Appendix C. MMDS Articles ·Dow Jones Interactive Publications Library File:Lllq/Windowsldesktop/MMDS 12-21.Htm

Appendix C. MMDS Articles ·Dow Jones Interactive Publications Library file:lllq/WINDOWSlDesktop/MMDS 12-21.htm

FRAMINGHAM, MASSACHUSETTS, U.S.A., 1999 DEC 14 (NB). Voice, data, and video services, as well as Internet access, will be delivered by broadband, fixed (i.e. non-mobile, fixed point) wireless technologies, according to a just released report from International Data Corp. (lDC).

The report, "US Broadba Fi ket Assessment and Forecast 1998-2003," analyzes the use ofbroa and fixed wireless technologies in the local loop by US networ servIce providers. It also discusses market drivers and inhibitors as well as key trends occurring in the market.

According to IDC, the US market for services delivered via broadband, fixed wireless technologies will increase dramatically from $767 million in ]999 to $7.4 billion by 2003.

The report also looks at service offerings and providers using frequencies below 10 gigahertz (GHz), as well as those operating in millimeter-wave frequencies, and includes forecasts for US fixed wireless customers and service revenue, segmented by the residential and business markets of all sizes.

"The growth ofJJJternet traffic is creating a need for increased bandwidth in the local loop, which is a major driver ofthe market for broadband, fixed wireless technologies," said Jeannette Noyes, a manager with IDC's Worldwide Telecommunications Markets research program.

In an interview with Newsbytes, Noyes also claimed that other factors drivinggrowth in the broadband, fixed wireless market include: the Telecommtqrications Act of 1996, which has created more opportunities for competition in th~:19~an~l~communications serVices market; technology developments that enable service proyiders, to"co:$t:-effe~ti~ely prov.idtrn::lia1.?le .s~rvice; as well as the investment b S rint and Mel W~rldComofover 1.'5 bi" S (multi-channeT, multi-point dlstri utlon servIce) l~s.

According to IDC, wireless access networks offer service providers several advantages, including scalability, a quick return on investment, aJll$t,installation,process, and high,capacity.

IDC forecasts that over the next five years, ~mall and medium-sized businesses will emerge as the pri ket for services delivered vi, ' adband wireless technolo ies. ResiaentiaI services will account for 60 percent ofspending for broadband, fixed wire ess services in 1999, but bY 2003, the business market will be the larger revenue generator. accountin~ for 70 percent ofthe total

The reason most ofthe business marketis prc::dicted to lie with small to inediWn~~ized enterprises is that larger businesses, according to Noyes, are more likely to have access to, or be able to, justify the cost ofinstalling fiber optic transmission capability. Also, small to medium-sized business do not need the capacity offiber.

More information about International Data Corp. and the study can be found at http://www.idc.co~

Reported by Newsbytes.com, http://www.newsbytes.com

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WASHINGTON D.C., U.S.A., 1999' DEC 6 (NB). A new rep~rt from telecom research and consulting company The Strategis Group, predicts that wireless broadband revenues will increase at a 418 percent compound annual rate over the, next five years, fueled by demand for high speed Internet access and local telephone service.

John Zahurancik, vice president ofbroadband information ofThe Strategis Group, said, "By 2003, we forecast that no less than 34 percent ofUS households and 45 percent ofUS businesses will be serviceable by broadband wireless networks."

According to the report, "Wireless broadband technologies such as local multipoint distribution service (LMDS) 'present an inexpensive means to market entry' for local telephQ:p.e service."

Peter Jarich, spokesman for Strategis, told Newsbytes, "We're forecasting revenue in those three spectrums - LMDS, MMDS , and unIiceI)~ed spectrum - which means it doesn't include (companies) like WinStar or even AT&T." .. ~

Explaining the basic drivers ofgrowth, he said, "One ofthe basic drivers is the growth ofthe Internet - businesses and consumers are going to be moving to the Internet more and more, and moving to high speed Internet. High-speed Internet is really the main'driver. People are getting tired ofdial-up and they want something that can provide them with all the great things the Internet promises. Businesses, as well as consumers, are demanding those high ~peed connections."

But he added that voice services too\vi1) oe"amajor factor'. "The other driver for revenue is voice services. (Broadband) is going to have a voice focus as time goes on. The early focus js 20ing to be h~ed Internet because that is whe,re ~hedemand is, and that's where there is a lack ofsupply."

He continued, "Voice is really where you'·see~~~i~~r~~enues. Be~au~~ people are willing to pay a premium for voice services. Ifyou lose a packet, or lose e-mail, that's one thing - it can be resent, you may not notice it, or ifyou're connection is slow you're kind ofused to it and it'll get faster, or it may be just a glitch - but you notice problems with voice. So premium voice service will always have a premium paid for it.

" •• 'j "., • "., "And when those voice services start being pmducedthat's when you are going.to see the revenues really ramp up.'" . Finally, large carriers offering bundled~ervige~~.l1be aIlothermajor revenue source. Said Jarich, " Mel, Worldcom ,Sprint, and AT&T...'.you see these bigger carriers getting into it....and what you're seeing is operators that have a lot ofmoney to build up these systems. They have the brand and marketing potential out there to drive the market."

Consumer demand for bundled servi¢~~j~~~ey.,~.·Our,S1,lry~ys.al.ways!~l;towth~t what customers are looking for is bundles - they wantlocal; long distance, and'Internet all from one.carrier, and (you can) throw in mobile wireless and pagipg. And ifyou can get to the customer and provide that to them, that really the key. But you have to get there before anyone else. Then you can really leverage that connection."

The report says that, in 1997, "less than five ven,clorshad the ability to pr'odu~e an operating LMDS system, and few had been tested extenSively. Today, any number ofvendors - including major

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integrators such as Lucent, Nortel and Ci~co - canprovide a working system. Capable ofvoice, data, Internet and video services, these systems can meet any customer's local access needs."

Jarich said the report was based on the activity ofthe operators that are in those spectrums, including their stated business plans, their deployments to date.

"US Wireless Broadband: LMDS, MMDS and Unlicensed Spectrum" is available for $2,400 in hard copy and $3,600 for CD-ROM formats.

Reported by Newsbytes.com, http://www.newsbytes.com

16:54 CST . Contact: Press Contact: 202-530-7500, Strategis Group IWIRES TELECOM, BUSINESS1

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SANTA CLARA, Calif. (AP) - Internet equipment provider Cisco Systems Inc. on Wednesday offered a new approach to bringing high-speed, low-cost Web connections to homes and businesses.

In an attempt to resolve a problem thathas~plagued television watchers and cellular phone users in big cities for years, Cisco plans to market technology that essentially harnessesand redirects the voice and data microwave signals that bounce offmany obstructions in large cities. When these signals ricochet offobstacles like buildings, trees and hills, they cause "ghosting" that distorts pictures on televisions and interferes with cell phone calls.

The service is called multichannel multipoint distribution services, or MMDS . It could help companies such as Mel Wor)dco~,thatare'hoping tei provide local phone and Internet services to businesses and consumers in large metropolitan areas avoid the billions ofdollars in costs of building expensive fiber optic networks. It also could speed reliance on the Internet for commerce, learning and entertainment - a key goal for Cisco and its core business ofproviding equipment to connect business computer systems.

"Our goal is to be able to build altemativeaccess technologies ... and provide consistent service delivery" overany type ofcommunications device," said Don Listwin, Cisco's executive vice president for corporate marketing.

Engineers at Clarity Wireless, which Cisco acquired last year, decided to adapt ghosting phenomenon, which has troubled many consumers, and special encoding techniques to transmit digital voice and data, eliminating what had been an obstacle to reliable communication - the need for fixed lines ofsight between the transmitter and the receiver.

With a base station that costs $15 0 mall cellular towers or satellite' , businesses could 0 er ntemet c.onnections and local'and long:-distance phone service to tens. ofthousands of customers in a given city. ciSCO technolo'gy ipthe base station would allow 3.000 simultaneous users to receive data 1,000 times faster than they would from a typical voice line.

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users to receive data 1,000 times faster than they would from a typical voice line.

The service is being touted as an inexpensive way to connect computer systems fonnedium- and small businesses and an alternative hi~h-speed connection fOr homes I ranscelvers expected to cost less than $50030uld be marketed to consumers as early as June, Cisco executives said at a media and analyst briefing.

While there are many competitors hoping to offer new fixed high-speed wireless service, Cisco hopes to speed acceptance ofits product by revealing its technology and teaming with such powerhouses as Motorola, Texas Instruments, Toshiba and a half-dozen others to provide the service and equipment.

As the Internet assumes a more important role in everday life, many businesses are offering such wireless alternatives to the telephone industry's high-speed digital phones lines, or DSL, and the cable television industry's Internet modems.

Research firm CLBC World Markets estimates the point-to-point wireless eQ.Uipment market will grow to $5 billion in 2003 from $2.56 billion last year, while the multichannel market is expected to jump to $3 billion by 2004 from less than $200 million next year.

