BCE INC.

ANNUAL INFORMATION FORM FOR THE YEAR ENDED DECEMBER 31, 2001 APRIL 15, 2002 2001 T ABLE OF CONTENTS Annual Information Form for the year ended December 31, 2001 April 15, 2002

Documents Incorporated by Reference ...... 2 BCE Emergis ...... 25 Trade-marks ...... 2 General ...... 25 Note to Reader ...... 3 Recent Developments ...... 26 Item 1 • Corporate Structure of BCE ...... 3 Competition ...... 26 Item 2 • General Development of BCE ...... 3 BCE Ventures ...... 27 Overview ...... 3 BCI ...... 27 Recent Developments ...... 4 Telesat ...... 28 Significant Developments ...... 4 CGI ...... 29 Item 3 • Businesses of BCE ...... 5 Others ...... 29 Bell Segment ...... 5 Employees ...... 29 General ...... 5 Legal Proceedings ...... 30 Subsidiaries and Associated Companies ...... 7 Certain Contracts ...... 31 Regulation ...... 10 Forward-Looking Statements ...... 32 Competition ...... 15 Risk Factors ...... 32 Capital Expenditures ...... 18 Item 4 • Selected Financial Information (Consolidated) ...... 39 Environment ...... 18 Item 5 • Management’s Discussion and Analysis ...... 39 Bell Globemedia ...... 18 Item 6 • Market for the Securities of BCE Inc...... 39 General ...... 18 Item 7 • Directors and Officers of BCE Inc...... 39 CTV ...... 19 Item 8 • Additional Information ...... 40 Bell Globemedia Publishing ...... 19 Schedule – Corporate Structure ...... 41 Bell Globemedia Interactive ...... 19 Regulation ...... 20 Competition ...... 20 Teleglobe ...... 21 General ...... 21 Global Network – GlobeSystem ...... 22 Regulation ...... 23 Competition ...... 25

NOTES: (1) Unless the context indicates otherwise, “BCE” refers to BCE Inc. and its subsidiaries and associated companies. (2) All dollar figures are in Canadian dollars, unless otherwise indicated.

2001 BCE Annual Information Form 1 Documents incorporated by reference Part of Annual Information Form in which Documents incorporated by reference 1. Portions of the BCE Inc. 2001 Annual Report Items 2, 5 and 6 2. Portions of the BCE Inc. Management Proxy Circular Item 7

Trade-marks Owner Trade-mark BCE Inc. BCE Bell ActiMedia Inc. Yellow Pages Rings & Head Design (Bell Canada corporate logo) Bell Bell World Espace Bell Sympatico Bell Globemedia Publishing Inc./ ROB TV Publications Bell Globemedia Inc. The Globe and Mail Inc./Bell Mobilité inc. Mobile Browser CTV Inc. CTV CTV Newsnet Talk TV The Comedy Network Inktomi Corporation Inktomi Intelsat, Ltd. Intelsat Telecom Services Inc. First Rate NetStar Communications Inc. NetStar Stentor Resource Centre Inc./ Datapac Centre de ressources Stentor Inc. Megalink SmartTouch Teleglobe Inc. GlobeSystem Telesat Canada Anik Nimiq Inc. TSN RDS TSN MAX AT&T Corp. AT&T MCI Communications Corporation Hyperstream OnStar Corporation Onstar Yahoo! Inc. Yahoo!

Any other trade-marks, corporate, trade or domain names used in this Annual Information Form are properties of their respective owners.

2 2001 BCE Annual Information Form Note to Reader: owned or over which control or direction is exercised directly or ings Inc. (“BCH”) with Bell Canada and its subsidiaries The information contained in this Annual Information Form is indirectly by BCE Inc. Certain subsidiaries, each of which (including Bell Mobility Inc. (“Bell Mobility”), BCE Nexxia Inc. disclosed as at December 31, 2001, unless otherwise indicated. All of represents not more than 10 per cent of consolidated assets and (carrying on business in Canada under the name “Bell Nexxia”), the information contained in this Annual Information Form is not more than 10 per cent of consolidated sales and operating Bell ActiMedia Inc. (“Bell ActiMedia”), Bell Distribution Inc. qualified in its entirety by the announcements made by BCE Inc. and revenues of BCE Inc., and all of which, in the aggregate, repre- (“Bell Distribution”), Bell West Inc. (“Bell West”), Certen Inc. Teleglobe Inc. on April 24, 2002, which are described in Item 2 – sent not more than 20 per cent of total consolidated assets and (“Certen”), Northern Telephone Limited (“Northern Tele- “General Development of BCE – Recent Developments” as well as by total consolidated sales and operating revenues of BCE Inc. at phone”), Inc. (“Northwestel”) and Télébec ltée the ultimate outcome of the events described therein. In particular, the December 31, 2001, have been omitted. (“Télébec”)), and also its investments in significantly influenced following portions of this Annual Information Form are qualified: companies (including Manitoba Telecom Services Inc. (“MTS”), Item 2 – “General Development of BCE – Overview”; Item 3 – “Busi- ITEM 2 • GENERAL DEVELOPMENT OF BCE and others). BCE Inc. owns 80 per cent of BCH and the nesses of BCE – Teleglobe” (in particular information regarding the remaining 20 per cent ownership interest is beneficially owned The information contained in this Item2–“General Develop- operations of Teleglobe, the principal markets in which Teleglobe by SBC Communications Inc. In addition, the Bell Canada ment of BCE” is qualified in its entirety by the announcements provides services, the completion of the GlobeSystem network and of segment includes the consolidation of Aliant Inc. (“Aliant”) made by BCE Inc. and Teleglobe Inc. on April 24, 2002, which various investments or expansion by Teleglobe in relation thereto, the (approximately 39 per cent held by Bell Canada and approxi- are described hereinafter under “Recent Developments” as well status of Teleglobe’s licenses, the ability of Teleglobe to comply with mately 14 per cent held by BCE Inc.) as well as BCE Inc.’s 100 per as by the ultimate outcome of the events described therein. the requirements of applicable legislation and regulation and to meet cent interest in Bell ExpressVu Limited Partnership (“Bell its obligations under the agreements to which it is a party; and the Overview ExpressVu”). Bell ExpressVu, a licensed DTH satellite broad- ability of Teleglobe to maintain sufficient financial resources in order caster, has been delivering, since 1997, digital audio and video BCE Inc. is Canada’s largest communications company. BCE Inc. to remain competitive); Item 3 – “Businesses of BCE – Legal Proceed- services directly to Canadian homes and businesses. Since 1999, had, on a consolidated basis, operating revenues of ings” (in particular the status of the class action lawsuits to which Bell ExpressVu has utilized the Telesat Canada (“Telesat”) Nimiq $21.7 billion, earnings of $0.5 billion and cash flows from Teleglobe Inc. is a party); Item 3 – “Businesses of BCE – Forward- direct broadcast satellite. The Bell Canada segment had oper- operating activities of $4.6 billion in 2001, and had total assets Looking Statements – Risk Factors”; and Item 5 – “Management’s ating revenues of $17.3 billion in 2001. of $54.3 billion at December 31, 2001. BCE had approximately Discussion and Analysis”. 75,000 employees at December 31, 2001. BELL GLOBEMEDIA The information relating to the business, assets and operations BCE Inc. has among the largest number of registered share- Bell Globemedia Inc. (“Bell Globemedia”) is a Canadian multi- of Teleglobe as contained in this Annual Information Form has been holders of any Canadian corporation. At December 31, 2001, media company in the fields of broadcasting, print and the derived primarily from information prepared by Teleglobe Inc. in the there were more than 181,000 registered holders of common Internet, created on January 9, 2001. Bell Globemedia provides course of the drafting of Teleglobe Inc.’s own Annual Information shares, of whom about 95 per cent were registered as resident in integrated information, communications and entertainment Form. As a result of substantial Board of Directors and management Canada and held approximately 89 per cent of the common services to Canadian customers and access to distinctive Cana- changes at Teleglobe Inc. on April 23, 2002, Teleglobe Inc.’s Annual shares outstanding. dian content. Through its various Internet media properties, Information Form has not been finalized. BCE Inc. has no reason to At December 31, 2001, BCE centered its activities around four Bell Globemedia also provides unique destinations for Internet believe that any of the information herein so derived from the infor- core operating segments, based on products and services, users. Bell Globemedia is comprised of the television operations mation prepared by Teleglobe Inc. is inaccurate in any material reflecting the way that management classified its operations of CTV Inc. (“CTV”), the print operations of Bell Globemedia respects for purposes of BCE Inc.’s Annual Information Form. for purposes of planning and performance management: Publishing Inc. (“Bell Globemedia Publishing”) carrying on Bell Canada segment; Bell Globemedia; Teleglobe; and business under the name The Globe and Mail, and the interac- ITEM 1 • CORPORATE STRUCTURE OF BCE BCE Emergis. All other businesses were grouped in the BCE tive operations of Bell Globemedia Interactive Inc. (“Bell Globe- BCE Inc. was incorporated in 1970, continued under the Canada Ventures segment. media Interactive”), and other media interests. Bell Business Corporations Act in 1979 and exists under a Restated BELL CANADA SEGMENT Globemedia had operating revenues of $1.2 billion in 2001. Certificate of Incorporation dated December 1, 2000. BCE Inc. BCE Inc. owns 70.1 per cent of Bell Globemedia, while 20 per The Bell Canada segment provides connectivity to residential has its principal and registered offices at 1000, rue de La cent is held by The Thomson Corporation (“Thomson”) and and business customers through wired and voice and Gauchetière Ouest, Bureau 3700, Montréal, Québec H3B 4Y7. 9.9 per cent is held by The Woodbridge Company Limited data communications, high- and wireless Internet access, The Schedule hereto presents certain subsidiaries and asso- (“Woodbridge”). direct-to-home (“DTH”) satellite entertainment services, ciated companies of BCE Inc., their respective jurisdictions of Internet Protocol (“IP”)/Broadband services, e-business solu- TELEGLOBE incorporation or continuance and the percentage of voting and tions and local and long distance phone and directory services. The Teleglobe segment (“Teleglobe”) provides a range of inter- non-voting securities or partnership interests beneficially This segment represents the consolidation of Bell Canada Hold- national and domestic communication services including voice,

2001 BCE Annual Information Form 3 Internet connectivity, high-speed data transmission, hosting, customer service and fund other operations-related needs while Américas (the “Reorganization”), pursuant to which the parties broadband, broadcast and other value-added services on a it reviews its options for the future, including possible business reorganized the assets of Telecom Américas through certain wholesale and retail basis. Teleglobe had operating revenues of combinations, a debt restructuring, a wind-down of some or all asset transfers and arranged for certain funding commitments. $2.1 billion in 2001. Teleglobe Inc. is 23 per cent held by Bell of its business or a court-supervised proceeding. Following the closing of the Reorganization, the operations of Canada and 77 per cent held by BCE Inc. BCE Inc. also announced that the revised outlook provided Telecom Américas focused exclusively on the Brazilian mobile BCE EMERGIS by Teleglobe Inc.’s management no longer meets the objectives wireless market. The Reorganization addressed, in part, the of break-even cash flow by 2003 and the prospect for “value funding requirements of Telecom Américas’ operating compa- BCE Emergis Inc. (“BCE Emergis”) is a premier e-commerce recovery” of this investment, and the market prospects for data nies by reducing the aggregate level of debt and by extending service provider, strategically focusing on market leadership in are not expected to improve in the foreseeable future. BCE Inc. the average life of some of its existing debt. In conjunction with the transaction-intensive e-Health and financial services sectors provided $550 million (U.S.$350 million) of funding to Tele- the Reorganization, Telecom Américas secured capital contri- through its three strategic business units, e-Health Solutions globe Inc. since December 2001 and announced that, as previ- butions from its principal shareholders, América Móvil and BCI, Group, BCE Emergis – Canada and BCE Emergis – U.S.A. BCE ously indicated, it will now provide only short-term periodic in the amount of U.S.$240 million. Additional capital resources Emergis had operating revenues of $656 million in 2001. BCE funding on terms and conditions satisfactory to it. in the amount of U.S.$120 million were committed in the form Inc. owns approximately 65 per cent of BCE Emergis, with the On the same day, Teleglobe Inc. announced that in light of of a shareholder loan that is repayable in June 2004 in common remaining common shares being publicly held. the decision by BCE Inc. to cease long-term funding to Teleglobe shares of Telecom Américas. BCE VENTURES Inc., Teleglobe Inc. was now pursuing a range of financial BCE Inc. has started accounting for BCI as a discontinued BCE Ventures reflects BCE Inc.’s interests in Bell Canada Inter- restructuring alternatives, potential partnerships and business operation in the first quarter of 2002. national Inc. (“BCI”), Telesat, CGI Group Inc. (“CGI”) and combinations. To reach a rapid resolution of its situation, On December 3, 2001, BCI announced a recapitalization certain other BCE investments. BCI owns, develops and oper- Teleglobe Inc. announced that, in addition to the short-term plan intended to enable the company to meet its short-term ates advanced communications companies in Latin America. periodic funding which, as previously indicated, BCE Inc. may funding commitments. On January 11, 2002, BCI closed its Telesat delivers satellite business services primarily to North provide to Teleglobe Inc., it has taken the following steps: Tele- rights offering for total gross proceeds of $440 million, in American companies. CGI provides end-to-end information globe Inc. has retained an investment banking firm to assist in connection with its recapitalization plan. The public share- technology (“IT”) services and business solutions to customers the evaluation and pursuit of all viable options; Teleglobe Inc. holders exercised 42 per cent of the rights offered to them, with in North America, Europe and Asia. BCE Ventures had operating has accepted the resignation of all of its directors who were also BCE Inc. funding the remaining balance of $392 million. Also revenues of $1.7 billion in 2001. directors or officers of BCE Inc., and appointed Paul Farrar and included in the recapitalization plan was the settlement of J. Bruce Terry, to join H. Arnold Steinberg as independent approximately $478 million in obligations through the issuance Recent Developments members of its Board of Directors; and Teleglobe Inc. intends to of common shares (excluding the settlement of a put option On April 24, 2002, the Board of Directors of BCE Inc. announced retain Crossroads, LLC, an international consulting firm, to obligation). BCE Inc.’s percentage ownership in BCI after the that it has accepted the resignation tendered by Mr. Jean C. advise it as it evaluates restructuring initiatives. John G. settlement date of February 15, 2002 was diluted to approxi- Monty as Chairman and Chief Executive Officer of BCE Inc. Mr. McGregor, Principal, will be the lead consultant. Teleglobe Inc. mately 62 per cent, subject to further change upon settlement Monty’s resignation is effective as of April 23, 2002. The Board of also indicated that it anticipates discussions with its banks and of the put obligation. Directors further announced that it has appointed Mr. Michael bondholders to keep them apprised of the process. On August 26, 2001, Teleglobe Inc. and certain of its J. Sabia as Chief Executive Officer and Mr. Richard J. Currie as subsidiaries entered into definitive agreements for the sale of Significant Developments non-executive Chairman of the Board of Directors. Excel Communications group’s (“Excel”) North American oper- On April 24, 2002, BCE Inc. announced that it will cease On February 12, 2002, a private investor signed an agreement to ations to an affiliate of VarTec Telecom, Inc. (“VarTec”). The U.K. further long-term funding to Teleglobe Inc. BCE Inc. indicated purchase U.S.$300 million of common shares in Telecom operations, which are not part of the transaction, were shut that its decision is based on a number of factors, including: Tele- Américas Ltd. (“Telecom Américas”). This transaction is down during the year. Consequently, the results of Excel have globe’s revised business plan and outlook with associated expected to reduce BCI’s interest in Telecom Américas from been reported as discontinued operations. The transaction was funding requirements; a pragmatic assessment of Teleglobe’s approximately 42 per cent to approximately 39 per cent. The completed on April 5, 2002, and the final proceeds of approxi- prospects; and a comprehensive analysis of the state of the proceeds of the investment will be used to retire debt. The trans- mately U.S.$227.5 million were paid in the form of unsecured industry. Furthermore, BCE Inc. announced that it will provide action is expected to close in the second quarter of 2002 and is five-year interest-bearing promissory notes. only short-term periodic funding to Teleglobe Inc. subject to a number of conditions. In March 2001, BCE Inc. recorded a gain of approximately on terms and conditions satisfactory to BCE Inc. up to a On February 8, 2002, BCI with its partners, América Móvil $3.7 billion relating to the settlement of short-term forward maximum aggregate amount of between U.S.$100 million and S.A. de C.V. (“América Móvil”) and SBC International Inc. (“SBC contracts on approximately 47.9 million Nortel Networks U.S.$125 million so that Teleglobe Inc. can provide continuing International”), completed a reorganization of Telecom Corporation (“Nortel Networks”) common shares as well as the

4 2001 BCE Annual Information Form sale of an equivalent number of Nortel Networks common •the acquisition by BCE Inc. of all of the outstanding ITEM 3 • BUSINESSES OF BCE shares. These transactions resulted in total proceeds of approxi- common shares of CTV for a total purchase price of The information contained in this Item 3 is qualified in its mately $4.4 billion. BCE Inc. continues to hold approximately approximately $2.5 billion. entirety by the announcements made by BCE Inc. and Teleglobe 13 million Nortel Networks’ common shares of which six 1999 Inc. on April 24, 2002, which are described in Item 2 – “General million have been reserved to hedge BCE Inc.’s exposure to Development of BCE – Recent Developments” as well as by the special compensation payments, relating to Nortel Networks •the acquisition by Ameritech Corporation, since ultimate outcome of the events described therein. common shares, which were granted to employees under Nortel purchased by SBC Communications Inc. (collectively, Networks’ stock option plan prior to 2000. “SBC”), of a 20 per cent minority interest in BCH for Bell Canada Segment On January 9, 2001, BCE Inc., Thomson and Woodbridge $5.1 billion. GENERAL closed the transaction which resulted in the creation of the • as part of the foregoing transaction, the acquisition by Canadian multi-media company Bell Globemedia. BCE Inc. BCE Inc. at net book value of Bell Canada’s interest in Bell Canada’s revenues are reported along five lines of business: owns 70.1 per cent of Bell Globemedia and its principal contri- CGI, BCE Emergis and Telesat, and the transfer to Bell local and access; long distance; wireless; data; and terminal sales, butions were its wholly-owned interest in CTV and its indirect Canada, also at net book value, of BCE Inc.’s indirect directory advertising and other. The Bell Canada segment also 71 per cent interest in Sympatico-Lycos Inc. (“Sympatico- interest in Bell Mobility, Teleglobe Inc. and in several includes DTH revenues earned through Bell ExpressVu. The Lycos”). Thomson owns 20 per cent of Bell Globemedia and provincial and regional telecommunications companies, revenue distribution by percentage of the Bell Canada segment contributed all of the assets and undertakings of The Globe and namely Aliant, Northern Telephone, Northwestel and is shown in Table 3.1. Mail and of Globe Interactive. Woodbridge owns 9.9 per cent of Télébec. LOCAL AND ACCESS Bell Globemedia and contributed $385 million. Bell Globe- •the privatization by Bell Canada of Bell Mobility for Local and access revenues are earned principally by connecting media’s initial capitalization was approximately $4 billion. $1.6 billion. business and residential customers to the Bell Canada segment’s During the course of 2000 and 1999, the following signifi- •the launch by Bell Canada of Bell Nexxia, an IP/Broad- network and providing them with local area service. As at cant events have influenced the general development of band services company operating a network with over December 31, 2001, the Bell Canada segment provided about BCE’s business: 100 points of presence throughout Canada and the 13.3 million network access services to its residential and busi- United States. 2000 ness customers, which consist primarily of basic exchange •the acquisition by Bell Canada of an approximate 20 per services (residential and business individual lines), private •the closing of a joint venture agreement between BCI, cent interest in MTS and the launch by Bell Canada and branch exchange (“PBX”) trunk lines and centrex lines. Local América Móvil and SBC International and the formation MTS of Bell Intrigna Inc. (“Bell Intrigna”), a provider of and access revenues also include revenues from the provision of of Telecom Américas, a facilities-based communications access facilities offering an extensive suite of telecommu- SmartTouch services (for example, call waiting and call display) company which serves as the partners’ principal vehicle nication services to business customers in and to residential and business customers as well as consumer for expansion in Latin America. At closing, BCI and . terminal sales, and operator and directory assistance charges. América Móvil each held a 44.3 per cent interest in Additional details on the above and some of the other major All of the above services are provided to customers primarily on Telecom Américas while SBC International held an events that have influenced the businesses carried out over the a monthly contract basis. Payments from competitors accessing 11.4 per cent interest. last three years are discussed in Item 3 – “Businesses of BCE”. •the acquisition by BCE Inc. of all of the outstanding Reference is made to the discussion of such events for the common shares of Teleglobe Inc. that it did not already purposes of this Item 2. own, for an aggregate purchase price of $7.4 billion which was comprised of $240 million in cash and $7.2 billion in BCE Inc. common shares at $41.20 per BCE Inc. common 3.1 Bell Canada segment – Communications services (revenue distribution) share. Revenue distribution as a % of operating revenues for the years ended December 31 2001 2000 1999 •the distribution by BCE Inc. of an approximate 35 per Local and access 37 38 39 cent interest in Nortel Networks to BCE Inc. common Long distance 15 18 20 shareholders. BCE Inc. common shareholders received, Wireless 11 10 9 for each common share of BCE Inc. held, approximately Data 20 18 16 1.57 post-split common shares of Nortel Networks. DTH (Direct-to-home satellite service) 3 21 Terminal sales, directory advertising and other 14 14 15 100 100 100

2001 BCE Annual Information Form 5 the Bell Canada segment’s local network are also included in LONG DISTANCE National long distance and network services were formerly this revenue category. These payments include contribution Long distance revenues include long distance voice revenues, as managed on a nationwide basis by Stentor Canadian Network payments intended to help offset the costs of providing local well as long distance settlement payments from other carriers. Management (“SCNM”), a working association of provincial services and access charge payments associated with the inter- These services are provided through a variety of calling plans telephone companies, which was terminated in 1999. Effective connection of long distance competitors to the Bell Canada including residential discount calling plans such as Bell January 1, 2000, Bell Canada began providing national network segment’s network. A summary of local and access services Canada’s First Rate Savings Plans. Separate discount plans, management and operations support services to Commu- revenues, the number of network access services and estimated including toll and toll-free calling, are available to business nications Inc. and to Bell Canada’s partners Aliant, MTS and local market share is shown in Table 3.2. customers through Bell Canada’s Business Savings Plans. Telecommunications Holding Inc. (“Sasktel”). To ensure a seamless transition to customers, most of SCNM’s 3.2 Bell Canada segment – Local and access employees and functions were transferred to Bell Canada and to For the years ended December 31 2001 2000 1999 the other former SCNM members, with many of the operating Local and access revenues (in $ millions) 6,360 6,019 5,714 functions carried out by the same people, in the same locations, Network access services (in thousands of lines in service) using the same assets. Accordingly, SCNM was wound up on Residential 8,633 8,642 8,570 December 31, 1999. Business 4,706 4,719 4,548 Long distance revenues are derived from services originating 13,339 13,361 13,118 and terminating within the Bell Canada segment’s service terri- Estimated local market share (1) (Bell Canada territory only (2)) 95.8% 97.1% 98.7% tory, and from services provided with other telecommunica-

(1) The loss of business market share reflects facilities-based competition only. tions companies. A summary of long distance revenues and (2) Bell Canada operating territory in Québec and at December 31. other long distance statistics is shown in Table 3.3.

3.3 Bell Canada segment – Long distance WIRELESS For the years ended December 31 2001 2000 1999 Wireless revenues are primarily derived from the provision of Long distance revenues (in $ millions) 2,651 2,845 2,909 cellular, personal communications service (“PCS”), paging and Conversation minutes (in millions) 18,200 17,898 16,406 wireless data communications services, as well as airline (1) Revenue per minute (in cents) 14 15 n.a. passenger communications and wireless consulting services Local market share (% based on revenues) (2) 63.6% 62.0% n.a. (1) offered by the Bell Canada segment, namely Bell Mobility, (1) Reporting of these statistics began in 2000 only. Northern Telephone, Northwestel, Télébec and Aliant. Cellular (2) Bell Canada operating territory in Québec and Ontario at December 31. n.a.: not available. and PCS revenues are derived from subscription fees, air time usage, prepaid services, long distance, data, wireless Internet 3.4 Bell Canada segment – Wireless access, roaming and a variety of value-added services, such as For the years ended December 31 2001 2000 1999 voice mail and text messaging. Wireless services revenues (in $ millions) 1,839 1,515 1,336 Bell Mobility also generates revenues through the provision Cellular & PCS subscribers (in thousands, at December 31) of service to other service providers under resale agreements. Prepaid 964 717 518 This includes: the provision of analog cellular service to Micro- Postpaid 2,496 2,053 1,657 cell Connexions Inc, a subsidiary of Microcell Telecommunica- 3,460 2,770 2,175 tions Inc. (“Microcell”); the provision of cellular and PCS service Cellular & PCS net activations (in thousands) to Telus Mobility, complementing the coverage provided by Prepaid 247 199 n.a. (1) Postpaid 443 396 n.a. (1) Telus Mobility on its own facilities; the provision of cellular and PCS service to support General Motors’ “Onstar” in-car commu- 690 595 n.a. (1) nications service; and the provision of digital cellular service to Cellular & PCS average revenue per subscriber ($/month) 46 47 n.a. (1) Prepaid 13 13 n.a. (1) Bell Canada to provide wireless local loop service as an alterna- Postpaid 58 58 n.a. (1) tive to fixed lines in high cost areas. Usage per subscriber (minutes/month) 182 161 n.a. (1) A summary of the Bell Canada segment’s wireless services Postpaid churn rate (average per month) 1.5% 1.5% n.a. (1) revenues and other wireless services statistics is shown in Table 3.4. (1) Reporting of these statistics began in 2000 only. n.a.: not available.

