BELL CANADA

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 ...... 1 Documents incorporated by reference Part of Annual Information Form in Trade-marks ...... 1 Document which incorporated by reference Item 1 • Corporate Structure of Bell Canada ...... 2 Portions of the 2001 Bell Canada Financial Information Item 5 Item 2 • General Development of Bell Canada ...... 2 Item 3 • Business of Bell Canada ...... 3 General ...... 3 Principal Service Area ...... 5 Subsidiaries and Associated Companies ...... 5 Regulation ...... 8 Competition ...... 12 Capital Expenditures ...... 15 Environment ...... 15 Employee Relations ...... 16 Legal Proceedings ...... 16 Trade-marks Certain Contracts ...... 17 Owner Trade-mark Forward-Looking Statements ...... 18 Bell Canada Rings & Head Design Risk Factors ...... 18 (Bell Canada corporate logo) Bell Item 4 • Selected Financial Information (Consolidated) ...... 20 Bell World Item 5 • Management’s Discussion and Analysis ...... 21 Espace Bell Sympatico Item 6 • Market for the Securities of Bell Canada ...... 21 Bell ActiMedia Inc. Yellow Pages Item 7 • Directors and Officers of Bell Canada ...... 21 Bell Mobility Inc. / Bell Mobilité inc. Mobile Browser Item 8 • Additional Information ...... 23 Manitoba Telecom Services Inc. First Rate Schedule – Directors’ and Officers’ Remuneration ...... 24 Stentor Resource Centre Inc. / Datapac Centre de ressources Stentor Inc. Megalink SmartTouch AT&T Corp. AT&T MCI Communications Corporation Hyperstream OnStar Corporation Onstar NOTES: (1) Unless the context indicates otherwise, “Bell Canada” refers to Bell Canada and its subsidiaries Yahoo! Inc. Yahoo! and associated companies. (2) All dollar figures are in Canadian dollars, unless otherwise indicated. (3) The information in this Annual Information Form is disclosed as at December 31, 2001, Any other trade-marks, corporate, trade or domain names used in this Annual Information Form are properties of their unless otherwise indicated. respective owners.

2001 Bell Canada Annual Information Form 1 ITEM 1 • CORPORATE STRUCTURE ITEM 2 • GENERAL DEVELOPMENT is expected to introduce 1X service across the majority of its OF BELL CANADA OF BELL CANADA national coverage area throughout 2002. On October 17, 2001, Bell Canada announced that Bell Bell Canada was incorporated in 1880 by a Special Act of the Bell Canada provides connectivity to residential and business Mobility and Aliant Telecom Wireless (a business unit of Aliant Parliament of Canada, was continued under the Canada Busi- customers through wired and wireless voice and data commu- Inc. (“Aliant”) ) entered into an enhanced ten-year network reci- ness Corporations Act on April 21, 1982, and is currently governed nications, high-speed and wireless Internet access, Internet procity agreement with Telus Mobility (a business unit of Telus by a Certificate and Articles of Amalgamation dated May 31, Protocol (“IP”)/Broadband services, e-business solutions, as well Corporation (“Telus”)) which is expected to significantly 1999 as well as several Certificates and Articles of Amendment, as local and long distance phone and directory services. Bell expand access to advanced digital voice and data services across the latest of which is dated June 12, 2001. Bell Canada may also Canada and its subsidiaries provide services through Canada and to bring competition to rural areas. This agreement be legally designated as The Bell Telephone Company of Canada 11.8 million access lines. Bell Canada also serves more than extended the current roaming and resale agreements between or La Compagnie de Téléphone Bell du Canada and it has its three million wireless customers including paging customers Bell Mobility and Telus Mobility. It is anticipated that this agree- registered office at 1050, côte du Beaver Hall, Bureau 1600, through its subsidiaries. In addition, Bell Canada and its ment will enhance the reach of Bell Mobility’s digital personal Montréal, Québec H2Z 1S4 and its principal executive offices at subsidiaries provide Internet access to 1.5 million subscribers. communications service (“PCS”) across rural Alberta and British 1000, rue de La Gauchetière Ouest, Bureau 3700, Montréal, In light of the announcement by BCE on April 24, 2002 that Columbia by providing access through the Telus Mobility Québec H3B 4Y7. Mr. Jean C. Monty has resigned as Chairman and Chief Execu- network in the two provinces. As a result of this agreement, Bell Bell Canada is a wholly-owned subsidiary of Bell Canada tive Officer of BCE, Bell Canada anticipates that Mr. Monty will Mobility is expected to be able to avoid capital expenditures of Holdings Inc. (“BCH”). BCE Inc. (“BCE”) owns 80 per cent of also resign as Chairman and Chief Executive Officer of Bell more than $500 million over the term of the agreement. BCH, while the remaining 20 per cent is beneficially owned by Canada in the near future. On September 17, 2001, Bell Mobility officially launched its SBC Communications Inc. (“SBC”). BCE is Canada’s largest On April 11, 2002, Bell Canada and Manitoba Telecom Western expansion with its consumer marketing campaign in communications company. It has 23 million customer connec- Services Inc. (“MTS”) announced that they have completed a Alberta and British Columbia. tions through the wireline, wireless, data/Internet and satellite transaction to combine the interests of Bell Intrigna Inc. (“Bell On February 7, 2001, Bell Canada, La Confédération des services it provides, largely under the Bell brand. BCE leverages Intrigna”) and Bell Nexxia in Alberta and British Columbia to caisses populaires et d’économie Desjardins du Québec those connections with extensive content creation capabilities create a new company, Bell West Inc. (“Bell West”), which is (“Desjardins”) and Connexim, Limited Partnership through Bell Globemedia Inc. (“Bell Globemedia”) which owned 60 per cent by Bell Canada and 40 per cent by MTS. Bell (“Connexim”) announced a strategic telecommunications features CTV Inc. (“CTV”), The Globe and Mail and Sympatico- West operates under the Bell brand and focuses on businesses in alliance. As part of the alliance, the parties have concluded a Lycos Inc. (“Sympatico-Lycos”). As well, BCE has extensive Alberta and British Columbia, providing a suite of advanced seven year agreement of an approximate value of $400 million e-commerce capabilities provided under the BCE Emergis Inc. fibre-based data and IP services, as well as the full spectrum of under which Bell Canada will ensure the migration of the (“BCE Emergis”) brand. local and long distance voice services on a fully managed basis. Desjardins telecommunications network to a new technology The following principal subsidiaries of Bell Canada are On April 9, 2002, Bell Canada announced that a receipt for a and Connexim will assume the management of Desjardins’ wholly-owned (directly or indirectly) by Bell Canada and were final prospectus had been issued on behalf of all securities regu- telecommunications operations. The alliance also formalizes incorporated under Canadian jurisdiction: BCE Nexxia Inc. latory authorities throughout Canada for the sale of units of a Desjardins’ participation as a Connexim partner. Connexim is a (carrying on business in Canada under the name “Bell newly created income fund – Bell Nordiq Income Fund (the limited partnership which is also owned by Bell Canada and Nexxia”), Bell ActiMedia Inc. (“Bell ActiMedia”) and Bell “Fund”). The Fund will acquire from Bell Canada a 40 per cent Hydro-Québec. Mobility Inc. (“Bell Mobility”). All non-voting securities of interest in each of Télébec, Limited Partnership (“Télébec LP”) On February 5, 2001, BCE announced plans to develop new these subsidiaries, if any, are beneficially owned by Bell Canada. and Northern Telephone, Limited Partnership (“Northern Tele- technology that would integrate high speed Internet access with Certain other subsidiaries, each of which represents not more phone LP”). Bell Canada will retain control over both partner- satellite television and enhanced digital storage. This new tech- than 10 per cent of consolidated assets and not more than ships with a 60 per cent stake. The net proceeds from this nology, designated “ComboBox”, would combine Sympatico 10 per cent of consolidated sales and operating revenues of Bell transaction (approximately $338 million assuming full exercise High Speed Edition digital subscriber line (“DSL”) Internet access Canada, and all of which, in the aggregate, represent not more of the over-allotment option) will be used by Bell Canada to service and Bell ExpressVu Limited Partnership’s (“Bell than 20 per cent of total consolidated assets and total consoli- reduce debt. The transaction is subject to various closing condi- ExpressVu”) satellite television service with content from Bell dated sales and operating revenues of Bell Canada at tions and approvals which are expected to be met and obtained Globemedia. A commercial service launch is anticipated in 2002. December 31, 2001, have been omitted. by the end of April 2002. On February 1, 2001, Bell Mobility announced that it had On February 12, 2002, Bell Mobility announced the launch successfully bid on 20 new PCS spectrum licenses in Industry of its Code Division Multiple Access 1X wireless network. 1X Canada’s auction for a total investment of approximately delivers the fastest mobile data network in Canada. Bell Mobility $720 million. These new licenses should enable Bell Mobility,

2 2001 Bell Canada Annual Information Form together with its Bell Wireless Alliance (“BWA”) partners strategic sourcing and e-commerce expertise, to provide services to business customers in Alberta and British Aliant, MTS and Saskatchewan Telecommunications Holding Canadian businesses and emerging vertical exchanges Columbia; Corporation (“Sasktel”) to deliver third generation (“3G”) wire- with a national business-to-business (“B2B”) exchange to •the launch by Bell Canada and Bell Mobility of Bell Distri- less services. Furthermore, the licenses acquired in Alberta and buy business products and services; bution Inc. (“Bell Distribution”), the company that oper- British Columbia and the additional licenses acquired in •the announcement of a $1.5 billion investment by Bell ates Bell World stores in Ontario and Espace Bell in Southern Ontario should permit Bell Mobility to deliver a full Canada over three years to rapidly expand and enhance Québec; range of services on a national basis. Final ownership of the new high speed Internet availability for Bell Canada’s resi- •the creation of Connexim, in partnership with Hydro- licenses was confirmed by Industry Canada on November 30, dential and business customers in order to be able to Québec, to manage Hydro-Québec’s and the Québec 2001, and the licenses will expire on November 29, 2011. provide DSL service to over 85 per cent of all of its resi- segment of Bell Canada’s internal telecommunications; On January 31, 2001, Bell Canada and Amdocs Limited dential and business customers. Bell Canada’s high speed and (“Amdocs”), a company specializing in telecommunications Internet services are enabled by both DSL and optical •the creation of Nordia Inc., a majority-owned subsidiary customer care and billing solutions, announced the creation of a fibre technologies; of Bell Canada, to provide operator-assisted services for new company, Certen Inc. (“Certen”), in which Bell Canada holds telephone companies in Canada and the United States. 1999 a majority interest. Certen’s initial focus will be on the deploy- Certain of these companies and other subsidiaries and asso- •the acquisition by Ameritech Corporation, since ment of an integrated billing platform for all of Bell Canada’s ciated companies of Bell Canada are more fully described in purchased by SBC, of an indirect 20 per cent minority services including local, long distance, wireless, broadband and Item 3 herein under the heading “Subsidiaries and Associated interest in Bell Canada for $5.1 billion; Internet services. Certen is expected to eventually broaden its Companies”. • as part of the foregoing transaction, the acquisition at net scope to meet the billing needs of other companies inside and Additional details on the above and some of the other major book value of BCE’s indirect interests in Bell Mobility, outside the Bell Canada and BCE group. It is anticipated that total events that have influenced the general development of the Teleglobe Inc. (“Teleglobe”) and in several provincial or investment by Bell Canada and Amdocs in Certen will reach business over the last three years, are discussed in Item 3 – “Busi- regional telecommunications companies, namely Aliant, approximately $200 million by the end of 2002. ness of Bell Canada”. Reference is made to the discussion of such Northern Telephone Limited (“Northern Telephone”), On January 9, 2001, BCE, The Thomson Corporation and events for the purposes of this Item 2. Northwestel Inc. (“Northwestel”) and Télébec ltée The Woodbridge Company Limited closed the transaction (“Télébec”) and the transfer to BCE, also at net book which resulted in the creation of the Canadian multi-media ITEM 3 • BUSINESS OF BELL CANADA value, of Bell Canada’s interests in CGI Group Inc., an company, Bell Globemedia. As part of this transaction, Bell information technology (“IT”) company, in BCE Emergis, GENERAL Canada sold, through its subsidiary Bell ActiMedia, its a premier e-commerce service provider, and in Telesat 71 per cent interest in Sympatico-Lycos, a Canadian Web Bell Canada’s revenues are reported along five lines of business: Canada, a satellite business services provider; communications commerce and media company which oper- local and access; long distance; wireless; data; and terminal sales, •the privatization of Bell Mobility for $1.6 billion; ates a business-to-consumer Web portal, to BCE for total directory advertising and other. The revenue distribution by •the launch of Bell Nexxia, an IP/Broadband services proceeds of $425 million which resulted in a gain of percentage of these lines of business is shown in Table 3.1. company operating a network with over 100 points of $373 million. presence throughout Canada and the United States; LOCAL AND ACCESS During the course of 2000 and 1999, the following signifi- •the acquisition by Bell Canada of an approximate Local and access revenues are earned principally by connecting cant events have influenced the general development of Bell 20 per cent interest in MTS for $339 million; business and residential customers to Bell Canada’s network Canada’s business: •the launch by Bell Canada and MTS of Bell Intrigna, and providing them with local area service. As at December 31, 2000 which offers an extensive suite of telecommunications 2001, Bell Canada (including Northern Telephone, Northwestel •the award by the Government of Alberta of a $300 million contract to a consortium of global and provincial tech- 3.1 Telecommunications services (revenue distribution) nology companies, headed by Bell Intrigna and including Revenue distribution as a % of operating revenues for the years ended December 31 2001 2000 1999 Bell Nexxia to build and implement a high speed, broad- Local and access 40 41 41 band Internet network; Long distance 16 19 21 •the launch by Bell Canada, Canadian Imperial Bank of Wireless 11 10 9 Commerce, The Bank of Nova Scotia, Desjardins and BCE Data 23 19 16 Emergis of a new e-procurement company, Procuron Inc., Terminal sales, directory advertising and other 10 11 13 which uses combined purchasing volumes, along with its 100 100 100

2001 Bell Canada Annual Information Form 3 and Télébec) provided about 11.8 million network access These services are provided through a variety of calling plans A summary of long distance revenues and other long distance services to its residential and business customers, which consist including residential discount calling plans such as Bell statistics is shown in Table 3.3. primarily of basic exchange services (residential and business Canada’s First Rate Savings Plans. Separate discount plans, WIRELESS individual lines), private branch exchange (“PBX”) trunk lines including toll and toll-free calling, are available to business Wireless revenues are primarily derived from the provision of and centrex lines. Local and access revenues also include customers through Bell Canada’s Business Savings Plans. cellular, PCS, paging and wireless data communications revenues from the provision of SmartTouch services (for National long distance and network services were formerly services, as well as airline passenger communications and wire- example, call waiting and call display) to residential and busi- managed on a nationwide basis by Stentor Canadian Network less consulting services offered by Bell Canada’s subsidiaries, ness customers as well as consumer terminal sales, and operator Management (“SCNM”), a working association of provincial namely Bell Mobility, Northern Telephone, Northwestel and and directory assistance charges. All of the above services are telephone companies, which was terminated in 1999. Effective Télébec. Cellular and PCS revenues are derived from subscrip- provided to customers primarily on a monthly contract basis. January 1, 2000, Bell Canada began providing national network tion fees, air time usage, prepaid services, long distance, data, Payments from competitors accessing Bell Canada’s local management and operations support services to Telus Commu- wireless Internet access, roaming and a variety of value-added network are also included in this revenue category. These nications Inc. and to Bell Canada’s partners Aliant, MTS and services, such as voice mail and text messaging. payments include contribution payments intended to help Sasktel. To ensure a seamless transition to customers, most of Bell Mobility also generates revenues through the provision offset the costs of providing local services and access charge SCNM’s employees and functions were transferred to Bell of service to other service providers under resale agreements. payments associated with the interconnection of long distance Canada and to the other former SCNM members, with many of This includes: the provision of analog cellular service to competitors to Bell Canada’s network. A summary of local and the operating functions carried out by the same people, in the Microcell Connexions Inc. a subsidiary of Microcell Telecom- access services revenues, the number of network access services same locations, using the same assets. Accordingly, SCNM was munications Inc. (“Microcell”); the provision of cellular and and estimated local market share is shown in Table 3.2. wound up on December 31, 1999. PCS service to Telus Mobility, complementing the coverage Long distance revenues are derived from services originating LONG DISTANCE provided by Telus Mobility on its own facilities; the provision of and terminating within Bell Canada’s service territory, and from Long distance revenues include long distance voice revenues, as cellular and PCS service to support General Motors’ “Onstar” services provided with other telecommunications companies. well as long distance settlement payments from other carriers. in-car communications service; and the provision of digital cellular service to Bell Canada to provide wireless local loop service as an alternative to fixed lines in high cost areas. 3.2 Local and access A summary of Bell Canada’s wireless services revenues and For the years ended December 31 2001 2000 1999 other wireless services statistics, is shown in Table 3.4. Local and access revenues (in $ millions) 5,731 5,450 5,180 Number of network access services (1) (in thousands) DATA Residential 7,695 7,693 7,622 Data revenues are generated from legacy data services and non- Business 4,094 4,113 3,957 legacy data services. Legacy data services include digital trans- 11,789 11,806 11,579 mission services such as Megalink, network access for integrated Estimated local market share (Bell Canada territory only) (2)(3) services digital network and data as well as competitive network Residential 99.3% 99.6% 99.8% services and the sale of inter-networking equipment. Non-legacy Business 89.8% 92.8% 96.5% data services include national and regional IP/Broadband data, Total 95.8% 97.1% 98.7% e-commerce and Internet services. Services such as managed (1) Network access services represent, at December 31, approximately, the number of lines in service. private line service and digital private line service provide (2) Bell Canada operating territory in Québec and Ontario at December 31. (3) The loss of business market share reflects facilities-based competition only. customers with a high volume digital network for the transmis- sion of voice, video and data messages. Bell Canada also 3.3 Long distance provides access to public digital packet switched networks as For the years ended December 31 2001 2000 1999 well as private line data transmission services. A summary of Bell Long distance revenues (in $ millions) 2,328 2,474 2,580 Canada’s data revenues and Internet subscribers is shown in Conversation minutes (in millions) 14,704 14,601 13,830 Table 3.5. Average long distance revenue per minute (in cents) 14.2 15.2 n.a. (1) Market share (% based on revenues) (2) 63.6% 62.0% n.a. (1)

(1) Reporting of these statistics began in 2000 only. (2) Bell Canada operating territory in Québec and Ontario at December 31. n.a.: not available.