Dow Jones Business News

NEW YORK -(Dow Jones)- Cisco Systems-lnc., Wednesday plans to unveil new fixed-wireless technology for delivering broadband Internet and voice services, as part ofits new alliance with 10 high-tech concerns, the New York Times reported Monday.

Cisco, the largest maker ofcomputer-networking equipment, in October announced partnerships with Motorola Inc., Broadcom Corp. (BRCM), Texas Instruments Inc. (TXN) and other companies to drive open standards for so-called fixed wireless technology to make "wireless cable" systems cheaper and more reliable. Cisco (CSCO) said then that it expected to roll out new fixed-wireless products by year's end.

Cisco said its new wireless technology works well in cQm~ested £ity. suburban and rural environments by overcoming the line-of-sight. distance reach. subscriber coverage, Installation and antenna size problems ofexisting proprietary wireless systems. -

The New York Times said Cisco's new technology works with the frequency band known as multichannel multipoint distribution services; or MMDS , which telecommunications giants like MCI Worldcom Inc. and Sprint.Corp. are investing in as a way to reach customers homes and offices while bypassing regional Bell phone companies' infrastructure.

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To use the MMDS frequency, communications carriers must buy licenses fromthe Federal Communications Commission. But Cisco's technology also will work on the Unlicensed National Information Infrastructure band, a free portion ofthe airwaves set aside for experimental uses, the Times said.

This will make it easier for small Internet-service providers to enter the market for speedy Internet access at a relatively low cost. -

Separately, Cisco said Monday that it has extended its strategic relationship with Comcast Commercial Online Communications Inc., a unit ofComcast Corp. (CMCSACMCSK).

Cisco said Comcast is using Cisco's Powered Network to provide Internet services to businesses and to offer high-speed Internet access in New Jersey.

PSINet Inc. (PSIX), an Internet-access provider, also expanded its participation in the Powered Network program to include full-time and,shared-network Internet-access services.

DOWNLOAD Sprint gears up for MMDS : Equipment vendors spar for contracts NANCYGOHRING '

While AT&T sorts out its new cable properties and pulls together fmancing to upgrade plant, Sprint quietly is ramping up to deliver services in,its recently acquired multichannel multipoint distribution service spectrum. By the,secondquaiter 'Of2000, the operator plans to roll out a high-speed Internet product to consumers and small businesses with hopes ofreaching between 10 and 20 markets by the end of2000.

In the midst ofa request for proposal process, Sprint expects to select a supplier before the end of the year, said Tim Sutton, president ofSprint 's wireless broadband group. Vendors are hustling to win that business. "What we have is the large traditional vendors that are scrambling to put something together," Sutton said. Those vendors are looking at internal capabilities and building relationships with smaller, entrepreneurial companies. They will have to meet Sprint's high expectations. "We think there's alot of work that has to get done there so we can scale to the extent we want to," Sutton said. One aspect ofdevelopment that is lacking is integration with all system components, such as network management systems and operations support systems.

Sprint also is seeking equipment that will follow its evolutionary paths. The operator initially plans to build a network using super cells, where .one cell placed on a tall site covers essentially a whole market. During the second phase;Sprint will add one or two more cells for extra capacity and coverage. The final stage will be a true cellular network, with a greater number ofshorter towers.

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Sprint will start with the super cell concept to better match the capacity ofthe network with the actual subscriber base and because it will have to obtain regulatory permission from the FCC to build in the cellular model. Sprint expects to secure that approval in the third quarter next year, Sutton said.

Equipment vendors also will have to meet Sprint's evolutionary services rollout plan. The service provider expects to follow the initial product, a high-speed Internet service, with additional services such as voice and video. Any video service would be small-scale, though, such as offering a few channels to small businesses that don't ,have access to cable TV. "We don't intend to compete with cable for traditional video services. We don't think it's the best use for the spectrum," Sutton said.

The network also could support Sprint Integrated On-Demand Network services, portable products and products that integrate with wireless LANs. "We see MMDS as a platform over which you can run a variety ofservices," he said.

To roll out these services, Sprint likely will choose multiple vendors in hopes ofgetting the best deals. "[Operators usually] pit vendors against each other on price and delivery," said Rich Valera, vice president at Needham & Co. So far, no clear winners have emerged in the battle for Sprint's business. "It's almost a level playing field," he said.

Before the two-way ruling, few vendors were developing products in the MMDS space. "There had been no activity. It was dormant until Sprint and [Mel] WorldCom made these announcements," Sutton said.

t ~ '. i; 1 i"l" \. :' L -j I ; i"'i r:' ii' ~ ,", : i-i -'; 1.. '.! "', - .;-;'" , -'.!. . Although Sprint hasn't made any public deCisions ye(Sutl(),O'mentioned q~cP,Systems' purchase ofClarity Wireless and its vector orthogonal frequency division multiplexing (VOFDM) technology, as well as Cisco's efforts to work toward standards. "It's a wonderful endorsement," Sutton said.

Cisco's VOFDM technology likely will be used iIi combination with other products, Valera said. VOFDM probably will be a high-priced prodU(;td~signed for niche us~ where line ofsight is an issue, he said. ., . '- .. , ",.. .' : , >',

License Transfers Approved: Los Angeles;S:anDiegd and'San Francisco, Cal.; Tampa, Fla.; Greenville, S.C.; Bellingham, Olympia, Port Angeles, Seattle and Spokane, Wash. -- to MCI WorldCom from Pacific Telesis. Carthage, Mo. -- to IDS Engineering from Southwest Mo. Cable TV, Ch. 1. Portsmouth, N.H. -- to CS Wireless from Nucentrix Spectrum Resources, E-group. Ada, Okla. -- to Nucentrix from Bob Story, H3. Kranzburg, S.D. --to Data Truck from Northeast TV Cooperative, H2.

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By Karekin Jelalian

Now that MCI WorldCom [WCOM] has made the biggest acquisition in corporate history, where will the telecom giant set its sights next? The immediate response to that question is "where the company perceives its service and product holes to be." '

And the most obvious hole is broadband local access.

With commoditization and prices falling in the long-distance market,WorldCom','which many ISPs rely on for backbone, will want to focus more on providing additional residential services rather than increasing its presence in voice long-distance and wireless. But how adequate will WorldCom 's post- Sprint broadband local assets be?

The Portfolio Widens After it merges with Sprint, WorldCom 's means ofresidential access will include wireless, broadband wireless (or MMDS ), and Sprint's approximately 5 million local wireline service customers, m.ostly in rural markets, h~ \'.ega,s. ~~ ,Carolinas and Florida. WorldCom will also acquire ongomg development ofSprmt 's Integrated On-Demand Network (ION).

WorldCom will thus have a patchwork oflocal-access technologies that would be even more ofa mosaic ifthe company began buying its way into other technologies. The challenges facing WorldCom would be economies oftechnological and marketing scale.

But, compared with the Bells, and particularly AT&T [T], WorldCo~ could provide local broadband service on the cheap via its MMDS licenses. Thus far, Sprint and WorldCom have paid more than $1 billion for MMDS and wireless Internet licenses covering 60 percent ofall U.S. householW;. '.

In the short term, WorldCom could fairly inexpensively hedge its local broadband bets by acquiring more wireless assets, such as Nucentrix Broadband Networks [NCNX).

Another last-mile broadband option i~ digiml'subscriber line (DSL). :aut WorldCom wouldn't necessarily have to purchase last-mile ,D'sL outright The company could lease capacity from the likes ofSBC's [SBC] newly announced: $6'billionProject Pronto.

A third local broadband option would be the CLEC that has focused most extensively on the residential market in the Northeast, RCN G,orp. [ReNC]..

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Further down the road - and a more expensive 'option ifother broadband local access routes don't pan out - are ILECS such as Cincinnati Bell [CSN], Alltel [AT] and CenturyTel [CTL]. The problem with acquiring an ILEC is that WorldCom would get fairly deep coverage in one region of the country, but no one ILEC would give WorldCom nationwide coverage.

Ironically, BellSouth [BLS], WorldCom 's bidding rival for Sprint, would be a very good acquisition candidate. But it will be a while before WorldCom could gobble up so large a company.

However, a vertical merger ofthat magnitude woufd have a better chance ofpassing regulatory muster later rather than sooner, particularly ifit holds the promise ofmore local competition.

In addition, other companies may be looking to acquire the last independent Bell. However, given BellSouth's strategic value, WorldCom would probably be willing, and able, to pay the biggest premium.

Services to Businesses

-. ; :~_:' '; : -f ~. '. '!'. ,.. , ' Primarily through its acquisitions oOv1fS:'andBrooks Fiber, WorldCom provides businesses local service in tier one and two markets. Compariiesstrong in tier three and four markets include CLECs, such as McLeod USA [MCLD] which focuses on the Midwest and Plains states, and the ILECS mentioned above. As well as providing last-mile access, Alltel and CenturyTel would provide a presence in third and fourth tier markets.