6 2001 BCE Annual Information Form DATA revenues. A summary of DTH revenues and the other DTH companies such as MTS and others. This segment also includes Data revenues are generated from legacy data services and non- statistics is shown in Table 3.6. BCE Inc.’s 100 per cent interest in Bell ExpressVu. legacy data services. Legacy data services include digital trans- TERMINAL SALES, BELL NEXXIA mission services such as Megalink, network access for integrated DIRECTORY ADVERTISING AND OTHER Bell Nexxia, which began commercial operations in the first services digital network and data as well as competitive network Terminal sales, directory advertising and other revenues are quarter of 1999, is Canada’s largest IP/Broadband company, services and the sale of inter-networking equipment. Non-legacy primarily derived from the rental, sales and maintenance of delivering the full range of connectivity, content and commerce data services include national and regional IP/Broadband data, business terminal equipment and from directory advertising, as solutions offered by BCE. Dedicated to the large enterprise e-commerce and Internet services. Services such as managed well as network management. A summary of terminal sales, market, Bell Nexxia bundles products and services into fully private line service and digital private line service provide directory advertising and other revenues is shown in Table 3.7. managed, end-to-end, e-business solutions using a powerful customers with a high volume digital network for the transmis- IP/Broadband network. Bell Nexxia offers Internet services sion of voice, video and data messages. The Bell Canada segment SUBSIDIARIES AND ASSOCIATED COMPANIES including extranets, wide area networks (“WANs”), and also provides access to public digital packet switched networks The Bell Canada segment’s principal subsidiaries are: Bell managed networks packaged with traditional voice services. The as well as private line data transmission services. A summary of Nexxia, Bell Mobility, Bell ActiMedia, Aliant, Bell Distribution, national IP/Broadband network is directly and indirectly owned, the Bell Canada segment’s data revenues and Internet Bell West, Certen, Northern Telephone, Northwestel, Télébec controlled and operated by Bell Nexxia and has more than subscribers is shown in Table 3.5. and Expertech Network Installation Inc. (“Expertech”). The Bell 100points of presence in key locations throughout Canada and DTH Canada segment also has a cost investment in Teleglobe Inc. the United States. Effective February 12, 1999, Bell Nexxia DTH revenues primarily reflect revenues generated from DTH and interests in Canadian telecommunications associated obtained from the United States Federal Communications satellite service, including programming and pay-per-view Commission (“FCC”) section 214 authority to operate as a common carrier in the United States offering switched and 3.5 Bell Canada segment – Data private line services between the United States and the rest of For the years ended December 31 2001 2000 1999 the world. Data revenues (in $ millions) BELL MOBILITY Legacy 2,176 2,007 1,827 Non-legacy 1,383 912 442 Bell Mobility offers a full range of wireless communications 3,559 2,919 2,269 services to approximately 3.6 million Canadians, including PCS, Internet subscribers (in thousands, at December 31) (1) one- and two-way paging, data and airline passenger communi- DSL high-speed 757 336 n.a. (2) cations services, and also specializes in the sale of private radio Dial-up 1,019 847 n.a. (2) system equipment. Effective January 1, 2002, the four operating 1,776 1,183 n.a. (2) subsidiaries of Bell Mobility – Bell Mobility Cellular Inc., Bell

(1) High-speed Internet subscribers include consumer, business and wholesale subscribers. Dial-up subscribers include consumer and business subscribers. Mobility Paging Inc., Bell Mobility Radio Inc. and Skytel (2) Reporting of these statistics began in 2000 only. Communications Corporation – amalgamated to continue as n.a.: not available. Bell Mobility Inc. (referred to in this Annual Information Form as “Bell Mobility”). 3.6 Bell Canada segment – DTH The cellular services division of Bell Mobility (“BMC”) oper- For the years ended December 31 2001 2000 1999 ates a cellular telecommunications system in Ontario and DTH revenues (in $ millions) 474 305 133 DTH subscribers (in thousands, at December 31) 1,069 722 416 Québec and through resale arrangements in British Columbia DTH net activations (in thousands) 347 306 237 and Alberta. BMC also operates a digital PCS service in major Average revenue per subscriber ($) 45 47 44 urban areas within its service territory, including , Churn rate (annual) 10.3% 11.0% n.a. (1) Ottawa, Montréal and Québec City. BMC also operates a (1) Reporting of this statistic began in 2000 only. nationwide mobile data . The coverage areas n.a.: not available. served by BMC had an estimated population of 17.6 million at December 31, 2001. BMC’s cellular and PCS customers 3.7 Bell Canada segment – Terminal sales, directory advertising and other numbered approximately 2,932,000 at December 31, 2001, For the years ended December 31 2001 2000 1999 reflecting a 25 per cent increase from the corresponding 2000 Terminal sales, directory advertising and other revenues (in $ millions) 2,371 2,197 2,143 figure of approximately 2,340,000.

2001 BCE Annual Information Form 7 In May 1999, Bell Mobility launched a new service called its service territory population in Ontario and Québec and In 2001, Bell ActiMedia reorganized its sales channels in Mobile Browser, making it the first wireless PCS company in should soon reach 95 per cent. Traffic on Bell Mobility’s digital Ontario and Québec. North America to combine an Internet browser feature with a PCS network currently accounts for approximately 77 per cent In June 2001, Bell ActiMedia entered into an agreement with digital PCS handset. Users of Bell Mobility’s Mobile Browser of its total wireless network traffic. Amdocs for the implementation of a new back-office platform, service are able to log on to the Internet directly from their PCS The paging services division of Bell Mobility (“BMP”) oper- which would replace legacy systems related to service orders, handsets and view a number of Internet sites that are specially ates a one- and two-way paging system in Ontario and Québec products and services contracts. Starting 2002, the new platform adapted for small display screens, including Sympatico.ca, and is Canada’s largest paging operator. BMP had approximately began delivering cost savings across all operating units and Charles Schwab, i/money, TD Waterhouse, VeeV from Bank of 649,000 in service at December 31, 2001, a decrease of providing enhanced systems capability related to bundling, Montreal, canada.com, canoe.ca, Web 411, MSN Hotmail and five per cent from the approximately 685,000 pagers in service at Web interfaces and customer data. others. On February 9, 2000, Bell Mobility announced it December 31, 2000. In the fall of 2001, Bell ActiMedia made a strategic decision to was providing its customers with wireless access to more On May 23, 2001, Glenayre Technologies Inc. (“Glenayre”), focus on its core business in Canada and end its associations Internet sites and new “com-ready” handsets through its Mobile the paging network infrastructure supplier for major carriers, with companies in Asia, the Middle East and the Caribbean. The Browser service, including access to one of Canada’s most announced that it intended to exit the business in May 2002. decision to divest its international properties and investments popular Internet sites, the Yahoo! Canada Web site. Over Bell Mobility uses Glenayre’s technology in its paging and prompted the sale of most of Bell ActiMedia’s international 80 wireless consumer and business applications were in place at ReFLEX 2-way messaging operations. As a result of this properties. The only sale pending as of April 15, 2002, is the sale December 31, 2001. announcement, Bell Mobility had indicated that it was exam- of the Cayman Islands-based Caribbean Publishing Company On October 17, 2001, Bell Canada announced that Bell ining options for network infrastructure support past May 2002. Limited, a wholly-owned subsidiary. Mobility and Aliant Telecom Wireless (a business unit of Aliant) Since that time, Glenayre has indicated that it intends to In deciding to concentrate on its core business in Canada, entered into an enhanced ten-year network reciprocity agree- continue to provide paging network support to carriers. In Bell ActiMedia analyzed all operations and streamlined activi- ment with Telus Mobility (a business unit of Telus Corporation February 2002, Glenayre and Bell Mobility entered into a renew- ties according to the company’s new focus on technology- (“Telus”)) which is expected to significantly expand access to able two-year maintenance contract for the supply of mainte- driven offerings. This resulted in the decision to discontinue advanced digital voice and data services across Canada and to nance and support services to Bell Mobility’s paging network printing Yellow Pages directories in and bring competition to rural areas. This agreement extended the infrastructure. Accordingly, this should enable Bell Mobility to consolidate efforts around electronic delivery of directory current roaming and resale agreements between Bell Mobility continue to provide paging services. services, through Sympatico-Lycos. However, Bell ActiMedia will and Telus Mobility. It is anticipated that this agreement will The radio communications services division of Bell Mobility continue to provide customers in Alberta and British Columbia enhance the reach of Bell Mobility’s digital PCS across rural provides private and shared radio communications services in with free listing services on yellowpages.ca as well as a wide Alberta and British Columbia by providing access through the the transit, public security and utility markets. range of online marketing options. Telus Mobility network in the two provinces. As a result of this The Skytel communications division of Bell Mobility Created in January 2001, Bell Zinc is Canada’s leading agreement, Bell Mobility is expected to be able to avoid capital provides airline passenger communications services. provider of online services to small- and medium-sized enter- expenditures of more than $500 million over the term of the BELL ACTIMEDIA prises. Bell Zinc serves over 250,000 registered users by offering agreement. several business services including Unified Messaging Services, Bell ActiMedia is the Canadian leader in Yellow Pages products On September 17, 2001, Bell Mobility officially launched its an international Trade Directory and a Request for Proposal plat- and provides Internet access as well as e-commerce solutions Western expansion with its consumer marketing campaign in form, among others. through Bell Zinc Corporation (“Bell Zinc”), a wholly-owned Alberta and British Columbia. On February 22, 2002, Bell ActiMedia acquired the 12 per subsidiary of Bell ActiMedia which owns and operates the On February 12, 2002, Bell Mobility announced the launch cent interest in Bell Zinc previously owned by BigVine.com business-to-business (“B2B”) Web portal bellzinc.ca. Bell of its Code Division Multiple Access 1X wireless network, the (“BigVine”). BigVine LLC, a subsidiary of BigVine, carrying on ActiMedia also owns a 12.9 per cent partnership interest in fastest mobile data network in Canada, which is expected to be business under the name AllBusiness, continues to license Aliant ActiMedia, which operates in Nova Scotia, Prince Edward introduced across the majority of its national coverage area certain content to Bell Zinc. Island, Newfoundland and Labrador, and . throughout 2002. Confirming Bell Canada’s commitment to help Canadian As at December 31, 2001, Bell ActiMedia and Aliant Acti- Bell Mobility has played a major role in the development of small- and medium-sized enterprises harness the power of the Media had more than 60 per cent of the Canadian directory mobile cellular services in Canada. As of December 31, 2001, , Bell Zinc acquired Onvia.com Inc. – the Vancouver- market with close to 300,000 business customers advertising in Mobility had invested approximately $885 million in its digital based B2B e-marketplace – in July 2001, as well as a controlling 116 directories and 247 Yellow Pages sections; Bell Zinc had PCS network, including $273 million for the year ended interest in Césart Création Inc. – a Montreal-based e-marketing more than 250,000 registered members and 45 preferred part- December 31, 2001. Bell Mobility has rapidly expanded its and Web development firm – in December 2001, to bring ners throughout Canada. digital coverage area which currently covers some 91 per cent of

8 2001 BCE Annual Information Form enhanced e-business services to members and corporate software sales, the outright sales of investments, transaction that are operated corporately and by dealer and franchise partners. revenues, joint developments and joint ventures. This group’s operators. Bell Zinc also confirmed partnerships with some 45 leading primary operations are through Innovatia Inc. (“Innovatia”), BELL WEST organizations of Canada’s Internet economy including IBM Prexar LLC (“Prexar”) and AMI Offshore Inc. (“AMI”). Innovatia On April 11, 2002, Bell Canada and MTS announced that they Canada Limited, Sun Microsystems of Canada Inc., Canada Post is focused on the research and development of Internet-based have completed a transaction to create Bell West, which is and CIBC-Bizsmart. By integrating these best-of-breed players services for broadband networks. Innovatia designs, develops owned 60 per cent by Bell Canada and 40 per cent by MTS. Bell into the Bell Zinc business model, Bell ActiMedia has demon- and sells Internet-based applications to service providers world- West is a combination of the interests of Bell Intrigna and Bell strated its commitment to fostering the growth of the small- and wide. Aliant Horizons owns 96.4 per cent of Prexar, an Internet Nexxia in Alberta and British Columbia. Bell West operates medium-sized enterprises market in Canada. service provider based in Maine and servicing the Northern New under the Bell brand and focuses on businesses in Alberta and England State. AMI (57.4 per cent owned by Aliant Horizons) ALIANT British Columbia, providing a suite of advanced fibre-based data provides process and systems control technical services, logis- Aliant, held approximately 39 per cent by Bell Canada and and IP services, as well as a complete portfolio of telecommuni- tics and supply chain management and contract manufacturing approximately 14 per cent by BCE Inc., provides integrated cations products and services, including local and long distance solutions to the offshore oil and gas and other industries. The communications and IT solutions through its subsidiaries. services and business Internet services on a fully managed basis. emerging businesses segment also includes a number of port- Aliant is comprised of four core lines of business: telecom- The terms of the agreement between Bell Canada and MTS also folio and strategic investments in the Internet and e-commerce munications, information technology, remote communications include certain put and call options with respect to MTS’ 40 per area including minority interests in iMagicTV Inc., Exigen Ltd. and emerging businesses. cent ownership of Bell West. and Voice Mobility International Inc., among others. The telecommunications line of business is carried on by Previously, Bell Intrigna was two-thirds owned by MTS On October 4, 1999, Bell Canada announced its decision to Aliant Telecom Inc. (“Aliant Telecom”). Effective January 1, and one-third owned by Bell Canada. Bell Nexxia’s operations make a cash offer to purchase up to 15.8 million outstanding 2001, Aliant Telecom amalgamated with most of its wholly- in Alberta and British Columbia were 100 per cent owned by common shares of Aliant at $27 per share for a total considera- owned subsidiaries including Island Telecom Inc., Maritime Tel Bell Canada. tion of up to $427 million. On December 20, 1999, the offer was & Tel Limited, NBTel Inc. (“NBTel”), NewTel Communications increased to $27.50 per share and was made by BCE Inc. rather CERTEN Inc. and NewTel Mobility Limited. Aliant Telecom provides a full than by Bell Canada. On January 27, 2000, BCE Inc. announced In January 2001, Bell Canada and Amdocs Limited (“Amdocs”) range of voice and data communications services including that 30,580,538 common shares of Aliant were validly tendered created Certen, which is 89.9 per cent held by Bell Canada and local, long distance, data, Internet, interactive television and under the offer and that it had taken up and accepted for 10.1 per cent held by Amdocs. Certen offers best-in-class other wireline and wireless services. This line of business also purchase its previously announced allotment of 15.8 million products and services using Amdocs’ world leading billing soft- includes the results of 87 per cent owned Aliant ActiMedia, a shares, representing a proration factor of 51.21 per cent. ware for Bell Canada (including Bell Mobility and Bell Nexxia), telephone directory advertising business operating in Atlantic Following this purchase, BCE Inc.’s direct ownership interest in and is expected to offer Bell Canada’s customers the con- Canada. Aliant was approximately 13 per cent. Certain put and call venience of an integrated billing platform for all of Bell Canada’s The IT line of business is carried out through Xwave Solu- options have been put in place which, if exercised, will transfer services, including local, long distance, wireless, broadband and tions Inc. (“Xwave”). Xwave is an established Canadian IT the shares acquired by BCE Inc. to Bell Canada on agreed upon Internet services. services and fulfillment company with offices in the United terms, thereby bringing Bell Canada’s ownership of the By virtue of a shareholders’ agreement, both Bell Canada and States and Europe. common shares of Aliant to approximately 53 per cent. Amdocs hold a series of put and call options on their ownership Aliant’s investment in the remote communications business of Certen. is a 61 per cent ownership position in Stratos Global Corpora- BELL DISTRIBUTION tion (“Stratos Global”). Stratos Global is a Canadian-based In 1999, Bell Canada and Bell Mobility established Bell Distri- NORTHERN TELEPHONE, NORTHWESTEL public company offering mobile and fixed remote communica- bution to manage a new customer-focused chain of stores AND TÉLÉBEC tions solutions to a global customer base through a combina- providing one-stop shopping for a full range of communications Bell Canada also provides a full range of telecommunications tion of its own satellite and microwave telecommunications products and services for the home and office. Combining the services in Canada through wholly-owned regional companies, facilities, shared infrastructure and distribution of services of retail operations of both companies, the new stores Bell World namely Northern Telephone (Northeastern Ontario), North- other network operators. in Ontario and Espace Bell in Québec were the first retail westel (Northwest Territories, Nunavut, Yukon and Northern The emerging businesses segment is a group of companies network in Canada to provide complete and integrated commu- British Columbia) and Télébec (Québec). under the ownership of Aliant Horizons Inc. (“Aliant Hori- nications solutions including wireline, wireless and DTH On April 9, 2002, Bell Canada announced that a receipt for a zons”). These companies recognize revenue through several satellite services. This new retail network is made up of stores final prospectus had been issued on behalf of all securities regu- means: licensing of software, consulting services, one-time latory authorities throughout Canada for the sale of units of a

2001 BCE Annual Information Form 9 newly created income fund – Bell Nordiq Income Fund (the business. In any of such cases, Bell Canada would take all neces- high-powered direct broadcast satellite, to be called Nimiq 2. “Fund”). The Fund will acquire from Bell Canada a 40 per cent sary steps to minimize or offset any disruption in its ability to Subsequently, the satellite was redesigned to incorporate an interest in each of Télébec, Limited Partnership (“Télébec LP”) provide service to its customers. experimental Ka-band payload, in order to allow Bell ExpressVu and Northern Telephone, Limited Partnership (“Northern OTHERS to utilize the special authorization granted to it by Industry Telephone LP”). As part of this transaction, Télébec and Canada to utilize Ka-band radio spectrum at the 91°WL orbital Bell Canada also has interests in: Entourage Inc., a maintenance Northern Telephone will transfer substantially all of their assets position. As a result, following a successful launch and insertion and repair services provider for interior cables and exterior and liabilities to Télébec LP and Northern Telephone LP, respec- of the Nimiq 2 satellite at the 91°WL orbital position, planned networks; Nexxia Inc. (carrying on business as “Nexxia U.S.”), tively. The name of Télébec will also be changed to Bell Nordiq for early 2003, the Nimiq 1 satellite will be relocated to the a telecommunications services provider in the United States; Group Inc. (“Bell Nordiq GP”). After completion of the fore- 82°WL orbital position. Bell ExpressVu’s additional capacity will and Fibreco Inc. (carrying on business as “Fibreco U.S.”), which going transaction, Bell Canada is to hold an indirect 60 per cent be utilized for service improvements, especially with respect to holds a fibre optic cable network in the United States. interest in each of Télébec LP and Northern Telephone LP, High Definition services, and to provide in-orbit back-up to the through its indirect wholly-owned subsidiary, Bell Nordiq GP, BELL EXPRESSVU primary service satellite located at the 91°WL orbital position. the general partner of each of Télébec LP and Northern Bell ExpressVu delivers more than 300 and CD- The Commercial division of Bell ExpressVu gained signifi- Telephone LP. The net proceeds from this transaction (approxi- quality audio channels to over a million customers in homes, cant momentum during the year in expanding the market into mately $338 million assuming full exercise of the over-allotment apartment buildings and condominiums, and commercial multiple dwelling units (“MDU”). Bell ExpressVu finalized option) will be used by Bell Canada to reduce debt. The transac- establishments such as restaurants and other public viewing agreements for access to a total of 105,000 units in approxi- tion is subject to various closing conditions and approvals areas. As of December 31, 2001, Bell ExpressVu had acquired mately 2,000 MDUs across Canada. In the forthcoming year, which are expected to be met and obtained by the end of 1,069,000 subscribers in the marketplace, an increase of 347,000 Bell ExpressVu will aggressively market to residents of buildings April 2002. from the December 31, 2000 year-end total of 722,000. Approxi- with existing Bell ExpressVu infrastructure. EXPERTECH mately two thirds of all new subscribers attracted in 2001 were In September 2001, Bell ExpressVu launched a total of from urban markets with existing broadcasting distribution 42 new digital specialty channels, as part of the largest new tele- Expertech, 75 per cent owned by Bell Canada and 25 per cent competitors. This number is significant because it means that vision channel launch in Canadian history. As the market leader owned by SNC-Lavalin Group Inc., specializes in the installa- continues to be an effective competitive alter- in terms of the number of digital subscribers, Bell ExpressVu tion of telecommunications networks in North America, native in cabled areas. played a key role in this launch. In conjunction with the launch, whether they are optical, copper, coaxial or wireless. Bell ExpressVu introduced the Model 5100 Personal Video Bell ExpressVu took the opportunity to revise its packaging and MTS Recorder (“PVR”) in August 2001, which allows satellite televi- pricing in order to provide more choice to consumers. MTS, held approximately 22 per cent by Bell Canada, is a full sion viewers to record, store, pause, rewind and fast-forward live In 2002, Bell ExpressVu plans to introduce the “Combo service Manitoba telecommunications company providing programming. The PVR is integrated with a digital satellite Box”, a development of Bell Canada and EchoStar Communi- local, long distance, wireless, directory and multimedia receiver in the Model 5100 to provide a seamless television cations Corporation. The “Combo Box” will expand the poten- telecommunications services. viewing experience. tial market for Bell ExpressVu’s service by combining a DTH TELEGLOBE The introduction of the Model 5100 PVR was accompanied receiver/decoder, a digital subscriber line (“DSL”) gateway and a by the introduction of a new Model 3100 receiver, which storage device in a single portal appliance. Bell Canada has a 23 per cent ownership interest in Teleglobe replaced the Model 2700 as the entry level receiver model for Inc., which is accounted for at cost (refer to “Teleglobe” in this REGULATION consumers. Both the Model 3100 and the Model 5100 have the Item 3 for details). As previously discussed under Item 2 – capability of offering interactive television services – technology Bell Canada, Aliant and several of Bell Canada’s direct and indi- “General Development of BCE – Recent Developments”, BCE that will allow viewers to learn, shop and customize program- rect subsidiaries and associated companies, including Bell Inc. announced on April 24, 2002 that it will cease further long- ming. Bell ExpressVu introduced both an improved interactive Mobility and its subsidiaries, are subject to the jurisdiction of term funding to Teleglobe Inc. Such events have not yet had any electronic programming guide and an interactive weather fore- the Canadian Radio-television and Telecommunications impact on Bell Canada’s relationship with Teleglobe Inc. or its casting application in 2001, and is planning to offer video game Commission (“CRTC”), an agency of the Government of ability to provide service to Bell Canada’s customers. If Teleglobe interactive television applications in 2002. Canada. Several laws of specific application also govern the Inc. is not successful in negotiating a restructuring, business Bell ExpressVu continues to offer High Definition Television businesses of Bell Canada and Bell Mobility. combination or partnership, it may have to pursue alternative services to consumers, in conjunction with its High Definition courses of action. There is, accordingly, a risk that Teleglobe Inc. BELL CANADA ACT Television-capable receiver, the Model 6000. may become the subject of a court-supervised proceeding or In addition to the Canada Business Corporations Act, Bell Canada In May 2001, Bell ExpressVu finalized an agreement with that it may have to conduct a wind-down of some or all of its is also subject to the provisions of the Bell Canada Act. The Bell Telesat for the purchase of all 32 of the transponders on a new

10 2001 BCE Annual Information Form Canada Act imposes on Bell Canada an obligation to provide Canadian carrier must be a Canadian-owned and controlled Canadian ownership of 80 per cent of all outstanding and issued service which is limited by the Bell Canada Act to those territo- corporation, and must not otherwise be controlled by non- voting shares and 80 per cent of the votes. ries within which a general telephone service is provided. This Canadians. Specifically, a Canadian carrier is required to meet Similarly, indirect ownership in a broadcasting licensee legal obligation is further limited to premises which are located a minimum level of direct Canadian ownership of 80 per cent requires that the parent corporation of a broadcasting licensee within a prescribed distance from Bell Canada’s existing and a minimum level of indirect Canadian ownership of has a minimum level of Canadian ownership of two thirds of all network facilities. Bell Canada provides a general telephone 66 2/3 per cent. BCE Inc. indirectly owns 80 per cent of the outstanding and issued voting shares and two thirds of service to specific areas or regions within the provinces of outstanding voting shares of Bell Canada. To the best of BCE thevotes. Ontario and Québec which encompasses the vast majority of Inc.’s knowledge, the level of non-Canadian ownership of BCE In addition to the foregoing ownership constraints, not less telephone customers in the two provinces. Inc.’s common shares was approximately 10.4 per cent as at than 80 per cent of the board of directors as well as the chief The Bell Canada Act also provides for prior approval of the March 30, 2002. executive officer of a broadcasting licensee must be Canadian. CRTC of any sale or other disposal of Bell Canada voting shares In addition to the foregoing foreign ownership constraints, Parent corporations of broadcasting licensees which: have held by BCE Inc., except if such sale or disposal would result in the Telecommunications Act provides that not less than less than 80 per cent Canadian directors on the board of direc- BCE Inc. retaining not less than 80 per cent of all such Bell 80 per cent of the members of the board of directors of a Cana- tors; have a non-Canadian chief executive officer or have a Canada shares issued and outstanding. dian carrier must be Canadian. minimum level of Canadian ownership of less than 80 per cent, TELECOMMUNICATIONS ACT BROADCASTING ACT are required to demonstrate to the CRTC that neither such parent corporation nor its directors exercise control or influence In 1993, the Government of Canada passed the Telecommunica- In 1991, the Government of Canada amended the Broadcasting over any programming decisions of the broadcasting licensee. tions Act which updated and revised previous legislation Act in recognition of the need to modernize and consolidate governing telecommunications in Canada. The Telecommunica- existing legislation. Key policy objectives of the Broadcasting Act RADIOCOMMUNICATION ACT tions Act applies to several companies of the Bell Canada include the safeguarding and strengthening of the cultural, The use of radio spectrum by Bell Mobility and other wireless segment, including Bell Canada, Bell Mobility, Bell Nexxia, political, social and economic fabric of Canada as well as service providers (“WSPs”) is subject to regulation and licensing Northern Telephone, Northwestel, Télébec, Aliant and MTS. The encouraging the development of Canadian expression. The by Industry Canada pursuant to the Radiocommunication Act. Telecommunications Act defines the broad objectives of the Cana- Broadcasting Act assigns the regulation and supervision of the The Minister of Industry has the discretion to issue radio dian telecommunications policy and empowers the govern- broadcasting system to the CRTC. licenses, establish technical standards in relation to radio ment to issue to the CRTC directions of general application with Most broadcasting activities, such as Bell ExpressVu’s (and equipment and plan the allocation and use of the radio spec- respect to any of these objectives. Under the Telecommunications CTV’s, see additional disclosure under this Item 3 entitled “Bell trum. The Radiocommunication Act provides the legislative Act, all telecommunications common carriers, including Bell Globemedia – Regulation”), require a broadcasting license. authority to perform a number of functions with a view to Canada and Bell Mobility, are required to seek regulatory Licenses are awarded by the CRTC and typically extend for a ensuring the orderly development and efficient operation of approval for all proposed tariffs for telecommunications period of seven years at which time an application for a license radiocommunication in Canada and the orderly establishment services. The Telecommunications Act also requires that all rates renewal must be made to the CRTC. There are two principal and modification of radio stations. be just and reasonable and prohibits a carrier from conferring types of broadcasting licenses, one is for broadcasting program- Pursuant to the Radiocommunication Regulations, persons an undue preference or advantage on any person. However, ming and the other is for broadcasting distribution, which who are eligible to be issued radio licenses, such as Bell Canada under the Telecommunications Act, the CRTC has the power to includes terrestrial wireline, terrestrial wireless and satellite DTH and Bell Mobility, must comply with the same foreign owner- forbear from regulating, in whole or in part, particular services. distribution. Three subsidiaries or associated companies of Bell ship restrictions as are applicable to Canadian carriers under The CRTC has in fact issued various forbearance orders which Canada – Aliant, Northwestel and Télébec – have broadcasting the Telecommunications Act. have resulted in Bell Mobility being largely forborne from regu- distribution licenses that permit them to offer terrestrial wire- WIRELINE FRAMEWORK lation and Bell Canada partially forborne. The CRTC may also line, and to a lesser extent terrestrial wireless, broadcast distri- All of Bell Canada’s services, including services which are subject exempt an entire class of carriers from regulation under the bution services in defined areas within Nova Scotia, New to price regulation under the Telecommunications Act, are Telecommunications Act, where the CRTC finds that exemption Brunswick, Québec, Ontario, Northwest Territories and provided in an open and competitive environment. of the class of carriers is consistent with the objectives of Cana- Nunavut. Bell Canada’s major utility segment services (comprised dian telecommunications policy. The Broadcasting Act and its accompanying regulations primarily of basic local services) are subject to price cap regula- The Telecommunications Act and accompanying regulations require that for a corporation to obtain a broadcasting license, it tion as set out in Telecom Decision 97-9. also provide that, in order for a company such as Bell Canada or must be a Canadian-owned and controlled corporation, and Telecom Decision 97-9, issued on May 1, 1997, outlined the Bell Mobility to operate as a telecommunications common must not otherwise be controlled by non-Canadians. A broad- regulatory framework for the price cap regime implemented on carrier, it must be eligible to operate as a Canadian carrier. A casting licensee is required to meet a minimum level of direct January 1, 1998, including the principles and components of

