Bell Atlantic 1996: Year in Review - Company Harvests Technology at Dawn of Competitive Era

Bell Atlantic 1996: Year in Review
Company Harvests Technology at Dawn of Competitive Era

Consumers use Technology to Prosper in the Information Age

January 8, 1997

ARLINGTON, Va. -- One year ago, Bell Atlantic promised
to find more ways
to meet the needs of customers who wanted more than "plain old
telephone
service," and to move them closer to the wonders of the information age.

Assisted by the growth of computer technology, the Internet and historic
changes in telecommunications law, Bell Atlantic delivered on its promise
in 1996 by introducing a wide array of services to make life easier for
its customers.

In 1996, Bell Atlantic introduced affordable packages for
residential
ISDN (integrated services digital network) lines to give consumers
high-speed connections from home to cyberspace. It launched an easy to
use Internet access service,
enhanced and expanded its own World
Wide Web home page and introduced a home page for vendors to sell
their
products. The company added value to its Caller
ID service by
expanding the ability of customers to get name information on long
distance calls, and the company added new features to its voice mail services to
give its customers more flexibility.

Bell Atlantic Chairman and CEO Ray
Smith declared "Ma Bell is dead," and
said, "Too much has changed since divestiture to resuscitate
her." Bell
Atlantic announced its intent to merge with
NYNEX, the regional Bell
operating company serving New York and New England. Smith called the
merger "a big plus for competition," adding, "It will
accelerate full
telecommunications competition and customers would benefit from increased
choice, lower prices and better and more innovative services."

Bell Atlantic welcomed local competition by signing agreements that will
allow other companies to use parts of its network to provide local
telephone service. Five days after the Telecommunications Act of 1996
became law, Bell Atlantic announced plans to offer
long distance service,
outside its mid-Atlantic region. Additionally, Bell Atlantic reaffirmed
its commitment to the communities it serves by supporting educational
initiatives that allow students to harness the Internet.

Throughout 1996, Bell Atlantic led the way in ensuring people had the
tools they needed to prosper in the information age.

Telecommunications Regulation
Changes Dramatically

Telecommunications Act of 1996:

In February, President
Clinton signed
into law a historic bill that made sweeping and far-reaching changes
to
telecommunications regulation. The law dissolved the outmoded
constraints of the Modification of Final Judgment, the court decree that
has regulated much of the telecommunications industry since 1984. Among
other things, the new law allows companies to compete with Bell Atlantic
to provide local telephone service, and will allow Bell Atlantic to
compete with interexchange carriers to provide long distance service.

FCC's Role: Congress gave the Federal
Communications Commission (FCC)
the authority to determine how the law would be implemented. In
October, the FCC announced its procedures, but they were challenged by
state regulators and local telephone companies. Bell Atlantic joined the
legal challenge because, like others, it believed the FCC had overstepped
its bounds by taking away the states' authority to set interconnection
pricing guidelines--a key component for introducing local
competition--and by establishing wholesale pricing guidelines for
resellers that failed to follow the intent of the Telecommunications
Act. In October, the 8th U.S. Circuit Court of Appeals suspended the
FCC's pricing rules, pending a ruling on the merits of the case.

The suspension did not stop local competition, however, and Bell Atlantic
marched forward to meet the intent of Congress. It negotiated
interconnection agreements with Commonwealth Communications, Inc.;
Commonwealth Long Distance; Eastern TeleLogic; Jones Communications; MFS
Communications; Residential Communications Network and WinStar. In
addition, state regulatory commissions throughout Bell Atlantic's service
area are setting interconnection pricing guidelines and arbitrating
interconnection negotiations if necessary.

All of the agreements meet the 14-point checklist required by the
Telecommunications Act, and negotiations continue with other carriers.
Bell Atlantic Vice Chairman Jim Cullen
said, "Local competition is
expanding and we're well on our way to offering long distance service."

Bell Atlantic Grabs Long Distance Ring: Five
days after President
Clinton signed the act into law, Bell Atlantic Communications filed to
offer long distance service in five states outside its region. In
July,
Bell Atlantic became the first regional Bell operating company to offer
long distance service outside its service area. This launch began in
Michigan, North Carolina and Texas with an aggressive marketing
campaign. This year, Bell Atlantic plans to ask the FCC to authorize the
company to offer long distance service in its own service area.