Other companies that could strengthe~:Wo'rldC~ni-'s'p6sitionin business markets include data CLECs, such as NorthPoint [NPNT] and Rhythms NetConnections [RTHM]. Rhythms, in which WorldCom already has a strategic investment, reaches into Canada. '

Once combined with Sprint, WorldCom will have only $1.8 billion, or3) percent, ofits $54 billion in revenues from overseas sales. To be a true supercarrier, WorldCom will have to strengthen its overseas services.

Internationally, the company probably has its sights set onbusiness markets in Europe, followed by Asia and Canada. .

In June, WorldCom said it would increase its capital spending by approximately $1.4 billion in 1999, with most going toward building proprietary Internet and telecommunications networks in Europe and Asia.

Wireless assets overseas would allow WorldCom to offer more affordable and convenient international wireless calling. German company's Mannesmann's wireless telecommunications operations would be a good candidate. In Asia, Telstra [TLS] would be a good fit.

By Karekin Jelalian, Phillips' senior telecommunications industry analyst.

Karekin can be reached at 301/340-7788, ext'. 2122, or [email protected].

Building A Mystery, Choosing So Carefully

Ofcourse, WorldCom will need time to digest Sprint [FON] and assess the usefulness ofits existing assets. So, the more time goes by the more likely, and able, WorldCom will be to acquire bigger companies. .

Second, there's practically no company offlimits with the exception ofthe few shaping up to be the other U.S. supercarriers: AT&T [T], SBC [SBC] and Bell Atlantic [BEL].

Third, investors must continue giving their blessings to Bernie Ebbers and WorldCom stock.

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Indications are that WorldCom shares are not about to fall out offavor anytime soon. As evidence ofthat, investors don't seem concerned with the goodwill accumulated on WorldCom 's balance sheet - an astounding $46 billion prior to the Sprint acquisition.

MMDS Systems Creep Forward. FRED DAWSON 11/22/1999 Multichannel News Page 35 Copyright 1999 Information Access Company. All rights reserved. COPYRIGHT 1999 Cahners Publishing Company ,;," DALLAS - MCI World-Com Inc. and Sprint Corp. have a way to go in their efforts to make MMDS a viable broadband-access platform in the mass market.

But they don't have to go as far as it seemed a few months ago.

Last week, Cisco Systems Inc. and City Telecom Hong Kong Ltd. said the Chinese service provider had successfully deployed the recent Cisco wireless-product line, which uses a new modulation tec~ to address line-of-sight and ietmerence prQblepts in multichannel-multipoint-distribution-service networks.

And representatives ofother vendors appearing at the Wireless Communications Association International engineering symposium here said they, too, had new solutions that would make life easier for MMDS operators.

But participants at the conference ~left no doubt that fixed-Wireless-network service providers operating at MMDS and other spectrum tiers still have many issues to resolve before they succeed in challenging wireline competitors.

The challenges are especially daunting for companies like MCI and Sprint that are hoping to achieve high penetration in the mass market with MMDS , which requires ~echniques to reuse limited spectrum while avoiding interference and overcoming line-of-sight limitations and other barriers. Costs, backhaul options for interconnecting transmitter sites and uncertainties surrounding media-access-control protocols are also major issues, noted Frank DeNap, director ofthe Advanced Technology Labs at Sprint. "There's a lot more to deploying wireless-broadband systems than resolving the RF-interface issues," DeNap said.

Sprint is looking at the Cisco system and ,other .vendor solutions that reJy on the. modulation technique known as "OFDM" (orthogo~~!.ft:eq\le:pcY"7division multiplexing), as well as the more traditional ~K (quadrature phase slll.ftk~ytand.QAM (quadrature amplitude modulation) options, De ap noted.

But he stressed that the carrier would not wait for new solutions. "We've got to get out and capture customers," DeNap said. "That's our No. 1 priority".

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Cisco's first OFDM-based product -- which it calls "VOFDM" (vector OFDM) to designate a second facet to its air-interface technology -- is a point-to-point version designed to enable connectivity to hard-to-reach customers and to support robust interlinking oftransmitter sites.

So far, the technology is living up to its claims ofgetting signals to customers who can't be reached by other modulation schemes, City Telecom managing director Paul Cheung said.

"Despite the complexity ofthe trial system, we managed to commission the whole system in less than three days," Cheung said. "We have successfully established multimegabit wireless links providing voice-over-IP [Internet protocol], video-on-demand and IP-multicasting applications with limited line of sight, which is an essential capability for extending the service coverage in a densely populated urban area like Hong Kong."

QEQ..M -- which is being used for digital TV in Europe, and which is gaining support from some broadcasters in this country against the Federal Communications Commission-endorsed digital-TV standard -- divides a iven fre uenc chapnel. such as the 6-me ahertz MMDS video channel, into small segments. Each IS packed witht emaximunt,bitload permitted by the conditions Wit n that frequency band.

This way, the amount ofbits that can be delivered over the 6-MHz channel is not limited by the poorest-performing frequency segment within the channel.

Cisco's system also uses dyal-feed antenna receivers at the .end-user premises to capture and combine signals coming in from separate paths, taking advantage ofnlUltipath reflections to maximize signal strength ofantennas that are not within the line-of-sight coverage.

The company has lined up Broadcom Corp. to supply ASICs (application-specific integrated circuits) that also contain the MAC component, and it has support from 10 other vendors, as well.

OFDM isn't the only new technique vying to .improve wireless-broadband spectral efficiency. Chip manufacturer Telesci-COM Ltd. is bringing achip to market based on anewly invented modulation scheme known as "OCDM" (orthogonal code-division multiplex). The vendor contended that OCDM is a cheaper means ofaccomplishing robust performance than OFDM, which requires care to avoid accumulation ofphase noise over multiple RF carriers.

"In terms ofphase-noise performance, OC.DM. is orders ofmagnitude betterthanOFDM for the same data rate," said Doron Koren, a sen.~R[;.eAgineeringexecutive at TeIesci-COM. He added that the company's system employs softcod~ng ;tecpniq~e~:to iJllpro~~ ,~e performan~eof error-correction coding, thereby gaining a I-decibel to 2-dB advantage in signal-to-noise at any given bit rate, compared with conventional error-correction modes.

As DeNap noted, however, operators have to get to market quickly and make do with the equipment that's currently available. In Sprint's case, this means deploying in 10 markets by the start ofthe second halfofnext year and in anoth~r ;20 byyear'seJ;ld.

C~ point-to-multipoint version of,VOFDM won't be available until well into next year, and TelesciCOM -- while it has unnamed original-equipment-manufacturer partners -- has an even harder task ofmaking its technology aviable option against the giants ofthe systems-networking domain. ' .. ." .. ' .•.

Just how far operators might have to go .to make. d~ with what'savaila1Jle. ""liS made clear by Robert Saunders, director ofwireless planning at BellSouth Corp.'s BellSouth Entertainment division.

In Atlanta, where the "treecanopy" barrier extends to 100 feet above the terrain and the terrain varies by 1,500 feet ofaltitude, BellSouth has installed five transmitters to achieve coverage, with four operating at 1,000 watts ofpower, Saunders said.

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But even with the high power output, BellSouth has had to improvise means of getting signals into households by using antenna receivers that are installed in the trees, rather than on rooftops. "Georgia pines make good poles, but yoU: have to use avery narrow-beamwidth antenna to compensate for the swaying," Saunders said.

BellSouth -- which is delivering upward of 160 channels ofvideo, and which may eventually add high-speed data over its five MMDS networks -- is looking at OFDM to help it deal with multipath problems, Saunders added. ' ,

"We're getting a very strong customer response -- higher demand than we anticipated -- and that means we have to find ways to expand out coverage quickly and cost-effectively," he said. "It's a big challenge."

f .,' Front News UUNET's wireless options increase DENISE PAPPALARDO 11/08/1999 '. ;;"..' ;.. i-~ ,:. Network World . -'I. :>'" !,,:,,~ , ::!l" ,;, ,';' Page 8 I'l,b.. .,. (c) Copyright 1999 Network World, Inc. All rights reserved.

UUNET customers could soon reap the benefits ofnew high..;speed Internet access services as a result ofparent company MCI WorldCom 's substantial acquisitions ofwireless technology.

MCI WorldCom has spent over $2 biUion,on-wireless·properties over tl1e past six months, not to mention its pending $115 billion Sprint acquisition that includes the Sprint PCS wireless network. And while MCI WorldCom 's deals will have an impact on the overall company, UUNET customers will be first on the list to get new wireless data services. "We want to find a unique platform for delivering broadband services to small and medium businesses and consumers in metropolitan areas," says John Sidgmore, chairman at UUNET and vice chairman at Mel WorldCom . Sidgmore says wireless Internet access will be the first wireless service that the company rolls out, but he would, not commit to a time frame.