2001 BCE Annual Information Form 11 the price cap formula applicable to a basket of telephone compa- final decision allowing recovery of approximately $220 million cations competition and deployment of advanced services at nies’ local services over a four-year period. During this period, of the estimated $250 million costs. affordable rates across Canada. price changes for this single basket of capped utility services On May 17, 1999, the CRTC announced, after an in-depth On November 30, 2000, the CRTC issued Telecom Decision were limited to the rate of inflation minus an adjustment for review, that it will not regulate new media services on the 2000-745, changing the contribution regime from a company productivity gains of 4.5 per cent. These price changes may be Internet and more particularly that new media services within specific long-distance per minute charge to a nationally aver- adjusted to account for the impact of any approved exogenous the purview of the Broadcasting Act will not require a broadcasting aged surcharge of 4.5 per cent on Canadian telecommunications factors, i.e., events which are beyond the telephone companies’ license. The CRTC concluded that new media on the Internet are revenues. This change effective January 1, 2001, had a negative control that are allowed to be reflected in the rates. The single achieving the goals of the Broadcasting Act and that any attempt impact on earnings before interest, taxes, depreciation and basket of capped services is divided into three sub-baskets (basic to regulate new media might put the Canadian industry at a amortization (“EBITDA”) (1) of BCE Inc.’s consolidated results of residential local services, single and multi-line local business competitive disadvantage in the global market place. approximately $70 million in 2001. This net impact reflects that and residual capped services), each subject to additional pricing In a letter decision dated March 9, 2000, the CRTC approved Telecom Decision 2000-745 was EBITDA positive for both Aliant constraints. The remaining utility segment services, including a proposal filed on December 13, 1999 by Bell Canada and other and Northwestel. Bell Canada and Bell Mobility applied to the optional services, are not subject to price cap constraints but are Incumbent Local Exchange Carriers (“ILECs”), to reduce Direct CRTC to vary this decision from the prescribed 4.5 per cent to tariffed. Essential services required by local and long distance Connect (switching and aggregation) rates paid by competitors 2.7 per cent for 2001. On March 15, 2001, the CRTC issued Order competitors, while not included with capped services, are gener- to interconnect with the ILECs networks. However, the CRTC 2001-219 denying the application by Bell Canada and Bell ally priced to recover incremental costs and make an appropriate denied the ILECs’ request to offset reduced Direct Connect Mobility to vary the terms of Telecom Decision 2000-745, as it contribution to fixed and common costs. The CRTC reviewed revenues with an exogenous adjustment to the price cap index. affects 2001. The CRTC held that a variance of the terms of its the current price cap regime in a proceeding which was On March 17, 2000, the ILECs appealed the CRTC decision decision, as requested by Bell Canada, would have caused completed in 2001. The CRTC’s decision which is expected on asking that the CRTC review and vary that part of its decision substantial local rate increases in other parts of Canada. More- or prior to May 31, 2002, will set the terms and conditions for that disallowed the exogenous factor adjustment. On May 16, over, the CRTC held that Bell Mobility’s request would have the new price cap regime. The terms of the price cap regime will 2000, the CRTC issued a decision that reversed its previous posi- amounted to giving wireless services preferential treatment over govern the pricing flexibility for local exchange and wholesale tion by allowing the ILECs to partially recover the Direct wireline services. services that Bell Canada will have going forward. Bell Canada Connect rate reductions. On December 18, 2000, the CRTC, in Orders 2000-1148 and believes that its proposals provide a proper balance between the On June 19, 2000, approval of Bell Canada’s third annual 1149, denied Bell Canada’s applications to increase the rates for interests of consumers and the interests of competitors by estab- price cap filing was essentially completed with the CRTC various calling features. On December 22, 2000, Bell Canada lishing the necessary foundation for the further evolution of approval of Tariff Notices (“TN”) 6465 and 6465a. TN 6465 and filed an application with the CRTC seeking to vary these Orders local service competition and the achievement of the ultimate TN 6465a, which became effective June 19, 2000, allowed Bell as Bell Canada believed these decisions were inconsistent with goal of full facilities-based competition in all telecommunica- Canada to increase prices for single-line residential telephone the parameters established for the current regulatory regime. On tions markets. However, there is no assurance that the CRTC will service for most customers, representing the first such increase March 21, 2001, the CRTC issued Order 2001-253 reversing accept Bell Canada’s proposals and Bell Canada cannot predict for residential customers in over two years. Also included as part Orders 2000-1148 and 1149 which denied Bell Canada’s appli- the final impact of the CRTC’s decision on Bell Canada. of the price cap filings were price decreases, filed and approved cations to increase the rates for various calling features. The rates In contrast to Bell Canada’s utility segment services, earlier in the year, for single-line and PBX services (used by originally proposed were approved effective March 21, 2001. competitive segment services (comprised primarily of long businesses of all sizes), as well as digital data services (used The annual revenue impact of these increased rates is approxi- distance, private line and data, and terminals) are largely primarily by larger businesses). mately $60 million. forborne from regulation. On June 28, 2000, the Governor In Council (“GIC”) On January 25, 2001, the CRTC issued Telecom Decision announced that it had dismissed appeals of Telecom Decisions 2001-23 regarding the terms and conditions of access by Cana- Significant Regulatory Decisions 99-15: Unbundled Local Loop Service Order Charges (filed by dian carriers to municipal property, as well as the entitlement On March 12, 1999, in Order 99-239, the CRTC established, on Call-Net Enterprises Inc. (“Call-Net”)), 99-16: Telephone Service of municipalities to compensation for allowing Canadian an interim basis, the manner in which Bell Canada can recover, to High Cost Serving Areas (filed by the Governments of Mani- carriers to occupy municipal rights-of-way. While the decision over a three-year period, costs associated with local competition toba and Saskatchewan and other parties) and 99-20: Review of was limited to the city of Vancouver, it is of importance to all start-up and local number portability. The portion to be recov- Frozen Contribution Rate Policy (filed by AT&T Canada Corp. ered from services subject to price cap regulation is to be (1) The term “EBITDA” used in this Annual Information Form does not have a (“AT&T Canada”) and other parties). In addition to upholding standardized meaning prescribed by Canadian Generally Accepted reflected as an exogenous factor in the price cap formula. On the CRTC decisions, the GIC also required that the CRTC report Accounting Principles (“GAAP”) and therefore may not be comparable to February 23, 2000, in Order 2000-145, the CRTC rendered its similar measures presented by other publicly-traded companies. Bell annually over a five-year period on the status of telecommuni- Canada uses EBITDA, among other measures, to assess the operating per- formance of its on-going businesses.

12 2001 BCE Annual Information Form carriers requiring access to municipal rights-of-way. By limiting a reasonable opportunity to make representations. Such revo- As a result, the terms and conditions associated with Bell municipalities to recovery of incremental costs, the CRTC has cation is rare and licenses are usually renewed upon expiration. Mobility’s cellular license are subject to the outcome of any such significantly reduced the potential charges applicable to Bell At this time, Bell Mobility knows of no reason why its current consultation initiated by Industry Canada. Canada and other carriers. The cities of Toronto, Ottawa, radio licenses will not be renewed as they expire. PCS License Halifax, , Vancouver and the Federation of Canadian Industry Canada typically assigns portions of the radio spec- In December 1995, following a competitive licensing process, Municipalities were granted leave to appeal the CRTC Decision trum on a first-come, first-served basis. However, in instances the Minister of Industry granted Bell Mobility one of four on May 14, 2001 and have since filed their appeal with the where the expressed demand for a given allocation of spectrum licenses to provide PCS in the 1.9 gigahertz (“GHz”) band for its Federal Court of Appeal. exceeds the amount available, a comparative selection process operating territory. The terms and conditions applicable to such On March 30, 2001, the CRTC, in Order 2001-278, approved has been used to identify which of the various proposed systems PCS licenses include requirements related to Canadian owner- monthly price increases ranging from approximately $0.25 to will be authorized, based on relative merit. Bell Mobility was ship and control, the time frame for rolling out service across $1.60 per residential customer per month, for local residential granted authority for its PCS network in December 1995, Canada, a restriction on cellular-affiliated PCS licensees to services. Local price increases were anticipated in Telecom Deci- following such a comparative selection process. According to provide PCS service in the 1.9 GHz band in each of the 25 major sion 2000-745, which introduced changes to the contribution criteria announced by Industry Canada in June 1995, the metropolitan areas prior to the commencement of service by at regime, and are designed to recover from local customers a successful applicants were to be judged according to, among least one PCS provider that is not affiliated with a cellular portion of Bell Canada’s national subsidy requirements for high other things, financial capability, service innovation, commit- licensee, resale of PCS and cellular services and facilities to other cost serving areas. ment to early and extensive deployment, technical, marketing PCS licensees, and research and development expenditures. The On April 27, 2001, the CRTC issued Telecom Decision and sales expertise and equipment availability. current term of Bell Mobility’s PCS license will expire on 2001-238, revising the unbundled local loop rates that compet- In February 1996, Industry Canada announced the results of March 31, 2006. As with the cellular license, Industry Canada itive local exchange carriers (“CLECs”) pay for the use of such its review of the radio licensing process. Industry Canada has noted its intention to engage in a public consultation that loops. The loop prices paid to Bell Canada have been reduced on concluded that a more streamlined version of the current will consider equating the (1995) PCS license conditions with average by 28 per cent. This aspect of Telecom Decision comparative process should be retained. At the same time, those of the recently auctioned PCS spectrum. As a result, the 2001-238 is not expected to have a material adverse effect on Industry Canada announced its intention to establish an alter- terms and conditions associated with Bell Mobility’s (1995) PCS Bell Canada’s financial results. This decision also addresses the native competitive selection process incorporating a bidding license are subject to the outcome of those consultations. costs to be used as the basis for establishing the subsidy require- procedure in instances where reliance on market forces is appro- ment under the national subsidy mechanism that was approved priate. Industry Canada released its Auction Framework in Spectrum Cap on November 30, 2000 in Telecom Decision 2000-745. On August 1998 but reiterated that auctions were only one of many In October 1998, Industry Canada issued Canada Gazette Notice December 14, 2001, the CRTC issued Order 2001-876, which tools it might use to allocate spectrum. Since that time, Industry DGTP-015-98 soliciting public comment on whether to established the revenue per cent charge for the national subsidy Canada has conducted several auctions subsequently awarding continue, modify or rescind the application of a limit on the program, on an interim basis, at 1.4 per cent for 2002. This spectrum in several frequency bands. aggregate amount of spectrum that may be held by PCS reduction, while significant, was expected at the time Telecom providers. At the time of the initial selection of PCS licensees in Cellular License Decision 2000-745 was issued, which set the charge at December 1995, Industry Canada adopted a Spectrum Cap The current term of Bell Mobility’s cellular license will expire on 4.5 per cent for 2001. Policy (“Policy”) which was set at 40 megahertz (“MHz”) and March 31, 2006. The material terms and conditions of its cellular consisted of frequency assignments for PCS at 2 GHz, cellular WIRELESS FRAMEWORK license include compliance with the Canadian ownership and radiotelephony and similar public high mobility radiotelephony control requirements established in the Radiocommunication Act Licensing Requirements services. Prior to the start of such consultation, Bell Mobility and associated regulations, notification of the Minister of All of Bell Mobility’s wireless communications services depend had licenses for 25 MHz of cellular spectrum and 10 MHz of PCS Industry prior to any material change in ownership or control on the use of radio frequencies. Industry Canada plans and spectrum. The stated objective of the Policy was to provide a in fact of Bell Mobility, and at least two per cent of adjusted gross assigns the use of spectrum in Canada for various wireless greater opportunity for competition. revenues (excluding intercarrier payments, bad debts and third communications systems and, where licensing is required, In November 1999, Industry Canada released its decision in party commissions) of Bell Mobility for the period from April 1, considers applications from prospective public and private its Policy Review, and increased the spectrum cap from 40 MHz 2001 to March 31, 2006, must be invested in research and devel- operators of such systems for licenses to operate those systems. to 55 MHz in any geographical area. In addition to the above opment related to wireless telecommunications activities. The Minister of Industry also has the authority to suspend or frequency assignments, the new aggregation limit also applies Industry Canada has noted its intention to engage in a public revoke radio spectrum licenses, if the license holder has contra- to any future spectrum that may be identified for PCS in subse- consultation that will consider equating the cellular license vened the Radiocommunication Act, regulations or terms and quent Industry Canada allocation proceedings. The same conditions with those of the recently auctioned PCS spectrum. conditions of its license and after giving the holder of the license proceeding announced the timing of the release of a remaining

2001 BCE Annual Information Form 13 40 MHz of PCS spectrum which was held in reserve at the time services provided in-house by NBTel and subsequently approved reduces Bell Mobility’s contribution payments for 2002 to of the awarding of PCS licenses in 1995. The FCC in the United the provision of current and future mobile services by the feder- approximately $21 million. States has recently announced its intention to sunset its spec- ally regulated members of the SCNM alliance. Telephone Charges for 911 Service trum cap policy as of January 2003. This action may cause Local Number Portability WSPs provide their customers with access to emergency 911 Industry Canada to further consider its spectrum cap policy in In December 1998, Microcell applied to the CRTC to impose service using the facilities of the wireline telephone companies. the future. wireless local number portability on the industry. In September Customers of the wireline telephone companies currently pay a PCS Auction 1999, the CRTC denied Microcell’s application. In the United per number monthly charge of $0.22 for access to municipally On June 28, 2000, Industry Canada released its policy and States, the FCC is considering a number of conservation initia- provided 911 service. This charge includes the provision of licensing procedures which governed the auction of the 40 MHz tives including some that may require the implementation of related features such as automatic location information to emer- of PCS spectrum held in reserve. Industry Canada determined number portability capability. Given the highly integrated gency answering centres. In an October 1999 decision, the CRTC that the spectrum would be subdivided into four blocks of nature of North American wireless networks, including the found that it would be appropriate for WSPs, because they do not 10 MHz to be authorized as regional licenses. The policy also requirement to support North America wide roaming, an FCC receive the same functionality as fixed location wireline determined that, subject to meeting Canadian ownership and decision requiring U.S. wireless carriers to implement such customers, to only be charged 50 per cent of the wireline 911 rate, control regulations and the provisions of the PCS spectrum cap, measures could prompt similar requirements in Canada. As i.e., a monthly charge of $0.11 per wireless telephone number. any entity would be permitted to participate in the auction. some U.S. wireless carriers are opposing such measures, the Enhanced Wireless 911 Service Existing competitors as well as new entrants participated in the timing of any such requirement is not clear. Due to technological limitations in wireline, wireless and 911 auction which concluded on February 1, 2001. Bell Mobility, Toll Contribution answering centre platforms, when wireless customers call 911 bidding on behalf of itself and its Bell Wireless Alliance (“BWA”) On May 1, 1997, the CRTC issued Order 97-590 in which it service, they are only provided with a voice link to the emer- partners, paid approximately $720 million to acquire 20 licenses determined that all WSP interexchange switched mobile voice gency answering centre. This contrasts to wireline service where across Canada, including Alberta and British Columbia. This services that originate or terminate on the telephone compa- databases, resident in the telephone network, provide the emer- resulted in a $1.40/pop/MHz of spectrum which compares to a nies’ public network would be subject to the payment of a long gency answering centre with the subscriber’s telephone number price of $6.28/pop/MHz in the recent U.S. auction. In the key distance contribution effective January 1, 1998. Another result for call back purposes, as well as with automatic location infor- Southern Ontario market, Bell Mobility acquired an additional of this Order is that cellular providers are no longer restricted mation. In 1996 in the United States, the FCC mandated WSPs 20 MHz of PCS spectrum. The new licenses will expire on from carrying on long distance between fixed landline stations. in that country to implement enhancements in wireless 911 November 29, 2011. Bell Mobility is now well positioned to The new contribution regime introduced by Telecom Deci- service in two phases. Phase 1 would provide the call back begin the deployment of its wireless services. sion 2000-745, which became effective January 1, 2001, applies number of the originating wireless telephone. Phase 2 would Forbearance to all Canadian telecommunications services providers, provide locational information to a fairly precise degree. While In December 1996, the CRTC confirmed an earlier decision that including WSPs, with revenues of over $10 million per year. Bell both phases would result in WSPs incurring costs, Phase 2 is esti- it was appropriate to forbear from regulating the rates for inter- Mobility paid $1.6 million in long distance contributions for the mated to involve substantial costs to retrofit wireless networks connected switched mobile voice services (i.e., cellular, PCS and year 2000, while revenue-based contribution for the year 2001 is to accommodate this requirement. Due to technical and related Enhanced Specialized Mobile Radio (“ESMR”)), other than wire- approximately $56 million. Bell Mobility and Bell Canada regulatory difficulties, the proposed implementation dates have less services provided in-house by the telephone companies. The applied to the CRTC for it to vary the terms of its decision so not been met, and have recently been extended. CRTC determined, however, that all interconnected mobile that in 2001, WSPs would be subject to a 1.5 per cent tax. On In light of the FCC regulatory initiatives, Canadian emer- service providers should remain subject to the statutory require- March 15, 2001, the CRTC issued Order 2001-219 denying the gency agencies have requested that the CRTC mandate similar ment prohibiting them from discriminating unjustly between application by Bell Mobility and Bell Canada to vary the terms requirements on Canadian WSPs. In response, in 1997 the Cana- customers. The CRTC also retained its jurisdiction to impose of Telecom Decision 2000-745, as it affects 2001. The CRTC held dian WSPs proposed the establishment of a joint WSP/emer- conditions on the provision of any interconnected switched that a variance of the terms of its decision, as requested by Bell gency agencies/telephone companies working group to examine mobile voice service. Other services (i.e., paging, data radio Canada, would have caused substantial local rate increases in the technical and regulatory considerations involved. The CRTC network, airline passenger communications and private and other parts of Canada. Moreover, the CRTC held that Bell and Industry Canada participate in the working group as shared radio services) are subject to unconditional forbearance Mobility’s request would have amounted to giving wireless observers. As a direct outcome of the working group’s activities, from regulation. services preferential treatment over wireline services. On all WSPs, including Bell Mobility, are currently engaged in an In October 1998, subsequent to an application from NBTel, December 14, 2001, the CRTC issued Order 2001-876, which enhanced wireless 911 trial in the York-Toronto area to provide the CRTC forbore from the regulation of cellular and PCS established the revenue per cent charge for the national subsidy the wireless call back number and improved emergency call program on an interim basis at 1.4 per cent for 2002. This

14 2001 BCE Annual Information Form routing. The trial ended on February 28, 2002, and a final report pay-per-view business authorized in 2000. In addition, Bell merged company is called AT&T Canada. AT&T Canada is active is expected by the end of April 2002. ExpressVu has obtained a Satellite Relay Distribution Under- in about 29 markets in Canada, including most urban areas such In a related development, on October 31, 2001, the CRTC taking broadcasting license which allows it to distribute, via as Toronto, Montréal, Ottawa-Gatineau, London and Québec issued Public Notice 2001-110 which, amongst other things, satellite, broadcasting programming services to terrestrial broad- City. Their foothold represents over 80 per cent of the address- considers whether WSPs should be mandated to offer E911 casting distributors throughout Canada. able market for local business lines in Canada. service to their clients in areas where E911 is commercially , an approved CLEC, is owned by Call-Net. COMPETITION offered by ILECs. In the meantime, E911 access service tariffs Sprint Canada competes in various markets including local, long have been approved, on an interim basis, in Telus’ and Bell WIRELINE distance, wireless products with interconnections to interna- Canada’s operating territories. Bell Mobility has argued that Bell Canada’s wireline services can be broadly classified under tional markets, data and Internet. Sprint Canada began offering mandates are not appropriate in the forborne and highly the following categories: local telephone service in Calgary, Vancouver, Toronto and competitive wireless segment. Bell Mobility and other WSPs Montréal in 1999. Basic Access Services have argued that the cooperative working group approach, Many regional companies have also received or registered for Basic access services are those services that allow Bell Canada to which includes the several stakeholders involved in the provi- CLEC status; however, due to the current economic climate, connect its customers to the network, i.e., basic local service. sion of wireless E911, is the more effective and prudent course. some of these companies are no longer in operation. Vidéotron, Bell Canada’s main competitors in basic access services include: Any decision to mandate WSP provision of wireless E911 service an approved CLEC, which operates its own facilities-based local AT&T Canada; Telus; Le Groupe Vidéotron Ltée (“Vidéotron”); could impose significant costs on Bell Mobility and other WSPs. service, was acquired by Quebecor Inc. (“Quebecor”) in 2000. and Call-Net. As discussed above, Bell Canada’s prices for basic A decision by the CRTC is pending. They offer service in the urban areas of Québec with offerings access services are subject to price cap regulation. On May 1, available in Montréal, Laval, Longueuil, Drummondville and Bundling and Joint Marketing 1997, the CRTC issued Telecom Decision 97-8, which estab- Granby. As permitted by Telecom Decision 98-4, Bell Canada and Bell lished the framework for local competition. In Telecom Decision Telus announced that it has completed a national fibre-optic Mobility are allowed to bundle their products and services with 97-8, the CRTC determined that: network to deliver high speed data and Internet services to busi- other companies, including each other and subsidiaries and • facilities-based entry into the local telephone market ness customers, including having a route immediately available associated companies, such as Bell ExpressVu. However, if would be permitted; through established agreements with 360Networks Inc. Telus is tariffed services are included in the bundle, the service bundle •new entrants are carriers equal in status and the new also in the process of constructing a metropolitan fibre-optic must be tariffed and pass an imputation test to ensure that framework must allow for the transition from a single infrastructure in Toronto, to be owned and operated by Telus. services are not sold at prices below cost. network to one of inter-operable networks; Wireless competitors (PCS and cellular license holders, such The relationship between Bell Canada and Bell Mobility is • all services of existing carriers and new entrants are to be as Telus Mobility, Microcell and Communica- expected to accelerate the delivery of bundled services, offer made available to competitors for resale; however, whole- tions Inc. (“Rogers”)/AT&T Wireless (U.S.)) have been posi- customers a single point of contact for their communication sale rates at a mandated discount are not required; tioning their services as alternatives to conventional wireline needs and improve overall cost structures allowing both compa- •new entrants’ retail prices will not be regulated; in the local market. To this end, Telus acquired nies to compete more effectively in the marketplace. •new entrants will have access to subsidies that ILECs Clearnet Communications Inc. (“Clearnet”), a national digital receive to provide service in higher cost areas; and DTH wireless company, in 2000. •new entrants must meet certain public interest require- Bell ExpressVu was awarded a broadcasting distribution license ments such as providing 911 and message relay service. Competitor Services for its DTH satellite TV service by the CRTC in December 1995 With terms and conditions for providing local telecommu- Competitor services are those services that Bell Canada provides and began operation in September 1997. Bell ExpressVu’s license nications services now established, new entrants are making to competitors that are used in the provision of competitive and the CRTC’s Broadcasting Distribution Regulations mandate their presence felt in this market. Many companies have been local and interexchange services. Many of the terms and various requirements in terms of the service that can be approved by the CRTC to operate as CLECs. conditions for local competition were determined in Telecom provided and how those services can be packaged. Bell On March 4, 1999, AT&T Canada and MetroNet Communi- Decision 97-15, which dealt with issues such as: co-location ExpressVu’s license allows it to provide service in all parts of cations Corp., a provider of data and voice services targeting access; requirements to obtain or resell co-location access; the Canada. Unlike cable companies, the price Bell ExpressVu medium and large business accounts in major Canadian urban type of equipment included in co-location and co-location sites. charges for its basic service is not regulated by the CRTC. areas, announced that they had entered into a definitive agree- In addition, in Telecom Decision 97-8, ILECs were required to Bell ExpressVu has been granted a pay-per-view program- ment to merge their respective companies in a transaction make local network components available to competitors on an ming license by the CRTC and operates a DTH pay-per-view valued at approximately $7 billion. The terms of the agreement unbundled basis, thus allowing competitors to provide service business pursuant to the terms and conditions specified in the were approved at a shareholders’ meeting in May 1999. The using a mix of their own facilities with those of the ILECs. Bell license. Bell ExpressVu has not yet initiated the terrestrial

2001 BCE Annual Information Form 15 Canada’s rates for these services are generally determined by a carrier. On May 31, 1999, AT&T Canada and Primus announced Internet services including extranets, WANs and managed cost plus markup formula. On November 30, 1998, the CRTC the consummation of a comprehensive strategic alliance in the networks packaged with traditional voice services. issued Telecom Decision 98-22 in which the CRTC established residential long distance consumer market in Canada. The Nationally, AT&T Canada has been Bell Canada’s most the rates that Bell Canada can charge CLECs to use its local agreement included the sale by AT&T Canada of its residential significant competitor in the data services market, offering access loops to compete in the local telephone service market. long distance customer base and consumer assets to Primus. frame relay and asynchronous transfer mode (“ATM”) services These rates were subsequently reduced in Telecom Deci- AT&T Canada retains a strong presence in the business market. to the business markets utilizing a Canada-wide ATM network. sion 99-15 to reflect anticipated cost efficiencies. The CRTC In Telecom Decision 97-19 issued on December 18, 1997, the Moreover, AT&T Canada has created a network with national, issued Telecom Decision 2001-694 and Order 2001-848 to CRTC concluded that the long distance and toll-free markets are high speed fibre-optic capabilities with bandwidth for delivery further reduce the service order charge based on updated cost now sufficiently competitive to protect the interests of of local, long distance, data and Internet services. information and to reclassify the band designations for certain customers, and that it would be appropriate to forbear from Sprint Canada strengthened its position in the data services telephone wire center serving areas. regulation of those services. As a result, Bell Canada is no longer business with its 1998 acquisition of Fonorola Inc., a long required to file and obtain CRTC approval of tariffs specifying distance services reseller which had become a facilities-based Options and Features rates for such services. However, Bell Canada is required to carrier and had been constructing a national fibre network. Its Options and features are discretionary services offered by Bell provide the CRTC, and to make publicly available, rate sched- service offerings include managed and unmanaged private line Canada to its customers, such as call waiting, calling number ules setting out the rates for North American basic long distance and virtual private networks (“VPNs”) over frame relay. identification and call answer. These services currently provide service, and to update them within 14 days of any change in Vidéotron is also focusing on residential High Speed Internet a substantial contribution to Bell Canada’s revenue base and such rates. In addition, the CRTC has placed a cap on these through its cable modem offering which is essentially available profitability. While these services are not capped, it is expected schedules such that the weighted-average rate for each schedule in all its territory. that in the longer term, with facilities-based local competition, will not be allowed to increase. These conditions were subject to Private line and data services had been competitive prior to margins from these services will decline. review during the price cap hearing in 2001. Competition in the 1979 on a non-interconnected basis and since 1979 for services Local Pay Telephones long distance market in Canada has been price intensive, connected to the public switched telephone network. In 1996, On June 30, 1998, the CRTC issued Telecom Decision 98-8, resulting from discount structures for term and volume the CRTC approved Bell Canada’s application for forbearance opening the local pay telephone market to competition. New contracts in the large business markets as well as from flat rate from regulation of its Datapac and HyperStream services. In a entrants into the market must meet certain requirements as set pricing in the residential and small business markets. Bell separate decision later in 1996, the CRTC also approved forbear- out by the CRTC. Bell Canada filed proposed tariffs on Canada intends to continue to compete vigorously and is ance for electronic messaging and information services. In both August 14, 1998 to allow competitors’ pay telephones access to committed to being competitively priced in all markets. decisions, the CRTC concluded that the market for those its local network. Removal of the last remaining barrier to long distance services was highly competitive. On December 18, 1997, the Rates charged by new entrants will not be regulated. competition took effect on October 1, 1998, when Teleglobe’s CRTC issued Telecom Decision 97-20 in which it noted that the However, rates charged by Bell Canada and other former SCNM exclusive right to provide certain international telecommuni- interexchange analog and other voice grade service sector, companies will continue to be monitored until, in the opinion cations services ended. The CRTC released Telecom Decision which it deemed to be distinct from the high capacity and of the CRTC, competition is sustainable. 98-17 in October 1998, which established a new regulatory digital data systems (“DDS”) service segments, required regime for international telecommunications services. The deci- continued regulation to protect the interests of customers. With Long Distance Services sion required that overseas carriers, including resellers, obtain a respect to the high capacity and DDS services, the CRTC Bell Canada’s major long distance competitors are all affiliated license from the CRTC from January 1, 1999; to date, numerous acknowledged that the sources of competitive supply had with U.S. carriers. No two countries in the world share as much parties have acquired licenses to provide international services, increased significantly and that there was evidence of sufficient cross-border traffic as Canada and the United States. making for an intensely competitive market. The decision also competitive supply to warrant forbearance on 20 specific routes. Sprint Canada has a considerable base of residential and eliminated traffic routing restrictions which previously required The CRTC also found that there were likely other routes, which business customers, and strong brand loyalty. Its market pre- the use of Canadian facilities for overseas traffic. would qualify for forbearance, and proposed a process to address sence in the United States, as well as in other parts of the world, further forbearance on a route-by-route basis. On May 12, 1999, is a key strength in the carriage of cross-border traffic, including Private Line and Data the CRTC announced that forbearance on additional routes traffic between Canada and the United States. The majority of In 1999, Bell Canada launched Bell Nexxia to provide IP/Broad- would be granted based on the existence of competing facilities this traffic originates and terminates in Bell Canada’s territory. band services to business customers. Bell Nexxia directly and on a route (competitors must file semi-annual reports identi- Other competitors include Primus Telecommunications Canada indirectly owns, controls and operates a national IP/Broadband fying qualifying routes). In subsequent rulings, the CRTC Inc. (“Primus”) and Telus. In March 1999, Primus acquired network with over 100 points of presence in key locations substantially extended the number of forborne routes to cover London Telecom Network Inc., an independent long distance throughout Canada and the United States. Bell Nexxia offers most major routes in Bell Canada’s territory.