Bell Atlantic Gains Regulatory Flexibility:
In November, state
regulators approved requests from Bell Atlantic -
Washington and Bell
Atlantic - Maryland for flexible regulation that is more appropriate
for
today's competitive environment. All of Bell Atlantic's operating
telephone companies are now regulated under a model known as "price
caps," which regulates a company's prices, but not its earnings. In
addition, Bell Atlantic - Washington fought for, and attained, a new fair
and balanced telecommunications competition law for the District of Columbia.

Bell Atlantic, NYNEX Announce Merger

In April, Bell Atlantic and NYNEX announced they would
merge. Called a
merger of equals, this partnership will create a new Bell Atlantic with
133,000 employees, revenues of over $27.8 billion and a combined market
value in excess of $50 billion. Shareholders of both companies
overwhelmingly approved the merger. The companies now await approval
from several state regulatory commissions in NYNEX's territory.

Bell Atlantic Makes Cyber-Surfing Easier

ISDN's Acceptance Zooms:

This year, Bell Atlantic made
high-speed ISDN
lines to the home affordable and easy to get. ISDN lines allow people to
access the Internet at speeds about five times faster than the average
analog modem. The company now offers packages that allow customers to
cruise the fast lane of the Information Superhighway inexpensively
whether they are browsing the Internet, telecommuting or going on-line.

Bell Atlantic Becomes an Internet Service
Provider: The company created
Bell Atlantic Internet
Solutions in March to develop and deliver a full
range of Internet services to businesses, governments and consumers.
Bell Atlantic launched its first high-speed Internet access service for
large businesses in the Washington, D.C., market in April. In July, the
company launched Bell Atlantic.net
^(sm), a value-added, dial-up
Internet
access service for consumers and small businesses. Bell
Atlantic.net
provides subscribers with Internet access, e-mail, browser software,
pre-packaged links to the best sites on the World Wide Web and other
communications capabilities. Bell Atlantic.net is offered in
conjunction
with ISDN in a number of markets.

Bell Atlantic also introduced the Bell Atlantic
Connectivity Package and
the Bell Atlantic Web Package for businesses--the first in a series
of
Internet offerings that bundle a number of capabilities into
"turnkey"
solutions that include Internet access, Web site hosting and creation,
communications equipment and applications software. The company began
its foray into the Web services arena for businesses by designing,
funding and maintaining a Web site for the NAACP
that was unveiled in June.

By year's end, Bell Atlantic's Internet access and Web services had been
launched in seven mid-Atlantic markets and were available to more than
eight million households.

Internet Usage Affects
Telephony

In June, Bell Atlantic sent the FCC a study showing the impact Internet
traffic has on its network. In the study, Bell Atlantic found that
typical calls to Internet service providers (ISPs) last four or five
times longer than typical residential or business calls. These ISP calls
often tie up network facilities for hours. In addition, the study noted
that ISPs currently pay far less than what it costs Bell Atlantic to
carry the traffic they generate. Bell Atlantic asked the FCC to consider
the impact of Internet growth on the telephone network, and the FCC has
opened a Notice of Inquiry to explore the issue.

Wireless Service Boosts Consumer
Benefits

Propelled by affordable and innovative services, Bell Atlantic NYNEX
Mobile (BANM) welcomed its four millionth customer, adding close to
one
million customers this year alone. (To put this in perspective, it took
10 years to reach the one million mark.)

In 1996, BANM continued initiatives to add value to its service and
enhance its call quality. Following the telecommunications act, BANM
expanded its cellular long distance service to its entire service area,
allowing customers to purchase both local and long distance service from
one company. It began to transition its cellular networks in Trenton,
N.J., and Bucks County, Pa., from analog to digital, using CDMA (code
division multiple access) technology. BANM introduced an authentication
procedure, using advanced encryption technology, that make it almost
impossible for cellular numbers to be cloned, and signed a $53 million
agreement with Motorola to upgrade its BANM's network. During the year,
BANM and other cellular companies agreed to create a seamless nationwide
digital network, using CDPD (cellular digital
packet data) technology,
that allows people to send and receive wireless data transmissions.

PrimeCo Personal Communications, a
wireless
partnership between Bell Atlantic, NYNEX, US WEST and AirTouch, made
wireless history by launching
digital PCS (personal communication service) networks in 16 major
cities
nationwide just 16 months after PrimeCo acquired its spectrum licenses.
This was the first and largest multi-market rollout of PCS.