4 2001 Bell Canada Annual Information Form TERMINAL SALES, DIRECTORY ADVERTISING 3.4 Wireless AND OTHER For the years ended December 31 2001 2000 1999 Terminal sales, directory advertising and other revenues are Wireless services revenues (in $ millions) 1,589 1,299 1,151 primarily derived from the rental, sales and maintenance of Cellular and PCS Net activations (in thousands) business terminal equipment and from directory advertising, as Prepaid 210 185 n.a. (1) well as network management. A summary of terminal sales, Postpaid 391 318 n.a. (1) directory advertising and other revenues is shown in Table 3.6. 601 503 n.a. (1) PRINCIPAL SERVICE AREA Total subscribers (in thousands) Prepaid 904 694 n.a. (1) Through Aliant in the Atlantic provinces, Bell West in Western Postpaid 2,078 1,687 n.a. (1) Canada, the coast-to-coast IP/Broadband network of Bell Nexxia 2,982 2,381 1,809 and the successful bid by Bell Mobility on PCS spectrum licenses Average revenue per subscriber ($/month) 46 46 n.a. (1) in 2001, Bell Canada can deliver a full range of telecommunica- Prepaid 13 14 n.a. (1) tions services to most residential and business customers Postpaid 61 60 n.a. (1) throughout Canada. Bell Canada’s principal service area (1) Usage per subscriber (min/month) 180 156 n.a. includes most of the two largest and most populous Canadian (2) (1) Postpaid churn rate 1.5% 1.5% n.a. provinces, Ontario and Québec. Their combined population (1) Reporting of these statistics began in 2000 only. represented approximately 62 per cent of the total Canadian (2) Average per month. n.a.: not available. population at December 31, 2000. The estimated gross domestic product of Ontario and Québec in 2000 represented approxi- 3.5 Data mately 62 per cent of the Canadian gross domestic product, and For the years ended December 31 2001 2000 1999 combined Ontario and Québec business investment in 2000 Data revenues (in $ millions) represented approximately 56 per cent of total Canadian busi- Legacy 1,919 1,691 1,560 ness investment in that year. Table 3.7 sets forth certain statis- Non-legacy 1,296 840 415 tical information for the combined population and economic 3,215 2,531 1,975 development of Ontario and Québec in recent years. Internet subscribers (in thousands) High-speed (DSL) (1) 689 300 n.a. (2) SUBSIDIARIES AND ASSOCIATED COMPANIES (3) (2) Dial-up 825 671 n.a. Bell Canada’s principal subsidiaries are: Bell Nexxia, Bell (2) 1,514 971 n.a. Mobility, Bell ActiMedia, Bell Distribution, Bell West, Certen, (1) High-speed Internet subscribers include consumer, business and wholesale subscribers, at December 31. Northern Telephone, Northwestel, Télébec and Expertech (2) Reporting of these statistics began in 2000 only. Network Installation Inc. (‘‘Expertech”). Bell Canada also has (3) Dial-up subscribers include consumer and business subscribers, at December 31. Dial-up subscribers for 2000 have been restated to reflect dial-up access subscribers only. Previously reported amounts reflected both dial-up access and features subscribers. a cost investment in Teleglobe and interests in Canadian n.a.: not available. telecommunications associated companies such as Aliant, MTS, and others. 3.6 Terminal sales, directory advertising and other For the years ended December 31 2001 2000 1999 BELL NEXXIA Terminal sales, directory advertising and other revenues (in $ millions) 1,402 1,476 1,697 Bell Nexxia, which began commercial operations in the first quarter of 1999, is Canada’s largest IP/Broadband company, 3.7 Principal service area: Ontario and Québec (1) delivering the full range of connectivity, content and As at December 31 2000 1999 1998 commerce solutions offered by the BCE group of companies. Population (in thousands) 19,034 18,842 18,859 Dedicated to the large enterprise market, Bell Nexxia bundles Gross domestic product (in $ billions) 658 610 565 products and services into fully managed, end-to-end, e-busi- Dwelling starts (in units) 96,216 92,977 76,968 ness solutions using a powerful IP/Broadband network. Bell (1) Statistics Canada. Nexxia offers Internet services including extranets, wide area

2001 Bell Canada Annual Information Form 5 networks (“WANs”) and managed networks packaged with sites and new “com-ready” handsets through its Mobile Browser BELL ACTIMEDIA traditional voice services. The national IP/Broadband network service, including access to one of Canada’s most popular Bell ActiMedia is the Canadian leader in Yellow Pages products is directly and indirectly owned, controlled and operated by Internet sites, the Yahoo! Canada Web site. Over 80 wireless and provides Internet access as well as e-commerce solutions Bell Nexxia and has more than 100 points of presence in key consumer and business applications were in place at December through Bell Zinc Corporation (“Bell Zinc”), a wholly-owned locations throughout Canada and the United States. Effective 31, 2001. As previously discussed in Item 2 – ‘‘General Develop- subsidiary of Bell ActiMedia which owns and operates the B2B February 12, 1999, Bell Nexxia obtained from the United States ment of Bell Canada”, Bell Mobility announced the launch of Web portal bellzinc.ca. Bell ActiMedia also owns a 12.9 per cent Federal Communications Commission (“FCC”) section 214 its Code Division Multiple Access 1X wireless network, the partnership interest in Aliant ActiMedia, which operates authority to operate as a common carrier in the United States fastest mobile data network in Canada, which is expected to be in Nova Scotia, Prince Edward Island, Newfoundland and offering switched and private line services between the United introduced across the majority of Bell Mobility’s national Labrador, and New Brunswick. States and the rest of the world. coverage area throughout 2002. As at December 31, 2001, Bell ActiMedia and Aliant Acti- BELL MOBILITY Bell Mobility has played a major role in the development of Media had more than 60 per cent of the Canadian directory mobile cellular services in Canada. As of December 31, 2001, Bell market with close to 300,000 business customers advertising in Bell Mobility offers a full range of wireless communications Mobility had invested approximately $885 million in its digital 116 directories and 247 Yellow Pages sections; Bell Zinc had services to approximately 3.6 million Canadians, including PCS, PCS network, including $273 million for the year ended more than 250,000 registered members and 45 preferred part- one- and two-way paging, data and airline passenger communi- December 31, 2001. Bell Mobility has rapidly expanded its ners throughout Canada. cations services and also specializes in the sale of private radio digital coverage area which currently covers some 91 per cent of In 2001, Bell ActiMedia reorganized its sales channels in system equipment. Effective January 1, 2002, the four operating its service territory population in Ontario and Québec and Ontario and Québec. subsidiaries of Bell Mobility – Bell Mobility Cellular Inc., Bell should soon reach 95 per cent. Traffic on Bell Mobility’s digital In June 2001, Bell ActiMedia entered into an agreement with Mobility Paging Inc., Bell Mobility Radio Inc. and Skytel PCS network currently accounts for approximately 77 per cent Amdocs for the implementation of a new back-office platform, Communications Corporation – amalgamated to continue as of its total wireless network traffic. which would replace legacy systems related to service orders, Bell Mobility Inc. (referred to in this Annual Information Form The paging services division of Bell Mobility (“BMP”) oper- products and services contracts. Starting 2002, the new platform as “Bell Mobility”). ates a one- and two-way paging system in Ontario and Québec began delivering cost savings across all operating units and The cellular services division of Bell Mobility (“BMC”) oper- and is Canada’s largest paging operator. BMP had approximately providing enhanced systems capability related to bundling, ates a cellular telecommunications system in Ontario and 649,000 pagers in service at December 31, 2001, a decrease of Web interfaces and customer data. Québec and through resale arrangements in British Columbia five per cent from the approximately 685,000 pagers in service at In the fall of 2001, Bell ActiMedia made a strategic decision to and Alberta. BMC also operates a digital PCS service in major December 31, 2000. focus on its core business in Canada and end its associations urban areas within its service territory, including Toronto, On May 23, 2001, Glenayre Technologies Inc. (“Glenayre”), with companies in Asia, the Middle East and the Caribbean. The Ottawa, Montréal and Québec City. BMC also operates a the paging network infrastructure supplier for major carriers, decision to divest its international properties and investments nationwide mobile data radio network. The coverage areas announced that it intended to exit the business in May 2002. prompted the sale of most of Bell ActiMedia’s international served by BMC had an estimated population of 17.6 million at Bell Mobility uses Glenayre’s technology in its paging and properties. The only sale pending as of April 15, 2002 is the sale December 31, 2001. BMC’s cellular and PCS customers ReFLEX 2-way messaging operations. As a result of this of the Cayman Islands-based Caribbean Publishing Company numbered approximately 2,932,000 at December 31, 2001, announcement, Bell Mobility had indicated that it was exam- Limited, a wholly-owned subsidiary. reflecting a 25 per cent increase from the corresponding 2000 ining options for network infrastructure support past May 2002. In deciding to concentrate on its core business in Canada, figure of approximately 2,340,000. Since that time, Glenayre has indicated that it intends to Bell ActiMedia analyzed all operations and streamlined activi- In May 1999, Bell Mobility launched a new service called continue to provide paging network support to carriers. In ties according to the company’s new focus on technology- Mobile Browser, making it the first wireless PCS company in February 2002, Glenayre and Bell Mobility entered into a renew- driven offerings. This resulted in the decision to discontinue North America to combine an Internet browser feature with a able two-year maintenance contract for the supply of mainte- printing Yellow Pages directories in Western Canada and consoli- digital PCS handset. Users of Bell Mobility’s Mobile Browser nance and support services to Bell Mobility’s paging network date efforts around electronic delivery of directory services, service are able to log on to the Internet directly from their PCS infrastructure. Accordingly, this should enable Bell Mobility to through Sympatico-Lycos. However, Bell ActiMedia will handsets and view a number of Internet sites that are specially continue to provide paging services. continue to provide customers in Alberta and British Columbia adapted for small display screens, including Sympatico.ca, The radio communications services division of Bell Mobility with free listing services on yellowpages.ca as well as a wide Charles Schwab, i/money, TD Waterhouse, VeeV from Bank of provides private and shared radio communications services in range of online marketing options. Montreal, canada.com, canoe.ca, Web 411, MSN Hotmail and the transit, public security and utility markets. Created in January 2001, Bell Zinc is Canada’s leading others. On February 9, 2000, Bell Mobility announced it was The Skytel communications division of Bell Mobility provider of online services to small- and medium-sized enter- providing its customers with wireless access to more Internet provides airline passenger communications services. prises. Bell Zinc serves over 250,000 registered users by offering

6 2001 Bell Canada Annual Information Form several business services including Unified Messaging Services, as well as a complete portfolio of telecommunications products EXPERTECH an international Trade Directory and a Request for Proposal plat- and services, including local and long distance services and busi- Expertech, 75 per cent owned by Bell Canada and 25 per cent form, among others. ness Internet services on a fully managed basis. The terms of the owned by SNC-Lavalin Group Inc., specializes in the installa- On February 22, 2002, Bell ActiMedia acquired the 12 per agreement between Bell Canada and MTS also include certain tion of telecommunications networks in North America, cent interest in Bell Zinc previously owned by BigVine.com put and call options with respect to MTS’ 40 per cent ownership whether they are optical, copper, coaxial or wireless. (“BigVine”). BigVine LLC, a subsidiary of BigVine, carrying of Bell West. TELEGLOBE on business under the name AllBusiness, continues to license Previously, Bell Intrigna was two-thirds owned by MTS The following information with respect to Teleglobe is qualified certain content to Bell Zinc. and one-third owned by Bell Canada. Bell Nexxia’s operations in its entirety by the announcements made by BCE on April 24, Confirming Bell Canada’s commitment to help Canadian in Alberta and British Columbia were 100 per cent owned by 2002, which are described below. small- and medium-sized enterprises harness the power of the Bell Canada. Teleglobe is a global communications and e-business group Internet, Bell Zinc acquired Onvia.com Inc. – the Vancouver- CERTEN of companies providing a range of international and domestic based B2B e-marketplace – in July 2001, as well as a controlling In January 2001, Bell Canada and Amdocs created Certen, which communication services including voice, Internet connectivity, interest in Césart Création Inc. – a Montréal-based e-marketing is 89.9 per cent held by Bell Canada and 10.1 per cent held by high speed data transmission, hosting, broadband, broadcast and Web development firm – in December 2001, to bring Amdocs. Certen offers best-in-class products and services using and other value-added services on a wholesale and retail basis. enhanced e-business services to members and corporate Amdocs’ world leading billing software for Bell Canada Bell Canada indirectly owns approximately 23 per cent of the partners. (including Bell Mobility and Bell Nexxia), and is expected to offer outstanding common shares of Teleglobe. On November 1, Bell Zinc also confirmed partnerships with some 45 leading Bell Canada’s customers the convenience of an integrated billing 2000, BCE acquired all of the outstanding common shares of organizations of Canada’s Internet economy including IBM platform for all of Bell Canada’s services, including local, long Teleglobe that Bell Canada did not already indirectly own. As a Canada Limited, Sun Microsystems of Canada Inc., Canada Post distance, wireless, broadband and Internet services. result, BCE and Bell Canada now indirectly own all of the and CIBC-Bizsmart. By integrating these best-of-breed players By virtue of a shareholders’ agreement, both Bell Canada and outstanding common shares of Teleglobe, and Bell Canada into the Bell Zinc business model, Bell ActiMedia has demon- Amdocs hold a series of put and call options on their ownership accounts for its 23 per cent investment, which has a carrying strated its commitment to fostering the growth of the small- and of Certen. value of approximately $1.4 billion, at cost. medium-sized enterprises market in Canada. NORTHERN TELEPHONE, NORTHWESTEL On April 24, 2002, BCE announced that it will cease further BELL DISTRIBUTION AND TÉLÉBEC long-term funding to Teleglobe. It is expected that Teleglobe will In 1999, Bell Canada and Bell Mobility established Bell Distri- enter into negotiations with its debt holders to restructure its Bell Canada also provides a full range of telecommunications bution to manage a new customer-focused chain of stores debt and will explore possibilities for business combinations and services in Canada through indirectly wholly-owned regional providing one-stop shopping for a full range of communications potential partnerships. These events raise doubts about companies, namely Northern Telephone (Northeastern products and services for the home and office. Combining the Teleglobe’s ability to continue as a going-concern. As a result, Ontario), Northwestel (Northwest Territories, Nunavut, Yukon retail operations of both companies, the new stores Bell World Bell Canada will be reviewing the carrying value of its invest- and Northern British Columbia) and Télébec (Québec). in Ontario and Espace Bell in Québec were the first retail ment in Teleglobe. This will likely result in an impairment As previously discussed in Item 2 – “General Development network in Canada to provide complete and integrated commu- charge of approximately $1.4 billion. This impairment would be of Bell Canada”, the Bell Nordiq Income Fund was recently nications solutions including wireline, wireless and direct-to- recorded as a charge to earnings. created and will acquire from Bell Canada a 40 per cent interest home (“DTH”) satellite services. This new retail network is made The events announced on April 24, 2002 have not yet had in each of Télébec LP and Northern Telephone LP. As part of this up of stores that are operated corporately and by dealer and any impact on Bell Canada’s relationship with Teleglobe or its transaction, Télébec and Northern Telephone will transfer franchise operators. ability to provide service to Bell Canada’s customers. If Teleglobe substantially all of their assets and liabilities to Télébec LP and is not successful in negotiating a restructuring, business combi- BELL WEST Northern Telephone LP, respectively. The name of Télébec will nation or partnership, it may have to pursue alternative courses As previously discussed under Item2–“General Development also be changed to Bell Nordiq Group Inc. (“Bell Nordiq GP”). of action. There is, accordingly, a risk that Teleglobe may of Bell Canada”, Bell Canada and MTS recently completed a After completion of the foregoing transaction, Bell Canada is to become the subject of a court-supervised proceeding or that it transaction to create Bell West, which is owned 60 per cent by hold an indirect 60 per cent interest in each of Télébec LP and may have to conduct a wind-down of some or all of its business. Bell Canada and 40 per cent by MTS. Bell West is a combination Northern Telephone LP, through its indirect wholly-owned In any of such cases, Bell Canada would take all necessary steps of the interests of Bell Intrigna and Bell Nexxia in Alberta and subsidiary, Bell Nordiq GP, the general partner of each of Télébec to minimize or offset any disruption in its ability to provide British Columbia. Bell West operates under the Bell brand and LP and Northern Telephone LP. service to its customers. focuses on businesses in Alberta and British Columbia, providing a suite of advanced fibre-based data and IP services,

2001 Bell Canada Annual Information Form 7 ALIANT and supply chain management and contract manufacturing BELL CANADA ACT Aliant, held approximately 39 per cent by Bell Canada and solutions to the offshore oil and gas and other industries. The In addition to the Canada Business Corporations Act, Bell Canada approximately 14 per cent by BCE, provides integrated emerging businesses segment also includes a number of port- is also subject to the provisions of the Bell Canada Act. The Bell communications and IT solutions through its subsidiaries. folio and strategic investments in the Internet and e-commerce Canada Act imposes on Bell Canada an obligation to provide Aliant is comprised of four core lines of business: telecom- area including minority interests in iMagicTV Inc., Exigen Ltd. service which is limited by the Bell Canada Act to those territo- munications, information technology, remote communications and Voice Mobility International Inc., among others. ries within which a general telephone service is provided. This and emerging businesses. On October 4, 1999, Bell Canada announced its decision to legal obligation is further limited to premises which are located The telecommunications line of business is carried on by make a cash offer to purchase up to 15.8 million outstanding within a prescribed distance from Bell Canada’s existing Aliant Telecom Inc. (“Aliant Telecom”). Effective January 1, 2001, common shares of Aliant at $27 per share for a total considera- network facilities. Bell Canada provides a general telephone Aliant Telecom amalgamated with most of its wholly-owned tion of up to $427 million. On December 20, 1999, the offer was service to specific areas or regions within the provinces of subsidiaries including Island Telecom Inc., Maritime Tel & Tel increased to $27.50 per share and was made by BCE rather than Ontario and Québec which encompasses the vast majority of Limited, NBTel Inc. (“NBTel”), NewTel Communications Inc. and by Bell Canada. On January 27, 2000, BCE announced that telephone customers in the two provinces. NewTel Mobility Limited. Aliant Telecom provides a full range of 30,580,538 common shares of Aliant were validly tendered The Bell Canada Act also provides for prior approval of the voice and data communications services including local, long under the offer and that it had taken up and accepted for CRTC of any sale or other disposal of Bell Canada voting shares distance, data, Internet, interactive television and other wireline purchase its previously announced allotment of 15.8 million held by BCE, except if such sale or disposal would result in BCE and wireless services. This line of business also includes the shares, representing a proration factor of 51.21 per cent. Certain retaining not less than 80 per cent of all such Bell Canada shares results of 87 per cent owned Aliant ActiMedia, a telephone direc- put and call options have been put in place which, if exercised, issued and outstanding. tory advertising business operating in Atlantic Canada. will transfer the shares acquired by BCE to Bell Canada on TELECOMMUNICATIONS ACT The IT line of business is carried out through Xwave agreed upon terms, thereby bringing Bell Canada’s ownership In 1993, the Government of Canada passed the Telecommunica- Solutions Inc. (“Xwave”). Xwave is an established Canadian of the common shares of Aliant to approximately 53 per cent. tions Act which updated and revised previous legislation IT services and fulfillment company with offices in the United MTS governing telecommunications in Canada. The Telecommunica- States and Europe. MTS, held approximately 22 per cent by Bell Canada, is a full tions Act applies to Bell Canada and several of its subsidiaries, Aliant’s investment in the remote communications business service Manitoba telecommunications company providing including Bell Mobility, Bell Nexxia, Northern Telephone, is a 61 per cent ownership position in Stratos Global Corporation local, long distance, wireless, directory and multimedia telecom- Northwestel and Télébec. The Telecommunications Act defines the (“Stratos Global”). Stratos Global is a Canadian-based public munications services. broad objectives of the Canadian telecommunications policy company offering mobile and fixed remote communications and empowers the government to issue to the CRTC directions solutions to a global customer base through a combination of OTHERS of general application with respect to any of these objectives. its own satellite and microwave telecommunications facilities, Bell Canada also has an interest in: Entourage Inc., a mainte- Under the Telecommunications Act, all telecommunications shared infrastructure and distribution of services of other nance and repair service provider for interior cables and exterior common carriers are required to seek regulatory approval for all network operators. networks; Nexxia Inc. (carrying on business as “Nexxia U.S.”), proposed tariffs for telecommunications services. The Telecom- The emerging businesses segment is a group of companies a telecommunications services provider in the United States; munications Act also requires that all rates be just and reasonable under the ownership of Aliant Horizons Inc. (“Aliant Hori- and Fibreco Inc. (carrying on business as “Fibreco U.S.”), which and prohibits a carrier from conferring an undue preference or zons”). These companies recognize revenue through several holds a fibre optic cable network in the United States. advantage on any person. However, under the Telecommunica- means: licensing of software, consulting services, one-time REGULATION tions Act, the CRTC has the power to forbear from regulating, in software sales, the outright sales of investments, transaction whole or in part, particular services. The CRTC has in fact issued revenues, joint developments and joint ventures. This group’s Bell Canada and several of its direct and indirect subsidiaries and various forbearance orders which have resulted in Bell Mobility primary operations are through Innovatia Inc. (“Innovatia”), associated companies, including Aliant and Bell Mobility and being largely forborne from regulation and Bell Canada partially Prexar LLC (“Prexar”) and AMI Offshore Inc. (“AMI”). Innovatia its subsidiaries, are subject to the jurisdiction of the Canadian forborne. The CRTC may also exempt an entire class of carriers is focused on the research and development of Internet-based Radio-television and Telecommunications Commission from regulation under the Telecommunications Act, where the services for broadband networks. Innovatia designs, develops (“CRTC”), an agency of the Government of Canada. Several laws CRTC finds that exemption of the class of carriers is consistent and sells Internet-based applications to service providers world- of specific application also govern the businesses of Bell Canada with the objectives of Canadian telecommunications policy. wide. Aliant Horizons owns 96.4 per cent of Prexar, an Internet and Bell Mobility. The Telecommunications Act and accompanying regulations service provider based in Maine and servicing the Northern New also provide that, in order for a company such as Bell Canada or England State. AMI (57.4 per cent owned by Aliant Horizons) Bell Mobility to operate as a telecommunications common provides process and systems control technical services, logistics

