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C O N N E C T I V I T Y C O N T E N T C O M M E R C E

A n n u a l I n f o r m a t i o n F o r mfor the year ended December 31, 2000March 9, 2001

Documents incorporated by reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Trade-marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Item 1 • Corporate Structure of BCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Item 2 • General Development of BCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Item 3 • Businesses of BCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Bell Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Subsidiaries and Associated Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Bell Globemedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

CTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Bell Globemedia Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Sympatico-Lycos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Teleglobe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Global Network – GlobeSystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2000 BCE Annual In format ion Form 1

T A B L E O F C O N T E N T S

BCE Emergis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

BCE Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

BCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Telesat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

CGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Excel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Item 4 • Selected Financial Information (Consolidated) . . . . . . . . . . . . . . . 36

Item 5 • Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . 36

Item 6 • Market for the Securities of BCE Inc. . . . . . . . . . . . . . . . . . . . . . . . . 36

Item 7 • Directors and Officers of BCE Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Item 8 • Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

2 2000 BCE Annual In format ion Form2 2000 BCE Annual In format ion Form

Documents incorporated by referencePart of Annual Information Form

Documents incorporated by reference

1. Portions of the BCE Inc. 2000 Annual Report Items 2, 5 and 62. Portions of the BCE Inc. Management Proxy Circular Item 7

Trade-marksCompany Trade-mark

BCE Inc. BCE

Bell ActiMedia Inc. Sympatico Sympatico High Speed EditionYellow PagesYellowpages.ca

Bell Canada Rings & Head Design (Bell Canada corporate logo) BellBell WorldBellZinc.caEspace Bell

Bell ExpressVu Limited Partnership Vu!

Bell Mobility Cellular Inc. Mobile Browser

Manitoba Telecom Services Inc. First Rate

Stentor Resource Centre Inc. Advantage, Advantage Optimum, Datapac, Dataroute, Megalink, Megaroute, Megastream, SmartTouch

Teleglobe Inc. GlobeSystem

Telesat Canada Anik, Nimiq

TMI Communications and Company, Limited Partnership MSAT

AT&T Corp. AT&T

Hughes Electronics Corporation DirecPC

Inktomi Corporation Inktomi

International Telecommunications Satellite Organization INTELSAT

MCI Communications Corporation Hyperstream

National Hockey League NHL

PanAmSat Corporation PanAmSat

The Toronto Stock Exchange Inc. TSE

Yahoo! Inc. Yahoo!Any other trade-marks, corporate, trade or domain names used in this Annual Information Form are properties of their respective owners.

ITEM 1 • CORPORATE S TRUCTUREOF BCE

BCE Inc. was incorporated in 1970, continued under theCanada Business Corporations Act in 1979 and exists under aRestated Certificate of Incorporation dated December 1, 2000.BCE Inc. has its principal and registered offices at 1000, rue deLa Gauchetière Ouest, Bureau 3700, Montréal, Québec H3B4Y7. Unless the context indicates otherwise, “BCE” refers to BCEInc. and its subsidiaries. Unless otherwise indicated, the informa-tion in this Annual Information Form is disclosed as at December31, 2000.

The Schedule hereto presents certain subsidiaries andassociates of BCE Inc., their respective jurisdictions of incor-poration or continuance and the percentage of voting andnon-voting securities or partnership interests beneficiallyowned or over which control or direction is exercised directlyor indirectly by BCE Inc. Certain subsidiaries, each of whichrepresents not more than 10 per cent of consolidated assetsand not more than 10 per cent of consolidated sales and operating revenues of BCE Inc., and all of which, in the aggre-gate, represent not more than 20 per cent of total consolidatedassets and total consolidated sales and operating revenues ofBCE Inc. at December 31, 2000, have been omitted.

ITEM 2 • GENERAL DEVELOPMENT OF BCE

Overview

BCE Inc. is Canada’s largest communications company. BCEInc. had, on a consolidated basis, revenues of $18.1 billion, netearnings of $4.8 billion and cash flows from operatingactivities of $2.3 billion in 2000, and had total assets of$51.4 billion. BCE had approximately 75,000 employees atDecember 31, 2000.

BCE Inc. has among the largest number of registered share-holders of any Canadian corporation. At December 31, 2000,there were more than 184,000 registered holders of commonshares, of whom about 95 per cent were registered as residentin Canada and held approximately 86 per cent of the commonshares outstanding.

Effective December 1, 2000, BCE Inc. implemented a newoperating structure following strategic acquisitions madeduring the year. As a result, BCE Inc. centers its activitiesaround four operating business segments: Bell Canada; Bell

Globemedia; Teleglobe and BCE Emergis. All other non-corebusinesses are combined in a new group called BCE Ventures.

BELL C ANADA

The Canadian Connectivity segment provides an integratedplatform of substantially domestic telecommunications ser-vices including voice, data, wireline, wireless and directorycommunications as well as satellite entertainment to Cana-dian customers. This segment represents the consolidation ofBell Canada Holdings Inc. (“BCH”) with Bell Canada and itsconsolidated subsidiaries (including Bell Mobility Inc. (“BellMobility”), BCE Nexxia Inc. (carrying on business in Canadaunder the name Bell Nexxia), Bell ActiMedia Inc. (“Bell Acti-Media”), Northern Telephone Limited (“NorthernTelephone”), Northwestel Inc. (“Northwestel”) and Télébecltée (“Télébec”)), and its significantly influenced investments,Manitoba Telecom Services Inc. (“MTS”) and Bell Intrigna Inc.(“Bell Intrigna”). BCE Inc. owns 80 per cent of BCH. Theremaining 20 per cent of BCH is held by SBC Communica-tions Inc. In addition, this segment includes the consolidationof Aliant Inc. (“Aliant”) (approximately 39 per cent held byBell Canada and approximately 14 per cent held by BCE Inc.)as well as BCE’s 100 per cent interest in Bell ExpressVu LimitedPartnership (“Bell ExpressVu”). Bell Canada provides a fullrange of communications services to customers, includingwireline and wireless local and long distance telephone ser-vices, Internet access, high speed data services and directories.Bell ExpressVu, a licenced direct-to-home (“DTH”) satellitebroadcaster, has been delivering, since 1997, television andradio channels of digital video and CD quality sound to Cana-dian homes via Telesat Canada’s (“Telesat”) direct broadcastsatellite (“DBS”).