16 2001 BCE Annual Information Form The key drivers in the data market include growth in Internet Industry Canada subsequently authorized the remaining PCS November 30, 2000, Rogers announced plans to overlay its access and applications using IP such as e-mail, Web site spectrum in its January 2001 PCS auction. In its pre-auction TDMA network with a GSM network with integrated General design/hosting and e-commerce; however, competition from consultation, Industry Canada considered, and subsequently Packet Radio Service packet data capability throughout its cable companies is not as important on the business side as it is declined, to adopt a new entrant set aside as part of its PCS nationwide digital coverage area. Rogers stated that the tech- on the residential side. Demand for faster and higher bandwidth auction policy. While eligible new entrants were permitted to nology change was to better position itself to evolve towards full access technologies, DSL and fibre access systems, applications participate in the auction, only one, Wireless2Net Inc., 3G wireless capabilities. GSM is the technology platform widely such as broadcast video, requirements for managed corporate succeeded in acquiring a limited amount of spectrum. Industry used throughout Europe and Asia. Rogers began its marketing and campus networks (VPN and ATM) and alternatives to dedi- Canada has stated its intention to reconsider the issue of setting of GSM phones in November 2001, and in January 2002, cated private line and circuit switched services are also aside spectrum for new entrants as part of the next licensing announced that its GSM service has been extended to reach increasing rapidly. round which is not expected prior to 2004. Should Industry 85 per cent of the Canadian population. Canada introduce such an approach for new entrants, further In October 1997, Clearnet launched its PCS service using Terminals competition in the wireless market may also be introduced in Code Division Multiple Access technology, which is the same Bell Canada has experienced substantial competition from a the future through the licensing of additional PCS and cellular PCS technology used by Bell Mobility. Clearnet has rolled out large number of companies in the provision of business and resi- operators. For additional information, see earlier disclosure its PCS network in major urban areas in British Columbia, dential terminal equipment in its operating territories, following under this Item 3 entitled “Regulation – Wireless Framework – Alberta, Ontario and Québec and has signed an agreement with CRTC decisions in the early 1980’s allowing the connection of PCS Auction”. In addition to competing with cellular and other Rogers to permit Clearnet customers to roam on the analog customer-owned terminal equipment to its facilities. existing wireless services, PCS is expected to eventually compete network of Rogers when outside of Clearnet’s own serving area. Service Outside ILECs Traditional Territory with local wireline access services. Clearnet is currently competing for customers and for distribu- On August 31, 2001, the CRTC issued Telecom Decision In November 1996, Microcell launched its PCS service in tion channels directly against Bell Mobility’s cellular and PCS 2001-534, granting forbearance to ILECs for service provided Montréal using Global System for Mobile Communications networks. Clearnet is also a Specialized Mobile Radio (“SMR”) outside of their traditional operating territory; however, it (“GSM”) digital technology. Microcell has rolled out its PCS operator that owns a national ESMR network in Canada offering retained powers to ensure that the confidentiality of customer network in major urban areas in British Columbia, Alberta, cellular-like service. Services offered using ESMR may also and competitor information is protected against undue prefer- Ontario, and Québec and has signed an agreement with compete with cellular service. ESMR refers to a low-powered ence or unjust discrimination. Mobility Canada to permit Microcell’s customers to roam on the ‘cellular-like’ communications service supplied by converting WIRELESS analog network of Mobility Canada when outside of Microcell’s analog trunk radio systems into an integrated digital transmis- own serving area. Microcell is currently competing for sion system. ESMR addresses certain of the technical limitations In 1985, Industry Canada awarded two cellular licenses in each customers and for distribution channels directly against Bell of existing SMR systems. In August 2000, Clearnet was acquired service area in Canada, which resulted in a highly competitive Mobility’s cellular and PCS networks. In Order 2000-831, issued by Telus. As a result of the acquisition of Clearnet, Telus Mobility cellular industry in Canada. Increased competition from the September 8, 2000, the CRTC approved on an interim basis was required by Industry Canada to return radio spectrum previ- introduction of PCS and the development of new products and Microcell’s proposed tariff, enabling it to operate as a wireless ously licensed to Telus Mobility and Clearnet in any regions services has heightened market awareness and stimulated CLEC. Microcell has subsequently received CRTC approval to where the merger resulted in the combined entity exceeding overall demand for wireless telecommunications services. operate as a CLEC in portions of Telus operating territory and Industry Canada’s spectrum cap. In December 1995, Industry Canada awarded four licenses to has indicated its intention to roll out its service across Canada. On May 11, 1999, Mobility Canada announced a major provide PCS in the 1.9 GHz range to Rogers, to two new PCS In addition, the CRTC is currently considering certain CLEC restructuring of its organization, creating two groups of wireless entrants (Clearnet and Microcell) and to the shareholders of related requirements identified in Order 2000-831, primarily carriers able to compete anywhere in Canada for the wireless Mobility Personacom Canada Ltd. (“Mobility Canada”), a those relating to wireless 911 and wireless equal provisions, that business of national customers. The agreement changes the company comprising the wireless affiliates or divisions of could influence the timing of Microcell’s deployment as a CLEC. wireless landscape in Canada by removing restrictions that kept Canada’s major wireline telephone companies, including Bell In November 1996, Rogers announced the launch of digital Mobility Canada members from competing in each other’s terri- Mobility. Bell Mobility and Rogers each received a license for PCS service on its 800 MHz network using its existing Time Divi- tories. The groups are each able to offer Canada-wide wireless 10 MHz of radio frequency spectrum, while subsidiaries of sion Multiple Access (“TDMA”) technology. At the same time, service, either by selling network services to each other or Clearnet and Microcell each received a license for 30 MHz of Rogers and AT&T Canada entered into a long-term strategic through direct competition. radio frequency spectrum. In its initial PCS licensing process, alliance which included the licensing of the AT&T brand to The first group is BWA, which covers Canada from coast-to- Industry Canada declined to award all of the available spectrum Rogers for use in connection with the marketing of its mobile coast and includes Bell Mobility, Island Tel Mobility, assigned to PCS, indicating at that time its intention to re-eval- wireless services. Effective January 17, 2000, Rogers changed its MTT Mobility Inc., NBTel Mobility, NewTel Mobility Limited, uate the need to allocate further PCS spectrum in two years. brand name from Cantel AT&T to Rogers AT&T Wireless. On

2001 BCE Annual Information Form 17 MTS Mobility and Sasktel Mobility. The other group is repre- Nationally, Bell ExpressVu also faced increased competition ENVIRONMENT sented by Telus Mobility. from the sale of equipment for the reception of pirated U.S. DTH Bell Canada monitors its operations to ensure their compliance Under the agreement, Mobility Canada may continue to services, such as DirecTV and Echostar. The sale of the illegal with applicable environmental requirements and standards and provide national wireless service for the duration of all existing equipment grew substantially during 2001. implements preventative and remedial action as required. Bell contracts with national customers. It may also continue its role Bell ExpressVu’s estimated market share compared with Star Canada has put in place an environmental management and as a provider of billing and settlement services for all member Choice grew to 60 per cent as at December 31, 2001, and 70 per review system which identifies potential environmental prob- companies. cent of new DTH activations during the month of December lems or opportunities, establishes a course of action and ensures Bell Mobility competes directly with Rogers, Telus Mobility 2001 were with Bell ExpressVu. ongoing improvement through a feedback process. and Microcell for cellular and PCS customers, dealers and retail Regionally, Bell ExpressVu competes with the existing cable One of the key management and review system tools is the distribution outlets. Competition for subscribers is primarily on Multiple System Operators, Rogers, Shaw, Vidéotron and Corporate Environmental Plan which essentially details the the basis of price, services and enhancements offered, the tech- , as well as smaller local cable companies. environmental activities undertaken by the various business nical quality of the cellular and PCS system, customer service, In some regions of Canada, Bell ExpressVu competes with units within Bell Canada. The plan identifies, over a three-year distribution, coverage and capacity. digital wireless operators such as Inc.’s period, funding requirements, accountabilities and deliverables, The combination of cellular and PCS licenses provides a Look TV in Southern Ontario and Québec (in which Teleglobe and allows for the follow-up of Bell Canada’s progress in competitive advantage and favourably positions Bell Mobility Inc. owns an interest), International’s SkyCable meeting its objectives supporting its policy. in the marketplace to benefit from accelerating wireless market in Manitoba, and Skinner Group’s Image Wireless Communica- For the year ended December 31, 2001, a total amount of growth while maintaining its existing customer base. Bell tions in Saskatchewan. Each of these three companies has less approximately $12 million (79 per cent which were expenses Mobility intends to compete vigorously in the wireless markets than 100,000 subscribers each. and 21 per cent which were capital expenditures) has been spent of the future, using its proven capabilities in the deployment C APITAL EXPENDITURES on environmental activities. For 2002, Bell Canada has budgeted and operation of wireless networks and its marketing expertise. a total amount of approximately $14 million (79 per cent which It also intends to continue to enhance its existing wireless Bell Canada continues to make large capital expenditures to are expenses and 21 per cent which are capital expenditures) to services as technology evolves, to apply for new radio licenses meet the demand for telecommunications services and the ensure the proper application of its environmental policy and and to deploy new services to the benefit of its customers. improvement of such services. the minimization of its various environmental risks. Bell Canada’s consolidated capital expenditures for the past DTH Bell Canada is one of the founding members of the North three years are shown in Table 3.8. Bell ExpressVu became the fourth largest broadcasting distribu- American Communications Environmental Excellence Initia- During 2002, capital expenditures are expected to be reduced tion undertaking in Canada during 2001, ahead of Cogeco tive which led, in 1999, to the finalization and signing of a to approximately $3.4 billion. This reduction is mainly attri- Cable Inc. (“Cogeco”) and behind Rogers, Shaw Communica- charter aimed at guiding the telecommunications industry in buted to non-recurring expenditures that were incurred in 2001 tions Inc. (“Shaw”) and Vidéotron in terms of total number of the management of its environmental issues. for the purchase of Bell Mobility’s PCS spectrum licenses. A subscribers. Bell ExpressVu’s main competitors can be broadly A second important milestone of this initiative was reached significant portion of 2002 expenditures will be related to the divided into national and regional competitors. in 2001, when ten leading North American telecommunications growth initiatives such as IP/Broadband, increased digitaliza- Nationally, Bell ExpressVu competes against Star Choice Tele- companies, including Bell Canada, jointly produced an industry tion of the wireless network, national expansion including, but vision Network Inc. (“Star Choice”), a DTH operator owned by report which provided objective guidelines for measuring not limited to, Western Canada, and continued deployment of Shaw through Canadian Satellite Communications Inc. the industry’s effect on the environment. Bell Canada believes high-speed access infrastructure. Capital spending is also (“Cancom”). Star Choice launched its service in April 1997, that this is a significant step forward in determining how expected to support, to a lesser degree, convergent billing and several months prior to Bell ExpressVu. On January 24, 2002, telecommunications technologies can help contribute to the productivity initiatives. The overall anticipated increase in Shaw and Cancom announced their consolidated financial development of meaningful solutions to the many global capital expenditures for wireless services is expected to be results for the first quarter ending November 30, 2001. Star challenges. mainly offset by reduced expenditures for traditional wireline Choice ended the quarter at 674,000 subscribers, and ended the services. Bell Globemedia December 31, 2001 calendar year at 699,000 subscribers. GENERAL

3.8 Bell Canada – Capital expenditures (1) Bell Globemedia is a Canadian multi-media company in the 2001 2000 1999 fields of broadcasting, print and the Internet, created on Capital expenditures (in $ millions) 4,099 2,852 2,499 January 9, 2001. Bell Globemedia provides integrated informa- (1) Comprised of Bell Canada’s capital expenditures only. tion, communications and entertainment services to Canadian

18 2001 BCE Annual Information Form customers and access to distinctive Canadian content. Through CTV Revenues from print are primarily advertising revenues its various Internet media properties, Bell Globemedia also representing 78 per cent of total revenues. Circulation revenues CTV’s principal business is the operation of conventional tele- provides unique destinations for Internet users. Bell Globemedia represent 16 per cent of total revenues while the remaining vision broadcasting stations. CTV operates the CTV Television is comprised of: the television operations of CTV (which six per cent is generated from other sources. Network, a private English-language national television operates the CTV Television Network and several specialty The Globe and Mail’s advertising revenues decreased in 2001 network, through wholly-owned television stations across channels); the print operations of Bell Globemedia Publishing due to the slowdown in global economic activity that began in Canada and through affiliation agreements with non-owned carrying on business under the name The Globe and Mail; the the second quarter. Maintaining growth is dependent on television stations. CTV holds and operates licenses for televi- interactive operations of Bell Globemedia Interactive; and other general economic conditions as well as the ability to maintain sion broadcasting undertakings in Toronto, Ottawa, Sudbury, media interests. market share. To date, The Globe and Mail’s market share of Sault Ste. Marie, North Bay, Timmins and Kitchener, Ontario; In 2001, Bell Globemedia completed the following signifi- advertising volume against its key competitors in the Toronto , Manitoba; Saskatoon, Regina, Yorkton and Prince cant transactions: marketplace remains constant at 31 per cent. Albert, Saskatchewan; Calgary, Lethbridge and , •exchanged its investment in, and cash commitments The key cost drivers in the print division are the cost of edito- Alberta; Vancouver, British Columbia; Montréal, Québec; towards, Landscape Entertainment Corp. for a 20 per cent rial content and staff, the number of copies circulated and the Halifax and Sydney, Nova Scotia; and Moncton and Saint John, economic interest in Film Holdings Co., the parent size and complexity of the product. At current levels, printing New Brunswick. In addition, CTV holds licenses for and oper- company of Artisan Entertainment Inc.; represents approximately 28 per cent of total operating costs ates rebroadcasting facilities in Ontario, Manitoba, • purchased CF Television Inc. (“CFCF-TV”) and CKY-TV, while compensation and newsprint represent 28 per cent and Saskatchewan, Alberta, Nova Scotia, New Brunswick and Prince two CTV affiliated television stations in Montréal and 14 per cent, respectively. The price of newsprint has been Edward Island which allow CTV to extend the reach of its broad- Winnipeg, respectively, for a total aggregate cash consi- declining since May 2001. casting operations in these areas. CTV’s principal source of deration of approximately $183 million; All printing is performed on a contract basis with long-term revenue is the sale of airtime for commercials aired on its televi- • sold its 40 per cent interest in CTV Sports Net Inc. (“CTV agreements in place at all six printing locations. During 2001, sion stations. ”), a specialty channel, for a total cash consider- all contract printers upgraded their presses for The Globe and CTV has ownership interests in and/or manages several ation of approximately $138 million; Mail to allow 50 per cent of the newspaper to be printed in specialty channels, including CTV Newsnet, The Comedy • completed the acquisition of a 100 per cent ownership colour, in order to meet increased colour demands from its Network, Outdoor Life Network, Talk TV, TSN, RDS and interest in Report on Business Television (“ROB TV”) advertisers. Capital requirements are generally restricted to Discovery Channel. These specialty channels derive revenues from affiliates of Thomson, pursuant to a previous system improvements and are not required for printing plant from advertising and from subscription payments set at a agreement; expansion. The Globe and Mail expects to make continued monthly rate per subscriber as determined by contracts with the • acquired 29.9 per cent of The Comedy Network, a system improvements over the years. distributors of the particular service. CTV is also involved in the specialty channel in which it previously held a 65.1 per production and distribution of television programs. CTV’s BELL GLOBEMEDIA INTERACTIVE cent ownership interest, for a cash consideration of production and distribution revenue is generated primarily approximately $36 million; and Bell Globemedia Interactive was created in the second quarter from the production of commercials for advertisers and the sale • announced an agreement with Cogeco, whereby Bell of 2001, as a division of Bell Globemedia, and is responsible for of programs and distribution rights. Globemedia would contribute approximately $72 mil- operating, maintaining and commercializing Bell Globemedia’s CTV’s television operations have grown primarily through lion in cash for a 40 per cent interest in a newly created various Internet media properties. Bell Globemedia Interactive acquisitions as well as by winning licenses through competitive company that would hold a 99 per cent interest in the operates a number of popular Internet media properties in the applications. TQS network as well as other television stations. Bell Finance, Careers, News, Entertainment and Sports categories, Globemedia closed the TQS transaction on February 15, BELL GLOBEMEDIA PUBLISHING which leverage extensively the well-known Bell Globemedia 2002. family brands and associated content and services. These media The Globe and Mail is an English-language print and electronic In January 2002, Bell Globemedia acquired the remaining properties include: daily Canadian newspaper (Canada’s largest national news- five per cent interest in The Comedy Network for a cash consid- • In the Finance category: The Globe financial network of paper), founded in 1844, publishing one Toronto and one eration of approximately $6 million, and sold its 12 per cent properties, including globeinvestor.com, globefund.com, national edition each day, six days a week, from six locations. interest in the History Channel for cash proceeds of approxi- globeadvisor.com and robtv.com, which provide compre- Total circulation amounts to approximately 364,000 copies per mately $20 million. hensive Canadian and global coverage of financial, busi- day Monday to Friday and 437,000 copies on Saturday, and total ness and investment news and services. These sites readership can reach over one million persons per day. generate revenues from the sale of advertising, sponsor- ships and promotions, as well as from distribution and

2001 BCE Annual Information Form 19 content syndication arrangements. In addition, in • Canadian Internet Directories: The canada411.ca and the The CRTC requires that in application for a transfer of owner- December 2001, Bell Globemedia Interactive launched a yellowpages.ca sites offer comprehensive English and ship or control of a television programming undertaking, subscription-based premium financial information and French electronic residential and business listings, significant and unequivocal tangible benefits representing a services website, globeinvestorgold.com, which generates allowing users to locate, sort and obtain relevant infor- financial contribution of 10 per cent of the value of the transac- revenue from both advertising and recurring user fees. mation on persons and businesses throughout Canada. tion be included. The CRTC policy is based on the CRTC’s view • In the Careers category: workopolis.com English (owned • Network of City Sites: This network consists of a that the absence of a competitive process for changes to the in partnership with Torstar Corp. (“Torstar”)) and series of local Web sites, including vancouverplus.ca, ownership or control of television programming undertakings workopolis.com French (owned in partnership with calgaryplus.ca, edmontonplus.ca, ottawaplus.ca, montreal- makes the benefits test an appropriate mechanism for ensuring GESCA Ltée) represents the meeting place of job plus.ca, quebecplus.ca and toronto.com (owned in part- that the public interest is served. recruiters and candidates generating revenues from distri- nership with Torstar), each providing an aggregation of On December 7, 2000, the CRTC approved the acquisition bution arrangements, postings and e-solutions. local Web programming, including information on arts by BCE Inc. of CTV. As part of the transaction, a tangible bene- • In the News, Entertainment and Sports category: Each of and entertainment, weather, news, community informa- fits package totalling $230 million over seven years was globeandmail.com, globetechnology.com, ctvnews.com, tion and more. approved. As of December 31, 2001, the balance remaining on tsn.ca, rds.ca, exn.ca, talktv.ca, comedynetwork.ca and BUSINESS AND MARKET the $230 million commitment was approximately $206 million. .ca offers consumers an online wealth of information, CTV also has combined benefit commitments of approxi- In 2001, advertising revenues represented approximately 57 per tools and resources under well-known brands in Canada. mately $59 million for other CRTC approved acquisitions of cent of Bell Globemedia Interactive’s total revenues. Licensing These sites generate revenues from the placement of television programming undertakings including NetStar, ROB and distribution generated approximately 10 per cent of total advertising and promotions, as well as from distribution TV, CKY-TV and CFCF-TV. The balance remaining on these revenues while the remaining 33 per cent was derived through and content syndication arrangements. In addition, in commitments as of December 31, 2001, is approximately subscription, transaction, e-solutions and consulting revenues. December 2001, Bell Globemedia Interactive launched a $50 million, the majority of which will be payable over the next According to Jupiter Media Metrix, the Bell Globemedia subscription-based premium sports Web site, tsnmax.ca, five years. Interactive collection of websites attracted over 9.8 million which generates revenue from both advertising and Pursuant to the provisions of the Income Tax Act, the cost of unique Canadian visitors during the month of December 2001, recurring user fees. advertising in a newspaper is deductible for the advertiser’s tax out of an estimated 15 million unique online users in Canada, purposes if the newspaper qualifies as a Canadian newspaper. In SYMPATICO-LYCOS representing over 65 per cent of online reach in Canada. order to qualify as a Canadian newspaper, The Globe and Mail Bell Globemedia owns a 71 per cent interest in Sympatico-Lycos. REGULATION must generally be held by a corporation incorporated under the Sympatico-Lycos was created in April 2000, as a joint venture laws of Canada, of which the chairperson and at least three with Lycos, Inc. of Boston (now Terra Networks, S.A., as a result CTV is subject to the provisions of the Broadcasting Act. For more quarters of the directors are Canadian citizens and which is not of the combination of Terra Networks, S.A. and Lycos, Inc. in information on the Broadcasting Act, see earlier disclosure under controlled by non-Canadians. As at the date of this Annual October 2000). this Item 3 entitled “Bell Canada Segment-Regulation-Broad- Information Form, The Globe and Mail qualifies as a Canadian Sympatico-Lycos provides an integrated collection of local, casting Act”. newspaper. national and global Internet content, products and services, On August 2, 2001, the CRTC renewed the licenses of all the including Web search and directory services, Internet commu- television stations owned and controlled by CTV for a full seven- COMPETITION nications and personalization features and various other year term. Furthermore, the CRTC imposed several conditions The Internet is driving the convergence of new media (i.e., Internet-based products and services for the consumer and of license, including a requirement to adhere to a Statement of graphical, audio and video digital media), and established small office/home office market in Canada. The Sympatico- Principles and Practices to ensure editorial independence media, including publishing and broadcasting. While conver- Lycos offerings are made available through its network of between the broadcast and print media interests, and to estab- gence remains at its early stages, industry participants have leading Canadian Web properties, including: lish a monitoring committee to address complaints concerning begun to position themselves for the new environment. This is • National Portal: The sympatico.ca portal, offered in both CTV’s compliance with the Statement of Principles and Practices. not a trend limited to Canada but is occurring around the world. English and French, provides a one-stop destination for When CTV’s acquisition of NetStar Communications Inc. Some competitors have chosen to proceed with strategies similar online content, information and communications tools, (“NetStar”) was approved by the CRTC in March 2000, the to that of BCE ensuring a presence in a broad cross-sector of products and services, leveraging content and tools from CRTC directed CTV to divest its interest in CTV SportsNet. In industry segments, while others have decided to focus more within the BCE group of companies and other leading July 2001, CTV, through its trustee, announced the sale of its narrowly on content development, for example. The creation of global content and service providers. 40 per cent interest in CTV SportsNet. This transaction was Bell Globemedia positions BCE to compete more effectively in completed in November 2001. the Internet age.

