Upwardly Mobile ALTO Barney Lane, Director Regulatory Affairs

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Upwardly Mobile - ALTOBarney Lane, Director
Regulatory Affairs

• Presented by MCI International Affairs Group
• May 19, 2003

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The New MCI
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The New MCI Update on Key Developments

• WorldCom is now doing business as MCI.
• MCI name has a strong heritage in telecoms as
  the
• MCI was the company that broke the Bell monopoly
  in the US.
• "MCI" is also known for innovation and value in
  the US.
• brand change is much more than just a name
  change....
• MCI will be a model of corporate governance.
• New CEO, new CFO, new Board of Directors, new
  auditors.
• Internal Investigation of accounting issues and
  full co-operation with US authorities have led to
  early settlement with the SEC
• All employees associated with wrongdoing have
  been removed.

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Continuation Update on Key Developments

• Plan of Reorganisation was filed on 14 April
  2003.
• MCI expects to emerge from Chapter 11
  Reorganisation process
• by Q4 2003.
• MCI management and creditors committee have
  confirmed the importance of MCIs global
  operations, with particular commitment to
  European operations. All units are operating with
  an outrageous sense of urgency, commitment to
  service excellence and world class performances
  in all areas of the business.

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02

• Section Title Using 28pt. Arial Bold

NEW EUROPEAN FRAMEWORK AND MARKET ANALYSIS
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New European Framework for Electronic
Communications and Market Analysis

• We applaud ComRegs quick action on market
  analysis under the new EU Framework for
  electronic communications. Although the process
  is complex and resource intensive (especially for
  new entrants), it is vital for ensuring effective
  regulation.
• We share the EU Commissions view that effective
  ex-ante regulation is required for the key
  markets identified in the relevant markets
  recommendation, especially local access leased
  lines (pricing and provisioning), fixed-to-mobile
  termination, and DSL bitstream. Continued
  effective regulation of access is critical for
  the future of competition in the Irish market.
• Identification of SMP operators and developing
  appropriate remedies is key. The incumbent
  fixed-line operator and mobile operators in
  Ireland will continue to require regulation for
  the foreseeable future. Appropriate remedies
  must include LRIC pricing of interconnection and
  access, non-discrimination and effective action
  against price-squeeze.

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New European Framework for Electronic
Communications and Market Analysis, continued

• We understand that ALTO (of which MCI is a
  member) met with the Department to discuss draft
  legislation for transposition of the new EU
  framework on April 16. We share the views and
  concerns voiced by ALTO at that meeting.
• Implementation of the new framework will
  considerable resource from ComReg and the
  operators. MCI will be fully involved in the
  process of market analysis and developing
  appropriate remedies.

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03

• Section Title Using 28pt. Arial Bold

REGULATION OF MOBILE OPERATORS
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Fixed to Mobile Termination in Ireland

• FTM costs were reduced by 13 on a unilateral
  basis by the two SMP operators, Vodafone
  (formerly eircoms mobile arm) and O2 (formerly
  BTs mobile arm) in 2002.
• MCI Ireland welcomes these reductions but 1.
  they are not sufficient and will leave Ireland in
  one of the worst positions if no further
  reductions are imposed 2. they do not resolve
  the price squeeze problem that all fixed
  operators in Ireland still face. ALTO has planned
  a government/industry conference on Mobile issues
  in Ireland for May 19 to focus attention on this
  issue.
• ComReg has taken the novel approach of banning
  GSM gateways. Although we are acutely aware of
  the technical issues related to the use of GSM
  gateways we disagree in principle with this
  approach and do not believe it has a sound legal
  basis.
• Price squeeze (from both mobile VPNs and GSM
  gateways) remains a major concern in Ireland.
  This situation will persist so long as the mobile
  termination remains above cost.

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Fixed to Mobile Termination in Ireland, continued

• Although mobile termination rates in Ireland are
  about average for Europe, they remain
  substantially higher than cost, imposing a
  tremendous burden on Irish fixed operators and
  their customers.
• To date ComReg has not chosen to regulate F2M
  interconnect rates in Ireland. The EUs relevant
  markets recommendation makes clear that mobile
  termination is a key area of regulatory concern.
• The market needs a clear signal from ComReg that
  mobile termination should be cost oriented.

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Fixed to Mobile (F2M) Termination
Privileged and Confidential
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Fixed to Mobile (F2M) Price Squeeze German
Example
Privileged and Confidential
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F2M - Forward Looking Rates
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F2M - Forward Looking Rates
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• Section Title Using 28pt. Arial Bold

MOBILE NUMBER PORTABILITY
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Mobile Number Portability

• ComReg is currently conducting a consultation for
  implementation of Mobile Number Portability in
  Ireland. A chief concern for MCI Ireland is the
  cost of implementation.
• ComReg prefers that the technical and pricing
  aspects of implementation be left to commercial
  negotiation between Mobile Network Operators and
  Fixed Network Operators.
• Mobile Operators in Ireland appear to be arguing
  for a gold plated solution involving direct
  routing of ported mobile numbers via queries of a
  central data base. This would substantially
  raise costs for fixed operators and their
  customers.
• A gold plated solution makes little sense at the
  introduction of MNP when very few numbers have
  been ported. Most European fixed and mobile
  operators use indirect routing, a more practical,
  low cost solution.

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Mobile Number Portability, continued

• We disagree with the current approach in Ireland.
  We believe that as a matter of policy, fixed
  network operators should be able to use indirect
  routing for ported mobile numbers until such time
  as a credible threshold of rerouted calls is
  reached, justifying the substantial investment in
  a direct routing solution.
• We have considerable experience with such
  solutions in other European countries and would
  be happy to discuss an appropriate threshold.
• If and when such a threshold is reached, the
  Regulator should, as a matter of policy, exercise
  strict oversight over the central data base
  solution to regulate its pricing, ensure it is
  independently administered, and to verify that
  costs are assessed and recovered in a
  transparent, objective, and fair manner.

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REMEDIES REQUIRED
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Regulatory Measures Required

• Effective Mobile Regulation - movement towards
  cost orientation required
• Direct action against price-squeeze by mobile
  operators
• Mobile Carrier Pre-Selection
• Proportionate implementation of mobile number
  portability

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MCI International AffairsBarney
Lane.barny.lane_at_mci.com

• Presented by MCI International Affairs Group