1

$267.2

$60.8

$291.2

$75.7

$322.2

$94.2

$356.6

$106.4

$395.0

$120.4

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

To

tal R

even

ues

in B

illio

ns

1994 1995 1996 1997 1998*

Communications Sector of the U.S. Economy

Communications Services Communications Equipment

* 1998 figures are estimates from the the 1998 Multimedia Telecom Market Review and from IAD.Sources: Census Bureau, Statistical Abstract of the U.S. and Annual Survey of Communications Services; 1998 Multimedia Telecom Market Review

2

$160.0

$10.2

$30.3

$29.6

$169.5

$14.2

$32.9

$30.3

$180.2

$18.6

$35.9

$33.9

$196.2

$25.9

$39.2

$38.5

$198.1

$33.0

$42.8

$43.7

$395.0

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

To

tal R

even

ues

in B

illio

ns

1993 1994 1995 1996 1997 1998*

Communications Services Revenues

Wireline Wireless Radio & TV Cable

* 1998 aggregate figure is an IAD estimate. Specific 1998 estimates for the different communications services segments were not available. Sources: IAD, Telecommunications Industry Revenue Report; Census Bureau, Annual Survey of Communications Services.

3

13.5

5.8

13.2

5.5

12.4

5.4

12

5.1

11.5

4.6

10.2

4.2

0

2

4

6

8

10

12

14

Ave

rag

e P

rice

/Co

st p

er M

inu

te, i

n C

ents

1992 1993 1994 1995 1996 1997

LD Consumer Prices and Access Costs are Falling*

LD Consumer Prices Access Costs

* As measured in average cents per conversation minute. LD consumer prices are based on all interstate and international calls. Access costs include all interstate and international access costs paid by IXCs to the LECs.Source: IAD, Telecommunications Industry Revenue Report. Prices shown are per conversation minute. Year-end 1998 data is not avail.

4

100 100

106.1

94.8

114.8

93.1

123.5

87.9

134.1

79.3

142.7

72.4

60

80

100

120

140

160

Ind

ices

1992 1993 1994 1995 1996 1997

Interstate & International Calling Continues to Grow and Access Costs Decrease*

Interstate & International Switched Access Minutes Access Costs

* Interstate & international calling as measured by all associated originating/terminating switched access minutes. Access costs as measured by the average cost per minute paid by IXCs to LECs for only the associated conversation minutes.Sources: Trends in Telephone Service and Telecommunications Industry Revenue Report. Full-year 1998 data is not yet avail.

5

321366

453

562 569

0

100

200

300

400

500

600

1993 1994 1995 1996 1997

Number of Long Distance Carriers*

Long Distance Carriers

* Refers to the carriers self-identified on their TRS filings as long distance service providers.Source: IAD, Trends in Telephone Service.

6

Average Rate per Minute* for an International Call 1994-1997

$0.91$0.84

$0.70$0.64

1994 1995 1996 1997$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

Source: FCC Section 43.61 data (excluding reorigination and country direct and beyond). Full-year 1998 data is not yet available.

* Consumers can obtain even lower per minute rates under some rate plans

7

$0.4 $0.5$0.9

$1.2

$3.1

$5.7

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Rev

enu

es in

Bill

ion

s

1993 1994 1995 1996 1997 1998*

Local Service Competitor Revenues

Revenues of New Local Service Competitors

* 1998 figure is an ALTS estimate.Source: IAD, Local Competition Report. Local service competitors refer those identifying themselves as CAPs and/or CLECs on their TRS Worksheets submitted to the FCC.

8

11,63313,421

17,953

9,677

30,614

17,431

28,55628,381

47,135

41,184

53,168

45,461

0

10,000

20,000

30,000

40,000

50,000

60,000

Nu

mb

er

of

Te

lep

ho

ne

-Re

late

d C

om

pla

ints

1993 1994 1995 1996 1997 1998

Complaint Workload Continues to Grow*

Complaints Received Complaints Processed

* Refers to telephone-related complaints made by consumers. These complaints are typically related to carrier spamming/cramming practices, to faulty payphones and to problems with operator services.

Source: CCB Enforcement Division

9

1992 1993 1994 1995 1996 1997 1998*

0

10

20

30

40

50

60

70

80

(In

Mil

lio

ns

)

Total MVPD Subscribers vs. Cable Subscribers

Cable

Total MVPD

Note: 1992-1993 and 1997-1998 (1998 is an estimate) are end of year; 1994-1996 end in December. Sources: 1996 Competition Report, 1998 Competition Report, Paul Kagan Associates.