BELL GLOBEMEDIA

The Content segment provides integrated information, com-munications and entertainment services to Canadiancustomers and access to distinctive Canadian content thatallows the creation of unique destinations for Internet usersthrough various portal properties. This segment is comprisedof BCE Inc.’s interest, through Bell Globemedia Inc. (“BellGlobemedia”), in CTV Inc. (“CTV”), The Globe and Mail,Sympatico-Lycos Inc. (“Sympatico-Lycos”) and other mediainterests.

TELEGLOBE

The Global Connectivity segment provides, on a world-widebasis, a broad portfolio of voice, data and Internet servicesincluding connectivity services to Internet service providers(“ISPs”), Internet content providers, application serviceproviders, carriers and global enterprises. This segment repre-sents the Teleglobe Communications group (“Teleglobe”),23 per cent held by Bell Canada and 77 per cent held by BCEInc. Teleglobe’s results are consolidated as of November 2000.

BCE EMERGIS

The Commerce segment represents BCE Emergis Inc. (“BCEEmergis”), a business to business (“B2B”) e-commerceprovider, strategically focusing on market leadership in thetransaction-intensive eHealth and financial services sectorsthrough its three strategic business units (eHealth, Canadianand U.S.). BCE Inc. owns approximately 66 per cent of BCEEmergis, with the remaining common shares being publiclyheld.

BCE VENTURES

The BCE Ventures group combines all the non-core businessesof BCE and reflects BCE’s interest in Bell Canada InternationalInc. (“BCI”), Telesat, CGI Group Inc. (“CGI”), Excel Commu-nications, Inc. (“Excel”) and other BCE investments.

Recent Developments

On January 9, 2001, Bell Globemedia, a Canadian multi-media company in the fields of broadcasting, print and theInternet, was created as a result of the closing of the transac-tion originally announced on September 15, 2000, when BCEInc., The Thomson Corporation (“Thomson”) and The Wood-bridge Company Limited (“Woodbridge”) proposed thecreation of a Canadian multi-media company. BCE Inc. owns70.1 per cent of Bell Globemedia and its principal contribu-tions were its wholly-owned interest in CTV and its indirect 71 per cent interest in Sympatico-Lycos. Thomson owns 20per cent of Bell Globemedia and contributed all of the assetsand undertakings of The Globe and Mail (division of Thom-son Canada Limited) and of Globe Interactive (division ofThomson Canada Limited). Woodbridge owns 9.9 per cent ofBell Globemedia and contributed $385 million. Bell Globe-media’s initial capitalization was approximately $4 billion.

On November 16, 2000, BCI, América Móvil S.A. de C.V.(“América Móvil”) and SBC International Inc. (“SBC Interna-tional”) announced the closing of the September 25, 2000


joint venture agreement and the formation of TelecomAméricas Ltd. (“Telecom Américas”), a new facilities-basedcommunications company, which will serve as the partners’principal vehicle for expansion in Latin America. The Sep-tember 25, 2000 agreement was originally entered into withTelefonos de Mexico S.A. de C.V. (“Telmex”). However, Telmexsubsequently assigned its rights in the joint venture agree-ment to América Móvil which now holds the cellularoperations and most of the international investments ofTelmex. BCI and América Móvil each hold a 44.3 per centinterest in Telecom Américas while SBC International holdsan 11.4 per cent interest. At closing, Telecom Américas’ initialcapitalization was approximately U.S. $4 billion and includedthe Latin American assets of BCI (excluding Vésper S.A.,Vésper São Paulo S.A. and the Internet service provider, VentoLtda. (collectively, the “Vésper companies”) and Axtel S.A. deC.V. of Mexico (“Axtel”)), and América Móvil’s and SBC Inter-national’s investments in the Brazilian wireless companyATL-Algar Telecom Leste S.A. (“ATL”). In addition, pursuant tothe joint venture agreement and upon receipt of the necessaryapprovals, Américas Móvil has undertaken to contribute toTelecom Américas, at no further cost, its interest in the Argen-tine broadband company, Techtel-LMDS ComunicacionesInteractivas S.A. On February 12, 2001, Telecom Américasentered into an agreement to acquire, for a total purchaseprice of U.S. $ 950 million, a 100 per cent economic interest inTess S.A. (“Tess”), a cellular operator in the Brazilian state ofSão Paulo. BCI recorded a gain of $530 million upon the con-tribution of its investments to Telecom Américas at fair value,which is being deferred and amortized on a straight-line basisover approximately 13 years as well as goodwill amounting to $569 million upon the contribution of ATL at fair value by itspartners, which is being amortized on a straight-line basis overapproximately 12 years.

On November 1, 2000, BCE completed the acquisition ofall of the outstanding common shares of Teleglobe Inc. that itdid not already own. The aggregate purchase price of $7.4 bil-lion was comprised of $240 million in cash and $7.2 billion inBCE Inc. common shares (approximately 174 million commonshares were issued) at $41.20 per BCE Inc. common share,which reflected the average of the high and low of the marketvalue of the shares on November 1, 2000. This acquisition wasaccounted for using the purchase method. Outstanding Tele-globe Inc. stock options will continue to be exercisable inaccordance with their original terms and conditions. How-

ever, Teleglobe Inc. stock option holders will receive, uponexercise of the options, 0.91 of a BCE Inc. common share foreach Teleglobe Inc. stock option held. More informationregarding the impact of the acquisition of Teleglobe Inc. onthe operating results and financial position of BCE Inc. can befound under the heading “Management’s Discussion andAnalysis” on pages 17 to 35 of the BCE Inc. 2000 AnnualReport, which is filed concurrently with this document and isincorporated herein by reference.