8 2001 Bell Canada Annual Information Form carrier, it must be eligible to operate as a Canadian carrier. A Cana- Similarly, indirect ownership in a broadcasting licensee services were limited to the rate of inflation minus an adjust- dian carrier must be a Canadian-owned and controlled corpora- requires that the parent corporation of a broadcasting licensee ment for productivity gains of 4.5 per cent. These price changes tion, and must not otherwise be controlled by non-Canadians. has a minimum level of Canadian ownership of two thirds of all may be adjusted to account for the impact of any approved Specifically, a Canadian carrier is required to meet a minimum outstanding and issued voting shares and two thirds of the votes. exogenous factors, i.e., events which are beyond the telephone level of direct Canadian ownership of 80 per cent and a minimum In addition to the foregoing ownership constraints, not less companies’ control that are allowed to be reflected in the rates. level of indirect Canadian ownership of 66 2/3 per cent. BCE indi- than 80 per cent of the board of directors as well as the chief The single basket of capped services is divided into three sub- rectly owns 80 per cent of the outstanding voting shares of Bell executive officer of a broadcasting licensee must be Canadian. baskets (basic residential local services, single and multi-line Canada. To the best of BCE’s knowledge, the level of non-Cana- Parent corporations of broadcasting licensees which: have local business and residual capped services), each subject to dian ownership of BCE’s common shares was approximately less than 80 per cent Canadian directors on the board of direc- additional pricing constraints. The remaining utility segment 10.4 per cent as at March 30, 2002. tors; have a non-Canadian chief executive officer or have a services, including optional services, are not subject to price cap In addition to the foregoing foreign ownership constraints, minimum level of Canadian ownership of less than 80 per cent, constraints but are tariffed. Essential services required by local the Telecommunications Act provides that not less than are required to demonstrate to the CRTC that neither such and long distance competitors, while not included with capped 80 per cent of the members of the board of directors of a Cana- parent corporation nor its directors exercise control or influence services, are generally priced to recover incremental costs and dian carrier must be Canadian. over any programming decisions of the broadcasting licensee. make an appropriate contribution to fixed and common costs. BROADCASTING ACT RADIOCOMMUNICATION ACT The CRTC reviewed the current price cap regime in a proceeding which was completed in 2001. The CRTC’s decision, which is In 1991, the Government of Canada amended the Broadcasting The use of radio spectrum by Bell Mobility and other wireless expected on or prior to May 31, 2002, will set the terms and Act in recognition of the need to modernize and consolidate service providers (“WSPs”) is subject to regulation and licensing conditions for the new price cap regime. The terms of the price existing legislation. Key policy objectives of the Broadcasting Act by Industry Canada pursuant to the Radiocommunication Act. cap regime will govern the pricing flexibility for local exchange include the safeguarding and strengthening of the cultural, The Minister of Industry has the discretion to issue radio and wholesale services that Bell Canada will have going forward. political, social and economic fabric of Canada as well as licenses, establish technical standards in relation to radio Bell Canada believes that its proposals provide a proper balance encouraging the development of Canadian expression. The equipment and plan the allocation and use of the radio spec- between the interests of consumers and the interests of competi- Broadcasting Act assigns the regulation and supervision of the trum. The Radiocommunication Act provides the legislative tors by establishing the necessary foundation for the further broadcasting system to the CRTC. authority to perform a number of functions with a view to evolution of local service competition and the achievement of Most broadcasting activities require a broadcasting license. ensuring the orderly development and efficient operation of the ultimate goal of full facilities-based competition in all Licenses are awarded by the CRTC and typically extend for a radiocommunication in Canada and the orderly establishment telecommunications markets. However, there is no assurance period of seven years at which time an application for a license and modification of radio stations. that the CRTC will accept Bell Canada’s proposals and Bell renewal must be made to the CRTC. There are two principal Pursuant to the Radiocommunication Regulations, persons who Canada cannot predict the final impact of the CRTC’s decision types of broadcasting licenses, one is for broadcasting program- are eligible to be issued radio licenses, such as Bell Canada and on Bell Canada. ming and the other is for broadcasting distribution, which Bell Mobility, must comply with the same foreign ownership In contrast to Bell Canada’s utility segment services, competi- includes terrestrial wireline, terrestrial wireless and satellite DTH restrictions as are applicable to Canadian carriers under the tive segment services (comprised primarily of long distance, distribution. Three subsidiaries or associated companies of Bell Telecommunications Act. private line and data, and terminals) are largely forborne from Canada – Aliant, Northwestel and Télébec – have broadcasting WIRELINE FRAMEWORK regulation. distribution licenses that permit them to offer terrestrial wire- All of Bell Canada’s services, including services which are subject line, and to a lesser extent terrestrial wireless, broadcast distri- Significant Regulatory Decisions to price regulation under the Telecommunications Act, are bution services in defined areas within Nova Scotia, New On March 12, 1999, in Order 99-239, the CRTC established, on provided in an open and competitive environment. Brunswick, Québec, Ontario, Northwest Territories and an interim basis, the manner in which Bell Canada can recover, Bell Canada’s major utility segment services (comprised Nunavut. over a three-year period, costs associated with local competition primarily of basic local services), are subject to price cap regula- The Broadcasting Act and its accompanying regulations start-up and local number portability. The portion to be recov- tion as set out in Telecom Decision 97-9. require that for a corporation to obtain a broadcasting license it ered from services subject to price cap regulation is to be Telecom Decision 97-9, issued on May 1, 1997, outlined the must be a Canadian-owned and controlled corporation, and reflected as an exogenous factor in the price cap formula. On regulatory framework for the price cap regime implemented on must not otherwise be controlled by non-Canadians. A broad- February 23, 2000, in Order 2000-145, the CRTC rendered its January 1, 1998, including the principles and components of casting licensee is required to meet a minimum level of direct final decision allowing recovery of approximately $220 million the price cap formula applicable to a basket of telephone Canadian ownership of 80 per cent of all outstanding and issued of the estimated $250 million costs. companies’ local services over a four-year period. During this voting shares and 80 per cent of the votes. period, price changes for this single basket of capped utility

2001 Bell Canada Annual Information Form 9 On May 17, 1999, the CRTC announced, after an in-depth On November 30, 2000, the CRTC issued Telecom Decision Calgary, Vancouver and the Federation of Canadian Municipal- review, that it will not regulate new media services on the 2000-745, changing the contribution regime from a company ities were granted leave to appeal the CRTC Decision on May 14, Internet and more particularly that new media services within specific long-distance per minute charge to a nationally aver- 2001 and have since filed their appeal with the Federal Court of the purview of the Broadcasting Act will not require a broadcasting aged surcharge of 4.5 per cent on Canadian telecommunications Appeal. license. The CRTC concluded that new media on the Internet are revenues. This change effective January 1, 2001, had a negative On March 30, 2001, the CRTC, in Order 2001-278, approved achieving the goals of the Broadcasting Act and that any attempt impact on the earnings before interest, taxes, depreciation and monthly price increases ranging from approximately $0.25 to to regulate new media might put the Canadian industry at a amortization (“EBITDA”) (1) of Bell Canada and its subsidiaries of $1.60 per residential customer per month, for local residential competitive disadvantage in the global market place. approximately $100 million in 2001. Bell Canada and Bell services. Local price increases were anticipated in Telecom In a letter decision dated March 9, 2000, the CRTC approved Mobility applied to the CRTC to vary this decision from the Decision 2000-745, which introduced changes to the contribu- a proposal filed on December 13, 1999 by Bell Canada and other prescribed 4.5 per cent to 2.7 per cent for 2001. On March 15, tion regime, and are designed to recover from local customers a Incumbent Local Exchange Carriers (“ILECs”), to reduce Direct 2001, the CRTC issued Order 2001-219 denying the application portion of Bell Canada’s national subsidy requirements for high Connect (switching and aggregation) rates paid by competitors by Bell Canada and Bell Mobility to vary the terms of Telecom cost serving areas. to interconnect with the ILECs networks. However, the CRTC Decision 2000-745, as it affects 2001. The CRTC held that a vari- On April 27, 2001, the CRTC issued Telecom Decision denied the ILECs’ request to offset reduced Direct Connect ance of the terms of its decision, as requested by Bell Canada, 2001-238, revising the unbundled local loop rates that compet- revenues with an exogenous adjustment to the price cap index. would have caused substantial local rate increases in other parts itive local exchange carriers (“CLECs”) pay for the use of such On March 17, 2000, the ILECs appealed the CRTC decision of Canada. Moreover, the CRTC held that Bell Mobility’s request loops. The loop prices paid to Bell Canada have been reduced on asking that the CRTC review and vary that part of its decision would have amounted to giving wireless services preferential average by 28 per cent. This aspect of Telecom Decision that disallowed the exogenous factor adjustment. On May 16, treatment over wireline services. 2001-238 is not expected to have a material adverse effect on 2000, the CRTC issued a decision that reversed its previous posi- On December 18, 2000, the CRTC, in Orders 2000-1148 and Bell Canada’s financial results. This decision also addresses the tion by allowing the ILECs to partially recover the Direct 1149, denied Bell Canada’s applications to increase the rates for costs to be used as the basis for establishing the subsidy require- Connect rate reductions. various calling features. On December 22, 2000, Bell Canada ment under the national subsidy mechanism that was approved On June 19, 2000, approval of Bell Canada’s third annual filed an application with the CRTC seeking to vary these Orders on November 30, 2000 in Telecom Decision 2000-745. On price cap filing was essentially completed with the CRTC as Bell Canada believed these decisions were inconsistent with December 14, 2001, the CRTC issued Order 2001-876, which approval of Tariff Notices (“TN”) 6465 and 6465a. TN 6465 and the parameters established for the current regulatory regime. On established the revenue per cent charge for the national subsidy TN 6465a, which became effective June 19, 2000, allowed Bell March 21, 2001, the CRTC issued Order 2001-253 reversing program, on an interim basis, at 1.4 per cent for 2002. This Canada to increase prices for single-line residential telephone Orders 2000-1148 and 1149 which denied Bell Canada’s appli- reduction, while significant, was expected at the time Telecom service for most customers, representing the first such increase cations to increase the rates for various calling features. The rates Decision 2000-745 was issued, which set the charge at for residential customers in over two years. Also included as part originally proposed were approved effective March 21, 2001. 4.5 per cent for 2001. of the price cap filings were price decreases, filed and approved The annual revenue impact of these increased rates is approxi- WIRELESS FRAMEWORK earlier in the year, for single-line and PBX services (used by busi- mately $60 million. nesses of all sizes), as well as digital data services (used primarily On January 25, 2001, the CRTC issued Telecom Decision Licensing Requirements by larger businesses). 2001-23 regarding the terms and conditions of access by Cana- All of Bell Mobility’s wireless communications services depend On June 28, 2000, the Governor In Council (“GIC”) dian carriers to municipal property, as well as the entitlement of on the use of radio frequencies. Industry Canada plans and announced that it had dismissed appeals of Telecom Decisions municipalities to compensation for allowing Canadian carriers assigns the use of spectrum in Canada for various wireless 99-15: Unbundled Local Loop Service Order Charges (filed by to occupy municipal rights-of-way. While the decision was communications systems and, where licensing is required, Call-Net Enterprises Inc. (“Call-Net”)), 99-16: Telephone Service limited to the city of Vancouver, it is of importance to all carriers considers applications from prospective public and private oper- to High Cost Serving Areas (filed by the Governments of Mani- requiring access to municipal rights-of-way. By limiting munici- ators of such systems for licenses to operate those systems. The toba and Saskatchewan and other parties) and 99-20: Review of palities to recovery of incremental costs, the CRTC has signifi- Minister of Industry also has the authority to suspend or revoke Frozen Contribution Rate Policy (filed by AT&T Canada Corp. cantly reduced the potential charges applicable to Bell Canada radio spectrum licenses, if the license holder has contravened (“AT&T Canada”) and other parties). In addition to upholding and other carriers. The cities of Toronto, Ottawa, Halifax, the Radiocommunication Act, regulations or terms and conditions the CRTC decisions, the GIC also required that the CRTC report of its license and after giving the holder of the license a reason- (1) The term “EBITDA” used in this Annual Information Form does not have a annually over a five-year period on the status of telecommuni- standardized meaning prescribed by Canadian Generally Accepted able opportunity to make representations. Such revocation is cations competition and deployment of advanced services at Accounting Principles (“GAAP”) and therefore may not be comparable to rare and licenses are usually renewed upon expiration. At this similar measures presented by other publicly-traded companies. Bell affordable rates across Canada. time, Bell Mobility knows of no reason why its current radio Canada uses EBITDA, among other measures, to assess the operating per- formance of its on-going businesses. licenses will not be renewed as they expire.

10 2001 Bell Canada Annual Information Form Industry Canada typically assigns portions of the radio spec- PCS License spectrum cap policy as of January 2003. This action may cause trum on a first-come, first-served basis. However, in instances In December 1995, following a competitive licensing process, Industry Canada to further consider its spectrum cap policy in where the expressed demand for a given allocation of spectrum the Minister of Industry granted Bell Mobility one of four the future. exceeds the amount available, a comparative selection process licenses to provide PCS in the 1.9 gigahertz (“GHz”) band for its PCS Auction has been used to identify which of the various proposed systems operating territory. The terms and conditions applicable to such On June 28, 2000, Industry Canada released its policy and will be authorized, based on relative merit. Bell Mobility was PCS licenses include requirements related to Canadian owner- licensing procedures which governed the auction of the granted authority for its PCS network in December 1995, ship and control, the time frame for rolling out service across 40 MHz of PCS spectrum held in reserve. Industry Canada following such a comparative selection process. According to Canada, a restriction on cellular-affiliated PCS licensees to determined that the spectrum would be subdivided into four criteria announced by Industry Canada in June 1995, the provide PCS service in the 1.9 GHz band in each of the 25 major blocks of 10 MHz to be authorized as regional licenses. The successful applicants were to be judged according to, among metropolitan areas prior to the commencement of service by at policy also determined that, subject to meeting Canadian other things, financial capability, service innovation, commit- least one PCS provider that is not affiliated with a cellular ownership and control regulations and the provisions of the ment to early and extensive deployment, technical, marketing licensee, resale of PCS and cellular services and facilities to other PCS spectrum cap, any entity would be permitted to participate and sales expertise and equipment availability. PCS licensees, and research and development expenditures. The in the auction. Existing competitors as well as new entrants In February 1996, Industry Canada announced the results current term of Bell Mobility’s PCS license will expire on participated in the auction which concluded on February 1, of its review of the radio licensing process. Industry Canada March 31, 2006. As with the cellular license, Industry Canada 2001. Bell Mobility, bidding on behalf of itself and its BWA part- concluded that a more streamlined version of the current has noted its intention to engage in a public consultation that ners, paid approximately $720 million to acquire 20 licenses comparative process should be retained. At the same time, will consider equating the (1995) PCS license conditions with across Canada, including Alberta and British Columbia. This Industry Canada announced its intention to establish an alter- those of the recently auctioned PCS spectrum. As a result, the resulted in a $1.40/pop/MHz of spectrum which compares to a native competitive selection process incorporating a bidding terms and conditions associated with Bell Mobility’s (1995) PCS price of $6.28/pop/MHz in the recent U.S. auction. In the key procedure in instances where reliance on market forces is license are subject to the outcome of those consultations. Southern Ontario market, Bell Mobility acquired an additional appropriate. Industry Canada released its Auction Framework Spectrum Cap 20 MHz of PCS spectrum. The new licenses will expire on in August 1998 but reiterated that auctions were only one of In October 1998, Industry Canada issued Canada Gazette Notice November 29, 2011. Bell Mobility is now well positioned to many tools it might use to allocate spectrum. Since that time, DGTP-015-98 soliciting public comment on whether to begin the deployment of its 3G wireless services. Industry Canada has conducted several auctions subsequently continue, modify or rescind the application of a limit on the awarding spectrum in several frequency bands. Forbearance aggregate amount of spectrum that may be held by PCS In December 1996, the CRTC confirmed an earlier decision that Cellular License providers. At the time of the initial selection of PCS licensees in it was appropriate to forbear from regulating the rates for inter- The current term of Bell Mobility’s cellular license will expire on December 1995, Industry Canada adopted a Spectrum Cap connected switched mobile voice services (i.e., cellular, PCS and March 31, 2006. The material terms and conditions of its cellular Policy (“Policy”) which was set at 40 megahertz (“MHz”) and Enhanced Specialized Mobile Radio (“ESMR”)), other than wire- license include compliance with the Canadian ownership and consisted of frequency assignments for PCS at 2 GHz, cellular less services provided in-house by the telephone companies. The control requirements established in the Radiocommunication Act radiotelephony and similar public high mobility radiotelephony CRTC determined, however, that all interconnected mobile and associated regulations, notification of the Minister of services. Prior to the start of such consultation, Bell Mobility service providers should remain subject to the statutory require- Industry prior to any material change in ownership or control had licenses for 25 MHz of cellular spectrum and 10 MHz of PCS ment prohibiting them from discriminating unjustly between in fact of Bell Mobility, and at least two per cent of adjusted gross spectrum. The stated objective of the Policy was to provide a customers. The CRTC also retained its jurisdiction to impose revenues (excluding intercarrier payments, bad debts and third greater opportunity for competition. conditions on the provision of any interconnected switched party commissions) of Bell Mobility for the period from April 1, In November 1999, Industry Canada released its decision in mobile voice service. Other services (i.e., paging, data radio 2001 to March 31, 2006, must be invested in research and devel- its Policy Review, and increased the spectrum cap from 40 MHz network, airline passenger communications and private and opment related to wireless telecommunications activities. to 55 MHz in any geographical area. In addition to the above shared radio services) are subject to unconditional forbearance Industry Canada has noted its intention to engage in a public frequency assignments, the new aggregation limit also applies from regulation. consultation that will consider equating the cellular license to any future spectrum that may be identified for PCS in subse- In October 1998, subsequent to an application from NBTel, conditions with those of the recently auctioned PCS spectrum. quent Industry Canada allocation proceedings. The same the CRTC forbore from the regulation of cellular and PCS As a result, the terms and conditions associated with Bell proceeding announced the timing of the release of a remaining services provided in-house by NBTel and subsequently approved Mobility’s cellular license are subject to the outcome of any such 40 MHz of PCS spectrum which was held in reserve at the time the provision of current and future mobile services by the feder- consultation initiated by Industry Canada. of the awarding of PCS licenses in 1995. The FCC in the United ally regulated members of the SCNM alliance. States has recently announced its intention to sunset its