One ofthe acquisitions MCI WorldComhopeswillhelp UUNET offer wireless data services is SkyTel Com-munications. Last month MCI WorldCom closed a stock- swap deal valued at $1.8 billion to buy pager company SkyTel. MCI WorldCom will be deploying additional technology on SkyTel's network, but Sidgmore would not comment further on what that technology would be or when additional services would be available..

";.; Earlier in the year MCI WorldCom also acquiredCAI Wireless, a Multipoint Multichannel Distribution Service ( MMDS ) fixe~ wireless service provider for more than $350 million. " MMDS will be an alternative to DSL," Sidgmore says.

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MMDS will be an alternative to DSL," Sidgmore says.

MMDS operates in the 2.5- to 2.7-GHz range. MMDS licenses were distributed by the Federal Communications Commission some 15 years ago with the idea that they would be used to offer asymmetric wireless cable television services. But that plan never came to fruition and the FCC set new rules earlier this year that allow two-way traffic over the MMDS spectrum.

" MMDS will let us deliver about 1.5M bit/sec worth ofaccess at a very competitive rate that's comparable to cable modems," he says. By the end ofnext year MCI WorldCom will operate a nationwide fixed wireless network. The first offering will be a wireless Internet access service, but the network will eventually support voice and data services, Sidgmore says.

In order to create a national MMDS reach, MCI WorldCom is also banking on Sprint 's MMDS purchases. MCI WorldCom 's acquisition ofSprint is still pending domestic and regulatory approval. . . \. Mel WorldCom is also investing $300 million in Metricom, the wireless Internet access service provider. The investment will go toward building and rolling out Metricom's nationwide Ricochet wireless Internet access service. .

MCI WorldCom will also distribute and co-brand the Ricochet service in a separate nonexclusive deal valued at $350 million. Business users can most likely expect a UUNET-branded Ricochet wireless Internet access service.

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Cisco Systems has teamed with 10 companjes to push a broadband wireless standard in a move that some say is Cisco's attempt to stall the market while it plays catch-up. - f' ., '. :... Cisco wants to standardize its vector orthogonal frequency division multiplexing (VOFDM) technology, which it acquired with Clarity Wireless last year.

VOFDM allows operators to lower the height Qfaoteonas and reach customers that may be unreachable with other technologies due to line-of-sight issues. ''It should help lower the cost of deploying and increase the number ofsubscribers," Smith said.

"From a technology standpoint, they're really doing something very different," said Bob Egan, research director for the GartnerGroup. "Cisco believes it has a clear and effective way to befriend multipath and add some significant capacity, while also providing some flexibility to carriers by answering some ofthe constraints about line ofsight."

VOFDM is most suitable in lower frequencies, so Cisco initially will target multichannel multipoint distribution service ( MMDS ) license holders and later unlicensed-national information infrastructure (V-NIl) spectrum users.

The only catch so far with the technology is that it's.,too expensjve compared with other available products and n_ot yet ready for the market, some analysts say. At the root ofCisco's standardization play is likely an attempt to solve those shortcomings in time to compe~e for Sprint's MMDS business. "This is Cisco trying to sell more gear," said Mark Zohar, senior analyst for Forrester Research.

During the past year, Sprint has agreed to purchase five MMDS licenseholders as a method for delivering broadband Internet access. Spr~nt pas takyn a two-phased ,approach to deploying service and already has sent out a request for proposal (RFP) for the first phase. Cisco didn't make that cut, according to a source close to the matter. Cis~o's recent move to standardize its technology may be aimed at lowering the price ofits product and possibly even slowing the progress ofcompetitors in an attempt to win Sprint's second-phase business. The phase two RFP is expected in November.

Cisco said it would have initial products available by the end ofthe year - a prediction several analysts doubt is possible. "I find that very hard to believe," said Rich Valera, vice president at Needham & Co. Most likely, Cisco will have a point-to-point produc~ available by the end ofthe year but not a point-to-multipoint solut~pn~ :~~sai~,~ "

Notably absent from the Cisco partnership are MMDS players Adaptive Broadband and ADC Telecommunications.

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"We always advocate standards," said Peter Jew, director ofmarketing in ADC's broadband wireless group. ADC has experience using a technology similar to VOFDM but on the cable modem side and believes the technology is not ready for commercial use yet. "It goes back to the market pressure we're seeing from customers today. They spent a fortune buying up licenses they're not going to wait a couple ofyears until something real is out there," he said.

VOFDM - with the backing ofheavy hitters such as Cisco, Motorola, Texas Instruments and Samsung - undoubtedly will present a strong option but possibly not the only one. "Though VOFDM could provide formidable long-te"nncompetition in the broadband wireless market, we believe it will co-exist as a more expensive complement to [technology such as Adaptive Broadband's] for applications where line-of-sight is not available," Valera said in a report.

Cisco, Broadcom Wireless Gear Boost MCI , Sprint MMDS Plans.(Cisco Systems Inc.; Mel WorldCom Inc.; multichannel-multipoint-distribution-service) FRED DAWSON 11/01/1999 ';':' ,".' Multichannel News Page 47 Copyright 1999 Information Access Company. All-rights reserved. COPYRIGHT 1999 Cahners Publishing Company

A cluster ofvendors led by Cisco Systems Inc., and Broadcom Corp. last week took the wraps offa wireless technology they hope will put;MCIW()rldCom Inc.andSprint qommunications Co. on course to challenge cable in the broadband-services arena.

Ifthe new wireless-broadband system -- targeted for multichannel-multipoint-distribution-service spectrum and other microwave tiers -- works as planned, it will allow MCI , Sprint and other players in fixed-wireless services to deliver a full slate ofvideo, voice and high-speed data to homes and small businesses without stinting on coverage or service variety. ..

"The most encouraging part ofthis development is that it really validates our choice ofwireless as a medium for delivering broadband services to the mass market," Sprint spokesman Russ Robinson said.

Underlying the new wire-less-broadband platform is a technology known as "vector orthoa-anal freQuency-diyisioo multiplexing," developed oyer the past four years bY Clarity Wireless Inc.,

which Cisco acquired one year ago. # '.

Cisco is making the technology available free-of-charge to Broadcom and other chip makers in an effort to establish it as a de facto industry standard that maximizes the broadband-service potential of microwave-based delivery systems, d.irector of marketing for broadband fixed wireless Steve Smith said. "Our game is to get fixed wireless moving asS vi~ble competitor to cable and DSL [digital subscriber line]," Smith said. "We've cl)os~nthi.s"t~~hno~ogyas the' OI~eto back, because it delivers both a higher spectral efficiency and a higher link efficiency than anything we've seen."

Broadcom -- which is supplying chips for the current wireless-broadband market, founded in QAM

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(quadrature amplitude modulation) and QPSK (quadrature phase shift key) technologies -- is swinging behind VOFDM for the same reason, vice president ofmarketing Tim Lindenfelser said. "This technology overcomes the severe line-of-sight and other limitations ofother approaches to MMDS ," he added.

While MCI and Sprint plan to launch next-generation wireless-broadband systems as soon as the first quarter of2000, Broadcom will be in a position to supply VOFDM chips to cable systems and customer-premises-equipment makers early enough next year to meet deployment schedules for most carriers' wireless-broadband deployments, Lindenfelser said.

Robinson said that while the new system offered "exciting" possibilities, Sprint has issued a request for proposals for initial market build-outs, and it would be unfair to vendors responding to that RFP to give an unqualified thumbs-up to a new system that has yet to be fully tested.

"We've looked at [VOFDM], and we are looking forward to what these guys come up with," he added.

Together, MCI and Sprint have secured control ofMMDS in 120 markets re resentin 60 percent ofU.S. hous holds . 80 markets now f: . S rint's a, Robinson Sal. Y e end ofthe second quarter, Sprint plans to have 10 cities operational on the new mreless-broadband platform, which starts with high-speed two-way data and one-way cable and later adds voice services, he added.

"We'll be operational in 30 markets by the end of2000," he said. The first 10 include Phoenix, San Francisco and Detroit -- where companit;:s ,acquired by Sprint were already operating -- as well as seven other markets to be named later.

The new "BCM2200" ASIC (applicati

"The main difference [in cost] is the .anten.n.a" although there's sometrade-offthere with the cost of the tuner that's required in cable," he .q.qt~~.. ;';;.' ,: .;.

. ( Lindenfelser declined to set a delivery date for commercial product, but he said samples ofthe new ASIC would be available to manufacturers in the first halfof2000.

One reason why Broadcom can proceed so fast and so cheaply is because it is tapping the same MAC technology used in DOCSIS (Data Over Cabl~ Service Interface Specification) chips, officials said. They also noted that the VOFDM technology has gone through several development phases over the past four years, giving the paitIlers confidt?nce that any further des~gn refinements before volume production would be relatively minor. .

VOFDM involves two basic techniques that backers said will allow network operators to achieve high levels ofmarket coverage with enough bandwidth per user to support everything from voice to high-definition TV. This is a tall order, given the fact that operators only have approximately 200 megahertz ofspectrum to work with. .