In addition, Bell Atlantic assumed management control of Grupo Iusacell,
the leading wireless telecommunications company in Mexico. Bell Atlantic
owns 42 percent of the company.

Telephone Numbers Dwindle

The supply of telephone numbers diminished as the demand for additional
phone lines continued at a record pace. Customers wanted more lines for
cellular telephones, multiple residential phone lines, pagers, fax
machines, computer modems and the Internet. Companies that plan to offer
local service in competition with Bell Atlantic also reserved large
blocks of numbers for their future customers.

The company announced new area codes to solve the
problem. The 703 area
code in northern Virginia will be split in half to create a new 540 area
code, and a 757 area code was created by splitting the 804 area code in
eastern Virginia. The 412, 717, 610 and 215 area codes in Pennsylvania
are almost exhausted. The company must eventually introduce new codes in
those areas. Bell Atlantic also announced plans to introduce 973 and 732
area codes in New Jersey to supplement 201 and 908 respectively. In
Maryland, Bell Atlantic will add a 443 area code to supplement 410, and
add a 240 area code to supplement 301.

"Geographic splits" have been the traditional way to create new
area
codes, however, the dramatic demand for new numbers has made this
approach less effective today. Bell Atlantic favors an
"overlay"
approach that creates new area codes in the same area as existing codes.
This method would not require existing customers to change their
telephone numbers.

Full Service Network Becomes a Reality

In January, Bell Atlantic launched its first commercial video
system in
Dover Township, N.J., offering consumers a high quality alternative for
their video services. This "open video system" allows video
programmers
to lease capacity on Bell Atlantic - New Jersey's all digital,
fiber-to-the-curb network and provide their programming. Bell Atlantic
Video Services, which last year acquired the New Jersey assets of
FutureVision, now is providing programming over the network.

This year, Bell Atlantic will move forward with the next generation of
its Full Service Network (FSN). This robust switched broadband network
will provide voice, high-speed data and video services over an
integrated, fiber-to-the-curb architecture. Initial deployment for voice
service will occur in the Philadelphia area later this year; high-speed
data and digital video services will follow in 1998. Bell Atlantic plans
to roll out its FSN in other key markets over the next few years.

In anticipation of delivering video over the FSN, Bell Atlantic conducted
a successful video-on-demand market trial with 1,000 households in
northern Virginia. TELE-TV, Bell Atlantic's video joint venture with
NYNEX and Pacific Telesis, established key programming agreements and
operating support systems, including a Digital Service Bureau to prepare
standards for video programming, movies and syndicated material for
digital retrieval and playback. While Bell Atlantic is now investigating
more efficient ways to manage its work activity, it is in a good position
for delivering video packages to its customers.

Bell Atlantic Enhances Consumer Services

Caller ID Growth Explodes:

In July, Bell Atlantic
celebrated its two
millionth Caller ID customer, only one year after reaching the one
million milestone. Caller ID shows the
number of the caller before the
phone is answered. Customers with Caller ID Deluxe also can see the name
associated with the phone number. Bell Atlantic signed agreements with
other telephone companies during the year, making Caller ID name
information available on more calls.

Enhanced Services Blossom: Bell Atlantic began
packaging its enhanced
services at a savings for customers while giving them more control and
flexibility over their lives. During the year, the company introduced
Talking Return
Call, an enhancement of Return Call which provides the
phone number of the last person that called as well as the ability to
automatically return the call. The company also introduced Easy Voice, a
voice activated dialing service, and Call Gate, a service
which allows
customers to control calls made from their phone. More than one million
customers signed up for Home Voice Mail
and Answer Call, Bell Atlantic's
voice mail systems.

Technology Advances Rapidly

All@once^(tm) Grows
Stronger:

Throughout the year, Bell Atlantic expanded
its All@once Solutions for large businesses, educational institutions and
state and local governments.

The company introduced a streamlined billing system called
expressTRAK^TM that offers an improved paper format, a CD-ROM
version and a process that allows customers to develop custom billing
reports.

In June, Bell Atlantic's All@once Solutions Center announced its
asynchronous transfer mode (ATM)
Cell Relay Service that, for a flat
monthly fee, allows customers to design, deploy and manage their own
high-speed bandwidth networks. The company also introduced All@once
Virtual
Private Network Solutions that provide customers with the
benefits of private communications network without actually having to
install one. The service allows users in remote locations to access the
system to make calls and use their voice mail system.