2001 Bell Canada Annual Information Form 11 Local Number Portability Telephone Charges for 911 Service In a related development, on October 31, 2001, the CRTC In December 1998, Microcell applied to the CRTC to impose WSPs provide their customers with access to emergency 911 issued Public Notice 2001-110 which, amongst other things, wireless local number portability on the industry. In September service using the facilities of the wireline telephone companies. considers whether WSPs should be mandated to offer E911 1999, the CRTC denied Microcell’s application. In the United Customers of the wireline telephone companies currently pay a service to their clients in areas where E911 is commercially States, the FCC is considering a number of conservation initia- per number monthly charge of $0.22 for access to municipally offered by ILECs. In the meantime, E911 access service tariffs tives including some that may require the implementation of provided 911 service. This charge includes the provision of have been approved, on an interim basis, in Telus’ and Bell number portability capability. Given the highly integrated related features such as automatic location information to emer- Canada’s operating territories. Bell Mobility has argued that nature of North American wireless networks, including the gency answering centres. In an October 1999 decision, the CRTC mandates are not appropriate in the forborne and highly requirement to support North America wide roaming, an FCC found that it would be appropriate for WSPs, because they do not competitive wireless segment. Bell Mobility and other WSPs decision requiring U.S. wireless carriers to implement such receive the same functionality as fixed location wireline have argued that the cooperative working group approach, measures could prompt similar requirements in Canada. As customers, to only be charged 50 per cent of the wireline 911 rate, which includes the several stakeholders involved in the provi- some U.S. wireless carriers are opposing such measures, the i.e., a monthly charge of $0.11 per wireless telephone number. sion of wireless E911, is the more effective and prudent course. timing of any such requirement is not clear. Any decision to mandate WSP provision of wireless E911 service Enhanced Wireless 911 Service could impose significant costs on Bell Mobility and other WSPs. Toll Contribution Due to technological limitations in wireline, wireless and 911 A decision by the CRTC is pending. On May 1, 1997, the CRTC issued Order 97-590 in which it answering centre platforms, when wireless customers call 911 determined that all WSP interexchange switched mobile voice service, they are only provided with a voice link to the emer- Bundling and Joint Marketing services that originate or terminate on the telephone compa- gency answering centre. This contrasts to wireline service where As permitted by Telecom Decision 98-4, Bell Canada and Bell nies’ public network would be subject to the payment of a long databases, resident in the telephone network, provide the emer- Mobility are allowed to bundle their products and services with distance contribution effective January 1, 1998. Another result gency answering centre with the subscriber’s telephone number other companies, including each other and subsidiaries and of this Order is that cellular providers are no longer restricted for call back purposes, as well as with automatic location infor- associated companies, such as Bell ExpressVu. However, if from carrying on long distance between fixed landline stations. mation. In 1996 in the United States, the FCC mandated WSPs tariffed services are included in the bundle, the service bundle The new contribution regime introduced by Telecom in that country to implement enhancements in wireless 911 must be tariffed and pass an imputation test to ensure that Decision 2000-745, which became effective January 1, 2001, service in two phases. Phase 1 would provide the call back services are not sold at prices below cost. applies to all Canadian telecommunications services providers, number of the originating wireless telephone. Phase 2 would The relationship between Bell Canada and Bell Mobility is including WSPs, with revenues of over $10 million per year. Bell provide locational information to a fairly precise degree. While expected to accelerate the delivery of bundled services, offer Mobility paid $1.6 million in long distance contributions for the both phases would result in WSPs incurring costs, Phase 2 is esti- customers a single point of contact for their communication year 2000, while revenue-based contribution for the year 2001 is mated to involve substantial costs to retrofit wireless networks to needs and improve overall cost structures allowing both compa- approximately $56 million. Bell Mobility and Bell Canada accommodate this requirement. Due to technical and related nies to compete more effectively in the marketplace. applied to the CRTC for it to vary the terms of its decision so regulatory difficulties, the proposed implementation dates have COMPETITION that in 2001, WSPs would be subject to a 1.5 per cent tax. On not been met, and have recently been extended. March 15, 2001, the CRTC issued Order 2001-219 denying the In light of the FCC regulatory initiatives, Canadian emer- WIRELINE application by Bell Mobility and Bell Canada to vary the terms gency agencies have requested that the CRTC mandate similar Bell Canada’s wireline services can be broadly classified under of Telecom Decision 2000-745, as it affects 2001. The CRTC held requirements on Canadian WSPs. In response, in 1997 the Cana- the following categories: that a variance of the terms of its decision, as requested by Bell dian WSPs proposed the establishment of a joint WSP/emer- Basic Access Services Canada, would have caused substantial local rate increases in gency agencies/telephone companies working group to examine Basic access services are those services that allow Bell Canada to other parts of Canada. Moreover, the CRTC held that Bell the technical and regulatory considerations involved. The CRTC connect its customers to the network, i.e., basic local service. Mobility’s request would have amounted to giving wireless and Industry Canada participate in the working group as Bell Canada’s main competitors in basic access services include: services preferential treatment over wireline services. On observers. As a direct outcome of the working group’s activities, AT&T Canada; Telus; Le Groupe Vidéotron Ltée (“Vidéotron”); December 14, 2001, the CRTC issued Order 2001-876, which all WSPs, including Bell Mobility, are currently engaged in an and Call-Net. As discussed above, Bell Canada’s prices for basic established the revenue per cent charge for the national subsidy enhanced wireless 911 trial in the York-Toronto area to provide access services are subject to price cap regulation. On May 1, program on an interim basis at 1.4 per cent for 2002. This the wireless call back number and improved emergency call 1997, the CRTC issued Telecom Decision 97-8, which estab- reduces Bell Mobility’s contribution payments for 2002 to routing. The trial ended on February 28, 2002, and a final report lished the framework for local competition. In Telecom Decision approximately $21 million. is expected by the end of April 2002. 97-8, the CRTC determined that:

12 2001 Bell Canada Annual Information Form • facilities-based entry into the local telephone market through established agreements with 360Networks Inc. Telus is Local Pay Telephones would be permitted; also in the process of constructing a metropolitan fibre-optic On June 30, 1998, the CRTC issued Telecom Decision 98-8, •new entrants are carriers equal in status and the new infrastructure in Toronto, to be owned and operated by Telus. opening the local pay telephone market to competition. New framework must allow for the transition from a single Wireless competitors (PCS and cellular license holders, such entrants into the market must meet certain requirements as set network to one of inter-operable networks; as Telus Mobility, Microcell and Rogers Wireless Communica- out by the CRTC. Bell Canada filed proposed tariffs on • all services of existing carriers and new entrants are to be tions Inc. (“Rogers”)/AT&T Wireless (U.S.)) have been posi- August 14, 1998 to allow competitors’ pay telephones access to made available to competitors for resale; however, whole- tioning their services as alternatives to conventional wireline its local network. sale rates at a mandated discount are not required; telephony in the local market. To this end, Telus acquired Rates charged by new entrants will not be regulated. •new entrants’ retail prices will not be regulated; Clearnet Communications Inc. (“Clearnet”), a national digital However, rates charged by Bell Canada and other former SCNM •new entrants will have access to subsidies that ILECs wireless company, in 2000. companies will continue to be monitored until, in the opinion receive to provide service in higher cost areas; and of the CRTC, competition is sustainable. Competitor Services •new entrants must meet certain public interest require- Competitor services are those services that Bell Canada provides Long Distance Services ments such as providing 911 and message relay service. to competitors that are used in the provision of competitive Bell Canada’s major long distance competitors are all affiliated With terms and conditions for providing local telecommu- local and interexchange services. Many of the terms and condi- with U.S. carriers. No two countries in the world share as much nications services now established, new entrants are making tions for local competition were determined in Telecom Deci- cross-border traffic as Canada and the United States. their presence felt in this market. Many companies have been sion 97-15, which dealt with issues such as: co-location access; Sprint Canada has a considerable base of residential and approved by the CRTC to operate as CLECs. requirements to obtain or resell co-location access; the type of business customers, and strong brand loyalty. Its market pre- On March 4, 1999, AT&T Canada and MetroNet Communi- equipment included in co-location and co-location sites. In sence in the United States, as well as in other parts of the world, cations Corp., a provider of data and voice services targeting addition, in Telecom Decision 97-8, ILECs were required to make is a key strength in the carriage of cross-border traffic, including medium and large business accounts in major Canadian urban local network components available to competitors on an traffic between Canada and the United States. The majority of areas, announced that they had entered into a definitive agree- unbundled basis, thus allowing competitors to provide service this traffic originates and terminates in Bell Canada’s territory. ment to merge their respective companies in a transaction using a mix of their own facilities with those of the ILECs. Bell Other competitors include Primus Telecommunications Canada valued at approximately $7 billion. The terms of the agreement Canada’s rates for these services are generally determined by a Inc. (“Primus”) and Telus. In March 1999, Primus acquired were approved at a shareholders’ meeting in May 1999. The cost plus markup formula. On November 30, 1998, the CRTC London Telecom Network Inc., an independent long distance merged company is called AT&T Canada. AT&T Canada is active issued Telecom Decision 98-22 in which the CRTC established carrier. On May 31, 1999, AT&T Canada and Primus announced in about 29 markets in Canada, including most urban areas such the rates that Bell Canada can charge CLECs to use its local the consummation of a comprehensive strategic alliance in the as Toronto, Montréal, Ottawa-Gatineau, London and Québec access loops to compete in the local telephone service market. residential long distance consumer market in Canada. The City. Their foothold represents over 80 per cent of the address- These rates were subsequently reduced in Telecom Deci- agreement included the sale by AT&T Canada of its residential able market for local business lines in Canada. sion 99-15 to reflect anticipated cost efficiencies. The CRTC long distance customer base and consumer assets to Primus. Sprint Canada, an approved CLEC, is owned by Call-Net. issued Telecom Decision 2001-694 and Order 2001-848 to AT&T Canada retains a strong presence in the business market. Sprint Canada competes in various markets including local, long further reduce the service order charge based on updated cost In Telecom Decision 97-19 issued on December 18, 1997, the distance, wireless products with interconnections to interna- information and to reclassify the band designations for certain CRTC concluded that the long distance and toll-free markets are tional markets, data and Internet. Sprint Canada began offering telephone wire center serving areas. now sufficiently competitive to protect the interests of local telephone service in Calgary, Vancouver, Toronto and customers, and that it would be appropriate to forbear from Montréal in 1999. Options and Features regulation of those services. As a result, Bell Canada is no longer Many regional companies have also received or registered for Options and features are discretionary services offered by Bell required to file and obtain CRTC approval of tariffs specifying CLEC status; however, due to the current economic climate, Canada to its customers, such as call waiting, calling number rates for such services. However, Bell Canada is required to some of these companies are no longer in operation. Vidéotron, identification and call answer. These services currently provide provide the CRTC, and to make publicly available, rate sche- an approved CLEC, which operates its own facilities-based local a substantial contribution to Bell Canada’s revenue base and dules setting out the rates for North American basic long service, was acquired by Quebecor Inc. in 2000. They offer profitability. While these services are not capped, it is expected distance service, and to update them within 14 days of any service in the urban areas of Québec with offerings available in that in the longer term, with facilities-based local competition, change in such rates. In addition, the CRTC has placed a cap on Montréal, Laval, Longueuil, Drummondville and Granby. margins from these services will decline. these schedules such that the weighted-average rate for each Telus announced that it has completed a national fibre-optic schedule will not be allowed to increase. These conditions network to deliver high speed data and Internet services to busi- were subject to review during the price cap hearing in 2001. ness customers, including having a route immediately available

2001 Bell Canada Annual Information Form 13 Competition in the long distance market in Canada has been connected to the public switched telephone network. In 1996, outside of their traditional operating territory; however, it price intensive, resulting from discount structures for term and the CRTC approved Bell Canada’s application for forbearance retained powers to ensure that the confidentiality of customer volume contracts in the large business markets as well as from from regulation of its Datapac and HyperStream services. In a and competitor information is protected against undue prefer- flat rate pricing in the residential and small business markets. separate decision later in 1996, the CRTC also approved forbear- ence or unjust discrimination. Bell Canada intends to continue to compete vigorously and is ance for electronic messaging and information services. In both WIRELESS committed to being competitively priced in all markets. decisions, the CRTC concluded that the market for those services In 1985, Industry Canada awarded two cellular licenses in each Removal of the last remaining barrier to long distance was highly competitive. On December 18, 1997, the CRTC issued service area in Canada, which resulted in a highly competitive competition took effect on October 1, 1998, when Teleglobe’s Telecom Decision 97-20 in which it noted that the interexchange cellular industry in Canada. Increased competition from the exclusive right to provide certain international telecommuni- analog and other voice grade service sector, which it deemed to introduction of PCS and the development of new products and cations services ended. The CRTC released Telecom Decision be distinct from the high capacity and digital data systems services has heightened market awareness and stimulated 98-17 in October 1998, which established a new regulatory (“DDS”) service segments, required continued regulation to overall demand for wireless telecommunications services. regime for international telecommunications services. The deci- protect the interests of customers. With respect to the high In December 1995, Industry Canada awarded four licenses to sion required that overseas carriers, including resellers, obtain a capacity and DDS services, the CRTC acknowledged that the provide PCS in the 1.9 GHz range to Rogers, to two new PCS license from the CRTC from January 1, 1999; to date, numerous sources of competitive supply had increased significantly and entrants (Clearnet and Microcell) and to the shareholders of parties have acquired licenses to provide international services, that there was evidence of sufficient competitive supply to Mobility Personacom Canada Ltd. (“Mobility Canada”), a making for an intensely competitive market. The decision also warrant forbearance on 20 specific routes. The CRTC also found company comprising the wireless affiliates or divisions of eliminated traffic routing restrictions which previously required that there were likely other routes, which would qualify for Canada’s major wireline telephone companies, including Bell the use of Canadian facilities for overseas traffic. forbearance, and proposed a process to address further forbear- Mobility. Bell Mobility and Rogers each received a license for ance on a route-by-route basis. On May 12, 1999, the CRTC Private Line and Data 10 MHz of radio frequency spectrum, while subsidiaries of announced that forbearance on additional routes would be In 1999, Bell Canada launched Bell Nexxia to provide IP/Broad- Clearnet and Microcell each received a license for 30 MHz of granted based on the existence of competing facilities on a route band services to business customers. Bell Nexxia directly and radio frequency spectrum. In its initial PCS licensing process, (competitors must file semi-annual reports identifying qualifying indirectly owns, controls and operates a national IP/Broadband Industry Canada declined to award all of the available spectrum routes). In subsequent rulings, the CRTC substantially extended network with over 100 points of presence in key locations assigned to PCS, indicating at that time its intention to re- the number of forborne routes to cover most major routes in Bell throughout Canada and the United States. Bell Nexxia offers evaluate the need to allocate further PCS spectrum in two years. Canada’s territory. Internet services including extranets, WANs and managed Industry Canada subsequently authorized the remaining PCS The key drivers in the data market include growth in Internet networks packaged with traditional voice services. spectrum in its January 2001 PCS auction. In its pre-auction access and applications using IP such as e-mail, Web site Nationally, AT&T Canada has been Bell Canada’s most signifi- consultation, Industry Canada considered, and subsequently design/hosting and e-commerce; however, competition from cant competitor in the data services market, offering frame relay declined, to adopt a new entrant set aside as part of its PCS cable companies is not as important on the business side as it is and asynchronous transfer mode (“ATM”) services to the busi- auction policy. While eligible new entrants were permitted to on the residential side. Demand for faster and higher bandwidth ness markets utilizing a Canada-wide ATM network. Moreover, participate in the auction, only one, Wireless2Net Inc., access technologies, DSL and fibre access systems, applications AT&T Canada has created a network with national, high speed succeeded in acquiring a limited amount of spectrum. Industry such as broadcast video, requirements for managed corporate fibre-optic capabilities with bandwidth for delivery of local, long Canada has stated its intention to reconsider the issue of setting and campus networks (VPN and ATM) and alternatives to dedi- distance, data and Internet services. aside spectrum for new entrants as part of the next licensing cated private line and circuit switched services are also Sprint Canada strengthened its position in the data services round which is not expected prior to 2004. Should Industry increasing rapidly. business with its 1998 acquisition of Fonorola Inc., a long Canada introduce such an approach for new entrants, further distance services reseller which had become a facilities-based Terminals competition in the wireless market may also be introduced in carrier and had been constructing a national fibre network. Its Bell Canada has experienced substantial competition from a the future through the licensing of additional PCS and cellular service offerings include managed and unmanaged private line large number of companies in the provision of business and operators. For additional information, see earlier disclosure and virtual private networks (“VPNs”) over frame relay. residential terminal equipment in its operating territories, under this Item 3 entitled “Regulation – Wireless Framework – Vidéotron is also focusing on residential High Speed Internet following CRTC decisions in the early 1980’s allowing the connec- PCS Auction”. In addition to competing with cellular and other through its cable modem offering which is essentially available tion of customer-owned terminal equipment to its facilities. existing wireless services, PCS is expected to eventually compete in all its territory. with local wireline access services. Service Outside ILECs Traditional Territory Private line and data services had been competitive prior to In November 1996, Microcell launched its PCS service in On August 31, 2001, the CRTC issued Telecom Decision 1979 on a non-interconnected basis and since 1979 for services Montréal using Global System for Mobile Communications 2001-534, granting forbearance to ILECs for service provided