20 2001 BCE Annual Information Form Each of Bell Globemedia’s component businesses faces competing with a greater number of Internet and media compa- with nearly every major international telecommunications vigorous competition from well-financed, and in many cases, nies, including companies offering both wireline and wireless carrier in the world, including national PTTs (i.e., government well-established competitors in their respective core markets. communications services and features as well as companies owned or controlled monopolies known as Post, Telegraph & Based on industry rating surveys, CTV’s broadcast operations involved in the broadcast, distribution and communication of Telephone Companies which usually provide domestic and enjoy a significant market position within their broadcast areas. content and related services. international services) and incumbent carriers, and also with However, CTV encounters substantial competition for viewers emerging carriers recently established as a result of the deregu- Teleglobe and corresponding advertising revenues in markets it serves lation of telecommunications markets. Teleglobe maintains from the Canadian Broadcasting Corporation (“CBC”) and The following information with respect to Teleglobe is qualified information systems designed to allow for network optimiza- CanWest Global Communication Corp. (“CanWest”). CTV also in its entirety by the announcements made by BCE Inc. and tion, least cost routing and the centralization of processing func- competes with CHUM Limited, which has a multi-regional pres- Teleglobe Inc. on April 24, 2002, which are described in Item 2 tions principally located at Teleglobe’s International Network ence, a number of specialty channels, and other Canadian and – “General Development of BCE – Recent Developments”, by Operating Center in Montréal and at its Internet Operating foreign conventional and specialty broadcasters. This competi- the ultimate outcome of the events described therein and by the Center in Reston, Virginia. tion has intensified over recent years. Market fragmentation has risk factors described in this Item 3 under the heading “Forward- PRINCIPAL MARKETS increased over the last decade as a result of the introduction of Looking Statements – Risk Factors – Risks Associated with Teleglobe has structured its regional operations to be managed additional television services, the expanded reach of existing April 24, 2002 Announcements”. locally, with centralized financial, network, IT and product signals and increased use of VCRs. The deployment of digital GENERAL development. Teleglobe enters new markets primarily by hiring capability further extends the choices available to Canadian local professionals who are better positioned to understand the viewers as new Canadian and foreign services are made available. Through operating subsidiaries of Teleglobe Inc., Teleglobe relevant markets. Teleglobe markets its products and services The Globe and Mail competes with a broad range of print provides global communications and e-business services through its sales force located in over 110 countries as well as media for subscriber and advertising revenues. Before 1998, The including voice, Internet connectivity, high-speed data trans- through agents and resellers. Globe and Mail was the only national newspaper in Canada. mission, hosting, broadband, broadcast and other value-added Since the launch of the National Post in that year and the services on a wholesale and retail basis. Teleglobe serves over North America. Teleglobe has international and domestic oper- launch of several transit papers in the key Toronto market, 1,000 customers, with approximately 50 per cent of such ating authorizations from the FCC in the United States and a competition has intensified. The Globe and Mail also vies for customers being ISPs, application service providers, and content full facilities-based license from the CRTC as well as the subscribers and advertisers with The Toronto Star owned by and broadband providers, approximately 40 per cent of such authority to provide services on a resale basis in Canada. These Torstar, Quebecor’s Sun Media newspaper chain, CanWest’s customers being carriers and approximately 10 per cent of such licenses and authorizations authorize Teleglobe to offer its numerous community newspapers across Canada in addition to customers being multinational corporations. services in the following market segments: carriers, resellers, the National Post, and dozens of independent community Teleglobe’s network connects approximately 240 countries ISPs, content providers and broadcasters, businesses and newspapers. and territories via terrestrial and submarine cables, satellite access consumers. Teleglobe provides communications and e-business The market for Internet products and services, and for related and peering arrangements with other network providers. As of services, ranging from traditional voice, data and broadcast Internet advertising and subscription services, is highly December 31, 2001, Teleglobe’s network had 133 points of pres- services to Internet, transmission, content and other value- competitive. Bell Globemedia Interactive believes that the prin- ence and approximately 72,000 square feet of hosting facilities. added services. These global services are offered to most of the cipal competitive factors in this market are brand recognition, Teleglobe has ownership or interests in Intelsat Ltd. major North American carriers by Teleglobe’s carrier services, performance, ease of use, relevance of content, variety of value- (“Intelsat”) and New Skies Satellite N.V. (“New Skies”) and in through sales offices in the United States and Canada. Tele- added services and products and quality of end user support. undersea cable systems and cable segments, including systems globe’s largest customers in North America are Bell Canada and Several companies currently offer competitive online prod- such as TAT 9/12/13/14, Gemini, TPC-4/5, AC-1, China-U.S. and AT&T Canada which accounted for approximately 11.4 per cent ucts and services to Bell Globemedia Interactive’s target market. FLAG-1. Teleglobe also owns or has access to cable landing of Teleglobe’s revenues for the year ended December 31, 2001. These competitors currently include the network of websites stations on the Atlantic and Pacific coasts of North America as In 2001, Teleglobe generated approximately $320 million of offered by Yahoo! Inc., Microsoft Corporation’s (“Microsoft”) well as satellite earth stations that provide access to the Intelsat, revenues from BCE affiliates (including Bell Canada), repre- MSN and America Online, Inc. As well, a number of companies New Skies, Loral, Lockheed Martin INTERSPUTNIK, EUTELSAT, senting approximately 15 per cent of its total revenues. have and will continue to offer localized Internet content and PanAmSat and Telesat international satellite networks and back- Europe. In Europe, Teleglobe has sales offices and various services. Bell Globemedia Interactive’s competitors in this local to-back connectivity to U.S. and Canadian domestic satellite licenses and authorizations in 18 countries to operate as an market include the network of websites offered by CanWest, networks. These operating facilities are connected by fiber-optic international and domestic facilities-based carrier or service CBC, Telus and Quebecor. As Bell Globemedia Interactive links to Teleglobe’s international switching centers and Internet provider. Teleglobe’s principal markets in Europe include expands its offering of Internet products and services, it will be gateways. Teleglobe has operating agreements and relationships

2001 BCE Annual Information Form 21 Denmark, France, Germany, Italy, Norway, Spain, Sweden and to allow any underlying technology to interconnect with the entertainment programmers, news agencies and sportscasters the United Kingdom. Its customer base includes incumbent and system. The GlobeSystem network’s design is based on directly throughout the world. emerging carriers, ISPs, resellers/distributors, large corporations fusing optical wavelengths to routers and ATM platforms as well In cooperation with Bell Canada, Teleglobe has launched an and broadcasters. as intelligent network management systems that are expected uncompressed 270 Megabits digital video network service. to enable customers to select service parameters on demand. Teleglobe also offers occasional use, full time and special event Asia/Pacific. Teleglobe has sales offices in ten countries of the Teleglobe is working with a number of technology suppliers, video services through its own Program Booking Center and a Asia/Pacific region and licenses and authorizations in three including Nortel Networks for Dense Wave Division Multi- combination of satellite and fiber-based facilities. countries to operate as an international facilities-based carrier. plexing (“DWDM”) and synchronous digital hierarchy/synchro- In Hong Kong, Japan and Australia, Teleglobe’s principal Voice Network. Teleglobe’s switching facilities include three nous optical network equipment. In addition, Teleglobe is markets in Asia/Pacific, Teleglobe offers various data and voice backbone international switching centers (or gateways) in working with Cisco Systems, Inc. (“Cisco”) to connect Gigabit telecommunications services to incumbent and alternative Canada and one in each of the United Kingdom and the United Switch Routers onto the wavelengths in Teleglobe’s European carriers, resellers, ISPs and broadcasters, such as international States. At these gateways, traffic is routed through or received and North American fiber networks. Teleglobe has also invested virtual transit service, switched transit, international toll free, from Teleglobe’s submarine cables or satellite earth stations. The in the Inktomi platform for caching and distributing content at collect, global roaming, Internet, international private line and gateways use DMS-300, DMS-250/300, DMS-500 and DMS-100E the edges of Teleglobe’s network. broadcast services. digital telephone switches from Nortel Networks and other Internet Network. Teleglobe operates an Internet backbone equipment necessary for handling international traffic. Tele- Latin America. Teleglobe has sales offices in nine countries of peered with the U.S. and European backbones and providing globe has added a larger backbone international switch in the Latin America and authorizations in such countries to operate as international connectivity in over 100 countries. Teleglobe’s IP United Kingdom as well as backbone international switches in an international facilities-based carrier or service provider. Tele- network is present at all major network access points and Los Angeles, Newark and Tokyo. Teleglobe also owns and oper- globe provides Internet, data and corporate voice services Internet business exchanges. In addition to its own points of ates regional switches located in Denmark, Germany, Spain, mainly to large corporations and ISPs, with its principal markets presence, Teleglobe has points of presence in 58 telehouses and Italy and France. The software in Teleglobe’s switches is designed being Argentina, Brazil, Colombia and Mexico. exchanges around the world. Telehouses are buildings that offer to provide feedback about inbound and outbound traffic to Tele- Rest of the World. Teleglobe has sales offices in eight countries shared co-location facilities for telecommunications and tech- globe’s network management software and to its billing system. of the rest of the world, a market division that includes Africa, nology companies. Teleglobe uses co-location facilities in loca- The reporting software is designed to provide vendor and Eastern Europe, the Middle-East and the Indian Sub-Continent. tions where traffic volumes do not justify the cost of customer usage reports to allow Teleglobe to seek the most cost- In India, the United Arab Emirates and Saudi Arabia, Teleglobe’s fully-dedicated facilities. Approximately 15 per cent of global effective routing of traffic and to target customers who might principal markets in the rest of the world, Teleglobe provides routes are directly reachable through Teleglobe without the absorb increased levels of traffic. Multiple redundant routes are mainly switched voice and Internet services to carriers, ISPs and need to transit other backbone networks. used to provide backup and decrease the risk of losing connec- resellers. The network is supported by approximately 300 Cisco tivity in case of a network failure. routers running up to optical carrier (“OC”)-48 levels of GLOBAL NETWORK – GLOBESYSTEM Cable Facilities. Teleglobe’s cable facilities include cable stations capacity. While most of Teleglobe’s Internet customer base is as well as ownership interests and indefeasible rights of use Teleglobe’s network currently connects approximately accessed via cable, past innovations have focused on improving (“IRUs”) in terrestrial and undersea cables. Teleglobe’s cable 240 countries and territories via terrestrial and submarine satellite-based connectivity services. Teleglobe’s Internet access stations at Pennant Point (Nova Scotia) and Port Alberni (British cables, satellite access and peering arrangements with other service is satellite-based in a number of the countries where it Columbia) serve as landing points for transatlantic and transpa- network providers. The Teleglobe network’s capacity and service offers Internet connectivity with a large portion of such satel- cific cable systems respectively. Teleglobe has ownership inter- capability has been upgraded as a result of the building of the lite connectivity being provided with asymmetrical links ests in cable systems in North America and Europe as well as in GlobeSystem network. In addition, Teleglobe is one of the whereby information may be downloaded and uploaded. Tele- the Atlantic, Indian and Pacific oceans and the Caribbean, largest service providers in terms of satellite capacity connecting globe’s facilities are also composed of ATM switches that are Mediterranean and North seas. As at December 31, 2001, Tele- the Internet. The Teleglobe network is supported by monitoring located in several major cities in North America and Europe. globe had ownership rights or IRUs in cable systems and cable and other technical systems principally located at Teleglobe’s Broadcasting. Teleglobe operates International Television Access segments with a total capacity in excess of 60 Gigabits (“Gbps”). International Network Operating Center in Montréal and at its Centers in London, Los Angeles, New York, Toronto and Wash- Internet Operating Center in Reston, Virginia. Internet Data Centres. Teleglobe offers a hosting and content ington which provide international video broadcast services. distribution product line used by multinational companies to Network Strategy. In 1998, Teleglobe Inc. developed the first With more than 30 years of experience, Teleglobe provides facilitate eBusiness transactions using practices, systems and plans for the GlobeSystem network, representing an upgrade of transport services for broadcast networks, content producers, technologies that are supported by service level agreements. network capacity and service capability. The system is designed

22 2001 BCE Annual Information Form Satellite Facilities. Teleglobe’s satellite facilities include satellite Canada – Regulatory Framework & Licensing Regime. Until Canada – The Telecommunications Act. The Telecommunications earth stations as well as Teleglobe’s investment in Intelsat and October 1, 1998, Teleglobe Canada Inc. (“Teleglobe Canada”), a Act, as amended in May 1998 to implement Canada’s commit- New Skies. Teleglobe operates three satellite earth stations in predecessor of Teleglobe Inc., was the sole authorized Canadian ments under the World Trade Organization (“WTO”) Agree- Canada and five in Latin America. These stations transmit and operator of facilities to provide Canada/overseas telecommuni- ment, applies to all defined Canadian telecommunications receive messages via Intelsat, New Skies, Loral, Lockheed Martin cations services. On October 1, 1998, the CRTC issued Telecom common carriers, and to the provision of international services INTERSPUTNIK, EUTELSAT, PanAmSat and Telesat satellites Decision CRTC 98-17 that changed the regulatory framework to other telecommunications service providers. The Telecommu- over the Pacific and Atlantic oceans and also provide back-to- governing the provision of international services in Canada. nications Act defines the broad objectives of the Canadian back connectivity to North American domestic satellites. With this decision, the CRTC introduced a licensing regime that telecommunications policy and empowers the Government of Intelsat completed its privatization in July 2001 and now applies to all Canadian international service providers. The Canada to issue to the CRTC directions of general application operates as “Intelsat Ltd.” in a framework similar to other non- CRTC decision also eliminated the rules prohibiting the routing with respect to any of these objectives. The Telecommunications governmental satellite systems. By operation of U.S. law, Intelsat of Canada-Canada calls and Canada-overseas calls through the Act gives the CRTC discretion to establish a licensing regime for must conduct an initial public offering by December 31, 2002. United States, thereby removing all traffic routing restrictions. telecommunications service providers of international telecom- At the present time, Teleglobe Inc.’s shareholding interest in In September 1999 and September 2001, the CRTC issued orders munications services. The CRTC also has discretion to specify Intelsat is approximately four per cent. An executive of Teleglobe which forbear from regulation all of Teleglobe Inc.’s services in classes of telecommunications service providers required to Inc. was elected to Intelsat’s Board of Directors in July 2001. As a Canada. obtain a license before providing international telecommuni- customer of Intelsat, Teleglobe Inc. has the right to use the The licensing regime defined in Telecom Decision CRTC 98-17, cations services as well as to specify a class of international Intelsat satellite system and the obligation to pay certain charges effective January 1, 1999 and revised on December 17, 1999, telecommunications services which licensed telecommunica- according to the governing contracts and tariffs. establishes two classes of international telecommunications tions service providers are permitted to provide. In addition, the Teleglobe Inc. also holds an interest of approximately two per service providers: (a) Class A licensees are those who operate CRTC has the power to establish the form, manner and infor- cent in New Skies, a limited liability company operating five telecommunications facilities, whether owned by them or mation required in an international license application and to satellites. New Skies competes directly with Intelsat and other leased from a separate facilities provider, used in transporting set the fees which must accompany such license application. satellite operators. New Skies has completed an initial public basic telecommunications service traffic between Canada and The Telecommunications Act provides that the term of an inter- offering and Teleglobe Inc. could sell a portion or all of its another country; those who operate telecommunications national license may not exceed ten years on its issuance or interest in New Skies in the future. equipment that converts basic international traffic from circuit- renewal and that a license is not transferable except with the switched minutes originating in Canada to non-circuit switched consent of the CRTC. The Government of Canada has the power Information Technology. Teleglobe has built an IT infrastructure traffic, or from non-circuit switched traffic to circuit-switched to vary, rescind or refer back CRTC decisions. The CRTC may to support its national and international operations. Teleglobe’s minutes terminating in Canada, regardless of whether the itself review and rescind or vary any decision made by it. An system is designed to allow its various operating entities to carry licensee is responsible for the international transport; or those appeal of a CRTC decision on a question of law or jurisdiction a high volume of traffic and to bill customers. Teleglobe main- who perform both of the functions described above; and (b) may be brought with leave before the Federal Court of Appeal. tains programming and management information personnel, Class B licensees are those who neither operate telecommuni- The CRTC has the power to exempt any class of carriers from the as well as contract programmers dedicated to the maintenance, cations facilities owned by them or leased from a separate facil- application of the Telecommunications Act, and to refrain from operation and continued development of Teleglobe’s manage- ities provider used in transporting basic telecommunications regulating classes of services where this would be consistent ment information systems, network management systems and service traffic between Canada and another country; nor with the objectives of the Telecommunications Act. The latter operational support systems. All IT activities in Teleglobe are operate telecommunications equipment that converts basic concept is generally known as the power of forbearance. centralized in one single IT department. international traffic from circuit switched minutes originating The Telecommunications Act limits eligibility to operate as a REGULATION in Canada to non-circuit switched traffic, or from non-circuit- telecommunications common carrier (a “Canadian carrier”) to The following summary of regulatory developments and legis- switched traffic to circuit-switched minutes terminating in corporations incorporated in Canada that are Canadian-owned lation does not purport to describe all present and proposed Canada. Among other things, it prescribes, as conditions of and controlled. These ownership restrictions do not apply in laws and regulations affecting the telecommunications industry. license, a basic prohibition for all licensees from engaging in respect of the ownership or operation of international subma- Other existing laws and regulations are currently (or may anti-competitive conduct, and a requirement for Class A rine cables or earth stations that provide telecommunications become) the subject of judicial proceedings, legislative hearings licensees to file certain information as to the basic international services by means of satellites. Resellers are exempted from the and administrative proposals which could change, in varying traffic they carry and the agreements and arrangements they application of the Telecommunications Act, except for the provi- degrees, the manner in which the telecommunications industry enter into with foreign service providers. Teleglobe holds a Class sion of international services. operates. A license granted in 1998 for a term of five years which is renew- able at certain conditions.

2001 BCE Annual Information Form 23 Canada – The Teleglobe Act. Teleglobe Canada was established conditions applicable to their services. Domestic interstate the types of service covered by the agreement, the division of under the Teleglobe Act in 1987, as the successor corporation to common carriers are not required to obtain individual Section revenues between the carrier that bills for the call and the carrier the rights and obligations of the Canadian Crown corporation 214 or other authority from the FCC for the provision of that terminates the call at the other end, the frequency of settle- responsible for the provision of overseas telecommunications domestic interstate telecommunications services. ments (i.e., monthly or quarterly), the currency in which services. The Teleglobe Act was amended in May 1998 in order to payments will be made, the formula for calculating traffic flows United States – International Services. With respect to interna- implement Canada’s commitments under the WTO Agreement between countries, technical standards, procedures for the tional services, Teleglobe USA has obtained all necessary Section and to repeal provisions that were inconsistent with the end of settlement of disputes, the effective date of the agreement and 214 authorizations from the FCC to acquire, own and operate Teleglobe Canada’s exclusive mandate. As a result of these modi- the term of the agreement. international transmission facilities, to resell the services of fications, Teleglobe Inc. and its subsidiaries are generally subject The FCC issued an international accounting rate order aimed other U.S. carriers for the provision of international switched to rules similar to those applicable to other telecommunications at reducing accounting rates by adopting a three-tiered system services and international private line services, and to use the service providers under the Telecommunications Act. of benchmarks, which was upheld by the U.S. Court of Appeals interconnection arrangements and network assets of Teleglobe in January 1999. Under this policy, U.S. carriers negotiating with Canada – CRTC. In its role as Canadian regulator, the CRTC in Canada, L.P. Teleglobe USA has filed international tariffs with overseas correspondents to exchange traffic will be required to the past approved tariffs for Teleglobe’s regulated telecommu- the FCC. use the specified benchmarks as the target for the negotiated nications services and periodically issued directives which Additionally, the FCC has established different levels of regu- settlement rate between the two carriers. The order establishes a affected the accounting treatment of specific items in Tele- lation for dominant and non-dominant carriers. Teleglobe USA three-tiered system of benchmarks, with different rates to be globe’s accounts. As a result of its decision to forbear from regu- is presently classified as a non-dominant carrier for both applied based on each country’s level of development (calcu- lating Teleglobe services, CRTC’s oversight of Teleglobe’s domestic and international services on all routes, including lated from World Bank and International Telecommunication activities is very limited, consistent with its treatment of other Canada. As a result of the acquisition by BCE Inc. of all of the Union data). If successful, the effect of this order could signifi- international operators in Canada. outstanding common shares of Teleglobe Inc. that it did not cantly reduce Teleglobe USA’s costs. At the same time, these already hold in 2000, Teleglobe USA and its common carrier Canada – Cable and Earth Station – Licenses. The Telecommunica- accounting rates could strengthen the ability of Teleglobe USA’s affiliates are now subject to the FCC’s dominant carrier regula- tions Act and the Radiocommunication Act require that a carrier competitors to reduce their own costs and more effectively tion with respect to U.S.-Canada traffic. The primary effect of must have a license for each of its satellite earth station sites and compete with Teleglobe USA and other Teleglobe affiliates. dominant carrier regulation is to impose additional FCC international undersea cable landing sites in Canada in order to reporting and tariffing obligations. The FCC mandated the United States – Federal Legislation. The 1996 Telecommunications operate such facilities and to carry traffic between Canada and withdrawal of most tariffs by U.S. carriers by the end of 2001, Act is intended to, among other things, establish competition any foreign country, or between countries through Canada. including those filed by dominant carriers. to ILECs as a national policy by expressly prohibiting any legal Teleglobe holds such licenses as are required by its business. The The FCC permits the resale of international switched services barriers to competition in intrastate or interstate communica- radio transmission licenses are renewable annually. The and the resale of private lines for the provision of services inter- tions services under state and local laws. The 1996 Telecommu- undersea cable landing licenses are granted for periods of ten or connected to the public switched telephone network, generally nications Act further empowers the FCC, after notice and an 20 years and expire at various dates between 2003 and 2008. The referred to as ISR. U.S. carriers may provide ISR on routes as opportunity for comment, to preempt the enforcement of any holding of such licenses is subject to certain terms and condi- permitted by the FCC. statute, regulation or legal requirement that prohibits, or has the tions, with which Teleglobe is in compliance. With regard to some carriers, Teleglobe USA must conduct effect of prohibiting, the ability of any entity to provide any United States – Overview. The FCC exercises authority over all its international business in compliance with the FCC’s inter- intrastate or interstate communications service. The 1996 interstate and international facilities-based and resale services national settlements policy. The FCC currently applies the inter- Telecommunications Act also establishes certain requirements, offered by Teleglobe USA Inc. (“Teleglobe USA”) and its national settlements policy to contracts with dominant carriers including interconnection requirements, the offering of local operating affiliates. Services that originate and terminate within in offshore markets, but does not apply the international settle- network elements on an unbundled basis and other ILEC obli- the same state, also known as intrastate services, are regulated ments policy to contracts with most new and emerging offshore gations with respect to resale, number portability, dialing parity, by state regulatory commissions. carriers. Where it does apply, the international settlements access to rights-of-way and reciprocal compensation. policy establishes the permissible boundaries for U.S.-based Certain provisions of the 1996 Telecommunications Act could United States – General Federal Requirements. Under the Commu- carriers and their affected foreign correspondents to settle the materially affect the growth and operation of the telecommu- nications Act of 1934, as amended (the “Communications Act”), cost of terminating each other’s traffic over their respective nications industry and the services provided by Teleglobe USA. and the FCC’s rules, all international carriers are required to networks. The precise terms of settlement are established in a There are currently in process numerous proceedings under the obtain authority under Section 214 of the Communications Act correspondent agreement, also referred to as an operating agree- 1996 Telecommunications Act. Certain sections of the 1996 prior to initiating international common carrier services, and ment. Among other terms, the operating agreement establishes Telecommunications Act and the FCC’s rules have been, and likely must file and maintain tariffs containing the rates, terms, and

24 2001 BCE Annual Information Form will continue to be, judicially challenged. Teleglobe USA is COMPETITION of facilities-based international carriers is not only seen in unable to predict the outcome of such legislative action, rule- the liberalization leader countries but more recently, in The global communications and e-business industry is highly makings or litigation or the substantive effect (financial or Latin America, Asia/Pacific and additional Western European competitive and subject to the introduction of new services otherwise) of the new legislation and the rulemakings on the countries. facilitated by rapid technological change and market liberaliza- operations of Teleglobe USA. In Canada, the elimination of the routing restrictions on tion. International telecommunications providers compete on international simple resale and international switched hubbing United States – Arrangements with U.S. Carriers. Teleglobe’s U.S. the basis of price and pricing plans, customer service, transmis- and the implementation of a streamlined process for the carrier affiliates are classified by the FCC as non-dominant and sion quality, reliability and availability, breadth of service offer- licensing of international telecommunications service providers they may freely contract with other U.S. carriers. On February ings and availability of value-added services. Many of have subjected the Canadian international direct distance 3, 1998, Teleglobe USA received authority from the FCC to use Teleglobe’s competitors and potential competitors upon dereg- dialing market to unprecedented and intensifying levels of owned or leased facilities between the United States and Canada ulation or expansion have significantly greater financial, tech- competition from Canadian and foreign international telecom- to interconnect the switched networks of Teleglobe USA and nological and other resources than Teleglobe. In addition, munications service providers with greater financial resources Teleglobe Canada, L.P. Teleglobe is classified as a dominant certain of Teleglobe’s competitors have recently filed for bank- and larger breadth of service offerings than those of Teleglobe. carrier on the U.S.-Canada route in light of its affiliation with ruptcy or are restructuring their debt, which may result in their Acknowledging this, the CRTC has fully forborne from regu- Bell Canada. assets being purchased or otherwise operated by companies lating Teleglobe’s services. with a significantly less leveraged capital structure from that of Rest of the World. Teleglobe is also subject to regulation in coun- Technological changes, tied with competitive forces, may Teleglobe. Internationally, Teleglobe competes with incumbent tries in which it operates in connection with Teleglobe’s carrier affect all aspects of telecommunications, including network providers, some of which have special regulatory status or the services and other telecommunications service activities. The selection and access. Recent advances in technology, such as exclusive right to sell particular services and virtually all of policies of the national governments and regulatory authorities DWDM, are expected to help accommodate bandwidth expan- whom have historically dominated their markets and accord- of these countries may have a positive or negative impact on sion requirements by significantly expanding, in a cost effective ingly have existing customer relationships. In addition, Tele- Teleglobe’s ability to conduct business in such locations. manner, capacity and size. In the United States, private compa- globe may be dependent upon these incumbent providers to Teleglobe currently expects that the European Union nies are building North American terrestrial transmission obtain facilities. Member States will continue to implement more liberal systems which employ DWDM technology for commercial sale In certain circumstances, significant resources are required telecommunications policies and to address market entry issues. to telecom carriers, ISPs and resellers. As is the case in subma- to obtain the regulatory approvals necessary to operate in a Important issues remain with respect to the rates and terms of rine systems, these terrestrial providers already have significant particular country and to obtain access to, and interconnect service for interconnection of emerging carrier networks with capacity and in the near future are expected to offer substantial with, the incumbent’s network. Foreign competitors may also those of incumbent operators and the availability of fully bandwidth at declining prices. High-capacity fibre-optic cables, possess a better understanding of their local areas, and there can unbundled local loops and other network elements necessary to mobile telecommunications, compression technologies and be no assurance that, notwithstanding Teleglobe’s efforts to hire deploy broadband capabilities to end users. satellites also allow greater flexibility for consumers in their local employees in each market, Teleglobe can obtain similar In Asia, Teleglobe has benefited from deregulation in Japan, selection of a telecommunications provider, without commit- levels of local knowledge. However, such competitors are some- Hong Kong, Singapore, Taiwan and other markets both with ting them to a particular network. As high-capacity fibre-optic times each other’s customers for certain specific routes and for respect to securing its own operating authority and creating network technology is developed, international carriers may certain categories of products. Moreover, Teleglobe may face environments conducive to the establishment of new carriers. promote new cable systems, which will compete with Tele- additional competition from existing and future global alliances Elsewhere in Asia, China’s accession to the WTO is expected globe’s bandwidth service offerings. and mergers among the largest telecommunications carriers. to establish opportunities for the establishment of new domestic Teleglobe also faces competition from companies offering BCE Emergis and international carriers as well as foreign telecommunications resold international telecommunications services. Teleglobe investment in China over the next several years. In connection GENERAL expects that competition from such resellers will increase in the with accession, China has agreed to liberalize its telecommuni- future in tandem with increasing deregulation of telecommu- BCE Emergis is a premier e-commerce service provider, strategi- cations markets and to permit varying levels of non-controlling nications markets worldwide. Teleglobe’s ability to compete cally focusing on market leadership in the transaction-intensive, foreign investment in facilities-based operators over time. Tele- effectively will depend on its continued ability to maintain high e-Health and financial services sectors. Its focus is to offer tech- globe has also benefited from liberalization in Latin America quality, market-driven services at competitive prices. nologically advanced Internet-based e-commerce services that and Eastern and Central Europe, and is subject to certain levels Internationally, the continuing market liberalization of the enable business processes from orders through to payments. Its of regulation in its operating territories. telecommunications industry has had a direct impact on the services transform business processes, such as buying, selling, number of players in the market. This increase in the number invoicing and payment, and provide insurance claims