In May 2000, BCE Inc. distributed an approximate 35 percent interest in Nortel Networks Corporation (“Nortel Net-works”) to BCE Inc. common shareholders. BCE Inc. commonshareholders received, for each common share of BCE Inc.held, approximately 1.57 post-split common shares of NortelNetworks. Consequently, BCE Inc.’s results prior to May 2000reflect its 35 per cent interest in Nortel Networks as a dis-continued operation. This transaction was recorded as adistribution (dividend) to shareholders at the pro-rata carry-ing value of BCE Inc.’s approximate 37 per cent interest inNortel Networks prior to the distribution. This resulted in adecrease to investment in Nortel Networks related to the dis-continued operations of approximately $10 billion, a decreasein retained earnings of approximately $10.1 billion (includingtransaction costs of $70 million), and an increase in currencytranslation adjustment of $150 million. BCE’s remaininginterest (approximately two per cent) in Nortel Networks isnow being recorded as an investment at cost. BCE entered intoforward contracts, for up to one year, with several financialinstitutions to hedge its exposure to fluctuations in the marketprice of Nortel Networks common shares in relation to themonetization of such shares. As a result of these contracts,approximately 47.9 million of BCE’s 60 million Nortel Networks common shares have been hedged at an averageprice of approximately $90 per share. BCE currently intendsto settle the forward contracts and to dispose of these sharesby way of outright sale. This outright sale of Nortel Networkscommon shares, together with the gain anticipated to resultfrom the forward contracts referred to above, are expected toprovide BCE Inc. pre-tax aggregate gross proceeds in theamount of approximately $4.4 billion. More informationregarding the impact of the distribution of BCE Inc.’s interestin Nortel Networks on the operating results and financial position of BCE Inc. can be found under the heading “Mana-gement’s Discussion and Analysis” on pages 17 to 35 of the

BCE Inc. 2000 Annual Report, which is filed concurrently withthis document and is incorporated herein by reference.

In April 2000, BCE completed the acquisition of all of theoutstanding common shares of CTV, including the CTVcommon shares held by Electrohome Broadcasting Inc., for acash consideration of approximately $2.3 billion. CTV, inclu-ding its subsidiary NetStar Communications Inc. (“NetStar”), isa conventional and specialty broadcaster with a local presenceacross Canada. The CTV shares were transferred to a trusteepending receipt of the Canadian Radio-television andTelecommunications Commission (“CRTC”) and other regu-latory approvals which were obtained on December 7, 2000.During the time the shares were held by the trustee, the invest-ment in CTV was accounted for using the equity method.Starting in December 2000, BCE Inc.’s results reflect the con-solidation of CTV. As part of the CRTC approval process, anadditional 10 per cent (approximately $230 million) of thevalue of the transaction will be spent by the year 2007 oninitiatives that will benefit the Canadian broadcasting industry(“benefits package”). The cost of the benefits package has beenincluded as part of the purchase price for the acquisition ofCTV, for a total purchase price of approximately $2.5 billion.The acquisition was accounted for using the purchasemethod. The allocation of the purchase price was to tangibleassets for $1.7 billion, tangible liabilities for $1.1 billion, andgoodwill for $1.9 billion. Goodwill is being amortized on astraight-line basis over 20 years.

During the course of 1999 and 1998, the following eventshave influenced the general development of BCE’s business:

1999

• the acquisition by Ameritech Corporation, since pur-chased by SBC Communications Inc. (collectively,“SBC”) of a 20 per cent minority interest in BCH for$5.1 billion;

• as part of the foregoing transaction, the acquisition at netbook value of Bell Canada’s interest in CGI and BCEEmergis and the transfer to Bell Canada, also at net bookvalue, of BCE’s indirect interest in Bell Mobility,Teleglobe Inc. and in several provincial and regionaltelecommunications companies, namely Aliant, North-ern Telephone, Northwestel and Télébec;

• the privatization by Bell Canada of Bell Mobility for$1.6 billion;

4 2000 BCE Annual In format ion Form

• the launch by Bell Canada of Bell Nexxia, an InternetProtocol (“IP”)/Broadband company operating a networkwith over 100 points of presence throughout Canada andthe United States;

• the acquisition by Bell Canada of an approximate20 per cent interest in MTS and the launch by BellCanada and MTS of Bell Intrigna, a provider of accessfacilities offering an extensive suite of telecommunica-tion services to business customers in Alberta and BritishColumbia.

1998

• a gain of approximately $3.6 billion on the reduction ofBCE’s ownership in Nortel Networks from approximately51 per cent to approximately 41 per cent following NortelNetworks’ acquisition of Bay Networks, Inc.;

• the sale by Bell Canada of the Bell Sygma TelecomSolutions and Bell Sygma International divisions ofBell Sygma Inc. to CGI for a minority interest in CGI;

• the acquisition by Bell Canada of a controlling interest inBCE Emergis in exchange for the Electronic BusinessSolutions division of Bell Canada and a cash investment.

Additional details on the above and some of the other majorevents that have influenced the businesses carried out overthe last three years are discussed in Item 3 – “Businesses ofBCE”.

ITEM 3 • BUSINESSES OF BCE

Bell Canada

GENERAL

Bell Canada’s revenues are reported along five lines of busi-ness: local and access; long distance; wireless; data andterminal sales, directory advertising and other. BCE’s Cana-dian Connectivity segment also includes DTH revenuesearned through Bell ExpressVu. The revenue distribution bypercentage of the Bell Canada segment is shown in Table 3.1.

