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"This has happened a thousand times before, so it's not worth making a fuss about."

--Deputy Flight Director Viktor Blagov, referring to the loss of oxygen tanks on the Mir space stationEDITED BY PAT WECHSLERReturn to top

THE INSIDE DOPE ON OUTSIDE CEOs

EVERYONE KNOWS THAT Louis Gerstner Jr. has turned around IBM since arriving as an outside CEO four years ago. But with the recent failures of outsiders at AT&T and Apple Computer, does recruiting outsiders really make sense?

Harvard business school says it depends. According to research that examined 200 of the nation's largest companies between 1978 and 1992, a CEO drafted externally has an edge only when his predecessor was ousted. In those cases, outsiders improved returns on assets 3.6% on average over a three-year period. Inside candidates who become CEOs under similar circumstances produced no improvement.

Why? An outsider brings in badly needed fresh perspective, the study concludes. But in the case of a CEO retiring or leaving voluntarily, the outsider lacks a mandate for change. "It handcuffs his ability to reshuffle top management," says study co-author Rakesh Khurana.

So when a transition goes smoothly, outsiders actually tend to oversee declines at companies--5% on average over three years; insiders eke out a 1.5% gain.

The researchers surmise that knowing a company and its markets is a big edge only if a big change isn't needed.EDITED BY PAT WECHSLER John ByrneReturn to top

THE FCC SPARKS A GLOBAL HISSY FIT

U.S. CALLERS COULD BE in line to save some money when the Federal Communications Commission approves rules to lower international calling rates, expected as early as August 7. But not everyone is smiling.

Many nations--including Italy, Japan, Australia, Trinidad-Tobago, and Latvia, to name a few--are criticizing the FCC for its unilateral action. These countries insist that phone charges should be set by the International Telecommunication Union in Geneva. This multinational regulatory body, however, has dragged its feet on the subject, frustrating FCC chief Reed Hundt.

So the feds put the process in motion last December with a proposed rule to lower carrier-to-carrier rates from 88 cents a minute to between 15 cents and 23 cents. The commission also says that it will block foreign carriers from entering the U.S. market if they don't comply with the lower rates. This has enraged many, including the Japanese. "Japan thinks that's against the [principles of] the World Trade Organization," says Embassy official Junichiro Miyazaki.

The cost of this overcharge to a nation of immigrants who love to phone home: $5.4 billion annually.EDITED BY PAT WECHSLER Catherine YangReturn to top

SAN DIEGO KISSES A BABY BELL BYE-BYE

IN A MAJOR BOOST FOR competition in local phone markets, the city of San Diego plans to pull all of its local telephone business from Pacific Bell and give it

to Teleport Communications Group. The deal, which was scheduled to be announced on Aug. 13, marks the first time a top-10 U.S. city has dropped its incumbent Bell to get service for municipal offices.

With $283.3 million in revenues, the Staten Island (N.Y.)-based Teleport is one of the upstart providers attempting to chip their way into local markets. So far, companies such as Teleport, headed by aggressive CEO Bob Annunziata, have picked up mostly business customers. The San Diego deal marks a significant victory for not only the new local provider but also the 1996 Telecommunications Act, which has been roundly criticized for failing to increase the level of competition in local markets fast enough.

To Teleport, the six-year contract with the nation's sixth-largest city, San Diego County, and local schools is expected to be worth a minimum of $30 million. For San Diego, the switch from PacBell, now owned by SBC Communications, is expected to mean discounts of 20% to 30%.EDITED BY PAT WECHSLER Peter ElstromReturn to top


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