2001 BCE Annual Information Form 25 processing and cost containment services in the health sector. premium statement derived from a current enrolment database. delivered the managed Public Key Infrastructure to the first Customers include leading North American banks and insur- This solution allows the premium statement to reflect statutory client department of the Government of Canada. ance companies. and other changes made by the customer to its members’ profile Also in June 2001, BCE Emergis acquired for U.S.$30 million BCE Inc. owns approximately 65 per cent of BCE Emergis, coverage, as well as facilitate the electronic payment of the all of the outstanding shares of Associates for Health Care, Inc., with the remaining common shares being publicly held. BCE consolidated premium statement. Through a five-year, multi- aprivately held company involved in health care cost manage- Emergis generated approximately $205 million of revenues from million dollar transaction-based agreement, BCE Emergis will ment in the State of Wisconsin in the United States. BCE BCE affiliates in 2001 ($123 million in 2000), representing provide the Group Life and Health business unit of The Emergis paid U.S.$10 million at closing. The remaining approximately 31 per cent of its total revenues (26 per cent Principal with the Emergis e-Premiums service. U.S.$20 million will be paid in three equal cash or share instal- in 2000). In 2001, 82 per cent of the revenues generated from In October 2001, BCE Emergis announced that it had signed ments over a three-year period on the closing anniversary dates. BCE affiliates were of a recurring nature, compared to 99 per a five-year agreement with Bank of America that will enable the This acquisition builds on BCE Emergis’ strategy to expand the cent in 2000. bank to offer BCE Emergis’ e-Invoicing solution to its divisions reach of its provider network into a new geographic area. and business customers around the world, in multiple languages RECENT DEVELOPMENTS COMPETITION and multiple currencies. Concurrent to this agreement, BCE On April 5, 2002, BCE Emergis announced a re-alignment of its Emergis acquired technology assets from the bank. The e-commerce and the health care claims industries are and business and an increased focus on the major growth opportu- Also in October 2001, BCE Emergis signed a number of key will continue to be highly competitive and BCE Emergis faces nities where it already had a solid foundation and track record. agreements with Bell Canada for the provision of advanced competition for each of its individual services from numerous As a result, it will actively seek to increase penetration in three e-commerce services. Under these agreements, BCE Emergis competitors who have substantial marketing, personnel and specific areas: bill presentment services, payment solutions and extended its three-year reseller agreement with Bell Canada for technological resources. Many firms offer competing services in claims processing. Concurrent with its focus on these areas, BCE another three years and expanded this agreement to include, in electronic bill/invoice presentment, electronic payment, claims Emergis developed a plan to streamline its service offerings and addition to certain business Internet products (“IP Products”), processing invoice and payment. In the e-Health sector, certain reduce its operating cost structure. A service offering review has its electronic business network services which enable enterprises companies provide an array of services, some of which may be identified services considered non-core and that BCE Emergis to connect with their partners and exchange data in a secure IP- competitive to BCE Emergis’ claims processing solutions or plans to exit during the course of 2002. The plan also includes based environment. Committed revenue over the three-year managed care services. Furthermore, in some areas, BCE Emergis an overall reduction in personnel of approximately 550 persons, term will amount to $315 million. BCE Emergis also extended may compete with internal groups of major organizations. representing approximately 20 per cent of its work force. for an additional three years the three-year services agreement BCE Emergis expects that other competitors will develop In December 2001, BCE Emergis announced a five-year with Bell Nexxia with respect to the IP Products. over time. Some of these will be companies that are not agreement with the Workplace Safety and Insurance Board of In July 2001, BCE Emergis announced a five-year agreement currently in BCE Emergis’ markets, others will be new compa- Ontario (“WSIB”) to provide a new Web-enabled health claims with Visa U.S.A. that expands its payment and invoicing solu- nies, and others could be ventures between current clients and approval and payment system that will provide a faster, more tions in the United States. BCE Emergis will work closely to inte- competitors. consistent process for the province’s 27,000 health and medical grate its products into Visa’s commercial payment solutions. BCE Emergis believes that the principal competitive factors service providers. With Ontario having the largest industrial BCE Emergis will also provide VISA with other payment-related in its industry include: base in Canada, receiving over 300,000 claims for workplace application tools to facilitate the implementation and adoption •pricing of services; safety and insurance benefits from injured workers annually, the among its large commercial customer base. • leading-edge technology; WSIB is the largest payer of work-related health claims in the In June 2001, Bell Nexxia, BCE Emergis and CGI were • scalability of services; country, and among the largest in North America. By devel- awarded a multi-million dollar contract to build and manage an •quality of services; oping an online system for health claim submission and adju- e-government infrastructure for the Government of Canada. •technical and strategic expertise; dication as well as receipt of labour market re-entry plans, BCE The solution, called the “Secure Channel”, is designed to allow •speed of development and implementation of solutions; Emergis and the WSIB are breaking new ground in e-Health Canadian citizens and businesses to access different government •return on investment compared to costs and up-front services. services electronically. Key components of the solution include fees; In October 2001, BCE Emergis announced a new electronic the IP network, security, authentication, directory services, •brand-recognition and size of the firm; premium presentment and management solution for the health application integration services and portal interfaces. BCE •strategic alliances and commercial relationships; and and life insurance industry and that it had signed The Principal Emergis will provide e-commerce services, including managed •ownership of technology and ability to continue to Financial Group (“The Principal”) as its first customer. The new Public Key Infrastructure security and financial payment enhance and improve technology. service, called Emergis e-Premiums, allows customers to processing services, to the Government of Canada through Bell generate and present to their corporate customers an electronic Nexxia. As part of phase one of the project, BCE Emergis has

26 2001 BCE Annual Information Form BCE Ventures •Telecom Américas will transfer its 60 per cent indirect ACQUISITIONS AND DISPOSITIONS interest in Techtel-LMDS Comunicaciones Interactivas, In November 2001, Vésper S.A., Vésper São Paulo S.A. and Vento BCE Ventures combines, for management purposes, all the non- S.A. (“Techtel”) to América Móvil upon receipt of regula- Ltda.’s (collectively the “Vésper Companies”) various stake- core assets of BCE. tory approvals. holders completed a financial restructuring that resulted in a BCI In conjunction with the Reorganization, Telecom Américas dilution of BCI’s interest in the Vésper Companies to 1.4 per secured capital contributions from its principal shareholders, cent on a fully-diluted basis. Under the terms of the restruc- BCI, through joint ventures and subsidiaries, owns, develops América Móvil and BCI, in the amount of U.S.$240 million. turing, BCI agreed to guarantee approximately U.S.$32 million and operates advanced communications companies outside of Additional capital resources in the amount of U.S.$120 million of the principal amount of certain indebtedness of the Vésper Canada, with a focus on Latin America. BCI currently holds the were committed in the form of a shareholder loan that is Companies (25 per cent of the debt guaranteed is due in 2004 majority of its investments through Telecom Américas, which repayable in June 2004 in common shares of Telecom Américas. and the remaining 75 per cent is due in 2005). The amount of owns and operates four Brazilian B-Band cellular companies A private investor also signed an agreement to purchase the guarantee will be reduced proportionately in the event there serving more than 4.3 million subscribers in territories of Brazil U.S.$300 million of common shares in Telecom Américas. is a reduction in the principal amount being guaranteed. BCI with a population of approximately 60 million. Telecom Taking into account such U.S.$300 million equity injection, does not expect to recover any value from its investment in the Américas was formed as a joint venture on November 16, 2000 BCI’s interest in Telecom Américas would be approximately Vésper Companies, and wrote off as of September 30, 2001, as by BCI, América Móvil and SBC International, as a vehicle to 39 per cent, as compared to 41.7 per cent, currently. part of discontinued operations, the entire carrying value of its expand their collective presence within the Latin American BCI’s mobile operations in Brazil cover a combined total of investment of $86 million. telecommunications market. Upon the formation of the joint 60.2 million licensed POPs (i.e., a population equivalent where During the course of 2001 and in March of 2002, Telecom venture, BCI and América Móvil each held a 44.3 per cent one person equals one POP) and include the B-Band cellular Américas closed a portion of the agreements announced on interest in Telecom Américas, while SBC International held an operations of: March 13, 2001 entered into with a group of Brazilian pension 11.4 per cent interest. Early in the third quarter of 2001, BCI and •ATL in the states of Rio de Janeiro and Espírito Santo; and investment funds and Telesystem International Wireless América Móvil each tendered shares of Telecom Américas to •Tess S.A. (“Tess”) in the state of São Paulo, other than the Inc. to acquire an approximate additional 65 per cent indirect redeem U.S.$275 million and U.S.$141 million, respectively, of city and metropolitan region of São Paulo; economic interest in each of Telet and Americel, for an aggre- notes due to Telecom Américas. As a result, BCI’s ownership •Telet S.A. (“Telet”) in the state of Rio Grande do Sul; and gate purchase price of approximately U.S.$580 million, as interest in Telecom Américas declined from 44.3 per cent to • Americel S.A. (“Americel”) in seven states in the central- follows: (i) on March 30, 2001, Telecom Américas acquired an 41.7 per cent, while América Móvil’s and SBC International’s west region of Brazil. additional 16.3 per cent economic interest in each of Telet and ownership interests increased to 45.5 per cent and 12.8 per cent, The balance of BCI’s operations have been treated as discon- Americel for an aggregate purchase price of U.S.$153.3 million; respectively. tinued operations and consist of the following: (ii) on September 25, 2001, Telecom Américas acquired an addi- In February 2002, BCI with its partners, América Móvil and • BCI’s CLEC operations in Mexico including fixed tional 43.44 per cent and 42.71 per cent economic interest in SBC International, completed the Reorganization which reor- telephony and value-added services carried on by Axtel, each of Telet and Americel respectively for an aggregate ganized Telecom Américas into a company focused on the S.A. de C.V. (“Axtel”); purchase price of U.S.$376.65 million; (iii) on December 5, Brazilian mobile wireless market, while distributing the other • BCI’s broadband operations in Brazil carried on by 2001, Telecom Américas acquired an additional 1.47 per cent Telecom Américas assets to its shareholders. The Reorganization Canbras and consisting primarily of broadband cable and 1.31 per cent in Telet and Americel, respectively, for an gave effect to the following asset transfers: television services including , high-speed aggregate purchase price of U.S.$14.6 million; and (iv) on March •Telecom Américas transferred its 77.1 per cent indirect Internet access, wholesale data transport services and the 6, 2002, Telecom Américas acquired an additional 0.91 per cent interest in Comunicación Celular S.A.-Comcel S.A. ISP market; and interest in Americel for an aggregate purchase price of (“Comcel”) to América Móvil; • BCI’s Spanish Américas broadband operations carried on U.S.$3.5 million. Telecom Américas currently holds an approx- • América Móvil transferred U.S.$80 million in cash and its by Genesis and Communicaciones 2163, C.A. in imate 78 per cent indirect economic interest in each of Telet and 41 per cent indirect interest in ATL – Leste Venezuela. Americel. The remaining economic interests continue to be held S.A. (“ATL”) to Telecom Américas; On a consolidated basis, for the year ended December 31, by the Brazilian development bank, BNDES Participações S.A. – •Telecom Américas distributed its 75.6 per cent indirect 2001, BCI had revenues of $373.9 million, a net loss of interest in Canbras Communications Corp. (“Canbras”) $335.4 million, EBITDA(1) of $57.6 million, and as of December 31, to BCI; (1) The term “EBITDA” used in this Annual Information Form does not have a 2001, total assets of $4.9 billion and long-term debt (including standardized meaning prescribed by Canadian Generally Accepted •Telecom Américas distributed its 59.1 per cent interest in the current portion) of $2.1 billion. Accounting Principles (“GAAP”) and therefore may not be comparable to Genesis Telecom, C.A. (“Genesis”) equally to BCI and similar measures presented by other publicly-traded companies. BCI uses América Móvil; and EBITDA, among other measures, to assess the operating performance of its on-going businesses.

2001 BCE Annual Information Form 27 BNDESPAR, a wholly-owned subsidiary of Banco Nacional de 42 per cent of the rights offered to them ($49 million), Proceeds of the Rights Offering were used to pay the accrued Desenvolvimento Econõmico e Social (with an 18 per cent while BCE exercised all of the rights issued to it as well as interest owed to holders of the 1999 Debentures in the amount holding) and the group of Brazilian pension and investment all of the remaining rights not exercised by the public of $40 million and to reduce outstanding indebtedness under funds (with a four per cent holding). Telecom Américas is ($392 million); BCI’s syndicated senior secured facility (the “Credit Facility”) in contractually committed to purchase, for approximately • pursuant to the Rights Offering, BCI offered units, priced the amount of $170 million. Approximately $150 million have U.S.$33 million, the remaining four per cent economic interests at $100 per unit, consisting of a deposit receipt, a prin- been used to fund BCI’s equity commitments to Telecom in each of Telet and Americel held by the Brazilian pension and cipal warrant and an anti-dilutive secondary warrant. The Américas, which was in turn used to fund, among other things, investment funds once regulatory approvals are obtained. secondary warrants, which are non-transferable (and the first payment under the Tess Notes due on April 9, 2002. The On April 9, 2001, Telecom Américas closed the agreement to therefore do not trade along with any common shares remaining proceeds will be used for general corporate and acquire a 100 per cent interest in Tess, one of two B-Band cellular issued in connection with the Rights Offering), will investment purposes. operators in the Brazilian state of São Paulo (excluding the entitle the holder thereof to acquire a certain number of On March 8, 2002, BCI concluded the amendment and metropolitan region of São Paulo), for a total consideration of additional BCI common shares, for no additional consid- restatement of its Credit Facility whereby (i) the maturity date approximately U.S.$950 million. The consideration consisted eration, in the event that (i) BCI issues common shares to was extended to March 8, 2003; (ii) the principal was reduced of U.S.$319 million in cash and U.S.$631 million in notes affiliates of American International Group, Inc. (“AIG”) from $400 million to $230 million; and (iii) BCI pledged its payable (the “Tess Notes”), which had an estimated fair value of upon the exercise by AIG of a put option described below; shares in Canbras to secure the repayment of the Credit Facility. U.S.$571 million, resulting in an effective purchase price of and (ii) the average market price used to determine the On September 17, 2001, BCI amended and restated the approximately U.S.$890 million. Under the terms of the number of common shares to be issued to AIG is less than Credit Facility with a group of lenders under which it could agreement, and in accordance with the regulations governing the average market price used to determine the exercise borrow up to $400 million. The Credit Facility was secured up ownership of the B-Band licenses, a majority of the voting rights price of the principal warrants in the Rights Offering. The to a maximum of U.S.$250 million by a pledge by BCI of all of its continue to be held by the vendors. issuance of common shares pursuant to the secondary shares in Telecom Américas. The Credit Facility contains a On March 27, 2001, Telecom Américas invested warrants could result in significant dilution to BCI share- change of control clause relating to BCE Inc.’s ownership in BCI U.S.$300 million in ATL, increasing Telecom Américas’ total holders; which, if breached, could result in the acceleration of amounts economic ownership in ATL from 50 per cent to 59 per cent. As •the issuance of 1,457,938,474 common shares at $0.27436 drawn thereunder. Concurrently with the entering into of the a result of this transaction, BCI indirectly invested $208 million per share in settlement of the principal amount owing Credit Facility, on September 17, 2001, BCE Inc. extended a in ATL and increased its effective economic interest from under BCI’s existing 6.75 per cent convertible unsecured convertible subordinated loan (the “BCE Loan”), in a principal 22.1 per cent to 24.6 per cent. subordinated debentures due February 15, 2002 and amount of $75 million, to BCI, which was subsequently On February 23, 2001, BCI concluded the sale of its 20 per 6.50 per cent convertible unsecured subordinated deben- converted into common shares as mentioned above. cent minority interest in KG Telecommunications Co., Ltd., tures due February 15, 2002 (collectively, the “1999 TELESAT generating gross proceeds to BCI of approximately $785 million. Debentures”) in accordance with the terms of the inden- FINANCING ACTIVITIES tures governing the 1999 Debentures; Telesat is a world leader in satellite communications and systems •the payment in cash of approximately $40 million in management and a leading consultant in the establishment, On February 15, 2002, BCI completed a series of transactions accrued interest on the 1999 Debentures on February 15, operation and upgrading of satellite systems worldwide. Telesat (the “Recapitalization Transactions”) undertaken to improve the 2002; provides broadcast distribution and telecommunication services financial condition of BCI and more specifically to (i) address a •the issuance of 271,365,570 common shares at $0.2888 to over 275 customers located in North and South America. liquidity shortfall relating to the settlement of BCI’s short-term per share pursuant to the conversion on February 15, Telesat owns a total of four satellites: Anik E1, Anik E2, Nimiq 1 financial obligations; (ii) ensure that certain indebtedness of BCI 2002 of the principal amount and accrued interest owing and Anik F1. Telesat currently has two satellites under construc- is not accelerated; and (iii) better position BCI and its share- under the BCE Loan (defined hereinafter) in accordance tion, Nimiq 2 and Anik F2, which are expected to launch in holders to benefit in any future recovery in the values of Latin with its terms; and 2002 and 2003, respectively. While Nimiq 2 will provide addi- American telecommunications companies. The Recapitalization •a provision for the settlement of a put right (the “Put tional capacity for Bell ExpressVu’s DTH service as well as allow Transactions consisted of the following: Option”) in favour of AIG by the issuance of common for back-up capability, Anik F2 will provide full North America •the issuance of 2,988,986,201 common shares at shares of BCI in accordance with a put option agreement coverage in the traditional C and Ku-band frequency ranges in $0.147288 per share pursuant to a rights offering with entered into between BCI and AIG on December 10, 1998; addition to a Ka-band multi-media payload. Telesat owns and gross proceeds to BCI of $440,241,800 (the “Rights the issuance of common shares in satisfaction of the Put operates five teleports in Canada in addition to 240 earth Offering”). The Rights Offering was made to holders of Option is expected to result in significant dilution to BCI stations of various sizes and capabilities. BCI’s common shares with public shareholders exercising shareholders.

28 2001 BCE Annual Information Form BUSINESS SEGMENTS Until November 2001, Telesat also managed the mobile satel- On October 1, 2001, Fireman’s Fund Insurance Company Telesat provides satellite-based services through four strategic lite service business of TMI Communications and Company, (“Fireman’s Fund”), a subsidiary of Allianz AG of Munich, and business units: Limited Partnership (“TMI Communications”). BCE Inc. holds a CGI finalized a ten-year IT outsourcing agreement valued at • Broadcast Services: Broadcast services, which provided 100 per cent equity interest in TMI Communications Inc., the U.S.$380 million. As part of the agreement, CGI will provide 54 per cent ($173.8 million) of Telesat’s 2001 revenues, general partner of TMI Communications. In November 2001, Fireman’s Fund with IT support services to some 80 locations are comprised of point-to-point and point-to-multi-point TMI Communications and Motient Corporation closed a joint across the United States. satellite broadcast distribution of television programs and venture transaction under which they joined with financial part- On July 27, 2001, CGI acquired all of the outstanding video signals. Customers in this segment include major ners to create a new combined entity called Mobile Satellite common shares of IMRglobal Corp. (“IMRglobal”), for a total Canadian broadcasters, companies, video Ventures (“MSV”). TMI Communications transferred its oper- consideration of $553 million, on the basis of 1.5974 Class A distribution/reseller companies, Star Choice and Bell ating assets and all of its employees to new entities controlled or subordinate shares of CGI for each IMRglobal common share. ExpressVu. managed by Mobile Satellite Ventures, LP. TMI Communications On June 14, 2001, CGI began operating the IT system of • Business Networks Services: Telesat provides satellite-based holds partnership interests in various MSV entities. Laurentian Bank of Canada (“Laurentian Bank”), as part of a wireless data networks nationwide to a broad range of $300 million ten-year outsourcing contract with Laurentian CGI financial, retail, industrial and commercial companies Bank. The agreement covers areas such as project development, and government organizations, which require applica- GENERAL applications maintenance and evolution, operations support tions including point-of-sale, video conferencing, Since October 1, 2001, CGI has organized its business units and automated banking machine support. distance education, Lan-to-Lan connectivity, Internet according to the following breakdown: Canada and Europe, On May 1, 2001, CGI signed a strategic ten-year alliance and intranet requirements and private voice networks. United States and Asia Pacific, and Business Process Services worth an estimated value of $1.2 billion with leading Canadian Telesat also provides third party maintenance services at (outsourcing of a client’s processing functions). CGI provides financial services group Desjardins. In the context of this agree- approximately 12,000 customer-owned earth stations end-to-end IT services to six industry sectors, namely financial ment, CGI acquired the related assets, certain intellectual prop- within North America. Revenue from this business unit services, telecommunications, manufacturing/distribution/ erty rights and assumed liabilities of Desjardins used in data and was 27 per cent ($87.2 million) of Telesat’s total revenues retail, governments, utilities and services, and healthcare. micro-computing of Mouvement Desjardins’ operations. CGI in 2001. However, outside of Europe, CGI serves primarily the telecom- also took over 450 Mouvement Desjardins’ employees and two • Carrier Services: Telesat provides satellite voice and data munications and financial services industries. Montréal data centers, and will manage Mouvement Desjardins’ transmission services to individual telephone companies CGI provides a range of IT services including information data processing operations. CGI also agreed to join with Mouve- to extend their services to remote areas of Canada. technology and business process outsourcing, systems integra- ment Desjardins to market the client’s banking solutions to Revenue from this business unit was 9 per cent ($28.7 tion and consulting. CGI’s primary focus is large-scale systems financial institutions. million) of Telesat’s total revenues in 2001. integration and outsourcing contracts. Outsourcing revenue On January 4, 2001, CGI signed an outsourcing agreement • International Consulting Programs: Telesat has developed represented approximately 69 per cent of CGI’s 2001 total worth more than $119 million with UK-based financial services a wide range of specialized services designed to assist revenues, while systems integration and consulting represented company Sun Life Financial (“Sun Life”). Under the terms of the satellite operators, spacecraft manufacturers and companies 31 per cent. CGI generates a high proportion of its revenues agreement, extending over a seven-year period, CGI has taken involved in the field of satellite communications around from higher value-added services such as IT planning, business over Sun Life’s Basingstoke (UK) data center and will run and the world. This business unit provided 10 per cent process engineering, systems architecture, systems development support the client’s IT infrastructure and desktops. ($31.0 million) of Telesat’s total revenues in 2001. and maintenance. OTHERS Effective March 1, 2000, Telesat no longer has a monopoly RECENT DEVELOPMENTS on Fixed Satellite Service business in Canada. Telesat expects BCE Ventures also manages on behalf of BCE certain BCE On December 20, 2001, CGI successfully closed its public that competition may develop from the major U.S. satellite investments including Bimcor Inc. and BCE Capital Inc. offering of 11,110,000 Class A subordinate shares at a price of operators using satellites with North American coverage to sell $11.25 per share, for gross proceeds of $125 million, to a syndi- Employees services into Canada. Telesat believes, however, that it remains cate of investment dealers. The net proceeds of the offering was strongly positioned in the Canadian market, having entered Table 3.9 sets out the number of employees of BCE as of used to repay indebtedness and the balance was added to CGI’s into long-term contracts with its major Canadian customers. December 31, 2001. general funds to finance its development activities, including Telesat also actively competes with terrestrial competitors such A significant portion of the employees of BCE Inc.’s the funding of large outsourcing contracts and acquisitions, and as Canada’s telephone carriers and service resellers in virtually subsidiaries are unionized and have a collective agreement with for other general corporate purposes. all of its markets. Telesat focuses on market segments and niches their employer. best suited to satellite technology.

2001 BCE Annual Information Form 29 The following are some of the existing collective agreements western Bell” and the logo “Bell-in-a-circle design” infringe Bell and on May 24, 2001, the Federal Court of Appeal allowed the that are governing the employment relationships of certain BCE Canada’s exclusive rights to BELL trade-marks in Canada. In appeal. On August 20, 2001, Bell Canada filed for leave to appeal Inc. subsidiaries with their respective employees and which will their Statements of Defence and Counterclaims, the Defendants the Federal Court of Appeal decision to the Supreme Court of expire in 2002 (or which have already expired): allege that Bell Canada’s trade-marks are invalid and not distinc- Canada. Hearings before the Tribunal resumed in September •the collective agreement between Bell Canada and its tive of Bell Canada’s products and services and are seeking 2001. On December 13, 2001, the Supreme Court of Canada 12,685 clerical and associated employees represented by damages in the aggregate amount of $135 million and punitive granted Bell Canada’s application for leave to appeal. Bell the Canadian Telephone Employees’ Association damages of $500,000 from Bell Canada for allegedly interfering Canada intends to seek a stay of the proceedings before the (“CTEA”), which will expire on May 31, 2002. Renegotia- with their businesses. On June 16, 2000, the Federal Court of Tribunal pending the appeal to the Supreme Court of Canada tions have been underway since March 4, 2002; Canada permitted Sonigem to institute a third party claim which is expected to be heard towards the end of 2002. •several collective agreements between certain companies against and Unical alleging that they had warranted IRIDIUM LITIGATION of the Bell Globemedia segment (including CTV and The Sonigem’s use of the “Northwestern Bell” trade-mark in Canada Iridium LLC (“Iridium”) developed a global wireless system Globe & Mail) and their respective employees, repre- by virtue of a Distribution Agreement and the statutory designed to enable customers to send and receive telephone senting approximately 877 employees; and warranty of lawful use provided for in the Trade-Marks Act. calls virtually anywhere in the world. Iridium has initiated •two collective agreements between Teleglobe and approx- Qwest and Unical have both filed a Defence to this third party proceedings under the United States Chapter 11 Bankruptcy Code imately 300 of its employees, one of which expired in claim. On February 4, 2002, a Licence and Settlement Agree- which are ongoing. Iridium Canada Inc. (“Iridium Canada”), a March 2000 (Teleglobe is in the process of renegotiating a ment was entered into between Bell Canada and Qwest pursuant wholly-owned subsidiary of Bell Mobility, is a shareholder of new collective agreement) and the other one will expire to which they settled Bell Canada’s action against Qwest and Iridium. A group of banks and financial institutions led by the on December 31, 2002. Qwest’s counterclaim against Bell Canada. Pursuant to this Chase Manhattan Bank are creditors in the bankruptcy proceed- Failure of the renegotiations could have a material adverse settlement, each party has paid its own costs of the action and ings and have asserted claims in connection with a impact on the business, results of operations and financial counterclaim. On April 8, 2002, Bell Canada, Unical and U.S.$800 million syndicated loan to an Iridium subsidiary. In condition of the affected companies and, ultimately, on those Sonigem entered into a Settlement Agreement under which the June 2000, the Chase Manhattan Bank, on behalf of itself and of BCE Inc. parties have agreed to discontinue their respective action this group (the “Plaintiffs”), instituted an action in the United without costs. Legal Proceedings States District Court, District of Delaware, against 16 share- WAGE PRACTICES INVESTIGATION QWEST, UNICAL AND SONIGEM LITIGATION holders of Iridium, including Iridium Canada, alleging failure On November 2, 2000, the Federal Court of Canada allowed Bell to make capital contributions. The amount of the claim against Bell Canada instituted an action for trade-mark infringement Canada’s application for judicial review of the Canadian Human Iridium Canada was U.S.$10 million and Iridium Canada has seeking a permanent injunction and damages against US West, Rights Tribunal’s (the “Tribunal”) determination that it could filed an Answer to the claim. The Plaintiffs have amended their Inc., which has since merged with Qwest Communications proceed with an inquiry into the 1994 pay equity complaints action against a number of shareholders of Iridium, including International Inc., (“Qwest”, the successor of the merged filed by members of the Communications, Energy and Paper- Iridium Canada, alleging fraudulent and negligent misrepre- companies), Unical Enterprises, Inc. (“Unical”) and Sonigem workers’ Union of Canada and the CTEA. The Federal Court sentation and claiming that each are jointly and severally liable Products Inc. (“Sonigem”) (collectively, the “Defendants”) on found that the Tribunal lacked institutional independence and for U.S.$800 million. In January 2002, the Plaintiffs moved for February 11, 2000, in the Federal Court of Canada. The action prohibited further proceedings in the matter. Hearings before summary judgment of liability against all defendants on their alleges that the Defendants’ sales in Canada of telephones and the Tribunal into the merits of the case were suspended. The claim relating to failure to make capital contributions which answering machines bearing, among others, the mark “North- Canadian Human Rights Commission appealed this decision includes the U.S.$10 million claim against Iridium Canada. On the same day, all defendants cross-moved for summary judg- 3.9 BCE – Employees ment against the Plaintiffs to have dismissed all of their claims. As of December 31 2001 2000 1999 The Plaintiffs and the defendants have filed answering briefs in Bell Canada segment 55,712 55,195 43,995 (1) opposition to the respective motions for summary judgment. Teleglobe 1,861 2,097 n/a BELL DISTRIBUTION LAWSUITS Bell Globemedia 4,223 3,014 n/a BCE Emergis 2,603 2,096 1,147 Bell Distribution is involved in the distribution and sale of Bell Other operations 10,776 12,508 9,741 Canada, Bell Mobility, Bell ExpressVu and Sympatico wireless 75,175 74,910 54,883 and wireline communications products and services through its

(1) Excluding Aliant. Bell World/Espace Bell outlets owned by franchisees, inde- n/a: not applicable. pendent dealers or Bell Distribution itself. On October 16, 2001,

