit and, in January 1974, MCI filed an antitrust lawsuit against AT&T. On June 13, 1980, a jury in Chicago awarded MCI $1.8 billion in damages to be paid by AT&T, reduced to $113 million in 1985 on appeal. The suit, coupled with the Department of Justice antitrust suit also brought against AT&T, eventually led to the voluntary breakup of the Bell System.

In 1975, as a result of the Carterfone decision, MCI began offering switched voice telecommunications in direct competition with AT&T, using a combination of its own microwave circuits and leased circuits from AT&T. By 1977, the company operated several tandem switches manufactured by Danray (later part of Nortel).  Other switches were provided by DSC Corporation with their DEX series of tandem switches. DSC sold their line to Alcatel in the 1990s.

In 1982, MCI worked with Ally & Gargano to create what Entertainment Weekly referred to in 1997 as one of the 50 best commercials of all time. MCI hired the same actors used in an AT&T commercial in 1981. In the AT&T version, the son calls his mother and, when asked why, replied “just ‘cuz I love you”, which was not a common reason to make an expensive long-distance call, causing the mother to cry. In the MCI version, when the husband asked the wife why she was crying, she replied “I just received my phone bill”… after which an announcer’s voice stated “You’re not talking too much, you’re just paying too much. MCI: The Nation’s New Long-Distance Telephone Company.”

Other funny MCI commercials of the period:

In 1984, MCI became the first company to deploy single-mode optical fiber (the standard had been multi-mode optical fiber), which was manufactured by Siecor, a joint venture between Siemens Telecom and Corning Glass Company. Referred to as MAFOS (Mid-Atlantic Fiber Optic System), the fiber cable ran between New York City and Washington D.C. Eventually, single-mode fiber became the standard for US telecommunications carriers. Eventually MCI moved all of their data and voice services to fiber optic.

In 1990, the company acquired Telecom*USA and became the second-largest telecommunications company in the U.S., with a fiber-optic network spanning more than 46,000 miles. The company offered more than 50 services in more than 150 countries that included voice, data, and telex transmissions, MCI Mail and MCI Fax.

In March 1991, the company introduced the Friends & Family plan, whereby customers received a reduced rate when calling numbers, they had included in their “calling circle”, which could contain up to 20 MCI customers. This was a huge success for MCI.

In 1993, the company introduced a collect call service called “1-800-COLLECT”. They had a number of very funny TV commercials. Eventually wireless made most operator services obsolete and the service was sold to Viiz Communications in 2016.

In October 1994, BT Group acquired 20% of the company for $4.3 billion.

Purchase by WorldCom

In an era where you were either buy or were bought, many companies made bids to buy out MCI. 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.”

Post-bankruptcy

In January 2006, the company was acquired by Verizon Communications and was later integrated into Verizon Business. It was sold for $6.7 Billion.

Epilogue

MCI pretty much exists in name only. Verizon has kept both the old MCI and WorldCom long distance networks active. As of September 2020, both can by accessible via traditional POTS landline systems.

Verizon uses the MCI long distance network in multiple ways. For traditional landline customers, Verizon uses the MCI network as originally designed with the original DEX and DMS tandems as they have been since the 90s with very little changes. For Verizon FIOS voice customers, it provides the landline long distance system for the FIOS Digital Voice system. POTS customers can still get MCI branded long distance they same as they have been used to since the introduction of Equal Access.

Verizon still maintains the original MCI data network as well. The original UUNET Internet backbone that MCI acquired provides the backbone for its FIOS Internet network to this day. It is marketed to corporations under Verizon Business.

Other than that, MCI is mostly a footnote in history. For the most part, anything that was named MCI (including sponsorships with various stadiums) were later changed to Verizon.