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MCI WorldCom Provides Local Service

June 3, 1999

NEW YORK (AP) _ MCI WorldCom’s new local service in New York has signed up 75,000 residential phone lines after four months, suggesting that consumers may want the same choices in local calling they enjoy in long distance.

The New York customers who’ve switched to MCI WorldCom for local service represent about 15 percent of the company’s long-distance business in the state, John Donoghue, senior vice president for mass markets, said Wednesday at a company briefing with industry analysts.

``That’s more (local customers) than I thought they would have just starting in February this year,″ said Rex G. Mitchell, an industry analyst for Banc of America Securities in San Francisco.

The update by MCI WorldCom, the first since the new service was launched, also indicates that people may prefer to pay a single bill for various services such as local and long-distance calling, Internet access, and even television.

``It demonstrates that the nation has a fair amount of appetite to have one provider _ the single bill and the single point of contact, and when something’s wrong, they can call one company,″ said Mitchell.

Also at Wednesday’s meeting, MCI WorldCom expressed confidence in Wall Street’s profit forecasts for 1999 and 2000, and again brushed aside the suggestion it needs to buy a wireless calling company to compete effectively.

Last Friday, MCI WorldCom announced a deal to buy the paging company SkyTel Communications, but remains the only major telephone concern without a wireless calling operation. In recent months, the company has backed off on bids to acquire both AirTouch Communications and Nextel Communications.

``We hope that someday we will have an opportunity to be in mobile wireless, but the level of the need has not risen to the level where we feel we have to do something,″ said chief executive Bernard J. Ebbers. The company might be forced to act, he said, ``when a significant number of customers say if we don’t have it, they won’t buy from us.″

The 75,000 lines receiving MCI WorldCom’s local service represent only about 1 percent of the residential market in New York.

The company’s latest foray into local calling struggled at first, signing up just 10 lines a day, before growing rapidly in April and May, Donoghue said. He projected that revenues from local service to New York households will reach $50 million in 1999.

Despite the strong showing, local service remains a marginal business for MCI WorldCom, which expects New York to generate $400 million in sales of long distance services during 1999.

Furthermore, residential services remain a secondary concern for communications companies because they make more money serving businesses and the residential market is growing more slowly.

Excluding Internet access, consumer businesses account for less than a third of MCI WorldCom’s annual revenues.

MCI WorldCom introduced local service across most of New York state in early February, leasing lines from the Northeast regional monopoly, Bell Atlantic.

Local competition has been a thorny issue since 1984, when the government company broke up AT&T into a long-distance phone company and seven ``Baby Bells″ providing local service to specific regions.

While competition for long-distance service has flourished over the past 15 years, pushing down prices, most consumers still have only one choice for local phone service.

Three years ago, Congress passed legislation designed to pry open the local market, but long-distance providers and the Baby Bells continue to wrangle over the access fees and logistics for leasing the local wires that go into people’s homes.

AT&T has abandoned that fight, choosing to bypass the Bell system with the cable TV wires that also go directly into homes. Over the past year, AT&T has assembled a ``local″ network covering about 60 percent of the country, buying two of the nation’s four biggest cable companies and partnering up with the other two.

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