14 2001 Bell Canada Annual Information Form (“GSM”) digital technology. Microcell has rolled out its PCS operator that owns a national ESMR network in Canada offering growth while maintaining its existing customer base. Bell network in major urban areas in British Columbia, Alberta, cellular-like service. Services offered using ESMR may also Mobility intends to compete vigorously in the wireless markets Ontario, and Québec and has signed an agreement with compete with cellular service. ESMR refers to a low-powered of the future, using its proven capabilities in the deployment Mobility Canada to permit Microcell’s customers to roam on the ‘cellular-like’ communications service supplied by converting and operation of wireless networks and its marketing expertise. analog network of Mobility Canada when outside of Microcell’s analog trunk radio systems into an integrated digital transmis- It also intends to continue to enhance its existing wireless own serving area. Microcell is currently competing for sion system. ESMR addresses certain of the technical limitations services as technology evolves, to apply for new radio licenses customers and for distribution channels directly against Bell of existing SMR systems. In August 2000, Clearnet was acquired and to deploy new services to the benefit of its customers. Mobility’s cellular and PCS networks. In Order 2000-831, issued by Telus. As a result of the acquisition of Clearnet, Telus Mobility C APITAL EXPENDITURES September 8, 2000, the CRTC approved on an interim basis was required by Industry Canada to return radio spectrum previ- Microcell’s proposed tariff, enabling it to operate as a wireless ously licensed to Telus Mobility and Clearnet in any regions Bell Canada continues to make large capital expenditures to CLEC. Microcell has subsequently received CRTC approval to where the merger resulted in the combined entity exceeding meet the demand for telecommunications services and the operate as a CLEC in portions of Telus operating territory and Industry Canada’s spectrum cap. improvement of such services. has indicated its intention to roll out its service across Canada. On May 11, 1999, Mobility Canada announced a major Bell Canada’s consolidated capital expenditures for the past In addition, the CRTC is currently considering certain CLEC restructuring of its organization, creating two groups of wireless three years are shown in Table 3.8. related requirements identified in Order 2000-831, primarily carriers able to compete anywhere in Canada for the wireless During 2002, capital expenditures are expected to be reduced those relating to wireless 911 and wireless equal provisions, that business of national customers. The agreement changes the to approximately $3.4 billion. This reduction is mainly attrib- could influence the timing of Microcell’s deployment as a CLEC. wireless landscape in Canada by removing restrictions that kept uted to non-recurring expenditures that were incurred in 2001 In November 1996, Rogers announced the launch of digital Mobility Canada members from competing in each other’s terri- for the purchase of Bell Mobility’s PCS spectrum licenses. A PCS service on its 800 MHz network using its existing Time Divi- tories. The groups are each able to offer Canada-wide wireless significant portion of 2002 expenditures will be related to the sion Multiple Access (“TDMA”) technology. At the same time, service, either by selling network services to each other or growth initiatives such as IP/Broadband, increased digitalization Rogers and AT&T Canada entered into a long-term strategic through direct competition. of the wireless network, national expansion including, but not alliance which included the licensing of the AT&T brand to The first group is BWA, which covers Canada from coast-to- limited to, Western Canada, and continued deployment of high- Rogers for use in connection with the marketing of its mobile coast and includes Bell Mobility, Island Tel Mobility, speed access infrastructure. Capital spending is also expected to wireless services. Effective January 17, 2000, Rogers changed its MTT Mobility Inc., NBTel Mobility, NewTel Mobility Limited, support, to a lesser degree, convergent billing and productivity brand name from Cantel AT&T to Rogers AT&T Wireless. On MTS Mobility and Sasktel Mobility. The other group is repre- initiatives. The overall anticipated increase in capital expendi- November 30, 2000, Rogers announced plans to overlay its sented by Telus Mobility. tures for wireless services is expected to be mainly offset by TDMA network with a GSM network with integrated General Under the agreement, Mobility Canada may continue to reduced expenditures for traditional wireline services. Packet Radio Service packet data capability throughout its provide national wireless service for the duration of all existing ENVIRONMENT nationwide digital coverage area. Rogers stated that the tech- contracts with national customers. It may also continue its role nology change was to better position itself to evolve towards full as a provider of billing and settlement services for all member Bell Canada monitors its operations to ensure their compliance 3G wireless capabilities. GSM is the technology platform widely companies. with applicable environmental requirements and standards and used throughout Europe and Asia. Rogers began its marketing Bell Mobility competes directly with Rogers, Telus Mobility implements preventative and remedial action as required. of GSM phones in November 2001, and in January 2002, and Microcell for cellular and PCS customers, dealers and retail Bell Canada has put in place an environmental management announced that its GSM service has been extended to reach distribution outlets. Competition for subscribers is primarily on and review system which identifies potential environmental 85 per cent of the Canadian population. the basis of price, services and enhancements offered, the tech- problems or opportunities, establishes a course of action and In October 1997, Clearnet launched its PCS service using nical quality of the cellular and PCS system, customer service, ensures ongoing improvement through a feedback process. Code Division Multiple Access technology, which is the same distribution, coverage and capacity. One of the key management and review system tools is the PCS technology used by Bell Mobility. Clearnet has rolled out The combination of cellular and PCS licenses provides a Corporate Environmental Plan which essentially details the its PCS network in major urban areas in British Columbia, competitive advantage and favourably positions Bell Mobility environmental activities undertaken by the various business Alberta, Ontario and Québec and has signed an agreement with in the marketplace to benefit from accelerating wireless market units within Bell Canada. The plan identifies, over a three-year Rogers to permit Clearnet customers to roam on the analog network of Rogers when outside of Clearnet’s own serving area. Clearnet is currently competing for customers and for distribu- 3.8 Capital expenditures tion channels directly against Bell Mobility’s cellular and PCS 2001 2000 1999 networks. Clearnet is also a Specialized Mobile Radio (“SMR”) Capital expenditures (in $ millions) 4,099 2,852 2,499

2001 Bell Canada Annual Information Form 15 period, funding requirements, accountabilities and deliverables, and associated employees represented by the Canadian settlement, each party has paid its own costs of the action and and allows for the follow-up of Bell Canada’s progress in Telephone Employees’ Association (“CTEA”) will expire on counterclaim. On April 8, 2002, Bell Canada, Unical and meeting its objectives supporting its policy. May 31, 2002, and renegotiations have been underway since Sonigem entered into a Settlement Agreement under which the For the year ended December 31, 2001, a total amount of March 4, 2002. Failure of the renegotiations could have a parties have agreed to discontinue their respective action approximately $12 million (79 per cent which were expenses material adverse impact on the business of Bell Canada. without costs. and 21 per cent which were capital expenditures) has been spent LEGAL PROCEEDINGS WAGE PRACTICES INVESTIGATION on environmental activities. For 2002, Bell Canada has budgeted On November 2, 2000, the Federal Court of Canada allowed Bell a total amount of approximately $14 million (79 per cent which QWEST, UNICAL AND SONIGEM LITIGATION Canada’s application for judicial review of the Canadian Human are expenses and 21 per cent which are capital expenditures) to Bell Canada instituted an action for trade-mark infringement Rights Tribunal’s (the “Tribunal”) determination that it could ensure the proper application of its environmental policy and seeking a permanent injunction and damages against US West, proceed with an inquiry into the 1994 pay equity complaints the minimization of its various environmental risks. Inc., which has since merged with Qwest Communications filed by members of the Communications, Energy and Paper- Bell Canada is one of the founding members of the North International Inc. (“Qwest”, the successor of the merged compa- workers’ Union of Canada and the CTEA. The Federal Court American Communications Environmental Excellence Initia- nies), Unical Enterprises, Inc. (“Unical”) and Sonigem Products found that the Tribunal lacked institutional independence and tive which led, in 1999, to the finalization and signing of a Inc. (“Sonigem”) (collectively, the “Defendants”) on prohibited further proceedings in the matter. Hearings before charter aimed at guiding the telecommunications industry in February 11, 2000, in the Federal Court of Canada. The action the Tribunal into the merits of the case were suspended. The the management of its environmental issues. alleges that the Defendants’ sales in Canada of telephones and Canadian Human Rights Commission appealed this decision A second important milestone of this initiative was reached answering machines bearing, among others, the mark “North- and on May 24, 2001, the Federal Court of Appeal allowed the in 2001, when ten leading North American telecommunications western Bell” and the logo “Bell-in-a-circle design” infringe Bell appeal. On August 20, 2001, Bell Canada filed for leave to appeal companies, including Bell Canada, jointly produced an industry Canada’s exclusive rights to BELL trade-marks in Canada. In the Federal Court of Appeal decision to the Supreme Court of report which provided objective guidelines for measuring the their Statements of Defence and Counterclaims, the Defendants Canada. Hearings before the Tribunal resumed in September industry’s effect on the environment. Bell Canada believes that allege that Bell Canada’s trade-marks are invalid and not distinc- 2001. On December 13, 2001, the Supreme Court of Canada this is a significant step forward in determining how telecom- tive of Bell Canada’s products and services and are seeking granted Bell Canada’s application for leave to appeal. Bell munications technologies can help contribute to the develop- damages in the aggregate amount of $135 million and punitive Canada intends to seek a stay of the proceedings before the ment of meaningful solutions to the many global challenges. damages of $500,000 from Bell Canada for allegedly interfering Tribunal pending the appeal to the Supreme Court of Canada with their businesses. On June 16, 2000, the Federal Court of EMPLOYEE RELATIONS which is expected to be heard towards the end of 2002. Canada permitted Sonigem to institute a third party claim The number of employees of Bell Canada and its subsidiaries is against Qwest and Unical alleging that they had warranted IRIDIUM LITIGATION shown in Table 3.9. Sonigem’s use of the “Northwestern Bell” trade-mark in Canada Iridium LLC (“Iridium”) developed a global wireless system A significant portion of the employees of Bell Canada and of by virtue of a Distribution Agreement and the statutory designed to enable customers to send and receive telephone some of its subsidiaries are unionized and have a collective warranty of lawful use provided for in the Trade-Marks Act. calls virtually anywhere in the world. Iridium has initiated agreement with their employer. Qwest and Unical have both filed a Defence to this third party proceedings under the United States Chapter 11 Bankruptcy Code Among the various collective agreements that are governing claim. On February 4, 2002, a Licence and Settlement Agree- which are ongoing. Iridium Canada Inc. (“Iridium Canada”), a the employment relationships of Bell Canada and some of ment was entered into between Bell Canada and Qwest pursuant wholly-owned subsidiary of Bell Mobility, is a shareholder its subsidiaries with their respective employees, the existing to which they settled Bell Canada’s action against Qwest and of Iridium. A group of banks and financial institutions led by collective agreement between Bell Canada and its 12,685 clerical Qwest’s counterclaim against Bell Canada. Pursuant to this the Chase Manhattan Bank are creditors in the bankruptcy proceedings and have asserted claims in connection with a 3.9 Employees U.S.$800 million syndicated loan to an Iridium subsidiary. In As of December 31 2001 2000 1999 June 2000, the Chase Manhattan Bank on behalf of itself and Bell Canada 30,523 31,842 30,668 this group (the “Plaintiffs”), instituted an action in the United Bell Mobility 2,798 2,394 3,147 States District Court, District of Delaware, against 16 share- Bell Nexxia 1,526 1,748 1,897 holders of Iridium, including Iridium Canada, alleging failure Bell ActiMedia 1,520 2,441 2,726 to make capital contributions. The amount of the claim against Bell Distribution 1,076 1,027 532 Iridium Canada was U.S.$10 million and Iridium Canada has Other 6,281 5,621 5,025 filed an Answer to the claim. The Plaintiffs have amended their 43,724 45,073 43,995 action against a number of shareholders of Iridium, including

16 2001 Bell Canada Annual Information Form Iridium Canada, alleging fraudulent and negligent misrepre- CERTAIN CONTRACTS Shares and (Y) the amount of consideration payable or paid to sentation and claiming that each are jointly and severally liable BCE that is attributable to the Shares. In addition to other contracts described elsewhere in this for U.S.$800 million. In January 2002, the Plaintiffs moved for The resignation of Mr. Jean C. Monty as Chairman and Chief Annual Information Form, the following arrangements have a summary judgment of liability against all defendants on their Executive Officer of Bell Canada, when it becomes effective, will significant impact on Bell Canada: claim relating to failure to make capital contributions which not trigger any SBC right under the Shareholders’ Agreement. includes the U.S.$10 million claim against Iridium Canada. On SHAREHOLDERS’ AGREEMENT However, the Shareholders’ Agreement does provide SBC with the same day, all defendants cross-moved for summary judg- BCE and SBC have entered into a shareholders’ agreement with consultation and other rights on the choice of Mr. Monty’s ment against the Plaintiffs to have dismissed all of their claims. respect to their joint ownership of BCH (the “Shareholders’ successor until March 24, 2004. Absent an agreement among The Plaintiffs and the defendants have filed answering briefs in Agreement”). Pursuant to the Shareholders’ Agreement, the BCE and SBC on the choice of such successor, and if Bell Canada opposition to the respective motions for summary judgment. Board of Directors of each of BCH, the company which holds all decides nonetheless to proceed with such appointment prior to BELL DISTRIBUTION LAWSUITS of the outstanding voting shares of Bell Canada, and Bell December 31, 2002, SBC has the option to sell all of its Shares to Canada is comprised of ten directors, eight nominated by BCE BCE at a price equal to the higher of (a) $5.1 billion plus interest Bell Distribution is involved in the distribution and sale of Bell (four management nominees and four independent directors thereon at a rate of 15 per cent per year compounded annually Canada, Bell Mobility, Bell ExpressVu and Sympatico wireless from among the members of the Board of Directors of BCE) and less the amounts of all dividends and reductions of stated capital and wireline communications products and services through its two nominated by SBC. SBC is entitled to appoint the Chief received by SBC (also taking into account a 15 per cent interest Bell World/Espace Bell outlets owned by franchisees, inde- Financial Officer of Bell Canada and of Bell Mobility as well as a rate compounded yearly) and (b) the fair market value of the pendent dealers or Bell Distribution itself. On October 16, 2001, senior officer in charge of product management and product Shares multiplied by 1.25. After December 31, 2002, the price in 15 of Bell Distribution’s Québec franchisees filed a court development at Bell Canada. SBC is also entitled to nominate such circumstances would be the fair market value of the Shares proceeding against Bell Distribution before the Québec Superior one director to the Board of Directors of Bell Mobility. multiplied by 1.25. Court claiming damages of $25,135,000, the nullity of specific Pursuant to the Shareholders’ Agreement, at any time from The Shareholders’ Agreement provides BCE and SBC with clauses of their franchise agreement as well as injunctive relief. July 1, 2002 until December 31, 2002, and at any time from customary rights, including rights of first refusal and rights of On December 19, 2001, 44 of Bell Distribution’s Québec inde- July 1, 2004 until December 31, 2004, (i) SBC shall have the first offer. pendent dealers filed a court proceeding against Bell Distribu- option to sell all of its shares in BCH (the “Shares”) to BCE and tion before the Québec Superior Court claiming damages of INTERCONNECTION AGREEMENTS (ii) BCE shall have the right to purchase all of SBC’s Shares, in $55 million, the nullity of specific clauses of their independent Bell Canada is a party to agreements with AT&T Canada, MCI each case, at the fair market value of the Shares multiplied by dealer agreement as well as injunctive relief. Bell Distribution’s International, Inc., Sprint Corporation, Teleglobe and others 1.25. BCE has the right to issue as consideration, in full or in Québec franchisees and independent dealers allege that Bell which provide for the sharing of revenues from interconnecting part, two-year interest bearing notes. Interest on such notes is to Distribution is in breach of the franchise agreement and inde- telecommunications services. Bell Canada’s share of revenues be based on BCE’s cost of funds for a note of similar maturity pendent dealer agreement, respectively, in a number of respects flowing from such agreements is determined by the settlement and amount, plus up to a maximum of 150 basis points. Other including with respect to the direct and indirect competition process, under such agreements. terms and conditions of the notes are to be agreed upon by the created or allowed by Bell Distribution, the products supplying New connecting agreements defining the rules of connection parties. structure and the compensation structure. They also allege and payment have been reached with each of the former SCNM The Shareholders’ Agreement provides that in the event unfair competition by Bell Canada and its business units. members reflecting the more competitive and less-regulated there is a change of control of SBC, BCE shall have the right to environment in Canada’s telecommunications industry, as well GENERAL purchase SBC’s Shares at a price equal to the fair market value of as the fact that Bell Canada will be originating and terminating In addition to the legal proceedings disclosed herein, Bell the Shares. In the event there is a change of control of BCE, SBC traffic with alliance partners on its own behalf in the future. Canada and its subsidiaries and associated companies are shall have the right to sell its Shares to BCE at a price equal to: involved in various other claims and legal proceedings. While (i) if the change of control occurs on or before the fifth anniver- S TRATEGIC ALLIANCES the final outcome of the legal proceedings disclosed herein and sary of the closing date, the higher of: (A) $5.1 billion plus Bell Canada and WorldCom Inc. (“WorldCom”) have an of any other pending claims or legal proceedings cannot be interest thereon at a rate of 15 per cent per year compounded alliance to provide seamless voice and data services to customers predicted with certainty, it is the opinion of management that annually less the amounts of all dividends and reductions of in North America and globally. The agreement gives Bell Canada their resolution will not have a material adverse effect on Bell stated capital received by SBC; (B) the fair market value of the rights to distribute certain WorldCom services in Canada as well Canada’s consolidated financial position or results of opera- Shares multiplied by 1.25 and (C) the consideration paid for the as access to certain of WorldCom’s intellectual property. Bell tions. Bell Canada intends to vigorously defend itself against all Shares pursuant to the change of control transaction; and (ii) if Canada has appointed sub-distributors of the services including such claims and in all such proceedings. the change of control occurs after the fifth anniversary of the Aliant, MTS and SaskTel. The agreement combines the benefits closing date, the higher of: (X) the fair market value of the of WorldCom’s high-capacity end-to-end network with Bell

