NEW YORK (CNN/Money) - Executives of three struggling telecommunications companies and a government official assured Congress Tuesday that crucial services would not be interrupted despite massive accounting scandals and a severe downturn that have hurt the industry.

"This market is not collapsing. It is not going to fail over time," Federal Communications Commission Chairman Michael Powell said. "Communications services remain vital to consumers around the globe."

Powell told the Senate Committee on Commerce, Science and Transportation Tuesday that the sector is struggling under $2 trillion in debt and that profits in U.S. long-distance services are down 68 percent.

Half a million people have lost jobs in telecom over the last two years as debt ballooned in the sector.

WorldCom CEO John Sidgmore, Global Crossing CEO John Legere, and Afshin Mohebbi, president and chief operating officer of Qwest Communications International, also testified Tuesday before the committee chaired by Sen. Fritz Hollings, D-S.C.

"Clearly there are very serious stresses on this important industry," Powell said.

An economic downturn and over-enthusiastic expansion led to plunging profits at telecom firms in the last few years. Additionally, major accounting scandals at WorldCom, Global Crossing, which also is bankrupt, and now Qwest further eroded shareholder value.

When questioned about ways to curb abuses, WorldCom's Sidgmore told lawmakers, "I think they [stock options] should be accounted for as an expense."

Counting stock options as an expense helps shareholders by not tying the payouts directly to the company's equity value. Internet retailer Amazon.com said earlier this month that it would start expensing options.

The hearing comes after a report Tuesday that top executives at Qwest made about $500 million selling shares of their stock while revenue numbers were improperly inflated.

On July 21, WorldCom filed for Chapter 11 bankruptcy protection, making it the largest bankruptcy ever in the United States. The company's attempt to hide $3.8 billion in expenses led to the filing.

And Global Crossing, which filed for bankruptcy protection in January, faces two federal probes into its accounting methods. The company is saddled with $12.4 billion in debt and slowing demand for its high-speed fiber-optic network.

Investors have also criticized ex-CEO Gary Winnick's sale of $750 million of his own shares in the company.

Senators grilled all three executives about why their firms allowed their managers to cash in hundreds of millions of stock and stock options in spite of each firm's dismal performance.

"I think when someone runs a $10 billion company into the ground, the last thing you do is give him a bonus," Sen. Byron Dorgan, D-N.D., said. "Pay is based on performance. When somebody is cooking the books and running a company into the ground, you don't give them big bonuses. That's not rocket science."

"Stocks have tanked. Shouldn't you have asked for that money back? " Sen. John McCain, R-Ariz., asked after Legere said options are based on company performance.

Global Crossing's Mohebbi said the options granted to Winnick were part of a signed contract and that the company may only ask for them back if any wrongdoing is discovered.

But Powell told lawmakers concerned about service disruptions that efforts to shore up the industry with better regulation and oversight would help engineer a recovery.

"Protecting consumers from service disruption is the Federal Communications Commission's first and highest priority," Powell said in prepared remarks.

Global Crossing's Legere agreed.

"We are here today because America's telecommunications industry is threatened by a financial crisis of enormous and unexpected proportions," Legere said. "Global Crossing believes that government can play an important role in helping those segments of the communications industry that are in a state of turmoil to recover."

"We are intensely focused on ensuring that all of our customers -- consumer, business and government -- continue to receive the highest quality service without disruption," WorldCom's Sidgmore told the panel in prepared remarks before Tuesday's hearing.

Sidgmore, who was not CEO at the time WorldCom hid $3.8 billion in expenses, acknowledged the industry's difficulties but said competition is alive and will continue to drive new products and services.

"What we're witnessing today, however, is unprecedented," Sidgmore said. "Clearly, the entire industry is experiencing problems. While many competitive companies have experienced difficulties -- many have gone out of business -- it's important to emphasize that competition is alive."

Qwest, too, tried to reassure lawmakers about service.

"I want to assure the committee, and Qwest's customers, that Qwest expects to be around for a long time, and that the critical telecommunications services Qwest provides are not in jeopardy," Qwest's Mohebbi said in his prepared remarks. "I wish to assure the committee that Qwest is fully prepared to ensure that service continues uninterrupted."

The telecom industry has been struggling the last couple of years as the downturn in the economy choked off corporate spending on new technology. The growing popularity of mobile phones also pinched the long-distance phone-service industry.

That in part was behind Global Crossing's Chapter 11 bankruptcy filing in January.

However, it wasn't until June, when WorldCom acknowledged that it had improperly booked more than $3.8 billion in expenses, that things took a decided turn for the worse.

News that WorldCom and its auditor, Arthur Andersen LLP, tried to hide the expenses emerged after an internal auditor, Cynthia Cooper, discovered the discrepancy, according to documents disclosed last month by Rep. Billy Tauzin, R-La. Tauzin is chairman of the House Energy and Commerce subcommittee that is investigating the situation.

"Frankly, Arthur Andersen told us they never caught it in the audit we paid $4-$5 million for," Sidgmore said Tuesday. "Frankly, it's an outrage to our company that that happened. That should have been caught in an audit," he said, noting that WorldCom's own audit committee also failed to notice the problem.