30 2001 BCE Annual Information Form 15 of Bell Distribution’s Québec franchisees filed a court York against Teleglobe Inc. and certain of its former officers. The Pursuant to the Shareholders’ Agreement, at any time from proceeding against Bell Distribution before the Québec Superior complaints generally allege that the defendants violated the U.S. July 1, 2002 until December 31, 2002, and at any time from Court claiming damages of $25,135,000, the nullity of specific Securities and Exchange Commission Rule 10b-5 and defrauded July 1, 2004 until December 31, 2004, (i) SBC shall have the clauses of their franchise agreement as well as injunctive relief. investors who purchased stock between February 10, 1999 and option to sell all of its shares in BCH (the “Shares”) to BCE Inc.; On December 19, 2001, 44 of Bell Distribution’s Québec inde- July 29, 1999. These complaints were consolidated and lead and (ii) BCE Inc. shall have the right to purchase all of SBC’s pendent dealers filed a court proceeding against Bell Distribu- plaintiffs appointed in the fourth quarter of 2000. On Shares, in each case, at the fair market value of the Shares multi- tion before the Québec Superior Court claiming damages of $55 February 9, 2001, the lead plaintiffs filed a consolidated plied by 1.25. BCE Inc. has the right to issue as consideration, in million, the nullity of specific clauses of their independent complaint, which did not contain specific claims for money full or in part, two year interest bearing notes. Interest on such dealer agreement as well as injunctive relief. Bell Distribution’s damages. On April 10, 2001, Teleglobe Inc. filed a motion to notes is to be based on BCE Inc.’s cost of funds for a note of Québec franchisees and independent dealers allege that Bell dismiss the complaints. On January 2, 2002, the United States similar maturity and amount, plus up to a maximum of Distribution is in breach of the franchise agreement and inde- District Court dismissed the consolidated amended complaint 150 basis points. Other terms and conditions of the notes are to pendent dealer agreement, respectively, in a number of respects in its entirety and granted the plaintiffs 20 days to replead. The be agreed upon by the parties. including with respect to the direct and indirect competition aforesaid 20-day period has expired and the plaintiffs have not The Shareholders’ Agreement provides that in the event created or allowed by Bell Distribution, the products supplying repled. On March 28, 2002, final judgment was entered and there is a change of control of SBC, BCE Inc. shall have the right structure and the compensation structure. They also allege plaintiffs have until April 29, 2002 to file a notice of appeal. to purchase SBC’s Shares at a price equal to the fair market value unfair competition by Bell Canada and its business units. Plaintiffs have not disclosed whether they intend to appeal the of the Shares. In the event there is a change of control of BCE BELL GLOBEMEDIA CLASS ACTION LAWSUITS dismissal of their complaint. Inc., SBC shall have the right to sell its Shares to BCE Inc. at a price equal to: (i) if the change of control occurs on or before the On February 5, 2001, Bell Globemedia Publishing Inc., a GENERAL fifth anniversary of the closing date, the higher of: subsidiary of Bell Globemedia, was added as a defendant to a In addition to the legal proceedings disclosed herein, BCE Inc. (A) $5.1 billion plus interest thereon at a rate of 15 per cent per class action lawsuit in respect of copyright infringement. The and its subsidiaries and associated companies are involved in year compounded annually less the amounts of all dividends claim is that The Globe and Mail newspaper and magazines (as various other claims and legal proceedings. While the final and reductions of stated capital received by SBC; (B) the fair well as Bell Globemedia Interactive) do not have the right to outcome of the legal proceedings disclosed herein and of any market value of the Shares multiplied by 1.25 and (C) the archive and publish certain freelanced and employee material other pending claims or legal proceedings cannot be predicted consideration paid for the Shares pursuant to the change of from the newspaper or magazines in any format, other than with certainty, it is the opinion of management that their reso- control transaction; and (ii) if the change of control occurs after print, because allegedly only print rights were originally lution will not have a material adverse effect on BCE’s consoli- the fifth anniversary of the closing date, the higher of: (X) the obtained with respect to that material. The relief claimed dated financial position or results of operations. BCE intends to fair market value of the Shares and (Y) the amount of consider- includes damages of $100 million as well as injunctive relief. The vigorously defend itself against all such claims and in all such ation payable or paid to BCE Inc. that is attributable to the Ontario Superior Court of Justice rendered a decision on proceedings. Shares. October 3, 2001, rejecting the plaintiff’s motion for partial Certain Contracts The resignation of Mr. Jean C. Monty as Chairman and Chief summary judgment (including the rejection of a requested Executive Officer of Bell Canada, when it becomes effective, will injunction at this stage) on certain proposed common issues. SHAREHOLDERS’ AGREEMENT WITH SBC not trigger any SBC right under the Shareholders’ Agreement. The Ontario Superior Court of Justice declared that The Globe BCE Inc. and SBC have entered into a shareholders’ agreement However, the Shareholders’ Agreement does provide SBC with and Mail was legally entitled to publish the newspaper on with respect to their joint ownership of BCH (the “Shareholders’ consultation and other rights on the choice of Mr. Monty’s microfilm, microfiche and in the Internet edition, but reserved Agreement”). Pursuant to the Shareholders’ Agreement, the successor until March 24, 2004. Absent an agreement among for trial the question of whether The Globe and Mail had, over Board of Directors of each of BCH, the company which holds all BCE Inc. and SBC on the choice of such successor, and if Bell the years, acquired implied rights from freelancers to archive of the outstanding voting shares of Bell Canada, and Bell Canada decides nonetheless to proceed with such appointment and make available the freelancer written contents of the news- Canada is comprised of ten directors, eight nominated by BCE prior to December 31, 2002, SBC has the option to sell all of its paper on electronic databases and CD-ROMS. Both the plaintiffs Inc. (four management nominees and four independent direc- Shares to BCE Inc. at a price equal to the higher of (a) $5.1 billion and the defendants have certain appeal rights in respect of this tors from among the members of the Board of Directors of BCE plus interest thereon at a rate of 15 per cent per year decision, which will commence once the judge’s decision is Inc.) and two nominated by SBC. SBC is entitled to appoint the compounded annually less the amounts of all dividends and formally entered, which is expected by the end of April 2002. Chief Financial Officer of Bell Canada and of Bell Mobility as reductions of stated capital received by SBC (also taking into well as a senior officer in charge of product management and TELEGLOBE INC. CLASS ACTION LAWSUITS account a 15 per cent interest rate compounded yearly) and (b) product development at Bell Canada. SBC is also entitled to During 2000, several class action lawsuits were filed in the the fair market value of the Shares multiplied by 1.25. After nominate one director to the Board of Directors of Bell Mobility. United States District Court for the Southern District of New

2001 BCE Annual Information Form 31 December 31, 2002, the price in such circumstances would be forward-looking statements relate to the future financial the conditions in the broader market for communications and the fair market value of the Shares multiplied by 1.25. condition, results of operations or business of the BCE Group the conditions in the domestic or global economy generally. The Shareholders’ Agreement provides BCE Inc. and SBC companies. These statements may be based on current expecta- More specifically, the financial performance of the BCE Group with customary rights, including rights of first refusal and rights tions and estimates about the markets in which the BCE Group companies is affected by the general economic conditions as of first offer. companies operate and management’s beliefs and assumptions demand for services tends to decline when economic growth AGREEMENT BETWEEN BCE AND CGI regarding these markets. In some cases, forward-looking state- and retail and commercial activity decline. Recently, the slow- ments may be identified by words such as “anticipate”, “could”, down in global economic activity, including in Canada and the BCE Inc. entered into an agreement on July 1, 1998 with CGI’s “expect”, “seek”, “may”, “intend”, “will”, and similar expres- United States, has made the overall global and Canadian three largest individual shareholders (the “Shareholders”) sions. These statements are subject to important risks and uncer- economic environment more uncertain and could, depending providing for certain put and call options, as well as rights of tainties which are difficult to predict and assumptions which on the duration and extent of such slowdown and on the pace first refusal, on the shares of CGI held by the Shareholders. The may prove to be inaccurate. The results or events predicted in of an eventual economic recovery, have an important adverse agreement gives the Shareholders the right to gradually sell (put the forward-looking statements contained in this Annual Infor- impact on the demand for products and services and on the options) their shares to BCE Inc. through January 5, 2004 and, mation Form and in such other written or oral statements which financial performance of the BCE Group companies. Such nega- thereafter for a period of two years, the right to BCE Inc. to buy may subsequently be made, may differ materially from actual tive trends in global market and economic conditions could (call options) these shares to the extent not already acquired by results or events. Some of the factors which could cause results have an adverse effect on purchasing patterns of subscribers and BCE Inc. The price per share payable on any exercise of the put or events to differ materially from current expectations are customers especially in the case of products and services or call options will be, in all cases, 115 per cent of the market discussed below under the heading “Risk Factors” and provided by the BCE Group companies that are more subject to price for CGI shares on the exercise date payable in common other cautionary factors are outlined elsewhere in this being affected by economic slowdowns. These negative trends shares of BCE Inc. These options, if fully exercised, would Annual Information Form. The risk factors discussed below could also adversely affect the financial condition and credit risk increase BCE Inc.’s equity ownership and voting interest in CGI relate to BCE Inc.’s five business segments in existence as of of subscribers and customers which would, in turn, increase to approximately 41 per cent. December 31, 2001: Bell Canada segment; Bell Globemedia; uncertainties regarding the BCE Group companies’ ability to SHARED SERVICES AGREEMENT Teleglobe; BCE Emergis and BCE Ventures. Readers should also collect receivables. However, it is not possible for the BCE Group Effective June 22, 2001, Bell Canada entered into a ten-year consult, when filed, the Annual Information Forms for the year companies to accurately predict economic fluctuations and the service contract with a special purpose entity. This service ended December 31, 2001, of the following companies: Bell impact of such fluctuations on their performance. contract will allow Bell Canada to, over time, reduce systems Canada; Aliant; BCE Emergis; BCI; Telesat; and CGI. BCE Inc. Increasing Competition and administrative costs through the rationalization and disclaims any intention or obligation to update or revise any The markets in which each of the BCE Group companies carries enhancements of certain systems and the optimization of forward-looking statements, whether as a result of new infor- on business are characterized by vigorous and intensifying certain processes. Bell Canada’s commitments are approxi- mation, future events, or otherwise. In particular, forward- competition. Each company is facing many competitors with mately $150 million over the first three years of the agreement. looking statements do not reflect the potential impact of any substantial financial, marketing, personnel and technological In 2004, Bell Canada may either exercise an option to buy the mergers, acquisitions, other business combinations, divestitures resources. In some cases, competition does not only result from special purpose entity, or maintain the service contract and or other transactions that may be announced or completed after competitors within the same market segment, but also from therefore commit itself to an additional minimum of such statements are made. other businesses and industries. In addition, while competitors $420 million in service fees to the third party. RISK FACTORS of certain of the BCE Group companies already include both Forward-Looking Statements GENERAL FACTORS AFFECTING ALL domestic and foreign entities, the number of foreign-based competitors with large resources may increase in the future. Certain statements contained in this section and in other BCE GROUP COMPANIES Some industries in which the BCE Group companies sections of this Annual Information Form, including statements Economic and Market Conditions compete are consolidating. Mergers and acquisitions, as well as contained in BCE Inc.’s management’s discussion and analysis The future operating results of the BCE Group companies may strategic alliances, restructurings, partnerships and joint of financial condition and results of operations (“MD&A”) be affected by various trends and factors that must be managed ventures are creating new and larger participants. Such trans- incorporated by reference in this Annual Information Form, in order to achieve favourable operating results. In addition, actions may result in stronger competitors with broad skills and constitute forward-looking statements. In addition, other there are trends and factors beyond the control of the BCE significant resources. Furthermore, new competitors of the BCE written or oral statements which constitute forward-looking Group companies that affect their operations. Such trends and Group companies may emerge from time to time through the statements may be made from time to time by or on behalf of factors include adverse changes in the conditions in the specific development of new technologies, products and services, and one or more of BCE Inc. and its subsidiaries, joint ventures, and markets for the BCE Group companies’ products and services, other factors. associated companies (the “BCE Group companies”). These

32 2001 BCE Annual Information Form Factors such as product pricing and customer service are rially harm the business and operating results of the relevant modified laws or regulations governing the Internet could under continued pressure while the necessity to reduce costs, BCE Group company. decrease the demand for the BCE Group companies’ Internet manage expenses and generate productivity savings is ongoing. services and increase the costs of selling such services. Technological Development Intensifying competition may impact the BCE Group compa- The business markets in which the BCE Group companies Expenditures, Capital Requirements nies’ ability to retain existing and attract new customers, as well operate are characterized by rapid technological changes, and Demand for Services as affect revenues and network capacity. The BCE Group compa- evolving industry standards, changing client needs, frequent The financial condition and results of operations of the BCE nies must not only try to anticipate, but also respond promptly new product and service introductions and short product life Group companies are materially affected by a number of factors to continuous and rapid developments in their respective busi- cycles. The future success of each of the BCE Group companies such as: the level of expenditures necessary to expand opera- nesses and markets. will depend in significant part on its ability to anticipate tions, increase the number of customers, introduce new prod- Strategies, Acquisitions and Alliances industry standards, successfully introduce new technologies, ucts and services, update or build networks and maintain or BCE Inc. adjusts its business strategies and priorities as required initiatives, products and services and upgrade current products improve the quality of products and services; the availability to address changes to its external environment and internal and services, and to comply with emerging industry standards. and cost of capital required to fund such expenditures (espe- goals and capabilities. However, there is no certainty that BCE Furthermore, as the BCE Group companies seek to deploy new cially in light of the current market conditions in the telecom- Inc.’s strategies (including its convergence, bundling, billing and products, services and technologies and update their networks munications industry); the ability of the BCE Group companies branding strategies) will yield the expected benefits, revenue to remain competitive, they may be exposed to incremental to dispose of or otherwise monetize certain of their assets; and and earnings projections, synergies and growth prospects. financial risks associated with newer technologies that are the extent of demand for both traditional and emerging prod- A key element of the BCE Group companies’ growth strategy subject to accelerated obsolescence, or may be required to inject ucts and services in the markets served by the BCE Group has been and continues to be strategic acquisitions. There can more capital than anticipated. The proposed deployment of companies as well as their ability to develop a customer base be no assurance that in the future, acquisition candidates will new technologies and initiatives may also be delayed due to with recurring service revenues. Demand levels for the BCE be found on acceptable terms or that the relevant BCE Group factors beyond the BCE Group companies’ control. In addition, Group companies’ products and services are also affected by company will have adequate resources to consummate any new technological innovations generally require a substantial factors such as technology development and innovation, acquisition. Furthermore, acquisitions involve a number of financial investment before any assurance is available as to their sociodemographic trends, levels of business investment and other special risks, including time and expenses associated with commercial viability. There can be no assurance that the BCE general macro economic conditions. identifying and evaluating acquisitions, the diversion of Group companies will be successful in developing and The level of capital expenditures could materially increase as management’s attention, the difficulty in integrating operations marketing new products and services or enhancements that will the BCE Group companies seek to expand the scope and scale and realizing synergies and the potential loss of key employees respond to technological change and achieve market accept- of their businesses beyond traditional territories and service and customers of the acquired company. In addition, customer ance. Furthermore, the introduction of new products or services offerings. To the extent that the BCE Group companies fail to satisfaction or performance problems at a single acquired firm employing new or evolving technologies could render existing make expenditures on new and existing capital programs, they could have a material adverse effect on the reputation of the products or services unmarketable, or cause prices of such prod- may cease to be competitive in the markets in which they relevant BCE Group company as a whole. Acquisitions may also ucts or services to decrease. compete. However, if such capital expenditures are made, the result in potential dilutive issuance of equity securities, the BCE Group companies may also risk incurring substantial Uncertainties Related to the Internet incurrence of debt, write-offs and integration costs and the expenditures to acquire assets with little commercial or An increasingly important driver for network and infrastructure impairment of goodwill and the amortization of other intan- economic value. investments is the growth of Internet traffic. This traffic is driven gible assets, all of which could have a material adverse effect on by residential and business Internet usage and has overtaken the Defects in Software Products and Network Failures the results of operations and financial condition of the involved volume of voice telephony traffic on many routes. It is uncer- Defects in software products owned or licensed by the BCE BCE Group company. tain to what extent this traffic will continue to exhibit high Group companies, as well as failures or mistakes in the provision One other business strategy of the BCE Group companies has growth rates as high-speed access services are deployed and of services, could materially harm the business of any of the BCE been and continues to be to enter into strategic or similar collab- bandwidth intensive applications, such as video, are increas- Group companies, including customer relationships and oper- orative relationships or alliances with third parties in order, for ingly adopted by users. Significant upgrades to network capacity ating results. The operations of the BCE Group companies are example, to access competencies to develop new products and will be required to sustain service levels if Internet growth rates dependent upon their ability to protect their networks and services or to reach a larger client base than would otherwise be remain high as they are today. Alternatively, the BCE Group equipment and the information stored in their data centers achievable. The failure of, or the inability to consummate, one companies’ financial condition and results of operations could against damages that may be caused by fire, natural disaster, or more of such strategic relationships or alliances could mate- be materially adversely affected should future levels of Internet power loss, unauthorized intrusion, computer viruses, disabling traffic be lower than currently anticipated. In addition, new or devices, acts of war or terrorism and other similar events. There

2001 BCE Annual Information Form 33 can be no assurance that such events would not result in a interest-bearing notes. The exercise by SBC of its option would Increasing Competition prolonged outage of the operations of any of the BCE Group require BCE Inc. to refinance such notes within two years. With the advent of competition in the local service market in companies. 1998, virtually all parts of the businesses of the Bell Canada Stock Market Volatility Group companies are facing substantial and intensifying compe- Other General Factors The common shares of BCE Inc. have in the past experienced tition. The Bell Canada Group companies’ competitors include The success of the BCE Group companies is largely dependent price volatility generally due to certain announcements major telecommunications companies, cable companies, upon their ability to attract and retain highly skilled personnel affecting BCE Inc. and the BCE Group companies. Variations Internet companies, WSPs, CLECs and a variety of other compa- and the loss of the services of key persons could materially harm between BCE Inc.’s actual or anticipated financial results and nies that offer network services, such as providers of business their businesses and operating results. the published expectations of financial analysts may also information systems and systems integrators, as well as an Some of the BCE Group companies may have to renegotiate contribute to this volatility. These factors, as well as general increasing number of other companies that deal with, or have existing collective agreements with their unionized employees. economic and political conditions, may also have a material access to, customers through various communications networks. The failure of the renegotiations could have a material adverse adverse effect on the market price of BCE Inc.’s common shares. Internet access services are especially competitive with large effect on the businesses, operating results and financial condi- BELL CANADA cable television companies and a significant number of inde- tion of the BCE Group companies. pendent ISPs providing intense competition. Competitive pres- All BCE Group companies are subject to risks related to Regulatory Environment sure has led to Internet access pricing in Canada that is among pending or future litigation or regulatory initiatives or proceed- Bell Canada, Aliant and their subsidiaries and significantly the lowest in the world and largely independent of usage ings. In addition, changes in laws or regulations, or the adop- influenced companies (the “Bell Canada Group companies”) are patterns. Costs to Bell Canada, however, are driven by the tion of new laws or regulations, could also have a material subject to evolving regulatory policies in the form of decisions amount of network traffic a user generates and the location of adverse effect on the BCE Group companies’ businesses, oper- by various regulatory agencies including the CRTC. Many of the server that stores the Web site the user visits. Such costs are ating results and financial condition. these decisions balance competitor requests for access to the largely beyond Bell Canada’s control and cannot be accurately Some of the BCE Group companies, such as Teleglobe Inc., ILECs’ (such as Bell Canada and Aliant) essential facilities and predicted. CGI, Telesat and BCI, carry on business internationally and, other network infrastructure with the rights of the ILECs to The Canadian wireless telecommunications industry is also accordingly, a substantial proportion of their revenues are compete on a reasonably unencumbered basis. Also, Canadian highly competitive. Bell Mobility competes directly with other derived, or a substantial portion of their capital expenditures are Telecommunications Carriers and Broadcast Distribution WSPs with aggressive product and service introductions, pricing made, in currencies other than Canadian dollars. Additionally, Undertakings seeking physical access to customers’ facilities on and marketing. Bell Mobility expects competition to intensify some have exposures to emerging market currencies which have reasonable terms have increasingly found themselves in through the development of new technologies, products and extreme currency volatility. As a result, some of these compa- disputes with property owners regarding access to private services, and through consolidations in the Canadian telecom- nies may be exposed to movements in foreign currency property or with municipalities with respect to access to public munications industry. exchange rates which may have an adverse impact on their rights-of-way. As previously discussed in Item 3 – “Regulatory Bell Mobility and certain of its competitors have successfully respective results of operations and financial condition. Decisions”, a CRTC decision regarding the conditions and price bid for additional spectrum licenses in early 2001. Some of the The risk factors discussed below apply more specifically to for access to municipal rights-of-way is currently under appeal. awarded licenses will enable Bell Mobility to roll out wireless BCE Inc.’s five business segments and complete those previously At this point in time, it is impossible to assess the financial services in British Columbia and Alberta. This rollout will result discussed under the heading “General Factors Affecting All BCE implications of any final judicial decision. In addition, and also in substantial capital expenditures for the construction of a Group Companies”. as previously discussed in Item 3 – “Regulatory Decisions”, the network in these provinces. Furthermore, the expected level of CRTC recently completed its review of the price cap regime SPECIFIC FACTORS AFFECTING BCE INC. expenditures associated with this network expansion could which has been in force since January 1998 for the major increase as Bell Mobility will seek to gain adequate network SBC Put Option incumbent telephone companies. The CRTC decision on the coverage and secure new customers. Some of Bell Mobility’s As previously discussed under Item3–“Businesses of BCE – new price cap regime is expected on or prior to May 31, 2002. competitors were awarded licenses in Bell Mobility’s current Certain Contracts”, BCE Inc. and SBC entered into the Share- With the business of Bell Canada increasingly focusing on operating regions thereby increasing the potential for competi- holders’ Agreement which includes, among other terms, the content, e-commerce and connectivity, assessment of regula- tion and market share losses in such areas. Although the new option by SBC to sell all of its shares in BCH to BCE Inc. at tory risks must increasingly take into account regulatory deci- licenses awarded to Bell Mobility provide it with the possibility any time from July 1, 2002 until December 31, 2002, and at any sions in the areas of wireless spectrum auctions, programming to launch new technologies, services and applications and to time from July 1, 2004 until December 31, 2004, at the fair and carriage requirements under the Broadcasting Act, as well geographically expand its operations, there can be no assurance market value of the shares multiplied by 1.25. BCE Inc. has the as copyright and other content related issues particularly over that such additional licenses will result in the successful deploy- right to issue as consideration, in full or in part, two-year the Internet. ment of such new technologies, services and applications, a

34 2001 BCE Annual Information Form successful geographical expansion and, in general, in an new legislation or regulations may be adopted in order to Competition improvement in Bell Mobility’s financial condition and results address these concerns. Any such legislation or regulations Bell ExpressVu’s competitors have pursued, and may continue of operations. could adversely affect WSPs through reduced network usage by to pursue, aggressive marketing campaigns and pricing policies subscribers in motor vehicles. targeting the existing customers of Bell ExpressVu. In addition, Wireless Regulation Bell ExpressVu has recently faced increased competition from The operation of cellular, PCS and other radio-telecommunica- Radio Frequency Emission Concerns unregulated U.S. DTH services sold illegally in Canada. tions systems in Canada is subject to initial licensing require- Media reports have suggested that certain radio frequency Although Bell ExpressVu has, to date, been successful in ments and the oversight of Industry Canada. Operating licenses emissions from cellular telephones may be linked to certain increasing market share in the face of such competition, there are issued at the discretion of the Minister of Industry pursuant medical conditions such as cancer. In addition, certain interest is no assurance that such success will continue nor that Bell to the Radiocommunication Act. Bell Mobility’s current cellular groups have requested investigations into claims that digital ExpressVu will be able to increase average revenue per and PCS licenses will expire on March 31, 2006. The recently transmissions from handsets used in connection with digital subscriber, increase its share of the pay-per-view market or main- awarded PCS spectrum auction licenses will expire on wireless technologies pose health concerns and cause interfer- tain or reduce subscriber acquisition costs. November 29, 2011. Industry Canada has the authority at any ence with hearing aids and other medical devices. There can be time to modify the license conditions applicable to the provi- no assurance that the findings of such studies will not have a Satellite Defects sion of such services in Canada to the extent necessary to ensure material adverse effect on the business of WSPs or will not lead Bell ExpressVu’s DTH services are solely provided through the the efficient and orderly development of radiocommunication to governmental regulation. The actual or perceived health Nimiq Direct Broadcast Satellite operated by Telesat. Satellites facilities and services in Canada. Industry Canada can revoke a risks of wireless communications devices could adversely affect are subject to significant risks, including manufacturing defects, license at any time for failure to comply with its terms. Industry WSPs through reduced subscriber growth, reduced network destruction or damage that may prevent proper commercial use, Canada has indicated that, with respect to licenses other than usage per subscriber, threat of product liability lawsuits or or result in the loss of the satellite. Any such loss, manufacturing those awarded through the spectrum auction process, it intends reduced availability of external financing to the wireless defects, damage or destruction of the satellite would have a to engage in a public consultation process on appropriate license communications industry. material adverse impact on Bell ExpressVu’s results of operations term conditions and fees within the coming year. It is antici- BELL EXPRESSVU and financial condition. pated that Industry Canada will, at the end of this consultation BELL GLOBEMEDIA period, give effect to its conclusions by making suitable amend- Capital Requirements Television broadcasting is comprised of a conventional televi- ments to existing license conditions. To date, Bell ExpressVu has funded operating losses through sion sector of free over-the-air television services and a sector of capital injections from BCE Inc. Bell ExpressVu believes that it Announcements Concerning Teleglobe specialty and pay television services delivered to subscribers by will access sufficient sources of funding to achieve its business As previously discussed under Item2–“General Development broadcast distribution undertakings, including cable and DTH plan. However, such access is based on a business plan that is of BCE – Recent Developments”, on April 24, 2002, BCE Inc. and operators. CTV operates in both the conventional and specialty subject to various assumptions and estimates, including Teleglobe Inc. announced that BCE Inc. will cease further long- sectors. Commercial advertising is the primary source of subscriber base, average revenue per subscriber and costs for term funding to Teleglobe Inc. It is expected that Teleglobe Inc. revenue for the conventional television sector while the acquiring new subscribers. If the business plan is not achieved, will enter into negotiations with its debt holders to restructure specialty sector derives revenue both from subscribers and greater losses than planned would occur, requiring Bell its debt and explore possibilities for business combinations and commercial advertising. Commercial advertising is a function ExpressVu to seek additional financing. There is no assurance potential partnerships. There can be no assurance that Teleglobe of the viewing share in a given market, and viewing share is in that Bell ExpressVu will be successful in obtaining such Inc. will be successful in its efforts to effect a financial restruc- turn dependent on program content and the number of choices financing on favourable terms and conditions. turing, partnership or business combination. Accordingly, there available. Market fragmentation has increased over the last is a risk that Teleglobe Inc. may become subject to a court- DTH Market Risks decade as a result of the introduction of additional television supervised proceeding or may have to wind-down some or all of The success of Bell ExpressVu’s DTH business strategy is subject services, the extended reach of existing signals and the increased its business. Bell Canada cannot predict the form, terms and to factors that are beyond its control and impossible to predict use of VCRs. The deployment of digital capability will further legal implications of any such events nor the impact on Bell due, in part, to the limited history of digital DTH services in extend the choices available. Furthermore, new Web-based Canada, its subsidiaries or associated companies. Canada. Consequently, the size of the Canadian market for services available over the Internet are expected to provide alter- digital DTH services, the rates of penetration of that market, the native niche services to consumers, continuing the fragmenta- Use of Handsets in Vehicles churn rate, the extent and nature of the competitive environ- tion of the viewing market. Accordingly, reach and Media reports have suggested that the use of hand held cellular ment and the ability of Bell ExpressVu to meet revenue and cost attractiveness of programming content are the two prominent units by drivers in vehicles may, in certain circumstances, result expectations are uncertain. There is no assurance that Bell variables in the ability to generate revenues. However, there can in an increased rate of accidents on the road. It is possible that ExpressVu will be profitable in delivering its DTH services. be no assurance that CTV will be able to maintain or increase its