LOCAL AND ACCESS

Local and access revenues are earned principally by connect-ing business and residential customers to Bell Canadasegment ’s network and providing them with local area ser-vice. As at December 31, 2000, the Bell Canada segmentprovided about 13.4 million network access services to its busi-ness and residential customers, which consist primarily ofbasic exchange services (business and residential individuallines), private branch exchange (“PBX”) trunk lines and cen-trex lines. Local and access revenues also include revenuesfrom the provision of optional SmartTouchTM services (forexample, call waiting and call display) to business and residen-tial customers as well as rental revenue related to single-lineterminal equipment. All of the above services are provided tocustomers primarily on a monthly contract basis. Paymentsfrom competitors accessing Bell Canada segment ’s local net-work are also included in this revenue category. Thesepayments include contribution payments intended to helpoffset the costs of providing local services and access chargepayments intended to help offset increased costs associatedwith the interconnection of long distance competitors to BellCanada segment ’s network. A summary of local and accessservices revenues and the number of network access servicesis shown in Table 3.2.

LONG DIS TANCE

Long distance revenues include long distance voice revenues,as well as long distance settlement payments. These servicesare provided through a variety of calling plans including resi-dential discount calling plans such as Bell Canada’s FirstRateTM Savings Plans. Separate discount plans, including tolland toll-free calling, are available to business customersthrough the AdvantageTM family of services including theAdvantage OptimumTM service available for long distance andtoll-free calling. National long distance and network serviceswere formerly managed on a nationwide basis by StentorCanadian Network Management (“SCNM”), a workingassociation of provincial telephone companies. Effective Jan-uary 1, 2000, Bell Canada began providing national network management and operations support services to Telus Communications Inc. (“Telus”) and to Bell Canada’s partners –Aliant, MTS, and Saskatchewan Telecommunications Holding Inc. (“Sasktel”). To ensure a seamless transitionto customers, most of SCNM’s employees and functions weretransferred to Bell Canada and to the other former SCNM


3.2 Bell Canada segment – Local and access revenuesFor the years ended December 31 2000 1999(1) 1998(2)

Local and access revenues ($ millions) 6,018 5,714 5,364Number of network access services (thousands)

Residence 8,642 8,570 7,519Business 4,719 4,548 3,749

13,361 13,118 11,268

(1) Reclassified to conform to 2000 presentation. (2) Local and access, long distance and terminal sales, directory advertising and other included certain data revenues in 1998. Effective as of 1999, data

revenues were classified as a separate line item. In addition, 1998 figures do not include the consolidation of Aliant.

3.1 Bell Canada segment – Communications services (revenue distribution)Revenue distribution as a % of operating revenues 2000 1999(1) 1998(2)

Local and access 38 39 43Long distance 18 20 34Wireless 10 9 8Data 18 16 n/aDTH 2 1 nm(3)

Terminal sales, directory advertising and other 14 15 15100 100 100

(1) Reclassified to conform to 2000 presentation. (2) Local and access, long distance and terminal sales, directory advertising and other included certain data revenues in 1998. Effective as of 1999, data

revenues were classified as a separate line item. In addition, 1998 figures do not include the consolidation of Aliant.(3) Not meaningful.

members, with many of the operating functions carried out bythe same people, in the same locations, using the same assets.Accordingly, SCNM was wound up on December 31, 1999.

Long distance revenues are derived from services originat-ing and terminating within the Bell Canada segment’s serviceterritory, and from services provided with other telecommu-nications companies. A summary of long distance revenuesand total conversation minutes is shown in Table 3.3.

WIRELESS

Wireless revenues are primarily derived from the provision ofcellular, personal communication service (“PCS”), paging andwireless data communication services, as well as airline pas-senger communications and wireless consulting servicesoffered by the Bell Canada segment, namely Bell Mobility,Northern Telephone, Northwestel, Télébec and Aliant. Cellu-lar and PCS revenues are derived from subscription fees, airtime usage, prepaid services, long distance, data, wirelessinternet access, roaming and a variety of value added services,such as voice mail and text messaging.

Bell Mobility also generates revenues through the provi-sion of services to other service providers under resaleagreements. This includes: the provision of analog cellular ser-vice to Microcell Connexions Inc., a subsidiary of MicrocellTelecommunications Inc. (“Microcell”); the provision of cel-lular and PCS service to Telus Mobility Inc. (“Telus Mobility”),complementing the coverage provided by Telus Mobility onits own facilities; the provision of cellular and PCS service tosupport General Motors’ “On-Star” in-car communicationsservice and the provision of digital cellular service to BellCanada to provide wireless local loop service as an alternativeto fixed lines in high cost areas.

A summary of the Bell Canada segment’s wireless servicesrevenues, and the number of wireless voice subscribers, isshown in Table 3.4.

DATA

Data revenues include digital transmission services such asMegalinkTM, network access for integrated services digital net-work (“ISDN”) and data, as well as asymmetric digitalsubscriber line (“ADSL”), competitive network services,national and regional IP data, inter-networking equipmentand cabling, and Internet related services. Services such asMegastreamTM and MegarouteTM provide customers with ahigh volume digital network for the transmission of voice,video and data messages. The Bell Canada segment also pro-vides access to public digital packet switched networks suchas DatapacTM as well as private line data transmission services,such as DatarouteTM. A summary of the Bell Canada segment’sdata revenues is shown in Table 3.5.

DTH

DTH revenues primarily reflect revenues generated from DTHsatellite service, including programming and pay-per-viewrevenues. A summary of DTH revenues and the number of BellExpressVu customers is shown in Table 3.6.

TERMINAL SALES , D IRECTORY ADVER TIS ING

AND OTHER

Terminal sales, directory advertising and other revenues areprimarily derived from the rental, sales and maintenance ofbusiness terminal equipment and from directory advertising,as well as system integration and network management ser-vices. A summary of terminal sales, directory advertising andother revenues is shown in Table 3.7.


3.5 Bell Canada segment – Data revenuesFor the years ended December 31 2000 1999 1998(3)

Data revenues ($ millions)Legacy(1) 1989 1827 n/aNon-legacy(2) 906 442 n/a

2,895 2,269 n/a

(1) Legacy data revenues include digital transmission services such as; Megalink, network access for ISDN and Data, as well as ADSL, competitive networkservices and the sale of inter-networking equipment.

(2) Non-legacy data revenues include national and regional IP data and Internet services. (3) Data revenues are included in the local and access, long distance and terminal sales, directory advertising and other.

