Tollgate Order Implementation Actions

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 • 3rd 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 3rd 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 20th 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 1-800-COLLECT (1-800-2655328) and 1-800-C0LLECT (1-800-2055328) • 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 2nd and 3rd 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!