1 Tollgate Order Implementation Actions Craig Crowley WorldCom May 14, 2002

2 Outline  Timeline of Actions  Impact to 4Q01 Payout  Interim Expectations  Long Term Expectations  Payment Challenges  Compliance with Reporting Requirements  Final Expectations

3 Timeline of Actions  Announced intention of paying DAC on all calls to SBRs at PCC Forum – 5/14/01  Filed Petition for Clarification – 5/29/01  Began development work to modify PCS to pay for SBR calls – 6/12/01  Announced surcharge policy to SBR customers – 7/31/01  Participated in industry meetings to devise alternative reporting – »Meetings in DC (8/3) and Dallas (8/13) »Conference calls (9/7 & 9/14)  Presented implementation plans to FCC – 8/27 & 10/1  Implemented system modifications to include SBR calls in payment for part of 4Q01 – 10/1/01

4 Timeline of Actions  3 rd Order invalidated tracking & payment plans  Established daily calls with cross-organizational contacts to determine, implement and monitor information exchange with customers - ongoing »Announced new surcharge policy to SBR customers – 11/30/01 »Procedures on file exchange sent to SBRs – 12/13/01 »Revised procedures sent to SBRs – 2/28/02  Participated in series of calls with PSPs, IXCs, and SBRs throughout December and January »Discussed options for exchange of call data and default proposal

5 Timeline of Actions  Began development work to modify PCS to implement new reporting requirements – 12/13/01 »Changes required to daily, monthly and quarterly processes »Significant staffing resources assigned to project »Work is expected to be phased in by September 2002  Developed process to adjust 1Q02 compensable calls based on SBR information – 3/1/02 thru 5/10/02

6 Impact to 4Q01 Payout  Stopped tracking calls from ’07’ payphones »Flex ANI waivers expired in December 1998 »Change brought payment practice in line with SBRs »Valid ’07’ calls have dropped significantly  Payphone calls dropped from 42% in 4Q98 to 10% in 3Q01 as a percentage of total ’07’ calls »Surrogate methodology used to pay on ’07’ payphones »Test numbers established to assist PSPs in determining if Flex ANI is working »Continuing to track large volume of non-compensable ’07’ calls would expand system processing and data storage requirements

7 Impact to 4Q01 Payout Millions of non-payphone calls are captured by tracking ’07’ calls As level of detail needed for reporting increases, impact of these calls will magnify

8 Impact to 4Q01 Payout  All SBR calls were included in payout for December »WorldCom prepared for original plan to pay on all calls completed to SBRs »Release of 3 rd Order on November 23, 2001 did not provide enough time to change systems prior to effective date  For December 2001 WorldCom overpaid DAC  Adjustment will be processed in future quarter to recover overpayment »SBR-provided data will determine adjustment amount »No interest will be associated with overpayment

9 Interim Expectations  WorldCom and SBRs need time to fine tune exchange of DAC eligibility data »Expect to have routine down by 3Q02  For 1Q02 and 2Q02 WorldCom expects majority of SBR calls to be correct with payout »Subsequent quarter adjustments will be made for SBRs that deliver files late

10 Long Term Expectations  SBRs will provide DAC eligibility data for quarterly process »Files provided by the 20 th of the next month »Three options established  Opt in at 100% of surcharged calls  Provide call detail records for completed calls  Provide call detail records for incomplete calls »Option selection may change quarterly for ‘Opt in’  WorldCom will adjust call counts during quarterly process »No adjustment required for ‘Opt in’ calls »Adjustments will be based on call counts provided by SBRs  Files must pass edits prior to acceptance

11 Payment Challenges  Tight timelines exist for SBR DAC eligibility data »Data for month 3 of each quarter may not be received in time for quarterly process  Late data from SBRs will impact payment »WorldCom may pay for all calls related to SBR and take- back overpayment in subsequent choices »WorldCom may exclude all calls related to SBR and pay in subsequent quarter after receipt of DAC eligibility data from SBR  Some SBRs may never submit DAC eligibility data »WorldCom is prepared to block payphone calls from uncooperative customers or terminate contracts

12 Compliance with Reporting Requirements  WorldCom plans to comply fully with the new reporting requirements beginning with calls on July 1, 2002 »WorldCom supported alternative reporting proposals prior to release of 3rd Order on November 21, 2001 »Timing of Order did not provide sufficient time to implement changes for 4Q01 payout »FCC was correct in estimating 6-month timeframe for implementation  Increased volume of data must be planned and managed carefully »Data stored will triple due to reporting changes

13 Compliance with Reporting Requirements  Identification of Dialed Numbers is not always possible »No distinction is maintained between COLLECT ( ) and C0LLECT ( ) »Dialed digits are not maintained on Prepaid records »Other card products have the same handling of dialed digits  WorldCom plans to establish default numbers for reporting purposes »Cross-reference information will be provided to let PSPs know which dialed numbers map to which defaults

14 Final Expectations  Significant effort is being committed to comply with the 2 nd and 3 rd Orders »Impacts to call tracking, timing of payments, and reporting  2002 will be a year of transition to a new process »Subsequent quarter adjustments may be temporary or become a routine expectation  Accurate, timely payments remains the ultimate goal through this evolution!