3.4 Bell Canada segment – Wireless revenuesFor the years ended December 31 2000 1999(2) 1998(2)

Wireless services revenues ($ millions) 1,515 1,336 1,047Wireless voice subscribers(1) (thousands) 2,340 1,797 1,475

(1) Cellular and PCS customers, as at December 31 for Bell Mobility only. (2) Reclassified to conform to 2000 presentation. In addition, 1998 figures do not include the consolidation of Aliant.

3.6 Bell Canada segment – DTH revenuesFor the years ended December 31 2000 1999 1998

DTH revenues ($ millions) 305 133 37DTH customers (thousands) 722 416 179

3.7 Bell Canada segment – Terminal sales, directory advertising and other revenuesFor the years ended December 31 2000 1999 1998

Terminal sales, directory advertising and other revenues ($ millions) 2,208 2,143 1,798(1)

(1) Local and access, long distance and terminal sales, directory advertising and other included certain data revenues in 1998. Effective as of 1999, data revenues were classified as a separate line item. In addition, 1998 figures do not include the consolidation of Aliant.

3.3 Bell Canada segment – Long distance revenuesFor the years ended December 31 2000 1999(1) 1998(2)

Long distance revenues ($ millions) 2,850 2,909 4,196(1)

Conversation minutes(2) (millions) 17,898 16,406 11,664

(1) Reclassified to conform to 2000 presentation. (2) Local and access, long distance and terminal sales, directory advertising and other included certain data revenues in 1998. Effective as of 1999, data rev-

enues were classified as a separate line item. In addition, 1998 figures do not include the consolidation of Aliant.

SUBSIDIARIES AND ASSOCIATED COMPANIES

The Bell Canada segment’s principal subsidiaries are: BellMobility ; Bell Nexxia and Bell ActiMedia. The Bell Canadasegment also includes interests in Canadian telecommunica-tions companies such as Aliant and MTS and Bell Intrigna.This segment also includes BCE’s 100 per cent interest in BellExpressVu.

BELL MOBIL IT Y

Bell Mobility offers a full range of wireless communicationsservices to more than three million Canadians, including PCS,one- and two-way paging, data and airline passenger commu-nications services and also specializes in the sale of privateradio system equipment. Bell Mobility operates through itswholly-owned subsidiaries Bell Mobility Cellular Inc.(“BMC”), Bell Mobility Paging Inc. (“BMP”), Bell MobilityRadio Inc. (“BMR”) and Skytel Communications Corporation(“Skytel”).

BMC operates a cellular telecommunications system inOntario and Québec and through resale arrangements, inBritish Columbia and Alberta. BMC also operates a digital PCSservice in major urban areas within its service territory, includ-ing Toronto, Ottawa, Montréal and Québec City. BMC alsooperates a nationwide mobile data radio network. The cover-age areas served by BMC had an estimated population of 17.5 million at December 31, 2000. BMC’s cellular and PCScustomers numbered approximately 2,340,000 at December31, 2000, reflecting a 30 per cent increase from the correspon-ding 1999 figure of approximately 1,797,000.

In May 1999, Bell Mobility launched a new service calledMobile BrowserTM, making it the first wireless PCS company inNorth America to combine an Internet browser feature with adigital PCS handset. Users of Bell Mobility’s Mobile Browserservice are able to instantly log on to the Internet directly fromtheir PCS handsets and view a number of Internet sites thatare specially adapted for small display screens, including Sym-patico.ca, Charles Schwab, i/money, TD Waterhouse, VeeVfrom Bank of Montreal, canada.com, canoe.ca, Web 411, MSNHotmail and others. On February 9, 2000, Bell Mobilityannounced it was providing its customers with wireless accessto more Internet sites and new ‘.com-ready’ handsets throughits Mobile Browser service, including access to one ofCanada’s most popular Internet sites, the Yahoo!TM CanadaWeb site. Over 60 wireless consumer and business applicationswere in place at December 31, 2000.

Bell Mobility has played a major role in the developmentof mobile cellular services in Canada and intends to duplicateits efforts in developing digital PCS for the Canadian market.As of December 31, 2000, Bell Mobility had invested approxi-mately $780 million in its digital PCS network, including$180 million for the year ended December 31, 2000. BellMobility has rapidly expanded its digital coverage area whichcurrently covers some 75 per cent of its service territory pop-ulation in Ontario and Québec and should soon reach 95 percent – more than any other wireless service provider (“WSP”)today. Bell Mobility’s digital PCS network currently accountsfor approximately 49 per cent of its total wireless networktraffic.

BMP operates a one and two-way paging system in Ontarioand Québec and is Canada’s largest paging operator. BMP hadapproximately 685,000 pagers in service at December 31,2000, an increase of 15 per cent from the 598,000 pagers inservice at December 31, 1999. BMR provides private andshared radio communications services in the transit, publicsecurity and utility markets. Skytel provides airline passengercommunications services.

In 1999, Bell Canada and Bell Mobility established Bell Distribution to manage a new customer-focused chain of com-munications stores providing one-stop shopping for a fullrange of communications products and services for the homeand office. Combining the retail operations of both compa-nies, the new stores – Bell WorldTM in Ontario and EspaceBellTM in Québec – were the first retail network in Canada toprovide complete and integrated communications solutionsincluding wireline, wireless, DTH satellite and home securityservices. This new retail network is made up of stores that areoperated corporately and by dealer and franchise operators.

BELL NEXXIA

On April 22, 1998, Bell Canada announced plans to launch Bell Nexxia, a new IP-Broadband company. Bell Nexxia, whichbegan commercial operations in the first quarter of 1999,directly and indirectly owns, controls and operates a newnational IP-Broadband network with over 100 points of pres-ence in key locations throughout Canada and the UnitedStates. Bell Nexxia offers Internet services including extranets, wide area networks (“WANs”), and managed networks pack-aged with traditional voice services. Effective February 12,1999, Bell Nexxia has obtained from the United States FederalCommunications Commission (“FCC”) section 214 authority

to operate as a common carrier in the United States offeringswitched and private line services between the United Statesand the rest of the world.