2001 Bell Canada Annual Information Form 17 Canada’s reach and expertise as Canada’s leading telecommu- predicted in the forward-looking statements contained in this Canada Group companies’ ability to collect receivables. nications provider. Annual Information Form and in such other written or oral However, it is not possible for the Bell Canada Group companies Mobility Canada also has an agreement with Sprint Spec- statements which may subsequently be made may differ materi- to accurately predict economic fluctuations and the impact of trum, L.P. (“Sprint PCS”), that allows PCS wireless roaming ally from actual results or events. Some of the factors which could such fluctuations on their performance. throughout the United States and Canada. This combination cause results or events to differ materially from current expecta- REGULATORY ENVIRONMENT provides one of the largest roaming networks in North America, tions are discussed below under the heading “Risk Factors” and The Bell Canada Group companies are subject to evolving regu- giving customers the ability to stay connected while in the other cautionary factors are outlined elsewhere in this Annual latory policies in the form of decisions by various regulatory United States and Canada using the Sprint PCS or Mobility Information Form. Bell Canada disclaims any intention or obli- agencies including the CRTC. Many of these decisions balance Canada nationwide wireless networks. gation to update or revise any forward-looking statements, competitor requests for access to the ILECs’ (such as Bell Canada whether as a result of new information, future events, or other- SHARED SERVICES AGREEMENT and Aliant) essential facilities and other network infrastructure wise. In particular, forward-looking statements do not reflect the Effective June 22, 2001, Bell Canada entered into a ten-year with the rights of the ILECs to compete on a reasonably unen- potential impact of any mergers, acquisitions, other business service contract with a special purpose entity. This service cumbered basis. Also, Canadian Telecommunications Carriers combinations, divestitures or other transactions that may be contract will allow Bell Canada to, over time, reduce systems and Broadcast Distribution Undertakings seeking physical access announced or completed after such statements are made. and administrative costs through the rationalization and to customers’ facilities on reasonable terms have increasingly enhancements of certain systems and the optimization of Risk Factors found themselves in disputes with property owners regarding certain processes. Bell Canada’s commitments are approxi- ECONOMIC AND MARKET CONDITIONS access to private property or with municipalities with respect to mately $150 million over the first three years of the agreement. access to public rights-of-way. As previously discussed in Item 3 – The future operating results of the Bell Canada Group companies In 2004, Bell Canada may either exercise an option to buy the “Regulation”, a CRTC decision regarding the conditions and may be affected by various trends and factors that must be special purpose entity, or maintain the service contract and price for access to municipal rights-of-way is currently under managed in order to achieve favourable operating results. In therefore commit itself to an additional minimum of appeal. At this point in time, it is impossible to assess the finan- addition, there are trends and factors beyond the control of the $420 million in service fees to the third party. cial implications of any final judicial decision. In addition, and Bell Canada Group companies that affect their operations. Such also as previously discussed in Item 3 – “Regulation”, the CRTC FORWARD-LOOKING STATEMENTS trends and factors include adverse changes in the conditions in recently completed its review of the price cap regime which has the specific markets for the Bell Canada Group companies’ prod- Certain statements contained in this section and in other been in force since January 1998 for the major incumbent tele- ucts and services, the conditions in the broader market for sections of this Annual Information Form, including statements phone companies. The CRTC decision on the new price cap communications and the conditions in the domestic or global contained in Bell Canada’s management’s discussion and regime is expected on or prior to May 31, 2002. economy generally. More specifically, the Bell Canada Group analysis of financial condition and results of operations With the business of Bell Canada increasingly focusing on companies’ financial performance is affected by the general (“MD&A”) incorporated by reference under Item 5 of this Annual content, e-commerce and connectivity, assessment of regula- economic conditions as demand for services tends to decline Information Form, constitute forward-looking statements. In tory risks must increasingly take into account regulatory deci- when economic growth and retail and commercial activity addition, other written or oral statements which constitute sions in the areas of wireless spectrum auctions, programming decline. Recently, the slowdown in global economic activity, forward-looking statements may be made from time to time by and carriage requirements under the Broadcasting Act, as well as including in Canada and the United States, has made the overall or on behalf of one or more of Bell Canada and its subsidiaries copyright, privacy and other content related issues particularly global and Canadian economic environment more uncertain and associated companies (the “Bell Canada Group companies”). over the Internet. and could, depending on the duration and extent of such slow- These forward-looking statements relate to the future financial down and on the pace of an eventual economic recovery, have EXPENDITURES, CAPITAL REQUIREMENTS condition, results of operations or business of the Bell Canada an important adverse impact on the demand for products and AND DEMAND FOR SERVICES Group companies. These statements may be based on current services and on the financial performance of the Bell Canada The financial condition and results of operations of the Bell expectations and estimates about the markets in which the Bell Group companies. Such negative trends in global market and Canada Group companies are materially affected by a number Canada Group companies operate and management’s beliefs and economic conditions could have an adverse effect on purchasing of factors such as: the level of capital expenditures necessary to assumptions regarding these markets. In some cases, forward- patterns of subscribers and customers especially in the case of expand operations, increase the number of customers, intro- looking statements may be identified by words such as “antici- products and services provided by the Bell Canada Group compa- duce new products and services, update or build networks and pate”, “could”, “expect”, “seek”, “may”, “intend”, “will”, and nies that are more subject to being affected by economic slow- maintain or improve the quality of products and services; the similar expressions. These statements are subject to important downs. These negative trends could also adversely affect the availability and cost of capital required to fund such expendi- risks and uncertainties which are difficult to predict and assump- financial condition and credit risk of subscribers and customers tures (especially in light of the current market conditions in the tions which may prove to be inaccurate. The results or events which would, in turn, increase uncertainties regarding the Bell telecommunications industry); and the extent of demand for

18 2001 Bell Canada Annual Information Form access lines, value-added services, basic long distance services, companies’ ability to retain existing and attract new customers, have a material adverse effect on Bell Mobility’s results of opera- wireless services, Internet services and other new and emerging as well as affect revenues and network capacity. The Bell Canada tions and financial condition. products and services in the markets served by the Bell Canada Group companies must not only try to anticipate, but also Bell Mobility and certain of its competitors have successfully Group companies as well as their ability to develop a customer respond promptly to continuous and rapid developments in bid for additional spectrum licenses in early 2001. Some of the base with recurring service revenues. Demand levels for the Bell their businesses and markets. awarded licenses will enable Bell Mobility to rollout wireless Canada Group companies’ products and services are also The Bell Canada Group companies’ competitors include services in British Columbia and Alberta. This rollout will result affected by factors such as technology development and inno- major telecommunications companies, cable companies, in substantial capital expenditures for the construction of a vation, socio-demographic trends, levels of business investment Internet companies, WSPs, CLECs and a variety of other compa- network in these provinces. Furthermore, the expected level of and general macro-economic conditions. nies that offer network services, such as providers of business expenditures associated with this network expansion could The level of capital expenditures could materially increase as information systems and systems integrators, as well as an increase as Bell Mobility will seek to gain adequate network the Bell Canada Group companies seek to expand the scope and increasing number of other companies that deal with or have coverage and secure new customers. Some of Bell Mobility’s scale of their businesses beyond traditional territories and access to customers through various communications networks. competitors were awarded licenses in Bell Mobility’s current service offerings. To the extent that the Bell Canada Group Internet access services are especially competitive, with operating regions thereby increasing the potential for competi- companies fail to make expenditures on new and existing large cable television companies and a significant number of tion and market share losses in such areas. Although the new capital programs, they may cease to be competitive in the independent ISPs providing intense competition. Competitive licenses awarded to Bell Mobility provide it with the possibility markets in which they compete. However, if such capital expen- pressure has led to Internet access pricing in Canada that is to launch new technologies, services and applications and to ditures are made, the Bell Canada Group companies may also among the lowest in the world, and largely independent of geographically expand its operations, there can be no assurance risk incurring substantial expenditures to acquire assets with usage patterns. Costs to the relevant Bell Canada Group compa- that such additional licenses will result in the successful deploy- little commercial or economic value. nies, however, are driven by the amount of network traffic a ment of such new technologies, services and applications, a INCREASING COMPETITION user generates and the location of the server that stores the Web successful geographical expansion and, in general, in an site the user visits. Such costs are largely beyond the relevant improvement in Bell Mobility’s financial condition and results With the advent of competition in the local service market in Bell Canada Group companies’ control and cannot be accu- of operations. 1998, virtually all markets in which each of the Bell Canada rately predicted. Group companies carries on business are characterized by TECHNOLOGICAL DEVELOPMENT The Canadian wireless telecommunications industry is also vigorous and intensifying competition. Each company is facing The business markets in which the Bell Canada Group compa- highly competitive. Bell Mobility competes directly with other many competitors with substantial financial, marketing, nies operate are characterized by rapid technological changes, WSPs with aggressive product and service introductions, pricing personnel and technological resources. In some cases, competi- evolving industry standards, changing client needs, frequent and marketing. Bell Mobility expects competition to intensify tion does not only result from competitors within the same new product and service introductions and short product life through the development of new technologies, products and market segment, but also from other businesses and industries. cycles. The future success of each of the Bell Canada Group services, and through consolidations in the Canadian telecom- The significant size, growth and increasingly global scope of companies will depend in significant part on its ability to antici- munications industry. the telecommunications industry are attracting new entrants pate industry standards, successfully introduce new technolo- Bell Mobility is a participant in Mobility Canada, owned by and encouraging all participants to expand their service portfo- gies, initiatives, products and services and upgrade current the wireless affiliates or divisions of Canada’s major telephone lios and addressable markets. Some industries in which the Bell products and services, and to comply with emerging industry companies. In May 1999, Mobility Canada announced a signifi- Canada Group companies compete are consolidating. Mergers standards. Furthermore, as the Bell Canada Group companies cant restructuring of its organization, creating two groups of and acquisitions, as well as strategic alliances, partnerships and seek to deploy new products, services and technologies and carriers which can compete anywhere in Canada. The agree- joint ventures are creating new and larger participants. Such update their networks to remain competitive, they may be ment, which was implemented in the first quarter of 2000, has transactions may result in stronger competitors with broad skills exposed to incremental financial risks associated with newer changed the wireless landscape in Canada by removing restric- and significant resources. Furthermore, new competitors of the technologies that are subject to accelerated obsolescence, or tions that kept Mobility Canada members from competing in Bell Canada Group companies may emerge from time to time may be required to inject more capital than anticipated. The each other’s territories. The groups are each able to offer through the development of new technologies, products and proposed deployment of new technologies and initiatives may Canada-wide wireless service, either by selling network services services, and other factors. also be delayed due to factors beyond the Bell Canada Group to each other or by competing directly. Although the arrange- Factors such as product pricing and customer service are companies’ control. In addition, new technological innovations ment permits Bell Mobility to expand its business territory, it under continued pressure, while the necessity to reduce costs, generally require a substantial financial investment before any will also increase competition in the territory in which Bell manage expenses and generate productivity savings is ongoing. assurance is available as to their commercial viability. There can Mobility currently operates. These factors could, in the future, Intensifying competition may impact the Bell Canada Group be no assurance that the Bell Canada Group companies will be

2001 Bell Canada Annual Information Form 19 successful in developing and marketing new products and of the Bell Canada Group companies, including customer rela- have requested investigations into claims that digital transmis- services or enhancements that will respond to technological tionships and operating results. The operations of the Bell sions from handsets used in connection with digital wireless change and achieve market acceptance. Furthermore, the intro- Canada Group companies are dependent upon their ability to technologies pose health concerns and cause interference with duction of new products or services employing new or evolving protect their networks and equipment and the information hearing aids and other medical devices. There can be no assur- technologies could render existing products or services unmar- stored in their data centers against damages that may be caused ance that the findings of such studies will not have a material ketable, or cause prices of such products and services to decrease. by fire, natural disaster, power loss, unauthorized intrusion, adverse effect on the business of WSPs or will not lead to UNCERTAINTIES RELATED TO THE INTERNET computer viruses, disabling devices, acts of war or terrorism and increased governmental regulation. The actual or perceived other similar events. There can be no assurance that such events health risks of wireless communications devices could adversely An increasingly important driver for network and infrastructure would not result in a prolonged outage of the operations of any affect WSPs through reduced subscriber growth, reduced investments is the growth of Internet traffic. This traffic is driven of the Bell Canada Group companies. network usage per subscriber, threat of product liability lawsuits by residential and business Internet usage and has overtaken the or reduced availability of external financing to the wireless volume of voice telephony traffic on many routes. It is uncertain WIRELESS REGULATION communications industry. to what extent this traffic will continue to exhibit high growth The operation of cellular, PCS and other radio-telecommunica- rates as high-speed access services are deployed and bandwidth tions systems in Canada is subject to initial licensing require- OTHER GENERAL FACTORS intensive applications, such as video, are increasingly adopted ments and the oversight of Industry Canada. Operating licenses The success of the Bell Canada Group companies is largely by users. Significant upgrades to network capacity will be are issued at the discretion of the Minister of Industry pursuant dependent upon their ability to attract and retain highly skilled required to sustain service levels if Internet growth rates remain to the Radiocommunication Act. Bell Mobility’s current cellular personnel and the loss of the services of key persons could mate- as high as they are today. Alternatively, the Bell Canada Group and PCS licenses will expire on March 31, 2006. The recently rially harm their businesses and operating results. companies’ financial condition and results of operations could awarded PCS spectrum auction licenses will expire on Some of the Bell Canada Group companies may have to rene- be materially adversely affected should future levels of Internet November 29, 2011. Industry Canada has the authority at any gotiate existing collective agreements with their unionized traffic be lower than currently anticipated. In addition, new or time to modify the license conditions applicable to the provi- employees. The failure of the renegotiations could have a mate- modified laws or regulations governing the Internet could sion of such services in Canada to the extent necessary to ensure rial adverse effect on the businesses, operating results and finan- decrease the demand for the Bell Canada Group companies’ the efficient and orderly development of radiocommunication cial condition of the Bell Canada Group companies. Internet services and increase the costs of selling such services. facilities and services in Canada. Industry Canada can revoke a All Bell Canada Group companies are subject to risks related ANNOUNCEMENTS CONCERNING TELEGLOBE license at any time for failure to comply with its terms. Industry to pending or future litigation or regulatory initiatives or Canada has indicated that, with respect to licenses other than proceedings. In addition, changes in laws or regulations, or the As previously discussed under Item 3 – “Business of Bell Canada those awarded through the spectrum auction process, it intends adoption of new laws or regulations, could also have a material – Subsidiaries and Associated Companies”, on April 24, 2002, to engage in a public consultation process on appropriate license adverse effect on the Bell Canada Group companies’ businesses, BCE announced that it will cease further long-term funding to term conditions and fees within the coming year. It is antici- operating results and financial condition. Teleglobe. It is expected that Teleglobe will enter into negotia- pated that Industry Canada will, at the end of this consultation tions with its debt holders to restructure its debt and explore period, give effect to its conclusions by making suitable amend- ITEM 4 • SELECTED FINANCIAL possibilities for business combinations and potential partner- ments to existing license conditions. INFORMATION (CONSOLIDATED) ships. There can be no assurance that Teleglobe will be successful in its efforts to effect a financial restructuring, partnership or USE OF HANDSETS IN VEHICLES (a) Three-year data business combination. Accordingly, there is a risk that Teleglobe Media reports have suggested that the use of hand held cellular may become subject to a court-supervised proceeding or may units by drivers in vehicles may, in certain circumstances, result See Table 4.1. have to wind-down some or all of its business. Bell Canada in an increased rate of accidents on the road. It is possible that cannot predict the form, terms and legal implications of any new legislation or regulations may be adopted in order to (b) Dividend policy such events nor the impact on Bell Canada, its subsidiaries or address these concerns. Any such legislation or regulations associated companies. could adversely affect WSPs through reduced network usage by Bell Canada’s dividend policy as per the Shareholders’ Agree- DEFECTS IN SOFTWARE PRODUCTS subscribers in motor vehicles. ment is to pay dividends on its common shares in an amount AND NETWORK FAILURES RADIO FREQUENCY EMISSION CONCERNS equal to the lower of (a) the year’s consolidated net income available to the shareholders owning participating securities for Defects in software products owned or licensed by the Bell Media reports have suggested that certain radio frequency emis- the fiscal year, as set out on the consolidated statement of opera- Canada Group companies, as well as failures or mistakes in the sions from cellular telephones may be linked to certain medical tions comprising part of the consolidated audited financial provision of services, could materially harm the business of any conditions such as cancer. In addition, certain interest groups statements of Bell Canada for such fiscal year, times 75 per cent

20 2001 Bell Canada Annual Information Form ITEM 6 • MARKET FOR THE SECURITIES 4.1 Three-year data OF BELL CANADA For the years ended December 31 (in $ millions) 2001 2000 1999 Selected consolidated financial data Bell Canada’s common shares and several series of debentures Total operating revenues 14,265 13,230 12,583 are not listed on any stock exchange or similar market for secu- Earnings from continuing operations 1,620 1,552 1,309 rities. Table 6.1 contains information on markets for Bell Net earnings applicable to common shares (1) 1,415 1,314 1,242 Canada’s listed securities. Total assets 24,660 22,826 21,829 Long-term debt (including current portion) 10,237 8,955 8,531 6.1 Market for the securities of Bell Canada Equity settled notes interest 80 99 35 Dividends on preferred shares 55 40 32 Series 15, 17 and 19 The Toronto Stock Exchange Dividends on common shares 1,157 1,085 868 preferred shares Series EB and ER debentures Luxembourg Stock Exchange (1) Net earnings and common dividends are not provided on a per share basis as all of the common shares of Bell Canada are indirectly owned by BCE and SBC. Series 6 debt instruments Zurich, Basle and Geneva Stock Exchanges or such other percentage of consolidated net income as may be other shareholder and the shareholders will seek to agree to a determined by Bell Canada’s Board of Directors in its discretion reduced dividend amount. In the event that the shareholders and (b) the free cash flow (i.e., cash flow provided from or used are unable to agree on a reduced dividend amount, the dividend ITEM 7 • DIRECTORS AND OFFICERS for operations plus or minus cash provided by or used for invest- for that quarter will be determined on the basis of the formula in OF BELL CANADA ment, before any dividends and before any cash provided by or the Shareholders’ Agreement. As of March 31, 2002, directors and officers of Bell Canada as a used for financing) of Bell Canada and its subsidiaries for group did not beneficially own, directly or indirectly, or exercise the fiscal year. For 2002, the dividend formula under the ITEM 5 • MANAGEMENT’S DISCUSSION control or direction over, any class of voting securities of Bell Shareholders’ Agreement is waived in favour of a schedule of AND ANALYSIS Canada or its subsidiaries. specific dividend amounts to be declared by Bell Canada each The information which appears under the heading “Manage- DIRECTORS quarter on its common shares. In the event that a shareholder ment’s Discussion and Analysis” on pages 2 to 12 of the 2001 of BCH (either BCE or SBC) feels for any reason prior to any On April 15, 2002, the directors of Bell Canada were as shown Bell Canada Financial Information is incorporated herein given quarterly dividend declaration that the Bell Canada divi- in Table 7.1. by reference. dend amount is too high in the circumstances, it may notify the

7.1 Directors Name and municipality of residence Date of election or appointment Principal occupation Jean C. Monty, (1) Montréal, Québec October 1997 Chairman and Chief Executive Officer, BCE Inc. James W. Callaway, (2) San Antonio, Texas October 2000 Group President, SBC Communications Inc. (3) James S. Kahan, (4) San Antonio, Texas October 1999 Senior Vice-President – Corporate Development, SBC Communications Inc. (3) Judith Maxwell, (2) Ottawa, Ontario December 2000 President, Canadian Policy Research Networks Inc. (5) J. Edward Newall, (2) Calgary, Alberta May 1998 Chairman of the Board, Newall and Associates (6) Peter J.M. Nicholson, Montréal, Québec March 2001 Chief Strategy Officer, BCE Inc. Michael J. Sabia, (4) Montréal, Québec July 2000 President and Chief Operating Officer,(7) BCE Inc. Guy Saint-Pierre, (4) Montréal, Québec April 1999 Chairman of the Board, SNC-Lavalin Group Inc. (8) John W. Sheridan, (2) Toronto, Ontario January 2000 President, Bell Canada Paul M. Tellier, (4) Montréal, Québec March 1996 President and Chief Executive Officer, Canadian National Railway Company (9)

(1) Mr. Monty resigned as Chairman and Chief Executive Officer of BCE effective April 23, 2002. (2) Indicates membership on Bell Canada’s Audit Committee of which Mr. Newall is Chairman. (3) SBC Communications Inc. is a U.S. telecommunications services company. (4) Indicates membership on Bell Canada’s MRNC of which Mr. Tellier is Chairman. (5) Canadian Policy Research Networks Inc. is a non-profit organization whose mission is to create knowledge and lead public debate on social and economic issues important to Canadians. The research focuses on work, family, health and social policy. (6) Newall and Associates is a consulting company. (7) As of March 1, 2002. On April 24, 2002, BCE announced the appointment of Mr. Sabia as Chief Executive Officer of BCE. (8) SNC-Lavalin Group Inc. is an engineering-construction company. (9) Canadian National Railway Company operates Canada’s largest freight railway system.