The vector part ofthe nomenclature re(~rstoP1;e.fact that the system uses &Datia] diversity. That means it uses a dual-feed antenna wceiyerat-tbe end-iiserpremises to'capture signals coming in from separate paths and combines th~inia maximize the signal-to-noise ratio at any given frequency.

This helps to strengthen the signals bouncing.()[freflective surfaces, re~ching users that are not in direct line ofsight ofthe transmitter, Li~denfelser noted.

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Spectral efficiency -- which maximizes the number ofbits per hertz, or cycle offrequency -- is achieved througH the orthoganal frequency-division multiplexin~ aspect ofthe technology, where the number ofbits inserted into thin slices offrequency, or "frequency bins," depends on the noise-tolerance level within each frequency segment.

"We pack a lot ofcarriers into the spectrum and weight them based on signal-to-noise [ratio], which gets away from the modulation-capacity limitations you encounter when you use a single carrier over a 6-MHz channel," Smith said. -

The result is a system that delivers 20 megabits per second in a 6-MHz channel to all users, wherever they happen to be, Broadcom product-line manager Pete LaRocca said.

The chip, operating at baseband, can also apply the modulation technique to a signal that's destined to go out at virtually any frequency, whether it's at the 1.9-gigahertz level used by PCS (personal-communications services) orat the,28.;.GHz level ofLMDS(local multi-point distribution service). - - ~- -\ : ;: .. ," : But it's MMDS -- and specifically the high-volume demand anticipated from a combined Mel and Sprint -- that comprises the immediate targets for the development activities ofthe new alliance.

"We think this technology is what Sprintand World-Coin need to be successful as providers of broadband services over fixed-wireless local-access networks," Smith said.

Other players signing on with the initiative include Motorola Inc., Texas Instruments Inc., Samsung Telecommunications America Inc., TO,shiba;Ameqca Consumer Products, Pace Micro Technology pIc, Bechtel Telecommunications, LCC International, Electronic Data Systems Corp. and KPMG International. .:. : So far, the only player involved that win be s~ppl;ying headend equipment is Cisco, but Smith said it appeared that other systems suppliers would soon join, since Broadcom and TI will be making their chips available to Cisco's competitors.

New standards-setting group for broadband wireless technology created by Cisco Systems and other manufacturers is "very encouraging to us," Sprintspokesman told us. He said newfound interest in MMDS and other fixed wireless technologies is "tremendous validation ofthe path we have chosen... to open a 3rd path to the home." Steve Smith, dir.-mktg. for Cisco's new Broadband Wireless unit, said standard-setting will:allow swifter technological jumps as companies specialize in each ofmultiple parts. He compared importance ofstill-unnamed partnership in broadband wireless industry to that ofData Over Cable Service Interface Specification(DOCSIS), which is setting standards for next-generation cable modems. First partners are Bechtel Telecom, Broadcom, EDS, KPMG Consulting, LCC International, Motorola, Pace Micro Technology, Samsung, Texas Instruments, Toshiba. They said they're working with new technology that will alleviate limitations that have hampered industry, including limited reach in congested cities and distance and

" d .... ";;. ' ' 't.' ,. ',.~ .: -'-:,.;.- -. : 230f40 114/20008:18 AM

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Control Transfers Approved: Anchorage, Alaska; Little Rock, Ark.; Merced, Redding, Sacramento, Salinas, Visalia, Yuba City, Cal.; Colorado Springs, Denver, Ft. Collins, Greeley, Pueblo, Colo.; Naples, Fla.; Kahului, Maui, Hawaii; Elkhart, Ft. Wayne, Mich. City, S. Bend, Ind.; Wichita, Kan.; Adrian, Lansing, Mich.; Fergus Falls, Jeffers, Mankato, Willmar, Windom, Worthington, Minn.; Jackson, Miss.; Geneva, Lincoln, Omaha, Neb.; Las Vegas, Nev.; Canton, Cincinnati, Columbus, Findlay, Lima, Sandusky, Toledo, Youngstown, 0.; Oklahoma City, Okla.; Bend, Eugene, Medford, Portland, Salem, Ore.; New Castle, Sharon, Pa.; Aberdeen, Mitchell, S.D.; McAllen, Waco, Tex.; Aberdeen, Bellingham, Bremerton, Seattle, Wenatchee, Wash.; Appleton, Fond du Lac, Green Bay, Manitowoc, Marinette, Sheboygan, Wis.; Sheridan, Wyo. -- to Sprint Corp. from American Telecasting. Eureka, Sacramento, Cal.; Ft. Pierce, Melbourne, W. Palm Beach, Fla.; Boise, Ida.; Helena, Mont.; Coos Bay, Klamath Falls, Roseburg, Ore.; Kennewick, Yakima, Wash. -- to Sprint Corp. from WBS America. Juneau, Alaska; Nogales, Phoenix, Shaw Butte, Sierra Vista, Tucson, Yuma, Ariz.; San Diego, San Francisco, Cal.; Anderson, Bloomingtpn, Columbus, Indianapolis, Kokomo, Lafayette, Marion, Muncie, Terra Haute, Vincennes, Ind.; Chicago, Kankakee, Ill.; Baltimore, Md.; Detroit, Flint, Jackson, Mich.; Rolla, St. Louis, Mo.; Galveston, Houston, Waco, Tex.; Danville, Va.; Provo, Utah; Janesville, LaCrosse, Madison, Milwaukee, Wis. -- to Sprint Corp. from People's Choice TV Corp. Oldsmar, Fla. --to Sprint Corp. from Videotron.

";' ;

When two giant long-distance carriers signaled they would be investing a combined $2 billion in a technology known by the oxymoron "wireless cable," it felt like Christmas in April for one Ventura County company. . i.. .. The long-distance behemoths were seeking to acquire the technology and manufacturing prowess to capture the Baby Bells' vaunted "last mile" to the home customer for voice and data communication - the Holy Grail for long-distance carriers.

The two giants were MCI and Sprint, and the local company that could gain from their foray is Camarillo-based California Amplifier. .

"We were certainly relieved by the news," said the company's chiefexecutive, Fred Sturm. "What the industry needed was the capital infusion, somebody that has the deep pockets to put the infrastructure in place. The announcements reaffirmed the money was gpingto be spent in the right

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direction."

As jubilant as Stunn has been, Wall Street investors have been more so, driving up Cal Amp's share price from its 52-week low of$1.25 to its recent peak of$19.37, a gain of689 percent in less than a year.

CaiAmp, as it's known, markets and manufactures microwave amplifiers, converters, antennas and systems for satellite television and Earth-based wireless applications.

CalAmp recently reported second-quarter sales increases of$10.2 million, or 123 percent, to $18.5 million, compared to sales of$8.3 million for the second quarter oflast year. Second quarter net earnings were $901,000 compared with a net loss of$1.3 million for the second quarter ended Aug. 29, 1998.

For the first quarter, it posted a 54 percent jump in sales year- to-year from $9 million to just over $13 million.

Things began getting interesting for the company in March, as MCI and Sprint began quietly making debt and equity investmentsjn a ,number ofU.S. wireless operators. On April 20, MCI bought CAl Wireless Systems for $476 million. About the same time; it bought.the paging company SkyTel for its network ofcell towers. Other wireless acquisitions are pending.

"The market potential is big," said Michael Ferron, California Amplifier's chieffinancial officer. "We're talking about a broad- based rollout - 3 (million) to 5 million subscribers over five years.".. According to Ferron, CalAmp has the potenti~lfo~ 40 percent ofthe :rp.arket share for the transceiver boxes and antennas that would be required iri subscribers' homes.' .

The increase in sales and earnings in the first and second quarters, Sturm said, is due primarily to increased shipments ofdigital satellite television equipment, another CalAmp business segment.

As far as wireless cable operations for voice~d data - known in the industry as two-way MMDS "we're waiting to clear a number ofhurdles: FTC, FCC, shareholders," Sturm said. "Also, a couple ofcompanies are bickering back and forth about'licenses, so we don't see any meaningful demand until mid-2000." ..

In April, CalAmp announced it had acquired technology and product rights from Garland, Texas-based Gardiner Communications Corp. in a cash and stock deal.

The agreement gives the company a signifi,cantentry into mai.nstreamlJ.S. an

direct-broadcast satellite markets., . .~·:l d.:{l. ·j:t.:\.~.. ", '.l·'-.,:;":';:',; ~ -1"':: . to;. -I:., "The Gardiner acquisition is a home run~" said Matt Robison, an analyst at Baltimore-based Ferris, Baker Watts, one oftwo firms that track CaiAmp.

"The timing couldn't be better. It gets them into (supplying equipment for) Dish Network and Direct TV."

.' _~.i,i', .!;! ... - '.; .; I ' .. The deal allows CalAmp to manufacture huge nurnbersofend-user set- topboxes and elliptical antennas, besides its own electronic converters and amplifiers.