BELL ACTIMEDIA

Bell ActiMedia is primarily engaged in the sale of telephonedirectory advertising representing approximately 57 per centof the Canadian market, and in the publishing of alphabeti-cal pages and Yellow PagesTM directories for Bell Canada. Inaddition, Bell ActiMedia publishes specialty products onmedia such as CD-ROM along with a range of other innova-tive advertising and marketing services that connect buyersand sellers.

Bell ActiMedia has a 12.9 per cent partnership interest in,and is the managing partner of, Aliant ActiMedia to publishalphabetical pages and Yellow Pages in four Atlanticprovinces. In 2000, Bell ActiMedia also started to operate inWestern Canada by publishing two new directories in Calgaryand Edmonton.

In May 2000, Bell ActiMedia started to develop its new B2B Web portal to give small- and medium-sized enterprisebusiness owners and managers access to the on-line resourcesthey need, which was launched as BellZinc.caTM on January 17,2001. As part of the launch of BellZinc.ca, Bell Canada alsoannounced a partnership with AllBusiness, a leading Webportal for U.S. small businesses. The San Francisco-based com-pany offers business content and services to more than twomillion businesses in the United States. Once the agreementis finalized, AllBusiness will take a minority equity interest inBellZinc.ca.

Bell ActiMedia includes Bell Canada’s Internet ServiceProvider business which provide High Speed Internet accessas well as Dial-Up access. At the end of December 2000, BellActiMedia had approximately 270,000 High Speed Access cus-tomers and approximately 555,000 Dial-Up customers.

Bell ActiMedia and Aliant ActiMedia have over 300,000business customers advertising in 115 directories and246 Yellow Pages directory sections.

ALIANT

Aliant, held approximately 39 per cent by Bell Canada andapproximately 14 per cent by BCE Inc., delivers full service,integrated solutions through its core lines of business: wireline and wireless telecommunications; information technology; remote satellite communications and Internet-based solutions.


On October 4, 1999, Bell Canada announced its decisionto make a cash offer to purchase up to 15.8 million outstand-ing common shares of Aliant at $27 per share for a totalconsideration of up to $427 million. On December 20, 1999,the offer was increased to $27.50 per share and was made byBCE Inc. rather than by Bell Canada. On January 27, 2000,BCE Inc. announced that 30,580,538 common shares ofAliant were validly tendered under the offer and that it hadtaken up and accepted for purchase its previously announcedallotment of 15.8 million shares, representing a prorationfactor of 51.21 per cent. Following this purchase, BCE Inc.’sdirect ownership interest in Aliant was approximately 13 percent. Certain put and call options have been put in place,which if exercised, will transfer the shares acquired by BCEInc. to Bell Canada on agreed upon terms, thereby bringingBell Canada’s ownership of the common shares of Aliant toapproximately 53 per cent.

MT S AND BELL INTRIGNA

MTS is a full service Manitoba telecommunications companyproviding local, long distance, wireless, directory and multi-media telecommunications services. Bell Intrigna, two thirdsowned by MTS and one third owned by Bell Canada, offers inAlberta and British Columbia a complete portfolio of telecom-munications products and services, including local and longdistance services, data networking and business Internet ser-vices. Bell Intrigna also distributes Bell Nexxia’s brandedproducts and services in Alberta and British Columbia.

OTHER

Bell Canada also provides telecommunications servicesthrough regional companies, namely Northern Telephone,Northwestel and Télébec.

BELL EXPRESS VU

Bell ExpressVu delivers more than 200 digital television andCD-quality audio channels to almost three-quarters of a millioncustomers in homes, apartment buildings and condominiumsand commercial establishments such as restaurants and otherpublic viewing areas. As of December 31, 2000, Bell ExpressVuhad acquired 722,000 subscribers in the marketplace – anincrease of 306,000 from the December 31, 1999 year-end totalof 416,000. More than half of all new subscribers attracted come from traditional urban markets with existing cablecompetitors, signaling an expansion of satellite televisionfrom the traditional rural and cottage areas.

In 2000, Bell ExpressVu introduced to the Canadian mar-ketplace the country’s first integrated high definition receiver– the Model 6000 – which allows subscribers to enjoy the clarity of high-definition television (“HDTV”). There is currently a wide range of high-definition programming available through the Bell ExpressVu service, and plans are underway to expand the scope of HDTV programmingofferings.

Also in 2000, Bell ExpressVu expanded the terms of itssatellite relay distribution undertaking license through a newcontract negotiated with the Cable Satellite Users Associationon behalf of its members. This license is used to offer signaldelivery services to terrestrial broadcasting distributors. Anadditional development included the extension of Bell ExpressVu’s DTH pay-per-view license for French and Englishlanguage services into terrestrial pay-per-view applications. Bell ExpressVu currently offers over 50 pay-per-view servicesas part of Vu!TM, including movies in English, French and anumber of foreign languages, sports such as the NHLTM CentreIce package, and a variety of children’s programming.

The Commercial division of Bell ExpressVu gainedmomentum during the year, both in terms of contracting withnew multiple dwelling unit owners and operators, including anumber of large portfolio owners, and in installing equipmentto make the Bell ExpressVu service available in new buildings.In addition, the DirecPCTM satellite edition service waslaunched, allowing subscribers to obtain high speed Internetaccess through the same DTH dish antenna used to receive theBell ExpressVu broadcasting service.

During the course of 2001, Bell ExpressVu plans to intro-duce new technology previously unavailable in Canada. ThePersonal Video Recorder (“PVR”) will allow satellite televisionviewers to record, store, pause, rewind and “fast-forward” liveprogramming. The introduction of the PVR should be fol-lowed by the first generation of interactive television services– technology which is expected to allow viewers to learn, shopand customize programming. Relationships with Open TVInc. and with Wink Inc. have been finalized with respect tothe introduction of new software for interactive televisionapplications in the Bell ExpressVu DTH System. The capabili-ties of the PVR, and interactive television, should be availableto consumers through a new generation of set-top receivers tobe introduced this year.