2001 Bell Canada Annual Information Form 21 Bell Canada’s by-laws provide that all directors hold office the positions disclosed in Table 7.1 or other executive positions away was, prior to September 2000, Group President – SBC until the next annual meeting of the shareholders or until their with the same or associated firms or organizations during the Services of SBC, prior to November 1999, President – California of respective successors are elected. All of the directors have held past five years or more with the following exceptions: Mr. Call- Pacific Telesis Group and, prior to November 1998, President – 7.2 Officers Name Municipality of residence Offices of Bell Canada presently held Jean C. Monty (1) Montréal, Québec Chairman and Chief Executive Officer J. Trevor Anderson (2) Gloucester, Ontario Senior Vice-President – Network Operations Pierre J. Blouin Mississauga, Ontario Chief Executive Officer – Bell Mobility Michael T. Boychuk Montréal, Québec Vice-President and Treasurer Charlotte Burke (3) Etobicoke, Ontario Senior Vice-President – Convergence Bernard A. Courtois Rockcliffe Park, Ontario Executive Counsel Isabelle Courville Montréal, Québec President – Télébec Renato J. Discenza (4) Mississauga, Ontario Senior Vice-President – Supply Chain and Capital Management Barry R. Dixon Pickering, Ontario Senior Vice-President – Carrier Services – Bell Nexxia Roch Dubé Longueuil, Québec Senior Vice-President Thomas J. Gillette Brampton, Ontario Senior Vice-President – Sales Heather A. Gomes Mississauga, Ontario Vice-President and Corporate Controller Josée Goulet Montréal, Québec President – Bell Québec Tomasz S. Hope Manotick, Ontario Chief Technology Officer Salvatore Iacono Ottawa, Ontario Senior Vice-President Jonathan P. Klug Montréal, Québec Chief Financial Officer Guy Marier Lakefield, Québec Executive Vice-President Timothy E. McGee Toronto, Ontario Chief Legal Officer and Corporate Secretary David G. McLennan Gomley, Ontario President – Bell ExpressVu Robert T. Mosey Oakville, Ontario President – Bell Ontario Michael A. Neuman (5) Toronto, Ontario President and Chief Operating Officer – Bell Mobility Barry W. Pickford Toronto, Ontario Vice-President – Taxation Randall J. Reynolds (6) North York, Ontario President and Chief Executive Officer – Bell West Eugene Roman Mississauga, Ontario Chief Information Officer Michael J. Sabia (5) Montréal, Québec Chief Operating Officer Anna M. Sado Toronto, Ontario Senior Vice-President – Business Processes & Operational Effectiveness Sheridan E. Scott Ottawa, Ontario Chief Regulatory Officer Pierre Shedleur Cap-Rouge, Québec Senior Vice-President – Business Markets Québec John W. Sheridan Toronto, Ontario President Karen H. Sheriff Toronto, Ontario Chief Marketing Officer David A. Southwell Oakville, Ontario President – Network Operations Georgina Steinsky-Schwartz Toronto, Ontario Chief Human Resources Officer Jean Taillon (4) Brampton, Ontario Senior Vice-President – Operations Marc P. Tellier Ottawa, Ontario President – Bell ActiMedia Ida Teoli Montréal, Québec Chief Communications Officer Pamela A. Went Toronto, Ontario Senior Vice-President – Operations – Bell Nexxia Stephen G. Wetmore (5) St. John’s, Newfoundland Vice-Chairman – Corporate Garry M. Wood North York, Ontario President – Bell Distribution

(1) In light of the announcement by BCE on April 24, 2002 that Mr. Monty has resigned as Chairman and Chief Executive Officer of BCE, Bell Canada anticipates that Mr. Monty will also resign as Chairman and Chief Executive Officer of Bell Canada in the near future. (2) Appointed on February 27, 2002. (3) Appointed on January 1, 2002. (4) Appointed on January 7, 2002. (5) Appointed on March 1, 2002. (6) Appointed on April 11, 2002.

22 2001 Bell Canada Annual Information Form Public Affairs of Pacific Telesis Group; Mr. Newall was, prior to management positions, with AT&T Canada; Mr. Wetmore was, request from the Vice-President, Investor Relations of BCE Inc., June 1998, Vice-Chairman and Chief Executive Officer of NOVA prior to April 1999, President and Chief Executive Officer of at the address indicated above or by e-mail at investor.rela- Corporation Ltd.; and Mr. Sabia was, prior to October 1999, NewTel Enterprises Limited and, prior to February 1998, Presi- [email protected]. This additional information includes Manage- Executive Vice-President and Chief Financial Officer of Cana- dent of Air Atlantic; and Mr. Wood was, prior to May 2000, ment’s Discussion and Analysis of the First, Second and Third dian National Railway Company. Group Vice-President and General Manager of Budget Car Quarter Results of Bell Canada. These documents, as well as Bell As required by applicable laws, Bell Canada’s Board of Direc- Rentals Toronto Limited. Canada’s annual and quarterly reports and news releases, are tors has an Audit Committee. Bell Canada also has a Manage- also available on BCE Inc.’s Web site on the World Wide Web ment Resources and Nominating Committee (“MRNC”). ITEM 8 • ADDITIONAL INFORMATION (www.bce.ca). Bell Canada also has toll free numbers for registered share- OFFICERS Bell Canada shall provide to any person or company, upon holders enquiries (1-800-561-0934) and for investor relations On April 15, 2002, the officers of Bell Canada were as shown in request to the Chief Legal Officer and Corporate Secretary of Bell (1-800-339-6353). Table 7.2. Canada, at 1000, rue de La Gauchetière Ouest, bureau 4100, All of the officers of Bell Canada have held the positions Montréal, Québec H3B 5H8: FINANCIAL YEAR-END disclosed in Table 7.2 or other senior positions with Bell Canada, (a) when the securities of Bell Canada are in the course of a The financial year of Bell Canada ends on December 31. BCE or one or more of BCE’s subsidiaries or associated companies distribution under a preliminary short form prospectus or a VOTING SECURITIES during the past five years or more, with the following exceptions: short form prospectus: As of the date of this document, 348,316,829 common shares of Mr. Boychuk was, prior to September 1997, Co-Founder, Principal (i) one copy of this Annual Information Form together Bell Canada were issued and outstanding, all of which are held and Chief Operating Officer of Manitex Capital Inc.; Ms. Burke with one copy of any document, or the pertinent pages of by BCH, which is 80 per cent owned by BCE and 20 per cent was, prior to March 2001, Chief Marketing Officer of Class Wave any document, incorporated by reference therein; beneficially owned by SBC. Only holders of the common shares Wireless Inc.; Mr. Discenza was, prior to August 2000, Senior (ii) one copy of the comparative financial statements of of Bell Canada are entitled to receive notice of, attend, and vote Vice-President – National Operations of AT&T Canada; Bell Canada for its most recently completed financial year at, any meeting of shareholders. Each common share is entitled Mr. Gillette was, prior to May 1997, Vice-President – Strategic together with the accompanying report of the auditors to one vote on each ballot taken at any meeting of shareholders. Marketing of ATS Automation Tooling Systems Inc.; Mr. Klug thereon and one copy of any interim financial statements of BCE indirectly owns 278,653,463.2 common shares of Bell was, prior to May 2000, Vice-President of SBC Operations, Inc. Bell Canada that have been filed subsequent to the financial Canada while the balance of 69,663,365.8 common shares are and, prior to October 1999, President – Arkansas of Southwestern statements for its most recently completed financial year; indirectly owned by SBC. Bell Telephone; Mr. McGee was, prior to January 1998, Vice- and President, General Counsel and Secretary of AT&T Canada; (iii) one copy of any other documents that are incorporated AUDITORS Mr. Monty was, prior to October 1997, Vice-Chairman and Chief by reference into the preliminary short form prospectus or The auditors of Bell Canada are Deloitte & Touche LLP. Executive Officer of Nortel Networks Corporation (“Nortel the short form prospectus and are not required to be Networks”); Mr. Roman, prior to November 1998, held senior provided under (i) or (ii) above; or IS/IT positions with Nortel Networks; Mr. Sabia was, prior to (b) at any other time, one copy of any documents referred to in October 1999, Executive Vice-President and Chief Financial (a)(i), (ii) and (iii) above, provided that Bell Canada may require Officer of Canadian National Railway Company; Mr. Shedleur the payment of a reasonable charge if the request is made by a was, prior to February 1997, Chairman of the Board and Chief person or company who is not a security holder of Bell Canada. Executive Officer of the Commission de la santé et de la sécurité Bell Canada does not prepare an information circular. Addi- au travail; Mrs. Sheriff, prior to June 1999, had a number of posi- tional information including directors’ and senior officers’ tions with Ameritech Corporation including Director – Corpo- remuneration and indebtedness, principal holders of Bell rate Marketing and Branding; Mr. Southwell was, prior to Canada’s securities, options to purchase securities and interests February 1997, Vice-President – New Business Development of of insiders in material transactions, where applicable, is Jones Intercable, Inc.; Mrs. Steinsky-Schwartz was, prior to contained in the Schedule hereto and elsewhere in this docu- October 1999, Senior Vice-President – Human Resources & ment. Additional financial information, including comparative Public Affairs and, prior to 1998, Senior Vice-President – Corpo- consolidated financial statements, is provided in the 2001 Bell rate Services, at The Manufacturers Life Insurance Company; Canada Financial Information. Mr. Taillon was, prior to September 2001, Senior Vice-President Information concerning Bell Canada, in addition to the – Customer Service and prior to August 1998, held various documents referred to in (a)(i) to (iii) above, is available upon

2001 Bell Canada Annual Information Form 23 SCHEDULE – DIRECTORS’ AND OFFICERS’ REMUNERATION

Report on Executive Compensation As a corporate practice, the Chairman and Chief Executive Similarly, Bell Canada is required to reimburse BCE for Officer and the President of Bell Canada also attend all MRNC 75 per cent of Mr. Sabia’s total remuneration package paid by COMPENSATION POLICY meetings, except when matters pertaining to them are BCE in 2001. Mr. Monty’s annual salary and annual short-term The objectives of Bell Canada’s executive compensation policy discussed. The Chairman and Chief Executive Officer and the incentive award as Chairman and Chief Executive Officer of BCE (“Executive Compensation Policy”) are to assist in attracting and President do not vote at MRNC meetings. for 2001 were set at $1,300,000 and $1,500,000, respectively. retaining executives, and to motivate them to achieve and None of the MRNC members who are also executive officers Mr. Sabia’s annual salary and annual short-term incentive award surpass individual and group performance objectives consistent of Bell Canada were in 2001 members of the compensation as President of BCE for 2001 were set at $690,000 and $720,000, with advancing Bell Canada’s corporate success, creating share- committee or of the board of directors of any corporation respectively. Information on their compensation can be found holder value, and in providing state-of-the-art telecommunica- employing any director of Bell Canada or member of the MRNC. in BCE’s management proxy circular dated March 30, 2002 tion services to its customers. Bell Canada, in the ordinary course of its business, enters relating to BCE’s 2002 Annual and Special Meeting (the The Executive Compensation Policy comprises the following into transactions with BCE and its other subsidiaries. Neither “Management Proxy Circular”). elements: Bell Canada nor any of its subsidiaries had any significant busi- SALARY (a) Total cash compensation, based on competitive practices, ness transactions during 2001, other than those in the ordinary Executives are paid at market median for satisfactory perfor- which is comprised of salary and an annual short-term course of business, with corporations in respect of which the mance, with upside potential for superior performance. incentive award; members of the MRNC, in 2001, served as directors, officers or (b) A long-term incentive program; employees. ANNUAL SHORT-TERM INCENTIVE AWARDS (c) A benefit package to provide adequate coverage for the The MRNC, as part of the Executive Compensation Policy, has TOTAL COMPENSATION executive and his/her family in case of sickness, disability, established for 2001 target amounts of 35 per cent of the base retirement or death; and Total compensation, which comprises salary, annual short-term salary for the lowest eligible officer position to 60 per cent for (d) A competitive perquisite package providing some flexi- incentive awards, long-term incentives, benefits and perquisites, the President. bility for specific personal and financial needs. is compared to a group of widely-held Canadian and U.S. The actual amount of an officer’s short-term incentive award Underlying Bell Canada’s compensation programs is an companies. This comparator group of companies is reviewed is based upon two factors for 2001: emphasis on share ownership, and officers of Bell Canada are from time to time by the MRNC to ensure comparability in the (1) Corporate performance – this is determined on the basis required to attain specified share ownership levels in BCE over a current context. Total compensation levels are set to reflect both of financial targets including EBITDA, revenues and five-year period. Such levels are expressed as a percentage of the marketplace (to ensure competitiveness) and the responsi- quantifiable customer value indicators set by the Board annual base salary and range from 200 per cent for the lowest bility of each position (to ensure internal equity). The total of Directors; and officer position to 300 per cent for the President. Executive Compensation Policy is positioned between the 50th (2) Individual contribution – this is evaluated on the basis of The MRNC of the Board of Directors undertakes periodic and the 75th percentile based on individual contribution and criteria which affect the performance of the business unit reviews of Bell Canada’s Executive Compensation Policy to on meeting certain financial threshold targets, i.e., if positioned of the officer. ensure its continued effectiveness in meeting Bell Canada’s fore- at the 75th percentile, 25 per cent of the companies pay more Actual awards may vary between zero and two times the going objectives. and 75 per cent of the companies pay less. target amounts depending on achievement of the above objec- In 2001, Mr. Jean C. Monty was Chairman and Chief Execu- tives. COMPOSITION OF THE COMPENSATION COMMITTEE tive Officer of Bell Canada. In addition to performing these Executive officers can elect to be paid up to 100 per cent of The MRNC is responsible for the administration of the Execu- functions, Mr. Monty was also Chairman and Chief Executive their annual short-term incentive award in the form of share tive Compensation Policy. The MRNC reports and makes Officer of BCE and Teleglobe, and Chairman of the Board of BCE units (see “Share Units” hereinafter) under the BCE Inc. Share recommendations on executive compensation matters to the Emergis and Bell Globemedia. In 2001, Mr. Sabia was Vice-Chair Unit Plan for Senior Executives and Other Key Employees (1997) Board of Directors. Corporate of Bell Canada and President of BCE. In early 2002, (“Executive Share Unit Plan”). The members of the MRNC are Messrs. Paul M. Tellier he was appointed Chief Operating Officer of Bell Canada and LONG-TERM INCENTIVES (Chairman), James S. Kahan, Michael J. Sabia and Guy Saint- President and Chief Operating Officer of BCE and Teleglobe. Pierre. As discussed in more detail below under “Total Compen- Messrs. Monty’s and Sabia’s 2001 compensation was deter- Stock Options sation”, Mr. Sabia is an officer of BCE, Bell Canada and mined by BCE’s Board of Directors in accordance with BCE’s BCE maintains stock option programs for key employees of BCE Teleglobe. Messrs. Tellier and Saint-Pierre are also directors of compensation policies and paid by BCE. Pursuant to a manage- and its subsidiaries (such stock option programs being herein BCE. The MRNC met ten times during 2001. ment services agreement entered into by BCE and Bell Canada, collectively referred to as the “BCE Stock Option Program”). Bell BCE holds an 80 per cent indirect ownership interest in Bell Bell Canada is required to reimburse BCE for 50 per cent of Canada officers are eligible to participate in the BCE Stock Canada. Mr. Monty’s total remuneration package paid by BCE in 2001.

24 2001 Bell Canada Annual Information Form Option Program. The following describes the BCE Stock Option to which the right to exercise has not yet accrued become exer- of a subsidiary of BCE or a company which is proposed to Program as it applied to Bell Canada officers for 2001: cisable in full for a period of 90 days thereafter, or such longer become a subsidiary of BCE is intended to be converted into an Stock option awards vary according to Bell Canada’s period as the BCE MRCC may determine. “Change of Control” option to acquire common shares of BCE so that the economic economic profit results for the preceding year and salary level is defined, in essence, as (i) an offeror acquiring 50 per cent or position of the optionee is not affected by such conversion. and do not take outstanding options into account. Grant levels more of the outstanding securities of a class of voting or equity Prior to December 1999, simultaneously with the granting depend on the position of the incumbent and the total compen- securities of BCE; (ii) certain changes to the composition of the of an option by BCE, rights to a Special Compensation Payment sation relative to the market. They are based on the value majority of the Board of Directors of BCE, or (iii) the approval (“SCP”) have been granted by the optionee’s employer. A SCP is required to attain the applicable percentile (i.e., between the by the shareholders of BCE of plans or agreements providing for a cash payment representing the excess of the market value of 50th and 75th percentile in total market compensation, as previ- the disposition of all or substantially all the assets of BCE, the the shares on the date of exercise over their Subscription Price. ously discussed above under “Total Compensation”) and trans- liquidation or dissolution of BCE or, in certain cases, the merger, When SCPs are attached to options, the SCPs are triggered when lated to options based on the market value of BCE common consolidation or amalgamation of BCE. Options held by an the options are exercised. shares on the day prior to the effective date of the grant of the optionee principally employed by Bell Canada, with respect to Share Units options (“Subscription Price”). which the right to exercise has not yet accrued will, in the event To increase the alignment of executive and shareholder inter- In addition, special grants of stock options may be approved that BCE ceases to hold at least a 50 per cent interest but ests, BCE established the Executive Share Unit Plan pursuant to to recognize singular achievements or, exceptionally, to retain continues to hold at least a 20 per cent interest in Bell Canada which share units (“Units”), each one being equivalent in value and motivate executives in order to further align executive and and the employment of the optionee is terminated in a manner to one BCE common share, may be awarded to certain officers shareholder interests and to motivate key employees (“Special which constitutes an Unjustified Termination within 18 months and other key employees of BCE and of certain BCE subsidiaries Grants”). following the decrease of BCE’s interest in Bell Canada, become (the “Participants”). Bell Canada officers are eligible to partici- Stock option awards are recommended by the MRNC to Bell exercisable in the same manner as described above with respect pate in the BCE program. Unit awards may be annual awards or Canada’s Board of Directors, which in turn makes its recom- to a Change of Control. Options held by an optionee principally may be special awards to recognize singular achievements or to mendations to the Management Resources and Compensation employed by Bell Canada, with respect to which the right to motivate officers or other key employees to achieve certain Committee of the Board of Directors of BCE (“BCE MRCC”). The exercise has not yet accrued will, in the event that BCE ceases to corporate objectives. term of an option is normally ten years from the date of the hold at least a 20 per cent interest in Bell Canada, become exer- On each BCE common share dividend payment date, addi- grant, except in the case of retirement, cessation of employ- cisable in full, effective upon the earlier of the date one year tional Units are credited to the account of the Participants in an ment, death or an optionee’s employer ceasing to be BCE or a following the occurrence of such event or the date of an Unjus- amount equivalent to dividends on outstanding BCE common subsidiary of BCE, in which case the term may be reduced in tified Termination of the optionee, for a period of 90 days there- shares. Following cessation of employment of a Participant, accordance with the provisions of the BCE Stock Option after, or such longer period as the BCE MRCC may determine. Units are paid, after remittance of applicable withholding taxes, Program or in accordance with decisions made from time to Beginning in the latter part of 2001, the terms for BCE in BCE common shares purchased on the open market. time by the BCE MRCC under such program. options generally provide that, should the holder cease to be There are no vesting conditions under the terms of the Execu- Except as indicated below, the right to exercise an option in employed by BCE or its subsidiaries (including Bell Canada) and tive Share Unit Plan. Furthermore, the number and terms of its entirety accrues by 25 per cent annual increments over a subsequently engages in Unfair Employment Practices (which outstanding Units are not taken into account when determining period of four years from the date of grant unless otherwise includes using confidential information for the benefit of a whether and how many new Units will be awarded. determined by the BCE MRCC at the time of grant. For example, subsequent employer), all then unexercised BCE options termi- The Executive Share Unit Plan allows eligible officers to elect in the case of the Special Grants of options, the right to exercise nate and, in addition, the holder shall reimburse to BCE the to be paid up to 100 per cent of their annual short-term incen- such options may accrue over a longer period of time. Further- after-tax profit realized upon any option exercises in the tive award in the form of Units in lieu of being paid in cash. more, the BCE Stock Option Program was modified in 1999 to preceding 12 months. Thus, once the MRNC approves the annual short-term incen- provide special vesting provisions in the event of a Change of The exercise price payable for each common share covered tive award based on the factors described under “Annual Short- Control (as defined below) of BCE. If there occurs a Change of by an option is generally the Subscription Price, except where Term Incentive Awards”, on the basis of the election of the Control of BCE and an optionee’s employment is terminated the BCE MRCC makes a determination that the exercise price eligible officer, the MRNC establishes the number of Units to be other than for cause or by the optionee for good reason (as set should be higher than the Subscription Price or where the BCE granted and then makes its recommendations to Bell Canada’s out in more detail in the BCE Stock Option Program, an “Unjus- MRCC establishes, subject to any required approval of the stock Board of Directors, which in turn makes its recommendations tified Termination”) within 18 months following such Change exchanges on which the common shares of BCE are listed and to the BCE MRCC. of Control, the options then held by such optionee with respect posted for trading, that the exercise price should be less than the Subscription Price in the event that an option to acquire shares