"Direct satellite television is eroding the cable share," Sturm said. "We see that market growing in particular in the U.S. and Canada. In Europe, the analog subscriber base is being phased out and digital phased in. We see that as an opportunity for the company."

But CalAmp has been left at the altar before.'

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In 1995, CalAmp was poised for rapidgrowth based on its wireless cable expertise. Three Baby Bells - Bell Atlantic, Nynex and Pacific Telesis - announced they had fonned a consortium dubbed Tele-TV, which would take cable programming and send it by line-of-sight microwave transmissions directly to customers' homes.

"The consortium was going to buy wireless operations and penetrate 3 million homes, and CalAmp was slated to participate as one ofthe major suppliers," Ferron said.

But in late 1996 - much to the relief ofthe traditional cable,providers - the consortium announced some of its members had shifted their strategic focus and would abandon wireless cable plans.

The announcement had a chilling effect on the industry's ability to raise capital for wireless initiatives in the United States. And equipment makers began retreating from the technology.

Overseas, however, wireless cable caught on to a greater degree, considered a quick and easy solution for cable TV where infrastructure lacked - perfect for locales where the streets couldn't easily be torn up, places as diverse as Qatar, Brazil, the Czech Republic andIreland.

But in mid-1996 the company announced it was losing money because offeeble demand in Saudi Arabia and Australia and loss ofa follow- up order in Thailand.

By late 1997, a capital crunch in emerging markets further took its toll, forcing CalAmp to discontinue shipment ofcertain components. The company reported sharply lower earnings, and investors had begun showing short interest in CalAmp shares - that is, betting its stock would fall. California Amplifier had "a lot of thi~gs goi~g"againstit,'" saM Donna Coward, asenior telecommunications analyst at the Renaissance Research Group, an investment management and research finn based in Richmond, Va. "Demand wasn't there, domestically or internationally."

In April, a vice president and senior analyst at Moody's Investors Service in New York pronounced the wireless cable industry, especiaJly.Aigitaty~de9.,,"4ead, for th~ ~ost part."

;, .. , .. . ., - " ; , But the company still believes ground-based wireless cable technology is the best bet to provide multichannel television in less developed or sparsely populated countries.

Not all agree.

"In my view, satellite is the best deliveiyme~4anism for broadcasting. The MMDS spectrum (wireless cable) will be proved more effective'tor twQ-wciycommunications," ~alyst Robison said.

In the United States, "Wireless cable (television) has worked for Bell South," Robison said, "but it's an anomaly." The Baby Bell offers wireless cable television services in New Orleans, Atlanta, Orlando and Tampa.

Then came Mel WorldCom and Sprint'with their plans to transmit not television, but to offer two-way voice and data using the technology.

And a new roller coaster ride began forCa)A.mp. . :, :.r::-•. ',_ .' ~ "We think the objectives are for ( Sprl~t~c{MCI) to be in the top 10 markets by mid-2000 and the top 30 by the end ofthe year," Robison said.

"This .kind of suc~ess and this kind ofragi.d dep~

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color) California Amplifier markets and manufactures components for satellite and wireless cable uses. (3 -- color) At Camarillo-based California Amplifier, Petronilo Farala screws housings onto converters. (4 -- color) Michael Ferron Michael Owen BakerlStaffPhotographer CHART: Wild Ride

Format to PrinUSave

40of40 1/412000 8: 18 AM Appendix D. Service Quality in Sprint's Local Telecommunications Division Sprint's Local Service Areas