Also expected later this year is the launch of a new groupof digital specialty channels, several of which should be avail-able to Bell ExpressVu subscribers.

On February 5, 2001, BCE Inc. announced plans to developnew technology that will integrate high speed Internet accesswith satellite television and enhanced digital storage. Thisnew technology, designated “ComboBox”, would combineSympatico High Speed EditionTM DSL Internet access serviceand Bell ExpressVu satellite television service with contentfrom Bell Globemedia. Trials are expected later in 2001 with acommercial service launch anticipated in 2002.

REGUL ATION

Bell Canada and several of its direct and indirect subsidiariesand associated companies, including Bell Mobility and its sub-sidiaries, are subject to the jurisdiction of the CRTC, an agencyof the Government of Canada. Several laws of specific appli-cation also govern the businesses of Bell Canada and BellMobility.

Bell Canada ActIn addition to the Canada Business Corporations Act, BellCanada is also subject to the provisions of the Bell Canada Act.The Bell Canada Act imposes on Bell Canada an obligation toprovide service which is limited by the Bell Canada Act tothose territories within which a general telephone service isprovided. This legal obligation is further limited to premiseswhich are located within a prescribed distance from BellCanada’s existing network facilities. Bell Canada provides ageneral telephone service to specific areas or regions withinthe provinces of Ontario and Québec which encompasses thevast majority of telephone customers in the two provinces.

The Bell Canada Act also provides for prior approval of theCRTC of any sale or other disposal of Bell Canada votingshares held by BCE except if such sale or disposal would resultin BCE retaining not less than 80 per cent of all such BellCanada shares issued and outstanding.

Telecommunications ActIn 1993, the Government of Canada passed the Telecommuni-cations Act (the “Act”) which updated and revised previouslegislation governing telecommunications in Canada. The Actapplies to several companies of the Canadian Connectivitysegment, including Bell Canada, Bell Mobility, Bell Nexxia,Northern Telephone, Northwestel, Télébec, Aliant and MTS.The Act defines the broad objectives of the Canadian telecom-


munications policy and empowers the government to issue tothe CRTC directions of general application with respect to anyof these objectives. Under the Act, all telecommunicationscommon carriers, including Bell Canada and Bell Mobility, arerequired to seek regulatory approval for all proposed tariffs fortelecommunications services. The Act also requires that allrates be just and reasonable and prohibits a carrier from con-ferring an undue preference or advantage on any person.However, under the Act, the CRTC has the power to forbearfrom regulating, in whole or in part, particular services. TheCRTC has in fact issued various forbearance orders which haveresulted in Bell Mobility being largely forborne from regula-tion and Bell Canada partially forborne. The CRTC may alsoexempt an entire class of carriers from regulation under theAct, where the CRTC finds that exemption of the class of car-riers is consistent with the objectives of Canadiantelecommunications policy.

The Act and accompanying regulations also provide that,in order for a company such as Bell Canada or Bell Mobility tooperate as a telecommunications common carrier, it must beeligible to operate as a Canadian carrier. A Canadian carriermust be a Canadian-owned and controlled corporation, andmust not otherwise be controlled by non-Canadians. Specifi-cally, a Canadian carrier is required to meet a minimum levelof direct Canadian ownership of 80 per cent and a minimumlevel of indirect Canadian ownership of 662⁄3 per cent. BCEindirectly owns 80 per cent of the outstanding voting sharesof Bell Canada. To the best of BCE’s knowledge, the level ofCanadian ownership of BCE Inc.’s common shares wasapproximately 86 per cent as at December 31, 2000.

In addition to the foregoing foreign ownership constraints,the Act provides that not less than 80 per cent of the membersof the Board of Directors of a Canadian carrier must beCanadian.

Broadcasting ActIn 1991, the Government of Canada amended the Broad-casting Act in recognition of the need to modernize and con-solidate existing legislation. Key policy objectives of theBroadcasting Act include the safeguarding and strengtheningof the cultural, political, social and economic fabric of Canadaas well as encouraging the development of Canadian expression. The Broadcasting Act assigns the regulation andsupervision of the broadcasting system to the CRTC.

Most broadcasting activities, such as Bell ExpressVu’s (andCTV’s, see additional disclosure under this Item 3 entitled“Bell Globemedia – Regulation”), require a broadcastinglicence. Licences are awarded by the CRTC and typicallyextend for a period of seven years at which time an applica-tion for a licence renewal must be made to the CRTC. Thereare two principal types of broadcasting licences, one for broad-casting programming and the other for broadcastingdistribution, which includes terrestrial wireline, terrestrialwireless and satellite DTH distribution. Three subsidiaries ofBell Canada – Northwestel, Télébec and Aliant (approximately39 per cent held) – have broadcasting distribution licencesthat permit them to offer terrestrial wireline, and to a lesserextent terrestrial wireless, broadcast distribution services indefined areas within Nova Scotia, New Brunswick, Québec,Ontario and the Northwest Territories and Nunavut.

The Broadcasting Act and its accompanying regulationsrequire that for a company to obtain a broadcasting licence itmust be a Canadian-owned and controlled corporation, andmust not otherwise be controlled by non-Canadians. A broad-casting licensee is required to meet a minimum level of directCanadian ownership of 80 per cent of all outstanding andissued voting shares and 80 per cent of the votes.

Similarly, indirect ownership in a broadcasting licenseerequires that the parent corporations of a broadcastinglicensee have a minimum level of Canadian ownership of twothirds of all outstanding and issued voting shares and twothirds of the votes.

In addition to the foregoing ownership constraints, notless than 80 per cent of the Board of Directors as well as theChief Executive Officer of a broadcasting licensee must beCanadian.

Parent corporations of broadcasting licensees which: haveless than 80 per cent Canadian directors on the Board; have anon-Canadian Chief Executive Officer; or have a minimumlevel of Canadian ownership of less than 80 per cent, arerequired to demonstrate to the CRTC that neither such parentcorporation nor its directors exercise control or influence overany programming decisions of the broadcasting licensee.