2001 BCE Annual Information Form 35 current ability to reach viewers with programming content that U.S.$1.3 billion due in 2002, representing annual debt service Intellectual Property is satisfactory to the public, nor that CTV will be able to main- payments of approximately U.S.$135 million at interest and BCE Emergis depends on its ability to develop and maintain the tain or increase its current advertising revenues. exchange rates prevailing on December 31, 2001. Teleglobe proprietary aspects of its technology. BCE Emergis cannot be Each of CTV’s conventional and specialty services operates Inc.’s U.S.$1.275 billion revolving credit facilities (which are certain that it will be able to enforce its rights or prevent other under a license issued by the CRTC for a fixed term, up to seven currently fully drawn) mature on July 22, 2002. Teleglobe Inc. parties from developing similar technology, duplicating its intel- years. These licenses are subject to the requirements of the does not have sufficient funds available from its cash flow to lectual property or designing around its intellectual property. It Broadcasting Act, the regulations enacted thereunder, the poli- meet these obligations, to make necessary capital expenditures is also possible that in the future, third parties may claim that cies and decisions of the CRTC, and the conditions and expec- and pay other operating expenses. BCE Emergis or its current or potential future intellectual prop- tations established in each licensing or renewal decision. These On April 24, 2002, BCE Inc. and Teleglobe Inc. announced erty infringes on their intellectual property. Any such claims, requirements may change or be amended from time to time. that BCE Inc. will cease further long-term funding to Teleglobe with or without merit, could materially harm BCE Emergis’ busi- License renewals are typically granted by the CRTC, although Inc. BCE Inc. will provide only short-term periodic funding ness and operating results. conditions of license and expectations are often varied or to Teleglobe Inc., on terms and conditions satisfactory to BCE Adoption Rate of Solutions by Customers amended at the time of renewal. Inc., up to a maximum aggregate amount of between In order to build its recurring revenue base, the number of trans- Advertising is related to economic growth and tends to U.S.$100 million and U.S.$125 million, so that Teleglobe Inc. actions that BCE Emergis processes must increase. This increase follow GDP (gross domestic product). Accordingly, any can provide continuing customer service and fund other opera- will depend on the rate at which its solutions are adopted by its economic downturn, such as the current one, will impact Bell tions-related needs while it reviews its options for the future. customers and by its channel partners’ customers. It will also Globemedia’s ability to generate revenue growth as approxi- It is expected that Teleglobe Inc. will explore possibilities for depend on its ability to stimulate its channel partners in being mately 73 per cent of Bell Globemedia’s current revenue base a business combination and will enter into negotiation with its pro-active and successful in selling its solutions to their from the television, print and interactive sectors is dependent debt holders to restructure its debt. There is uncertainty as to customers. on advertising revenues. whether Teleglobe Inc. will be successful in carrying out any Within the television sector, competition for highly rated business combination or negotiating with its debt holders a debt Growth programming maintains cost pressure on program acquisitions. restructuring and, accordingly, there is a risk that Teleglobe Inc. BCE Emergis has experienced rapid growth in its revenue. To Recent decisions allowing CanWest to own two conventional may become the subject of a court-supervised proceeding or continue to grow: stations in the markets of Ontario and Vancouver along with that it may have to conduct a wind-down of some or all of its •there must be continued adoption of e-commerce solu- completion of their national network across Canada will further business. In addition, there are risks and costs associated with tions; the competition for programming and increase CTV’s costs for Teleglobe Inc.’s negotiation of a business combination and a • large financial institutions and health insurance compa- the acquisition of popular programming. comprehensive debt restructuring, including the potential risks nies must adopt its e-commerce solutions and be effective In the print sector, competition from the launch of a new associated with the commencement of a court-supervised in reselling them to their customers; national newspaper in Canada more than three years ago proceeding or a wind-down. • BCE Emergis must integrate acquisitions successfully; continues to require substantial spending in distribution and BCE EMERGIS •the operations of BCE Emergis must be scalable; and marketing and impacts revenue growth through competitive • BCE Emergis must be able to enter into agreements that pricing. This competition is expected to continue and intensify. Adoption of E-Commerce generate non-recurring revenue and form the basis for Bell Globemedia also operates a number of Web-based activi- In order for BCE Emergis to be successful, e-commerce must generating new recurring revenue. ties through Bell Globemedia Interactive. These businesses are, continue to be widely adopted in a timely manner. Because Operating Results by their nature, relatively new and accordingly subject to uncer- e- commerce, and transactions over the Internet in general, are BCE Emergis has experienced losses in the past. Revenue in any tain returns. Leveraging existing content and brands from print new and evolving, it is difficult to exactly predict the size of this quarter is substantially dependent on the quantity of purchases and television through these new distribution channels requires market and its sustainable growth rate. Adoption of e-commerce of services requested in that quarter by customers. Furthermore, continued investment in labour and technology while has not been as fast as originally anticipated. its e-Health business unit derives a significant portion of attempting to grow share of revenues in an emerging market. Security and Privacy Breaches revenue from a small number of major payor clients. The loss of TELEGLOBE If BCE Emergis is unable to protect the security and privacy of a contract with a major payor client or the inability to replace its electronic transactions, its business, including customer rela- any such client with new clients could have a significant effect Risks Associated with April 24, 2002 tionships, could be materially adversely affected. on its operating results. Announcements Quarterly revenue, when inclusive of non-recurring revenue, At December 31, 2001, Teleglobe Inc. had outstanding indebted- is difficult to forecast since the market for e-commerce is rapidly ness of approximately U.S.$2.7 billion, including approximately

36 2001 BCE Annual Information Form evolving and its revenue in any period is significantly affected Integrity of the Public Key Cryptography Telesat by the economic environment and its impact on sales cycles, its Technology Risk of Launch and In-orbit Failure ability to enter into new sales agreements, and by the BCE Emergis’ Internet security solutions depend on public key Telesat currently has two satellites under construction. There is announcements and product offerings of its competitors as well cryptography technology. Any significant advance in tech- a risk that these or future satellites may not be launched success- as alternative technologies. niques for attacking cryptographic systems could render some fully. To protect against such events, Telesat purchases launch Quarterly operating results of BCE Emergis have fluctuated or all of its existing Internet security solutions obsolete or insurance. Once in-orbit, there is the possibility that Telesat’s in the past and BCE Emergis expects them to continue to fluc- unmarketable, which could reduce revenues from its security satellites may experience failure which prevents them from tuate in the future. Volatility in quarterly results is mainly due solutions and could materially harm its business and operating fulfilling their commercial mission as originally intended. To to the level of non-recurring revenue. If its quarterly operating results. protect itself against the risk of in-orbit failure, Telesat under- results fail to meet analysts’ expectations, the trading price of its Industry and Government Regulations takes a variety of measures including engineering satellites with common shares could decline. In addition, significant fluctua- Governmental policies adversely affecting the business of BCE spare components and on board redundancies, and, where tions in its quarterly operating results may harm its business Emergis could be implemented by legislation, executive order, appropriate, by purchasing in-orbit insurance. There is no assur- operations by making it difficult to implement its business plan administrative order or otherwise, particularly in the U.S. health ance that Telesat will be able to renew existing in-orbit insur- and achieve its results. care industry. In that industry, a number of proposals for health ance coverage in sufficient amounts at favourable terms. Success of U.S. Operations care reform have been made at federal and state levels, including Although it has already secured part of the insurance coverage it BCE Emergis is expanding its operations in the United States. proposals to provide greater government control of health requires for Anik F2 and entered into arrangements with the BCE Emergis has limited experience in marketing, selling and care spending, to reduce fraud and abuse, to broaden access to manufacturer of Nimiq 2 to obtain equivalent insurance protec- supporting its services in other countries, including the United health care services and to change the operating environment tion, there is no assurance that it will be able to complete these States. BCE Emergis may not be able to successfully market, sell, for healthcare providers and payors. BCE Emergis cannot programs with sufficient coverage at favourable rates. deliver and support its services in the United States. BCE Emergis predict what impact, if any, these activities (which include In August 2001, Boeing Satellite Systems, the manufacturer will need to devote significant management and financial efforts to effect reform through legislation and changes in of the Anik F1 satellite, advised Telesat of a gradual decrease in resources to its expansion in the United States. In particular, administration or interpretation of government health care available power on-board the satellite. Telesat believes the BCE Emergis will have to attract and retain experienced manage- programs, laws, regulations or policies) might have on it. Any of anomaly, over time, will require that some of Anik F1’s ment and other personnel. Competition for such personnel is these changes could have a significant impact on the business transponders be turned off and has advised its insurers of this intense, particularly in the United States, and BCE Emergis may and operating results of BCE Emergis. fact. The power degradation on the satellite is limited such that be unable to attract and retain qualified staff. If BCE Emergis is BCE VENTURES none of Telesat’s existing customers on Anik F1 are expected to unable to expand its international operations successfully and see any disruption in service over the life of the satellite. Telesat in a timely manner, its business and operating results could be General has insurance in place to cover such an occurrence and manage- materially harmed. Effective December 1, 2000, BCE Inc. implemented a structure ment believes that any claim it makes in connection with the whereby various operations which are not part of its four prin- power anomaly will be resolved successfully. Dependence on Contracting Medical Service cipal business units were grouped under the business segment Providers Business Risks designated BCE Ventures. This segment includes, without limi- The business growth in BCE Emergis’ e-Health sector is Provision of services into the United States and Latin American tation, BCE Inc.’s investments in Telesat, CGI and BCI. Specific dependent on its ability to retain existing contracting providers, markets is subject to certain risks such as changes in foreign risks relating to each of these companies are described below. to attract additional contracting providers and to retain or government regulations and telecommunications standards, BCE Ventures is mandated to enhance shareholder value by improve the price concessions granted by contracting providers. licensing requirements, tariffs, taxes and other matters. Latin maximizing the value of its investments by continuing their The termination of a significant number of contracts with American operations are also subject to risks associated with growth and operating success, or by expanding their scale or contracting providers having a significant number of claims economic and social instability, regulatory and licensing restric- scope through mergers and alliances, or by outright disposition. with its payor clients, the inability to replace those contracts tions and exchange controls. In addition, Telesat will face The level of the contribution of the BCE Ventures segment to with similar contracting providers and/or renegotiation of significant competition from other satellite companies, already BCE Inc.’s general financial condition and results of operations contracts resulting in reduced price concessions could have a providing services in these markets, which may have the advan- will significantly depend on the degree of success of BCE significant effect on its operating results. Also, such contracts do tage of long-standing customer relationships and may have Ventures in meeting its mandate. not prohibit the contracting providers from entering into greater financial resources than Telesat. A significant delay in discounted arrangements with others. the delivery of the Anik F2 satellite by the manufacturer, or of the launch by the launch service provider, could adversely affect

2001 BCE Annual Information Form 37 Telesat’s ability to provide service. Such delay could result from it will be able to generate any significant cash from such oper- could be significantly diluted. Furthermore, there can be no a delay in the construction of the satellite and/or launch ating companies in the near future. assurance that the other shareholders of Telecom Américas can vehicle, launch failures of vehicles similar in heritage to those BCI’s financial obligations, together with any investment or will contribute the necessary funding to Telecom Américas or preceding a Telesat satellite, unavailability of a reliable launch requirements for BCI’s operations, are expected to be settled that Telecom Américas will be successful in securing such opportunity and possible delays in obtaining regulatory with the proceeds from the future sale of BCI’s discontinued funding from any external sources. approvals among others. operations and other assets or through new financings in either Change of Control the public or private debt or equity capital markets. Governmental Regulation Certain of BCI’s financial obligations contain change of control The capital and equity markets in Latin America have been Prior to March 1, 2000, the CRTC regulated Telesat’s RF Channel provisions relating to BCE Inc.’s ownership in BCI which, if depressed and there can be no assurance as to whether or when service rates under a form of rate of return regulation. Effective breached, could result in the acceleration of such financial obli- a recovery will occur. Such conditions have negatively affected after this date, the CRTC approved an alternative form of regu- gations. The financial obligations containing such provisions the value of BCI’s telecommunications assets and restricted lation for these service rates based on certain price ceilings. represent approximately $930 million in principal amount of BCI’s ability to raise capital. While the price ceiling levels were established based on indebtedness. In the event that these change of control provi- Further, BCI’s ability to realize the required proceeds from prevailing market conditions and are above current rates for sions are triggered, all of the indebtedness mentioned above asset sales remains dependent on many other factors outside of certain of Telesat’s existing satellite services, there can be no could be accelerated. management’s control, such as the economic, political and assurance that these ceilings will be appropriate for services A “Change of Control” will be deemed to have occurred if monetary situations specific to each of the countries where offered in Canada on any future satellites operated by Telesat. (i) a Rating Decline (as defined below) occurs and BCE Inc. shall BCI’s investments are located, as well as the status of BCI’s rela- In 1999, the U.S. State Department published amendments cease to be the ultimate beneficial owner of more than tionship with its partners in these investments. In the event that to the International Traffic in Arms Regulations (ITAR) which 50 per cent of the total voting power of BCI’s voting stock on a BCI is unable to raise proceeds through asset sales, it will be included satellites on the list of items requiring export permits. fully-diluted basis; (ii) BCE Inc. shall cease to be the ultimate required to secure other sources of funds, and there can be no These provisions have already had an adverse impact on beneficial owner of at least 35 per cent of the total voting power guarantee that it will be able to secure such other financing. Telesat’s international consulting business. of BCI’s voting stock on a fully-diluted basis; (iii) any person or In the past and in particular in the context of the Recapital- group acting in concert becomes the beneficial owner of voting CGI ization Transactions, BCI was successful in securing financing stock representing a greater percentage of the total voting power Risk factors concerning CGI include, without limitation, those from its parent company, BCE Inc. BCE Inc. has publicly stated of the voting stock than is then ultimately beneficially owned previously referred to under the heading “General Factors that it no longer considers BCI as a core investment and has by BCE Inc.; or (iv) individuals who, on the date the obligation Affecting All BCE Group Companies”. stated its intent to monetize its interest in BCI. BCE Inc. has was created, constituted BCI’s Board of Directors (together with further stated its current intent to invest no additional funds in BCI any new directors whose election by the Board of Directors or BCI in the future. whose nomination for election by BCI’s shareholders was Liquidity – BCI Accordingly, there can be no assurance that BCI will be able approved by a vote of at least a majority of the members of the BCI believes that the Recapitalization Transactions, combined to meet its financial obligations through asset sales or new Board of Directors then in office who either were members of with BCI’s available cash and unused availability under the financings. the Board of Directors on the date the obligation was created or Credit Facility, should provide BCI with sufficient funds to meet Liquidity and Dilution – Telecom Américas whose election or nomination for election was previously so its financial obligations to March 2003. Telecom Américas and its operating companies have significant approved) cease for any reason to constitute a majority of the In March 2003, BCI expects to have the following principal ongoing funding requirements. Excluding its discontinued members of the Board of Directors then in office. financial obligations outstanding: operations, Telecom Américas and its operating companies as at A “Rating Decline” will be deemed to have occurred if at any (i) drawdowns under the Credit Facility due March 8, 2003; December 31, 2001, had net debt of U.S.$2.4 billion, net of cash time within 90 days (which 90-day period shall be extended so (ii) $160 million principal amount under its 11 per cent balances, of which U.S.$1.2 billion is short term and long as the rating of the High Yield Notes is under publicly senior unsecured notes due September 2004 (the “High U.S.$1.6 billion is denominated in U.S. dollars. The operating announced consideration for possible downgrade by any of Yield Notes”); and companies of Telecom Américas are not currently free cash flow Moody’s Investor Services Inc. or Standard & Poor’s Rating (iii) $465 million of contingent guarantees. (cash from operations less capital expenditures) positive and rely Services) of the earlier of (a) the date of public notice of the BCI’s assets consist almost entirely of its shareholdings in on external sources of financing, including capital contribu- change of beneficial ownership referred to in clause (i) of the operating companies owned through Telecom Américas which tions from their shareholders. If Telecom Américas is unable to definition of “Change of Control” in the preceding paragraph; have no obligation, contingent or otherwise, to pay any divi- fund such obligations and if BCI is unable to fund its share of (b) the date of public notice of the intention of BCI or any dends or make any distributions to BCI. BCI does not expect that investment requirements, BCI’s interest in Telecom Américas person to effect such a change of beneficial ownership; and

38 2001 BCE Annual Information Form (c) the occurrence of such change in beneficial ownership, the company through Telecom Américas or otherwise. Certain The information which appears under the heading rating of the High Yield Notes is decreased by any of the rating other agreements generally require that prior to the payment of “Management’s Discussion and Analysis” on pages 8 to 23 of the agencies mentioned above in this paragraph by one or more dividends, distributions or other transfers, no default or event BCE Inc. 2001 Annual Report is incorporated herein by gradations. of default shall have occurred, and the operating company reference. proposing to make the distribution must provide for the History of Losses and Debt Covenants payment of other current obligations, including operating ITEM 6 • MARKET FOR THE SECURITIES BCI has experienced losses in the past and may incur additional expenses, debt service and reserves. BCI or its operating compa- OF BCE INC. losses in the foreseeable future. nies are likely to continue to be subject to such restrictions and There can be no assurance that BCI will be able to meet its The information which appears under the heading “Stock prohibitions for the foreseeable future. debt service obligations and covenants under any financing Exchange Listings” on page 48 of the BCE Inc. 2001 Annual arrangements that it currently has, or may be able to secure. If Report is incorporated herein by reference. ITEM 4 • SELECTED FINANCIAL BCI is unable to comply with the various covenants in its INFORMATION (CONSOLIDATED) indebtedness, it would be in default under the terms thereof, ITEM 7 • DIRECTORS AND OFFICERS which would permit the holders of such indebtedness to accel- a) Three-Year Data OF BCE INC. erate the maturity of the indebtedness and could cause defaults See Table 4.1. As of March 31, 2002, directors and officers of BCE Inc. as a under other indebtedness of BCI. BCI’s ability to meet its debt group beneficially owned, directly or indirectly, or exercised covenants will depend on its future performance, which will be b) Dividends control or direction over approximately 183,396 common subject to prevailing economic conditions and to financial, busi- Common share dividends, which are declared and paid quar- shares of BCE Inc. (or 0.0228 per cent of the common shares), ness and other factors, including factors beyond BCI’s control. terly, have been adjusted to reflect the distribution of BCE Inc.’s 8,775 common shares of BCE Emergis (or 0.0086 per cent of 35 per cent interest in Nortel Networks to BCE Inc. common Substantial Leverage and Ability to Service Debt the common shares), 12,000 common shares of Aliant (or shareholders in May 2000. The indicated annual dividend rate Under certain terms of some of their indebtedness, Telecom 0.0087 per cent of the common shares) and 62,679 common remains at $1.20. Dividends on the preferred shares are declared Américas’ operating companies and BCI’s discontinued opera- shares of BCI (or 0.0013 per cent of the common shares). and paid quarterly, with the exception of the Series S preferred tions have breached covenants and are operating under tempo- shares, which are declared and paid monthly. DIRECTORS rary waivers from their creditors or are currently negotiating The information with respect to directors which appears on waivers with those creditors. There can be no assurance that ITEM 5 • MANAGEMENT’S DISCUSSION page 7 and on pages 9 to 11 of the BCE Inc. Management Proxy waivers will be obtained for such breaches or that they will be AND ANALYSIS Circular, under the headings “Election of directors” and “Nomi- in compliance with the terms and conditions of these facilities nees for election as directors and their beneficial ownership of when their waivers expire or will succeed in obtaining new The information contained in this Item 5 is qualified in its voting securities”, is incorporated herein by reference. waivers. Any failure of Telecom Américas’ operating companies entirety by the announcements made by BCE Inc. and Teleglobe All of the current directors have held their present positions or any discontinued operation to be in compliance with the Inc. on April 24, 2002, which are described in Item 2 – “General or other executive positions with the same or associated firms terms and conditions of its indebtedness could trigger cross- Development of BCE – Recent Developments” as well as by the or organizations during the past five years or more with the defaults under the terms and conditions of other indebtedness ultimate outcome of the events described therein. following exceptions: Mr. Fell was, prior to 1999, Deputy of that company. BCI’s ability to sell its shares of Telecom Américas or the discontinued operations, and the price it could obtain if it succeeds in selling them, could be adversely affected by the high level of indebtedness of Telecom Américas, the oper- 4.1 Three-year data ating companies and BCI’s discontinued operations, and by any For the years ended December 31 (in $ millions) 2001 2000 1999 failure of those companies to be in compliance with the terms Selected consolidated financial data Total operating revenues 21,711 17,432 13,922 and conditions of their indebtedness. Earnings from continuing operations 2,419 312 5,107 Certain debt agreements of BCI and its operating companies Net earnings applicable to common shares 459 4,782 5,366 now or hereafter may in effect restrict their ability to pay divi- Total assets 54,335 51,383 36,960 dends, make distributions or otherwise transfer funds, which Long-term debt (including current portion) 16,537 14,615 9,862 could negatively impact BCI’s ability to make payments under Dividends paid on preferred shares 64 79 93 outstanding debt obligations. Certain financing agreements are Dividends paid on common shares 969 849 875 or may be secured by capital stock held by BCI in such operating – per common share $1.20 $1.24 $1.36

2001 BCE Annual Information Form 39 Chairman of Royal Bank of Canada and, prior to February 1999, OFFICERS (i) one copy of this Annual Information Form together Vice-Chairman of Royal Bank of Canada; Mrs. Soble Kaufman On April 15, 2002, the officers of BCE Inc. were as shown in with one copy of any document, or the pertinent pages of was, prior to July 1997, a partner with Stikeman Elliott, barris- Table 7.1. any document, incorporated by reference therein; ters and solicitors; Mr. Kierans was, prior to October 1999, Presi- All of the officers of BCE Inc. have held their present posi- (ii) one copy of the comparative financial statements of dent and Chief Executive Officer of the C.D. Howe Institute; tions or other executive positions with BCE Inc. or one or more BCE Inc. for its most recently completed financial year Mr. Levitt was, prior to February 2000, President and Chief of BCE Inc.’s subsidiaries or associated companies during the together with the accompanying report of the auditors Executive Officer of Imasco Limited; Mr. Newall was, prior to past five years or more, with the following exceptions: Mr. thereon and one copy of any interim financial statements June 1998, Vice-Chairman and Chief Executive Officer of NOVA Bilodeau was, prior to April 2002, Senior Vice-President, of BCE Inc. that have been filed subsequent to the financial Corporation Ltd.; Mr. Pozen was, prior to January 2002, Vice- Compensation Practice of AON Consulting; Mr. Boychuk was, statements for its most recently completed financial year; Chairman of Fidelity Investments and, prior to June 2000, Presi- prior to September 1997, Co-Founder, Principal and Chief Oper- (iii) one copy of the BCE Inc. Notice of 2002 Annual and dent of Fidelity Management and Research Corporation; and ating Officer of Manitex Capital Inc.; Mr. Houle was, prior to Special Meeting and Management Proxy Circular; and Mr. Young was, prior to May 2001, Chairman and Chief Execu- June 2001, Senior Vice-President, Corporate Human Resources (iv) one copy of any other documents that are incorporated tive Officer of Fishery Products International Limited. of Alcan Inc.; Mr. Monty was, prior to October 1997, Vice- by reference into the preliminary short form prospectus or As required, BCE Inc.’s Board of Directors has an Audit Chairman and Chief Executive Officer of Nortel Networks; the short form prospectus and are not required to be Committee. The members of the Audit Committee are Mr. Sabia was, prior to October 1999, Executive Vice-President provided under (i), (ii) or (iii) above; or J.E. Newall (Chairman), A.S. Fell, T.E. Kierans, J. Maxwell, D. and Chief Financial Officer of Canadian National Railway (b) at any other time, one copy of any documents referred to in Soble Kaufman and V.L. Young. BCE Inc. also has a Management Company; and Mr. Skinner was, prior to March 1999, a Senior (a)(i), (ii), (iii) and (iv) above, provided that BCE Inc. may require Resources and Compensation Committee (“MRCC”). The Audit Manager of PricewaterhouseCoopers. the payment of a reasonable charge if the request is made by a members of the MRCC are R.J. Currie (Chairman), B.M. Levitt, person or company who is not a security holder of BCE Inc. J.H. McArthur, R.C. Pozen and P.M. Tellier. ITEM 8 • ADDITIONAL INFORMATION Additional information including directors’ and officers’ remuneration and indebtedness, principal holders of BCE Inc.’s BCE Inc. shall provide to any person or company, upon request securities, options to purchase securities and interests of insiders to the Corporate Secretary of BCE Inc., at 1000, rue de La in material transactions, where applicable, is contained in the Gauchetière Ouest, Bureau 3700, Montréal, Québec H3B 4Y7: BCE Inc. Notice of 2002 Annual and Special Meeting and (a) when the securities of BCE Inc. are in the course of a distri- Management Proxy Circular. Additional financial information is bution under a preliminary short form prospectus or a short provided in BCE Inc.’s comparative financial statements for its form prospectus: most recently completed financial year. Information concerning BCE Inc., in addition to the docu- ments referred to in (a)(i) to (iv) above, is available upon request from the Vice-President, Investor Relations of BCE Inc., at the 7.1 BCE Inc. officers address indicated above or by e-mail at [email protected]. Name Municipality of residence Offices of BCE Inc. presently held This additional information includes Management’s Discussion Jean C. Monty (1) Montréal, Québec Chairman and Chief Executive Officer and Analysis of the First, Second and Third Quarter Results of William D. Anderson Montréal, Québec President – BCE Ventures Alain Bilodeau Montréal, Québec Senior Vice-President BCE Inc. and BCE Inc.’s quarterly investor briefings to its earn- Pierre J. Blouin Montréal, Québec Executive Vice-President ings press releases. These documents, as well as BCE Inc.’s Michael T. Boychuk Montréal, Québec Corporate Treasurer annual and quarterly reports and news releases, are also avail- Léo W. Houle Montréal, Québec Chief Talent Officer able on BCE Inc.’s Web site on the World Wide Web Peter J. M. Nicholson Montréal, Québec Chief Strategy Officer (www.bce.ca). Barry W. Pickford Toronto, Ontario Vice-President, Taxation BCE Inc. also has toll free numbers for registered shareholder Marc J. Ryan Montréal, Québec Corporate Secretary enquiries (1-800-561-0934) and for investor relations Michael J. Sabia (2) Montréal, Québec President and Chief Operating Officer Stephen P. Skinner Montréal, Québec Vice-President and Corporate Controller (1-800-339-6353). Martine Turcotte Montréal, Québec Chief Legal Officer Siim A. Vanaselja Montréal, Québec Chief Financial Officer

(1) Resigned effective April 23, 2002. (2) On April 24, 2002, BCE Inc. announced the appointment of Mr. Sabia as Chief Executive Officer.

40 2001 BCE Annual Information Form SCHEDULE – CORPORATE STRUCTURE

Percentage of Percentage of voting securities non-voting securities or Partnership or Partnership Interests Interests held directly or held directly or Jurisdiction indirectly by indirectly by Subsidiary of Incorporation BCE BCE Bell Canada Holdings Inc. (1) Canada 80 N/A Aliant Inc. (2) Canada 53 N/A Bell Globemedia Inc. Ontario 70 N/A Teleglobe Inc. (3) Canada 100 100 BCE Emergis Inc. Canada 65 N/A

(1) Bell Canada Holdings Inc. holds 100 per cent of the voting securities of Bell Canada. (2) Aliant Inc.’s voting securities are held 14 per cent by BCE Inc. and 39 per cent by Bell Canada. (3) Teleglobe Inc. is held 77 per cent by BCE Inc. and 23 per cent by Bell Canada. N/A = not applicable.

2001 BCE Annual Information Form 41 www.bce.ca

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