MCI Communications - History - Licensing and Build-out

Licensing and Build-out

Despite a 1967 recommendation that MCI's application be approved, final authorization for MCI to begin operations was delayed until after Hyrum Rex Lee became an FCC Commissioner during October 1968. After Lee's joining of the commission, 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.

The FCC issued a final ruling on Docket 16509, MCI's licensing request, on 14 August 1969. By a decision of 4–3 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 U.S. Court of Appeals to have the ruling overturned.

After the FCC approval for MCI to begin building microwave relay stations between Chicago and St. Louis, Microwave Communications of America 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, fifteen new regional carriers were created, allowing for interconnection between a number of major cities in the United States. During July 1969, MICOM also purchased stock 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 1 January 1972.

To pay for the microwave transmission and relay equipment needed for build-out, MICOM began a series of private stock offerings on May 1971. During July 1971, MICOM was restructured into MCI Communications, and the restructured company began the process of absorbing the regional carriers into a single corporation. MCI went public on 22 June 1972, selling an initial offering of 3.3 million shares.

During the 1970s, Western Union organized its cable systems properties and the right-of-way rights of its telegraph lines into a subsidiary called Western Union International, which was sold subsequently to Xerox for their planned intra-city office network aspirations. During 1982, it sold this subsidiary to MCI Communications, which renamed it MCI International and relocated its headquarters from New York City to Westchester County, New York.

During 1983, in conjunction with Michael Milken and Drexel Burnham Lambert, the company issued a $1.1 billion hybrid security—- at the time the largest debt financing in history. The financing allowed company management to state an extra $500 million in cash on their balance sheet so that customers, suppliers, and investors would know they were strong financially. The immediate effect was that management no longer was forced to spend so much time raising capital. By 1990, MCI had become the nation’s second-largest telecommunications company, establishing 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.

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