Sowbtm• ~ Iii w_ ~ THE KANSAS CITY 8~1AR Lon lin u (. d f r "Ill f·· 1 is that Esrt'v and Sprint Presiaen: l:lonald leMay will have impOnc.D: .:1, : 1he deal was limd, lhat tigure jobs with the ne\', company. ".I'llfX'd to 16,llfKJ. According to EsTey. that is about all ~imilar changes could be coming they can say right nO\\, 1.> Sprint and MCI WorldCom sort "The transition teams won't ever. through a combined 150,000 em be formed and start to opera;:c unti: Diovees, observers sa" Particularly the end ofthe first quarter. until we January 16. 2000 ~'U1nerable"illbe those whoworkiI-. get funher along in the Department o·.'crlapping areas such as Internet ofJustice w.ie\\;" Esrev said in a re backbone businesses and long-dis cent interview, refeITing to the J.ance serviCE.. process of seellilg regulatory ap Indeed, the consensus among two proval. "Until the work begins. we dozen in\-esonent analysts. market can't begin tohave answers." researchers andindustrYconsultants The long-term success of the interviewed for this article is that job merger, hO\Yever. depends in large cuts will be extensive, given the con part on the companies' ability to siderable redundancies in the two meet their cost-savings numbers, companies' operations. and achieving that goal depends on Those observers presume that their abilitytostreamline operations. WorldCom ChiefExecutive Bernard By their own estimates, MO Cuts ahead J. Ebbers will remain true to form WorldCom and Sprint e:xpect to gen and waste little time selling off busi erate operating "synergies" of $9.7 the San Jose. Calif.-basedmarket reo nesses and shedding wmecessary billion in the first four years after the search. firm Dataquest, was quite for Sprint,' employees to pleaseWall Street. merger is completed.The largestpan pointedinhisanalysis ofthelikelyef "The issue here is that the overlap ofthose savings - $5.5 billion - is fects onSprint. is humongous," said Frank Dzubeck, slated to come from sales, general "MQ will waste little time after analysts say an analvst with CommWlications and administrative expenses, the closing before cutting staffto justify Network-Architects inWashington. largest part ofwhich is salaries and the deal, whichwill probably mean "There's a huge amount of redun benefits. discarding a significant portion of Overlap with Mel danC\:" Esrey's preferred termfor "layoffs" Sprint's long-distance staff, particu Thomas Weigman. senior vice is "dislocations," He acknowiedged larlymiddlemanagement and over called 'humongous' president of marketing for Sprint. that there would be some but said headfunctions" such as human re said it was not accurate to make di theyshould not hit Sprint employees sources, finance, payroll, strategic By TED SICKINGER rect comparisons to othermergers or anyharder than MOWorldComs. planningand audit, Koppman said The Kansas City Star MOWorldCom's past deals. He em WorldCom and MO said there Ebbersnotedonthe daythe merg phasized, for example, that the still would be no large layoffs whenthey erwas annoWlced thatWorJdCom's For years Sprint Corp. ChiefEx recent merger of MQ and World agreed to merge. Bittinlate 1997, j~ employment numbers had never ecutive William T. Esrey intoned a Com was almost a hostile takeover, as the deal was announced, MOtm gonedown fromyear toyear. single mantra: "We have what it whereas the Sprint deal was consen denook a reorganization and shed Butthe 77,000 employees the com takes to go it alone." sual, 4,500 employees. according to the pany said it had on that day was Now that Sprint has agreed to Weigman acknowiedged thatthere company'squarterlyrepons. 3,700fewer thanthetotalreportedby merge with MQ WoridCom Inc., wouldbe"changes intheoverall con The combined company also an MO Cooununications and World however. Esrey has adopted a new figuration ofthe company" after the nounced a layoffinDecember 1998 Combefore theirIDeIgeL theme, this one aimed at quelling deal and "some degree ofchanges." that affected perllaps 1,800 employ When questioned about the ap concerns about the merger's effect Former employees at MCI Com ees. Former employees also saythat parentdecline in employment, MO on more than 18,000 area employ munications and Brooks Fiber Prop many thousands ofemployees' lives WorldCom officials revised their ees and the local economy. erties - both ofwhich merged with have been disrupted, either through head countto 83.263. They said that, "The newWoridCom will "have WorldCom in the last two years smaller layoffs, undesirable transfers excluding divestitures and acquisi revenues of $50 billion a year, heard employmentassurances when ordepartures throughattrition. tions, employment grew 8.7 percent growing 20 percent a year. Our their companies were bought Lisa Pierce, ananalyst withGiga In between September 1998 and Sep problem is not how to get rid of Allan Shinogle, a software techni formation Group, an independent tember 1999. Beyond that they de people. but how we get enough cian at American Century Invest m.arlret research and consulting firm clinedtocommentfor dUs article. qualified individuals to run that ments in Kansas City, left MO after in Cambridge, Mass., wrote in a re Sprint's long-distance divWon em immense engine ofgrowth." his job "'"lIS outsourced to another cent reponthat "5,700 MO employ ploys Ei,550 inKansas Otyand 2O.soo Business plans, however, have a companyin the wake of the merger ees were let go after themerger." aaoss the country. Its colpOrate, ad way ofchanging when it comes to withWorldCom. He counsels Sprint Ifanything. she thinks Sprint's lay ministIativehead countis5,200, with megamergers. Executives must employees to brace themselves. offmunberswilllook evenbigger. 4,100 inKansas City. placate regulators and wring sav "Let's get it straight" Shinogle said "Despite the fact that Sprint has a The companies have said that ings out ofthe combined compa "They call it a merger. ButWorldCom better data network and technical where redundancies exist, World nies to meet the demands ofWall bought them out -lock, stock and staffthan MQWorldCom, it is also ComwlIhire the best from both 0p Street. barreL They just use that term to likely thatWorldCom's preference for erations, encouraging empl0)"!e5 to Witness the situation at newlv makefolks feel better." its own people and methods makes competefortheirjobs. merged &xon Mobil Corp. . the need for Sprint's obsolete, and Koppman acknawledged the sen When the merger ofExxon and Paring back therefore its data netwod::s, techni limeotbutsaid heIhoughtvohmtaIy Mobil was announced, executives Nearly four months have passed cians and networl:: operations center and involuntary layoffs would be estimated that about 9,000 jobs since announcement of what was at would be drastically downsized, weighted to the Sprint side, with up- would be eliminated. But a month the time thebiggest mergerin history. phased out or spun off,· Pierce per management staffed by Ebbers' Bitt the onlyconcrete employment wrote. closeassociates and Sprint manage news offered to Sprint worlcers so far Steve Koppman, an analyst with ment having limited authority and Vv'urldCom's strategic vision, "I see (the local operations) disap "If you can liquidate assets and pearing at some point," said Mel plm'l' the proceeds back into your re Manen, an analvst at Edward Jones 'llly high-growth businesses, you get in St. Louis. "Maybe not right away bet1er bang for your buck and but even the Baby Bells have been streamline yourvision," he said. selling their more regional proper Compan)' officials acknowledge ties. Tney're too expensive." that they will probably have to sell Analysts also think Sprint's equip Sprint's Internet backbone business, ment business, Sprint North Supply, the physical infrastructure that pro and its directory publishing unit \~des connectivitY to the Internet, to could be sold to raise monev in the pass regulatory muster. It is unclear wake of the merger. The 1\';0 busi how many employees would be af nesses employ 2,583; the company fected bvthatmove. was unable to break. out local em As the pressure mounts on the ployees. companies to show that the merger Notably, MQWorldCom recently is not anti-competitive in the long" sold MQ Systemhouse, a systems in distance marlcet, they might consid tegration business, to Electronic Da er selling the parts ofSprint's long ta Systems ofPlano, Thxas. distance network that are redundant Aspart ofthe deal, MQ\\brldCom with MQWorldCom's. also outsoun::ed muchofitsinforma Both companies are emphatically tiontechnology and software devel effect. opposed to anyforced divestitures of opmentworkto EDS. lhat contract Indeed, the very reason that MCI long-distance assets. But investment rippled through the ranks as 9,200 WorldCom is a Wall Street darling is bankers put the value of 'Sprint's MQjobs were transfe.tred to EDS. Ebbers' success in digesting past ac long-distance division at $30 billion. Sprint has a business similar to quisitions and slashing corporate Selling redundant assets may make MQ Systemhouse. Sprint Paranet, overhead. sense, analysts say. Again, the divi- that employs 1,728 inThxas. Analysts Esrey emphasizes that every mexg sionemploys 6,550 inKansas City. . thinlc:\\brldComwill sell it. er is different. There are no plans to Esreyinsists thatthe newcompany Sprint also employs a legion of sell or shuner any of Sprint's opera will retain Sprint's local division and software engineers. Unlike MQ tions. Construction ofthe $920 mil thatits 8 million local access lines will WorldCom, it does muchofits infor- . lion campus in Overland Park will become an integralpart ofthe com mationteclmologyworkin-house or continue. The new WorldCom will pany's strategy to introduce broad with long-term contractors. That remain a force in the community. band services to 'local customers. might change ifthe new company He also says local employmentwill lastweek Ebbers pledged to roll out adoptsMQWorldCom's model aetuallyrise overthelong term. Esrey those services in rural areas in the ·WorldCom doesn't lilte software points to the rapid growth of the year afterthe mexger. development," said Sbinogle. the for SprintPCS wireless division insaying Some analysts think the local as mer software'tester, one ofthe 9,200 that, long-term, area employment sets eventuallywill bevery valuable. employees whose jobs were trans will grow after the mexger. Others think the companywill ulti feIred toEDS as partofthe outsouIC Ebbers said the same thing to Sen. mateJyparebackthe division. ing contract. ~They'd rather farm it John Ashcroft, promptingenthusias Providinglocal telephone service is out." ' tic comments about the deal from capital-, labor- and management-in The vast majorityofthe 600people the MissouriRepublican. tensive, they say. The local telephone who worked in Brooks' S1. Louis Jack Norris, the former senior vice businesses that Sprint owns in 18 headquarters have left the comPanY president of global engineering at states are primarilyin more rural ar or been let go, according to several MQ, expects there will be a larger ef eas, where demandfor new services high-ranking former Brooks execu fect on managers than on anyone such as high-speedIntemetis gener tives. Again. MCI\\brldComwould else. ally lower and upgrading equipment not comment on the specifics of ~There are always too many barn toprovide them is moreexpensive. theirdepanures. bosses after these deals" he said. ~ey'reveryprofitable, butthey're Several ofthe 20 former MCI and ~Certainly there will be some fallout a distraction," said Pierce, theanalyst Brooks employees interviewed for after this deal, but it's really at the VP with Giga Information Group. "Deal this article are still with the com level andup." ingwith all those state regulators is a bined company. Some were laid off. real pain in the petunia They could Others voluntarilyleft - ieoognmng Selling off take thatmoneyand pumpitinto ex the opponunityintoday's job marltet In addition to cutting redundant panding their global networks or - or took severance packages that employees, analysts say, the new fixed wireless." helped them set up their own busi \\brldCom is likely to focus on high Sprint's local telephone division nesses. growth areas ofthe business- wire employs 26,000, with almost 5,000 in "At first they were saying all the less, Internet, international and Kansas City. According to estimates same things: thatthis is a good thing. broadband data- and sell some of that investment bankers worked up that we're all going to get rich from the others. in the companies' merger negotia our stock. benefits won't change;" For MCI WorldCom, the jewel in tions. it could beworth $25 billion. said Shinogle. "Whatthey sayand re Sprint's crown is Sprint PCS, says The JocaI division has been cutting ality are two different things." MarlcZDhar ofForrest:erResearch. He costs to bring its revenue and costs sees all orparts ofother divisions be per employee in line with those of 70 reach Thd Sickinger, a:zll ing dismantled and sold, partly to the regional Bell companies but has (816) 234-4336orsend e-mail mollify regulators, mostly to focus yet to meet those goals. to sid:inger@la::soom EIAPLCYSE e.VLl..ETIN CSQ L,JD""''-- _ lli29m

Please furward thh. bulletin vi.a e.maiI to all _mployea within the CSO orgOllnlu1l0n. M_gers are encouraged to provtde a copy of thIs bulletin to employees who do not !lave ace__ to ;I( PC. Tban/o: you.

A~frQm 811 Mc:00c*d. Senior Vic. President, CSO. LIt)

A few weeks ago. I had the. opportunity to meet with the eso Management Teams on a nationwide basis to discuss the critical need to ~uce costs within our.organization. During those meetings. we discussed a new effort known as~he FORGE (FOQJS Our Resources on Greater EfficiencJes) initiative, which is currently under way.

FORGE consists of six teams made up or representatives from a variety of levels and different segments within CSO. Their goal is t0r.educe operating costs by 1Q percent across the bOard for 2001. As a team, they are examining the major functional areas of esa - I&R, CO. WFM. Remote Entry and Assignment. Engineering and Non-payroll activities. They are also tlYing to pinpoint areas that COUld be more cost-effective through process improvement_ There is no doubt tnat tile FORGE initiative is a must for eso and there is also an underlying need for success from a business unit perspective, which will ultimately benefit us as a division.

Keep in mind that we ~ wait until we begin reaping the benefits from the FORGE initiative. From an industry per.;peetive our operating costs are much higher in comparison to the competition. As a result we are planning to focus on five key areas: reducing overtime, improving productivity, reducing we'" volume, reduCing contractor expense aod spending no dime before it's time. It is quite Clear thai those are the standards by which we will measure our success and you can expect that many changes will occur between now and the end ofthe year.

I would like to encourage an of you to take an active role as we work to deVelOp new approaches to manage our business more efflcient!Y. Don't hesitate to contact your manager/supervisor or a member of the FORGE team to submit your ideas/suggestions. (A list of the FORGE team member.; is located at the bottom ofthis bulletin_)

In condusion, I realize that a lot has taken place. over the last several weeks in telT1'lS of the SplintIVVol1dCom merger announcement. As you are all well aware, this is the largest acquisition ever, totaling $129 bHlion. AU of us should be very proud to be a part of this historic event whICh offers Spnnt many advantages competing nationally, even globally.

