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![]() WorldCom's roots run deep in the telecommunications business. From the Company's humble beginnings in Mississippi as a long distance reseller in 1983, through dozens of successful mergers and acquisitions and internal growth, WorldCom has emerged as the preeminent digital generation communications company. WorldCom has modernized the way businesses use technology. We are improving communications by integrating the Internet and access to data into everyday life. Streamlining e-commerce initiatives. And expanding our wholly owned, high-speed, global network. We have led the charge into a new era of broadband, next-generation services. However, without the profits and cash generated by our deep roots in the voice wireline business, WorldCom never would have been able to target its investments and acquisitions toward the fastest growth areas of communications services: Internet, data and international. Furthermore, our large base of voice customers gives WorldCom a natural entree to upgrade these customers into our data and Internet services. So, it is appropriate to understand this more mature part of our business, because it continues to generate tremendous amounts of capital and solidify our industry leading margins and fast growing earnings. Deregulation and
Techonology Spur Competition The U.S. got a headstart on the rest of the world with the break-up of AT&T in 1982 and then the Telecommunications Act of 1996. This led the U.S. telecom industry to evolve from a predictable, slow growth monopoly into a dynamic, competitive growth industry. While deregulation initially ignited competition in the U.S., it is technology that will increasingly do so going forward. Technology is constantly changing how people communicate. Just think of the developments in the last several years — wireless phones, faxes, call waiting, voice mail, email and everything connected to the Internet. These changes result in opportunities for aggressive, savvy companies. A couple of the budding opportunities are Voice over Internet Protocol (VoIP) - allowing people to verbally communicate in real-time over the Internet and voice over Digital Subscriber Line (DSL). The VoIP development is in its early stages and not near wireline or wireless quality, but it appears destined for increasing popularity, and WorldCom will be positioned to capitalize on what will be one of the exciting developments in voice communications. Voice over DSL will allow companies to access voice and data over a single integrated access line. As a result of the Telecom Act and ensuing federal and state regulatory initiatives, barriers are coming down as to what services companies may provide. WorldCom is offering local service in New York, which has in turn allowed Bell Atlantic, the incumbent local exchange carrier (ILEC), to provide long distance service in New York. And this is only the beginning of the traditional local and long distance carriers getting onto new turf. In addition, there are competitive local exchange carriers (CLECs) providing long distance and local service. Shift to All-Distance
Communications WorldCom provides a single source for all-distance communications. Our strategy has been to maximize our global communications network by sending customers' data streams and voice traffic on our facilities based networks around the world. This on-net approach provides WorldCom customers with superior reliability and low operating costs. And when WorldCom transmits calls from end-to-end completely on its own network, we avoid access costs from ILECs, as well. Minimizing access costs is a key element of WorldCom's profitable outlook and motivates the company to continue to expand our network locally on a global basis, so we can drive more traffic on-net. Positioned for
Future The communications industry has seen dramatic changes since the Telecom Act and is set for more dynamic change. As local markets are opened to competition and lead to further ILEC participation in the long distance business, it is clear industry players will have to be nimble and well financed to compete effectively. Local competition, wireless competition, broadband competition and long distance competition are leading to a fast-moving market. WorldCom is not new to a competitive, entrepreneurial environment. Remember our early roots and humble beginning and where we are today, and investors will realize that WorldCom truly has led the charge into this new era of competition and high-tech, digital communications. We like our position and will continue to see just how fast we can go. |
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