2001 Bell Canada Annual Information Form 25 IMPACT OF DISTRIBUTION BY BCE EXECUTIVE COMPENSATION TABLE affiliated companies in excess of 70 per cent of average pension- OF SHARES OF NORTEL NETWORKS able earnings. Table S.1 sets forth the compensation for the financial years In connection with the distribution by BCE of an approximate Benefits shown in table S.4 are not subject to any deductions ended December 31, 2001, 2000 and 1999, for the three most 35 per cent ownership interest in Nortel Networks as part of a for government benefits or other offset amounts. The benefits highly compensated executive officers of Bell Canada, other Plan of Arrangement (the “Arrangement”) on May 1, 2000, the are partially indexed annually to increases in the Consumer than Messrs. Monty and Sabia, serving as such on December 31, existing outstanding stock options granted by BCE were Price Index but in no case can indexation exceed four per cent. 2001. The individual who occupied the position of Chief Execu- cancelled, options to acquire an equal number of common The following describes the pensions payable to the eligible tive Officer of Bell Canada in 2001 is Mr. Monty. Mr. Monty is shares of BCE on the same terms and conditions as the original Named Executive Officers under the Pension Plan, as supple- also Chairman and Chief Executive Officer of BCE. Mr. Sabia is, options and options to acquire common shares of Nortel mented by the SERPs: since March 1, 2002, Chief Operating Officer of Bell Canada and Networks were issued in replacement (the “Nortel Replacement (a) Eligible Named Executive Officers are credited with an President and Chief Operating Officer of BCE. In 2001, Mr. Sabia Options”) to reflect the reduced value and market price of the additional 0.5 year of pensionable service for each year of was Vice-Chair Corporate of Bell Canada and President of BCE. common shares of BCE after giving effect to the Arrangement. service as an officer of Bell Canada, of BCE, or of another Messrs. Monty and Sabia received all of their 2001 compensa- Nortel Replacement Options are not governed by the BCE Stock subsidiary or associated company of BCE. tion from BCE. Pursuant to a management services agreement Option Program but rather are governed by stock option plans (b) Pensions are based on pensionable service and the entered into by BCE and Bell Canada, Bell Canada is required to of Nortel Networks adopted in connection with the Arrange- average of the best consecutive 36 months of pensionable reimburse BCE for 50 per cent of Mr. Monty’s total remunera- ment, which includes terms and conditions generally similar to earnings. Pensionable earnings include salary, short-term tion package paid by BCE in 2001. Pursuant to the same agree- the BCE Stock Option Program. incentive awards (or related annual share unit awards). ment, Bell Canada is also required to reimburse BCE for The SCPs attached to options granted prior to November The inclusion of such awards is subject to a maximum 75 per cent of Mr. Sabia’s total remuneration package paid by 1999 under the BCE Stock Option Program and still outstanding limit. BCE in 2001. Information on their compensation can be found as at the time of the Arrangement were replaced, in connection (c)Pensions are delivered for life with a spousal survivor in BCE’s Management Proxy Circular. Those listed in the table with the Arrangement, by SCPs attached respectively to the benefit entitlement of approximately 60 per cent. are hereinafter referred to as the “Named Executive Officers”. options to acquire BCE common shares and to the Nortel (d) A retirement allowance equal to one year’s base salary is Replacement Options issued in replacement of such options, so STOCK OPTIONS payable at time of retirement. (This amount is not included that such SCPs are triggered when the options to acquire BCE in computing the officer’s pensionable earnings.) Table S.2 sets forth individual grants of stock options under the common shares or the Nortel Replacement Options, as the case (e) Named Executive Officers generally become eligible to BCE Stock Option Program during the financial year ended may be, are exercised. However, the payment of all SCPs SERP benefits upon reaching: (i) age 55 or more and the December 31, 2001 to each of the Named Executive Officers. outstanding at the time of the Arrangement remains the respon- sum of age and service equals or exceeds 85; (ii) age 60 or Table S.3 sets forth details of all exercises of stock options by sibility of the original employer. more and the sum of age and service equals or exceeds 80; each of the Named Executive Officers under the BCE Stock Nortel Networks was not, at the time the Nortel Replacement or (iii) age 65 and 15 years of service. For purposes of this Option Program during the financial year ended December 31, Options were issued in connection with the Arrangement, and paragraph (e), service excludes the additional 0.5 year of 2001, and the financial year-end value of unexercised options is not a subsidiary, or even, as a result of the Arrangement, an pensionable service credited for each year of service of an on an aggregated basis. affiliate of Bell Canada. As the performance of the Nortel officer. Networks shares are extrinsic to the management of Bell Canada PENSION ARRANGEMENTS (f) For purposes of computing their total retirement bene- and BCE no longer holds a material shareholding interest in fits, as of December 31, 2001, Mr. Sheridan had 25.7 years, Named Executive Officers participate in the non-contributory Nortel Networks, Bell Canada believes that, effective with the Mrs. Sheriff 3.9 years and Mr. Marier 35.1 years. defined benefit pension plan of Bell Canada (the “Pension year 2001, disclosure of the Named Executive Officers’ (defined Mrs. Sheriff, age 43, under the terms of her offer of employ- Plan”). In addition, Named Executive Officers enter into supple- hereinafter) holdings and exercise of Nortel Replacement ment by Bell Canada dated May 9, 2001, is entitled to full credit mentary executive retirement agreements (“SERPs”). Table S.4 Options is not relevant to the disclosure of Bell Canada’s execu- of her SBC/Ameritech service (five years) for the purposes of shows estimated annual pension benefits payable, under the tive compensation. eligibility to SERP benefits. She would also be entitled, in the Pension Plan and SERPs, upon retirement on December 31, case of termination of employment before normal SERP bene- REPORT PRESENTED BY: 2001, at age 65, to Named Executive Officers in specified average fits eligibility and for reasons other than cause, to a severance earnings and service classifications. In no case may an eligible P.M. Tellier, Chairman payout as follows: officer receive under the basic Pension Plan and the SERP an J.S. Kahan (a) A one time payment equal to one time salary for termi- annual aggregate pension benefit from Bell Canada and its M.J. Sabia nation of employment after three years (but before five G. Saint-Pierre years) from her date of hire by Bell Canada.

26 2001 Bell Canada Annual Information Form (b) A one time payment ranging from one times up to two Bell Canada has taken steps to align more closely the inter- dividend-like credits in the form of Units are added to each non- and a half times salary plus target bonus for termination ests of its non-employee directors with those of its shareholders. employee director’s share unit plan account maintained under of employment between five years from her date of hire Non-employee directors may elect to have the annual retainer the Bell Canada Directors’ Share Unit Plan, to reflect dividends by Bell Canada to her eligibility to normal SERP benefits. portion of their remuneration be paid in the form of Units on BCE’s common shares. No shares are purchased on the open (c) Once Mrs. Sheriff is entitled to normal SERP benefits, no under the Bell Canada Share Unit Plan for Non-Employee Direc- market under the Bell Canada Directors’ Share Unit Plan until severance payment would be made under the present tors (1997) (the “Bell Canada Directors’ Share Unit Plan”). such time as a non-employee director ceases to be a member of arrangement. The Bell Canada Directors’ Share Unit Plan was amended in the Board of Directors. Following the cessation of a non- In addition, in the case of a Bell Canada initiated termina- 2001 in order to facilitate the movement of directors among employee director’s Board service, Bell Canada causes to be tion of employment for reasons other than for cause, Mrs. boards of directors within the BCE group of companies. The purchased on the open market a number of BCE common shares Sheriff would be entitled to a severance payout equal to two amendments do so by recognizing service on other boards of equal to the non-employee director’s credit balance under the times her annual salary plus target bonus. directors in the BCE group of companies and permit partici- Bell Canada Directors’ Share Unit Plan, less any applicable with- pating directors to transfer the share units earned under the Bell holding taxes and other source deductions, and such shares are COMPENSATION OF DIRECTORS Canada Directors’ Share Unit Plan to their account under the then delivered to the departing director. In 2001, each director who was not a salaried officer of Bell BCE Inc. Share Unit Plan for Non-Employee Directors (1997) Subject to the consent of the MRNC, non-employee directors Canada or BCE (hereafter referred to as a “non-employee (the “BCE Share Unit Plan”). Once so transferred, the share units have, in addition, the option of causing other fees to which they director”) was entitled to be paid $23,000 per annum for are thereafter governed by the BCE Share Unit Plan and are become entitled to be paid in Units under the Bell Canada Direc- services as a director, $4,000 per annum per committee for cancelled under the Bell Canada Directors’ Share Unit Plan. tors’ Share Unit Plan. services as a member of any standing committee of the Board The annual retainer of $23,000 is payable quarterly. Accord- During the last completed fiscal year, no non-employee of Directors and $4,000 per annum for services as chairman of ingly, each quarter, a number of Units equal to the number of directors of Bell Canada received compensation from any standing committee of the Board of Directors. In all cases, BCE common shares that could be purchased on the open subsidiaries of Bell Canada for services in their capacity as direc- non-employee directors were entitled to an attendance fee of market for a dollar amount equal to the quarterly retainer fee is tors of such subsidiaries. $1,000 per meeting. credited to the account maintained by Bell Canada for each non-employee director under the Bell Canada Directors’ Share Unit Plan. On each BCE common share dividend payment date,

2001 Bell Canada Annual Information Form 27 S.1 Summary Compensation Table Annual Compensation Long-Term Compensation Awards Restricted Other Annual Securities Under Shares or All Other Name and Principal Salary Bonus Compensation Options/SARs Restricted Share Compensation Position (1) Year$$ $(2) Granted (#) (3)(4) Units ($) (5) $ (6) J.W. Sheridan 2001 600,000 720,000 259,928 200,000 – 90,701 President, 2000 489,248 – 929,711 200,379 17,712 Share 289,321 Bell Canada Units based on $720,000 1999 337,500 140,000 131,058 50,400 – 163,415 K.H. Sheriff 2001 335,506 103,863 – 80,000 8,710 Share 150,606 Chief Marketing Officer, Units based Bell Canada on $304,880 2000 240,603 293,074 – – – – 1999 134,345 77,636 – – – – G. Marier 2001 415,000 263,000 364,827 97,122 1,453 Share 10,882 Executive Vice-President, Units based Bell Canada on $58,800 2000 387,500 – 2,098,889 93,448 8,856 Share 727,925 Units based on $360,000 1999 337,500 154,000 – 50,400 – 12,815 (1) Mr. Sheridan was appointed President of Bell Ontario on January 1, 1999, Vice-Chair, Market Groups on January 27, 2000 and President of Bell Canada on October 25, 2000. Mrs. Sheriff was appointed, on secondment from SBC/Ameritech, Senior Vice-President – Product Management and Product Development of Bell Canada on May 31, 1999 and Chief Marketing Officer on January 26, 2000. She was hired by Bell Canada on June 16, 2001 as Chief Marketing Officer. Accordingly, since June 16, 2001, all of Mrs. Sheriff’s remuneration is paid by Bell Canada. Prior to such date, Mrs. Sheriff was an employee of SBC/Ameritech and her remuneration was paid by SBC/Ameritech. However, pursuant to an agreement entered into by Bell Canada and SBC/Ameritech, Mrs. Sheriff’s remuneration was repaid to SBC/Ameritech by Bell Canada. For the year 1999, the above table includes information con- cerning Mrs. Sheriff’s remuneration from May 31, 1999. All remuneration paid to Mrs. Sheriff by SBC/Ameritech has been converted from U.S. dollars to Canadian dollars at the average of the exchange rates in effect during each year. Mr. Marier was appointed President of Bell Québec on January 1, 1999 and Executive Vice-President of Bell Canada on October 15, 2001. Since October 25, 2001, Mr. Marier also performs the functions of President of Bell Québec on an interim basis. (2) “Other annual compensation” consists of SCPs attached to the options to acquire BCE common shares under the BCE Stock Option Program made upon the exercise of such options. Perquisites and other personal benefits for Named Executive Officers are not included since they did not exceed minimum threshold disclosure levels in 1999, 2000 and 2001. (3) The numbers shown represent the number of securities under options as originally granted; in connection with the subsequent distribution by BCE of an approximate 35 per cent ownership interest in Nortel Networks, options to acquire common shares of BCE outstanding on May 1, 2000 were cancelled and replaced by (a) options to acquire an equal number of common shares of BCE and (b) options to acquire common shares of Nortel Networks, and the exercise prices of such options were established so as to preserve the economic value of the options originally granted. For more information refer to “Impact of Distribution by BCE of Shares of Nortel Networks”. (4) All options shown were granted under the BCE Stock Option Program. SCPs were attached to all options granted in 1999 to the Named Executive Officers. (5) Units, which are equivalent in value to BCE common shares, were awarded to Mrs. Sheriff and Mr. Marier for 2001 and also to Messrs. Sheridan and Marier for 2000. The number of Units awarded was determined on the basis of the closing price of BCE common shares on The Toronto Stock Exchange on the day prior to the effective date of the award of Units. The dollar amount included in the summary compensation table represents the pre-tax value of the Units at the time of the award. On each BCE common share dividend payment date, additional Units are credited to the account of the Named Executive Officers in an amount equivalent to dividends on outstanding BCE common shares. For further information, see the Report on Executive Compensation. Aggregate holdings of Units and their value as at December 31, 2001 are as follows: Mr. Sheridan 18,132 Units with a value of $652,939; Mrs. Sheriff 1,993 Units with a value of $71,799; and Mr. Marier 19,808 Units with a value of $713,290.

28 2001 Bell Canada Annual Information Form (6) “All other compensation” includes the following payments: company contributions under the BCE Employees’ Savings Plan (1970) which is described below; payments for life insurance premiums; and for January 1999, a health program allowance which is described below. Under the BCE Employees’ Savings Plan (1970), Bell Canada employees, including executive officers, are eligible to make a basic contribution towards the purchase of BCE common shares of up to six per cent of their basic wages matched by a Bell Canada contribution of $1 for every $3 contributed by the employee. The health program allowance mentioned above is equal to 1.5 per cent of salary and was paid by Bell Canada in January 1999 to all management employees residing in the Province of Québec. “All other compensation” also includes, in the case of Mr. Sheridan and Mr. Marier, gains from the exercise of SCPs under the BCE Stock Option Program attached to Nortel Replacement Options granted as a result of the Arrangement and exercised in 2000. In the case of Mr. Sheridan, “All other compensation” includes an amount of $75,000 which was paid in 2001 for the year 2001and in 2000 for the year 2000, and of $150,000 which was paid in 1999 representing an amount of $75,000 for each of the years 1998 and 1999, with respect to Mr. Sheridan’s relocation from Ottawa to Toronto. In the case of Mrs. Sheriff, “All other compensation” includes an amount of $66,017 which was paid in 2001 with respect to Mrs. Sheriff’s relocation from Chicago to Toronto. Mrs. Sheriff’s “All other compensation” also includes an amount of $65,000 paid in 2001. This amount was paid pursuant to the terms of her offer of employment from Bell Canada under which Mrs. Sheriff is entitled to special payments of $120,000 per year for the first five years of employment to transition from SBC/Ameritech to Bell Canada. The $65,000 represents a prorated amount for the period from her date of hire to December 31, 2001. There were no directors’ fees paid by Bell Canada subsidiaries to the Named Executive Officers.

S.2 Option/SAR Grants during the most recently completed financial year S.4 Pension Plan Table % of Total Market Value of Pensionable Credited Service Years Securities Options/SARs Securities Underlying Earnings 20 30 40 Under Granted to Exercise or Options/SARs on Options/SARs Employees in Base Price the Date of Grant Expiration $ 300,000 $ 96,600 $140,600 $183,100 Name Granted (#) (1)(2) Financial Year (2) ($/Security) (3) ($/Security) (2) Date 500,000 164,600 239,600 312,100 J.W. Sheridan 200,000 1.7 40.65 40.65 Feb. 27, 2011 700,000 232,600 338,600 441,100 K.H. Sheriff 80,000 0.7 38.25 38.25 June 15, 2011 900,000 300,600 437,600 570,100 G. Marier 97,122 0.8 40.65 40.65 Feb. 27, 2011 1,100,000 368,600 536,600 699,100 (1) Each option granted under the BCE Stock Option Program covers one BCE common share. No Special Compensation Payments were attached to options 1,300,000 436,600 635,600 828,100 granted to the Named Executive Officers under the BCE Stock Option Program. The BCE Stock Option Program is described in the Report on Executive Compensation section. (2) As freestanding SARs have not been granted, the numbers relate solely to stock options. (3) The exercise price of the stock options outlined in this table is equal to the closing price of BCE’s common shares on The Toronto Stock Exchange on the day prior to the effective date of the grant of the options.

S.3 Aggregated option/SAR exercises during the most recently completed financial year and financial year-end option/SAR values

Value of Unexercised Unexercised “in-the-money” Securities Aggregate Options/SARs at Options/SARs at Acquired on Value December 31, 2001 (#) (2) December 31, 2001 ($) (2)(3) Name Exercise (#) Realized ($) (1) Exercisable Unexercisable Exercisable Unexercisable J.W. Sheridan BCE 13,975 395,761 45,540 399,147 – 1,314,854 K.H. Sheriff BCE – – – 80,000 – – G. Marier BCE 22,975 656,954 21,238 223,361 – 1,314,854 (1) The aggregate value realized is calculated using the closing price for a board lot of common shares of BCE on The Toronto Stock Exchange on the date of exercise, less the exercise price. Excludes value received as a Special Compensation Payment which is disclosed in the Summary compensation table under “Other annual compensation” for SCPs attached to options to acquire BCE common shares as described in the Report on Executive Compensation. (2) As freestanding SARs have not been granted, the numbers relate solely to stock options. (3) The value of unexercised “in-the-money” options is calculated using the closing price for a board lot of common shares of BCE on The Toronto Stock Exchange on December 31, 2001, less the exercise price of “in-the-money” options. “In-the-money” options are options that can be exercised at a profit, i.e., the market value of the shares is higher than the price at which they may be bought from BCE. (4) As disclosed under the Report on Executive Compensation, this table does not reflect Nortel Replacement Options issued to Bell Canada’s executive officers as part of the Arrangement relating to the distribution by BCE of an approximate 35 per cent ownership interest in Nortel Networks.

2001 Bell Canada Annual Information Form 29 www.bell.ca

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