Remember that the time Is now to make a difference in esc. As ifldivlduals, I encourage each of you to submit your ideas to your managers/supervisors or FORGE team members as soonl!s possible. With your help I feel very confident that we will acl1ieve success In U1e months to come. _·,··.·...._~... 4

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February 4, 1999

Temporary hiring and employee transfer restrictions

The changing nature ofthe business is causing the LTD's leadership to evaluate several aspects ofthe LTD's operations to determine how to improve profitability. During this evaluation, the LTD must maintain the levels ofprofitability expected by shareowners. Several actions have been taken to control expenses during this period. One ofthose actions is to freeze hiring ofemployees in nlost cases. The freeze will not effect the hiring of: 1. associates who are selling our products and services 2. associates whose jobs are directly driven by the service requirements ofour external and internal customers, and 3. associates who apply for positions in Broadband Local Network (BLN). Since, for the most part, jobs ofdeparting LTD employees will not be backfilled, it is reasonable that LTD employees will not be released for other jobs that are laterals or downgrades in Lill. LDD, Corporate Center, pes or other Sprint organizations. Employees will be released for promotions and, in most instances, those vacancies will be backfilled.. Therefore, effective immediately, LTD employees may not submit JIRs for jobs that are laterals or downgrades. J1Rs that had been received as ofFeb. 2 will be honored.. Due to the critical need to staffour new BLN organization, employees who wish to transfer into this group on a lateral or do\\'ngrade will not be affected by this policy. When appropriate, jobs ofemployees who transfer into BLN may be backfilled..

Any exceptions to this policy must be approved by a vice president. This policy will be in effect through Friday, April 30, 1999. At that time the LTD's profitability will be evaluated to determine whether or not these restrictions will be lifted.

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OVER11¥E REDUCTlOH GUltlntNES

1. The fo8Owing am g1J~to be l.tSQd byibe ~O~CentQr (NOC) during the pef,od of ~ ~ctton. 100y ar9 not inteoded to be faJren as future pofleY d'raoges .or iMant"to be all ~ GOOD JUDGMENT MUST BE USED IN EACH SrruAT1ON. ~ 2. If a cantral office tadtnfdan is c:urramIy woOOng on a trouble. le. switch. ~~ cir03it. etc.. he1she win continue until the probiem is resoJv'ed. urness excessive overlimQ wi» be required to compjl!te1he b"cublte. The c_o. technician wi! notify hislher suptrVisor. {Un~this is an etrMg~saMce S\Jd"I as FAA. FEMA. I8w enfo«:ement impacting ~. E911 w aif:ic3i HiCap, etc., in which case 1he trouble wBf b4iJ ~ bIiJfore ~ tectm\clallleawts}. 3. If a ctt:1l1rcd office tedmician is cum:rrliywOOQog10 comp,et9 a due C1at~ 00 a $pedal SeMee -circuit ot'der. helshewit conttnue urdi ~ order is comp{eted~ unCess ~ssNe overtime win be, ~ to compIQte. the order. 'Tb9 C.O. technicianwill notHY. h~r supeNisoc". 4. ". Alarms ttIat are ~by the NOC thatinc:ftea1e ~ Is not a1rected, botthere is 3 loss of ~ancy~a taehnlcian wiH be QIIed out ifthere are 100 ormore ~ invclved_ 1f ~ than 100 ~~ invoIv~ a can 10 ttw ~Isorwilt be made to insure no spedal ormajor eustomer.J are in\lOi\oed, ifnot th~ would waft until the start of ttJe nextWClk d_y- whb 1he foDawing excepticns.. a} 1f moce than 100 customers are at risk. by-wor1Qng en a unit during normal woddng hrxJr.i then an immediate call outwiI be made. b) tf the equipment Involves 6)11. FAA. oranyother majorOf critical customer thEim an imme

. lQflV8 tIOC ... UST

OVER~RE!DUCT1QM QUIDE1.IE8

8. Whent we i1i1N'e 24 boor cenU:aI«Gce ~ hiNOC WII'try 2c utItmiNa ~ SbraftItf' hotJt' traIttMs. IfUft de1s wIII*J. • 2 J'JoW' ca'l'flUt8. MOTE: The HOC wiI need aD IIWI"1IiIQeI' to ~. Ilat ofdisl2'uIt are ~wd 2A hctn and what...... ~.1dI~ w;ceaaic. 9- ~~ CIIauta wi! ~be a18d$ an m1 emM_'RI'" TbIa WIJ be ~hni..ed by. the ~&wvIcas gtaJp and wit b;&Jde::JIIiNJio8c lIUd1- FAA. ~ FEMA, Jaw .....1'9 -vb.E911 T ...... me-1mf*AS119 many CU:tlbJinBra. rooallcal ~ efI:. 10_ If WQIfdng <:lna ~Sand Jtmaybe ~efNdfi&. fbe~io~ ovc:rtiu.wI) be medIJ bybNOCand ~ tI6ce~~. 11. ~ l4OC'wIl OJCdtnue ~ <*I ~«IS noIfIWl onldl'fib«~WIrinaland SONET Qtdc:aI RfmIior_ftlW. 12. n.HOC ..

Sprint's local telephone subsidiaries pay dividends to the parent company (Sprint Corporation) from profits they generate. The dividends paid by local telephone operations to Sprint Corporation are the major source ofcorporate profits. Sprint uses these funds either to invest in non-local telephone businesses or to distribute them to shareholders in the form ofcash dividends.

An analysis ofthe cash flow ofthese dividend payments shows that Sprint Corporation has been subsidizing shareholder dividends and investments in non-telephone subsidiaries with cash generated by its local telephone operations.

We arrive at this conclusion through the following methodology.! (The data is on the next page.)

Step 1. We calculate the "fair share" that each Sprint local telephone subsidiary should contribute in dividends to Sprint Corporation. The "fair share" is based on the percentage ofstockholder equity that each local telephone subsidiary holds in the parent corporation. In 1998,Sprint's local telephone subsidiaries' share of total corporate stockholder equity was 35.4 percent ($4.4 billion/$12.4 billion). Therefore, Sprint's local telephone subsidiares"'fair share" dividend contribution in 1998 was 35.4 percent oftotal dividends paid to shareholders ofthe parent company. We multiply Sprint Corporation's total 1998 corporate dividend payment of$ 430.3 million times 35.4 percent to arrive at a Sprint local telephone subsidiaries' "fair share" dividend of $ 152.2 million.

Step 2. We then calculate the actual share that Sprint's local telephone subsidiaries contributed to the parent company. In 1998, Sprint's local telephone subsidiaries paid Sprint Corp. $ 685.9 million. This represents 159.4 percent oftotal Sprint corporate dividends in 1998 ($685.9million/$430.3 million).

Step 3. Finally, we calculate the "excess dividend" payment. We subtract the actual dividend paid (Step 2) from the "fair share" dividend amount (Step 1) to arrive at the "excess dividend" payment. In 1998, Sprint's local telephone subsidiaries paid an excess dividend of$ 533.7 million to Sprint Corporation ($ 685.9 million - $ 152.2 million = $ 533.7 million).

We repeated these steps for 1997 and 1996. The excess dividend in 1997 was $68.6 million. The excess dividend in 1996 was $64.4 million. The total excess dividend for the three years was $207.6 million.

The excess dividend represents the subsidy that the local telephone company provides to Sprint Corporation.

I The source for the data is the Federal Communications Commission, Statistics o/Communications Common Carriers, Table 2.9 (Statistics ofReporting Local Exchange Carriers), for the years ended Dec. 31, 1996, Dec. 31, 1997, and Dec. 31, 1998. Excess Dividend Analysis Sprint's Sprint's local telephone subsidiaries $ millions

Stockholder Equity Step 1 Step 2 Step 3

Sprint's Sprint Fair Share Dividend Actual Dividend Paid Excess local telcos 0/0 $ 0/0 $ Dividend

1998 $ 4,404 $12,448 35.4 % $ 152.2 159 % $ 685.9 $ 533.7

1997 $ 4,087 $ 9,025 45.3 % $ 194.7 187 % $ 801.1 $ 606.4

1996 $ 3,871 $ 8,519 45.4% $ 190.6 110% $ 459.8 $ 269.1

Total N/A N/A N/A $ 537.5 N/A $ 1,946.8 $ 1,409.2

Note: Sprint Corporation's total dividend payments in each year were: 1998: $430. million; 1997: $430 million; 1996: $419.6 million. Source: Calculation based on data in FCC, Statistics ofCommon Communications Carriers, Table 2.9 (Statistics of Reporting Local Exchange Carriers, for the years ended Dec. 31, 1996, Dec. 31, 1997, and Dec. 31, 1998. TRACING THE CASH FLOW - 1996-98

Telephone Ratepayers

Sprint Local Telephone Companies I $1.9 Billion (total dividend)

Sprint Corp.

$0.5 Billion $1.4 Billion (fair share (excess dividend) dividend) Sprint Shareholders Non-Telephone Non-Regulated Investments

Wireless, long distance, data networks, foreign, new telecom services