10

DTH/DBS/C-Band GROWTH

3.47 Million

5.09 Million

7.25 Million

9.28 Million10.62 Million

June1995

June1996

June1997

June1998

December1998

From June, 1995 to December, 1998 satellite home subscribers grew 206% and now exceed 10.5 million.

Source: DBS Investor

(# of Subscribers)

11

Charting the Growth in the Mobile Telephone Industry 1993 - 1998

UPUP380%380%

From From 16 Million 16 Million

Subscribers Subscribers in 1993in 1993

UPUP284%284%

From 39,775 From 39,775 Jobs in 1993Jobs in 1993

DOWNDOWN35%35%

From $61.48From $61.48per Month in per Month in

19931993

UPUP359%359% From $14 From $14

Billion as of Billion as of 19931993

DOWNDOWN68%68% From 24From 24

Months for Months for ComparativeComparative

HearingsHearings

Subscribers JobsCapital

Investment

AverageSubscriber

Bill

Wait forLicenses

60.8 MillionSubscribers in 1998

113,111 Jobs in1998

$50.2 BillionInvested as of 1998

$39.88 Dollars Per Month

in 1998

7.8 Months From Application to Grant

Source: CTIA June 1998 Survey; FCC Report to Congress on Spectrum Auctions, September 30, 1997.

12

1000 42525 1000

2502000

700

3000

1500

4300

2700

0

1000

2000

3000

4000

5000

6000

7000

Th

ou

sa

nd

s o

f S

ub

sc

rib

er

Ho

us

eh

old

s

1997 1998 1999 2000 2001 2002

Residential Broadband Access Projections

Cable xDSLSource: The Yankee Group

13

DTV Build-Out Schedule

0

20

40

60

80

100

120

Dec-98 May-99 Nov-99 May-02 May-03

% o

f P

op

ula

tio

n w

ith

DT

V S

erv

ice

0

200

400

600

800

1000

1200

1400

1600

1800

Percent of Population with DTV Service Stations on AirNOTE: 38 of the first 40 stations scheduled for DTV have been granted construction permits

FCC’s Contract with Consumers

• The Communications sector of our economy is rapidly growing and becoming more competitive every day. (ch. 1&2)

• Our mission is to bring better services at better prices to every American.

• For this mission to be successful, competition in all facets of the telecom industry must take root.

The Evidence: Long Distance Competition Goes the Distance

• Long distance competition is robust:– Access costs/consumer prices are falling (ch. 3)– Spurring growth in long distance calling (ch. 4)– While the number of competitors grew by 77%

between 1993 and 1997 (ch. 5)– Impact of competition is also being felt in

International markets• per minute costs to consumers have declined each

year since 1994 (ch. 6)

The Evidence: Local Competition is Hitting its Stride

• Today, there are 10 times the number of competing local carriers (nearly 150) as there were pre-Telecom Act (source: ALTS)

• Today, there are over 20 publicly-traded CLECs with a combined market value of $33 billion versus just 6 with a combined value of $1.3 billion pre-Act (source: ALTS)

• Today, CLECs have 5.1 million access lines versus 800,000 pre-Act (source: ALTS)

The Evidence: Local Competition Continued

• Revenues from competing carriers doubled to $3 billion in 1997 alone, and were estimated to have nearly doubled again to $5.7 billion in 1998 (ch. 7)

• Since the Act, CLECs have raised almost $20 Billion from Wall Street versus just $3 billion pre-Act (source: ALTS)

Competition Reality Check

• The emergence of competitive markets, however, does spur:– Consumer confusion over new choices– Consumer anxiety over fraudulent practices by

new and existing carriers

• …Leading to a rise in consumer complaints, which the FCC is tackling one by one. (see ch. 8)

The Evidence: Competition has Revolutionized Video,Wireless

• Total MVPD subscribers have grown, with DBS and other alternatives capturing greater share of growth than cable (ch.9&10)

• Wireless growth in past 5 years is dramatic as prices fall, subscribership is up and capital investment soars (ch. 11)

Looking to the Future: the Future is Now

• Internet usage soared in 1998, driven by more consumers doing more shopping online.– The number of Internet shoppers during the

holiday season grew 330% from the prior year’s holiday season.

– Online spending during the holiday season almost tripled to $3 billion from the prior year’s holiday season.

Looking to the Future: The Future is Now

• The transition to high speed Internet access is now a reality at affordable prices. Subscribership is expected to soar. (ch. 12)

• Digital TV has begun rolling out, and prices already are falling for DTV sets. (ch. 13)