Frame Relay Usage Expands: Bell Atlantic also
developed broader-based
solutions to customers' data transmission needs. The company was the
first regional Bell operating company to provide Exchange Access
Frame
Relay Service. The service lets customers link local area networks,
over
geographic areas miles apart, to a network-to-network interface, and
transmit data at speeds from 56 kilobits per second to 1.536 megabits per
second.

Bell Atlantic
Continues its Dedication to Education

Throughout 1996, Bell Atlantic answered the call to action from
educators and government officials by contributing almost $7 million to
educational initiatives to wire schools and libraries to the Information
Superhighway. The company demonstrated the importance of public/private
partnerships in helping the nation's schools get on-line.

• Multi-Media Projects, New Jersey: Bell
  Atlantic - New Jersey expanded
  the interactive, multi-media trial at the Christopher Columbus Middle
  School in Union City. The trial allows students and teachers to exchange
  e-mail messages with others around the world. The company also
  established a distance learning network in Bergen County that allows
  teachers to use a video network to teach students in multiple locations.

• World
  School Project, West Virginia: Bell Atlantic - West
  Virginia
  provided a $158,000 grant to encourage teachers to use modern
  telecommunications technology to access the Internet from their
  classrooms. Eventually, 700 schools will be wired.

• Multi-Media Projects, Maryland: Bell
  Atlantic - Maryland is deploying a
  $13 million state-wide distance learning network that is part of the
  company's commitment to equip every public high school, community college
  and four-year public college in Maryland with distance learning
  classrooms, including all of the equipment. In addition, the company
  expanded its $1.6 million commitment to provide computers, e-mail and
  local area networks for Internet connections to Logan Elementary
  School
  in Dundalk, and the Bell Atlantic Foundation provided a $100,000 grant to
  Capitol College for similar purposes.

• Pennsylvania
  Advantage: Bell Atlantic - Pennsylvania presented
  grants
  totaling over $2 million to bring the latest technology to the
  Commonwealth's communities and classrooms. The company's $200,000 grant
  to the Allegheny County Intermediate Unit helped provide the first
  full-motion video technology in several resource-poor school districts in
  the county. A $750,000 grant to the state Education Department will
  provide 188 public libraries with access to the Internet. The project,
  OnLine at PA Libraries, provided
  computers, software, technical
  assistance and training for public librarians. The company presented
  $500,000 grant to the School District of Philadelphia's Children
  Achieving Program. The funding enables students to access the Internet
  in all 256 public school libraries.

• Access Virginia: Bell Atlantic - Virginia
  committed its resources to
  help build a multi-million dollar, high-speed, interactive
  telecommunications network in Virginia that will use fiber optic cable
  to link colleges and government agencies.

• Multi-Media Projects, Washington, D.C:
  Bell Atlantic - Washington
  partnered with the Foundation for Educational Innovation (FEI), donating
  $65,000 to wire three public schools in Washington, D.C. with ISDN lines
  and SMDS (switched megabit data service). Bell Atlantic donated an
  additional $65,000 to provide high-speed T1 lines for the Washington Area
  Project for Youth (WAPY). WAPY teaches inner-city children how to master
  computers and the Internet. The Bell Atlantic Foundation donated $1.5
  million to digitize photographs and artwork in the Library of Congress to
  create a National Digital Library that can be accessed from the
  Internet.

• NetMonth Initiative: Over 600 Bell
  Atlantic employees rolled up their
  sleeves with other volunteers to wire schools to the Internet. Bell
  Atlantic also donated 300 wiring kits to support the effort. NetMonth,
  which evolved from NetDay, is a national grass-roots initiative to wire
  schools across America.

It is unlikely that any year in the near future will be as significant as
1996 was for the telecommunications industry. Last year was a time of
historic change and important technological advances. This year will see
the growth of competition as companies begin to provide both local and
long distance telephone service. The FCC will make tough decisions on
how to encourage network investment while keeping telephone service
affordable, and more people will rely on computers and the Internet for
information.

Bell Atlantic Corp. (NYSE: BEL) is
at the forefront of the new
communications, entertainment and information industry. In the
mid-Atlantic region, the company is the premier provider of local
telecommunications and advanced services. Globally, it is one of the
largest investors in the high-growth wireless communication marketplace.
Bell Atlantic also owns a substantial interest in Telecom Corporation of
New Zealand and is actively developing high-growth national and
international business opportunities in all phases of the industry.