Radiocommunication ActThe use of radio spectrum by Bell Mobility and other WSPs issubject to regulation and licensing by Industry Canada pur-suant to the Radiocommunication Act. The Minister of Industryhas the discretion to issue radio licenses, establish technical

standards in relation to radio equipment and plan the alloca-tion and use of the radio spectrum. The RadiocommunicationAct provides the legislative authority to perform a number offunctions with a view to ensuring the orderly developmentand efficient operation of radiocommunication in Canadaand the orderly establishment and modification of radio stations.

Pursuant to the Radiocommunications Regulations, per-sons who are eligible to be issued radio licenses, such as BellCanada and Bell Mobility, must comply with the same foreignownership restrictions as are applicable to Canadian carriersunder the Act.

WIREL INE FRAMEWORK (1)

All of Bell Canada’s services, including services which are sub-ject to price regulation under the Act, are provided in an openand competitive environment.

Bell Canada’s utility segment services (comprised prima-rily of basic local service, competitor services, and options andfeatures), are subject to price cap regulation as set out in Tele-com Decision 97-9.

Telecom Decision 97-9, issued on May 1, 1997, outlined theregulatory framework for the price cap regime implementedon January 1, 1998, including the principles and componentsof the price cap formula applicable to a basket of telephonecompanies’ local services over a four-year period. This basketdoes not include optional local services. During this period,price changes for this single basket of capped utility serviceswill be limited to the rate of inflation minus an adjustment forproductivity gains of 4.5 per cent, adjusted for limited exoge-nous factors arising from events which are beyond thetelephone companies’ control. The single basket of capped ser-vices is divided into three sub-baskets (basic residential localservices, single and multi-line local business services andresidual capped services), each subject to additional pricingconstraints. The remaining utility segment services, includingoptional services, are not subject to price cap constraints butare tariffed. Competitor services required by local and longdistance competitors, while not included with capped ser-vices, are generally priced to recover incremental costs andmake an appropriate contribution to fixed and common costs.The price cap plan will be reviewed in 2001 as this is the lastyear of the four-year price cap period.


(1) Discussion under this item refers to Bell Canada on a non-consolidatedbasis.

In contrast to Bell Canada’s utility segment services, com-petitive segment services (comprised primarily of longdistance, private line and data, and terminals) are largely for-borne from regulation.

Recent Regulatory DecisionsOn March 12, 1999, in Order 99-239, the CRTC established,on an interim basis, the manner in which Bell Canada canrecover, over a three-year period, costs associated with localcompetition start-up and local number portability. Theportion to be recovered from services subject to price cap reg-ulation is to be reflected as an exogenous factor in the price capformula. On February 23, 2000, in Order 2000-145, the CRTCrendered its final decision allowing recovery of approximately$220 million of the estimated $250 million costs.

On May 17, 1999, the CRTC announced, after an in-depthreview, that it will not regulate new media services on theInternet and more particularly that new media services withinthe purview of the Broadcasting Act will not require a broad-casting license. The CRTC concluded that new media on theInternet are achieving the goals of the Broadcasting Act andthat any attempt to regulate new media might put the Cana-dian industry at a competitive disadvantage in the globalmarket place.

In a letter decision dated March 9, 2000, the CRTCapproved a proposal, filed December 13, 1999, by Bell Canadaand other Incumbent Local Exchange Carriers (“ILECs”), toreduce Direct Connect (switching and aggregation) rates paidby competitors to interconnect with the ILECs networks.However, the CRTC denied the ILECs’ request to offsetreduced Direct Connect revenues with an exogenous adjust-ment to the price cap index. On March 17, 2000, the ILECsappealed the CRTC’s decision asking that the CRTC reviewand vary that part of its decision that disallowed the exoge-nous factor adjustment. On May 16, 2000 the CRTC issued adecision that reversed its previous position by allowing theILECs to partially recover the Direct Connect rate reductions.

On June 19, 2000, approval of Bell Canada’s third annualprice cap filing was essentially completed with the CRTC’sapproval of Tariff Notices (“TN”) 6465 and 6465a. TN 6465and TN 6465a, which became effective June 19, 2000, allowedBell Canada to increase prices for single-line residential tele-phone service for most customers, representing the first suchincrease for residential customers in over two years. Alsoincluded as part of the price cap filings were price decreases,

filed and approved earlier in the year, for single-line and PBXservices (used by businesses of all sizes), as well as digital dataservices (used primarily by larger businesses).

On June 28, 2000, the Governor In Council (“GIC”)announced that it had dismissed appeals of Telecom Deci-sions 99-15: Unbundled Local Loop Service Order Charges(filed by Call-Net Enterprises Inc. (“Call-Net”)), 99-16: Tele-phone Service to High Cost Serving Areas (filed by theGovernments of Manitoba and Saskatchewan and other par-ties) and 99-20: Review of Frozen Contribution Rate Policy(filed by AT&T Canada Corp. (“AT&T Canada”) and other par-ties). In addition to upholding the CRTC decisions, the GICalso required that the CRTC report annually over a five-yearperiod on the status of telecommunications competition anddeployment of advanced services at affordable rates acrossCanada.

On November 30, 2000, the CRTC issued Telecom Decision2000-745 changing the contribution regime from a companyspecific long-distance per minute charge to a nationally averaged surcharge of 4.5 per cent on Canadian telecom-munications revenues. This change effective January 1, 2001,will have a negative impact on the earnings before interestexpense, income taxes, depreciation and amortization(“EBITDA”) for BCE Inc.’s consolidated results of approxi-mately $70 million in 2001. This net impact reflects thatTelecom Decision 2000-745 was EBITDA positive for bothAliant and Northwestel. Bell Canada and Bell Mobility haverequested that the CRTC vary the terms of its decision as iteffects 2001. The requested variance, if granted, would sub-stantially reduce the negative financial impact for 2001.However, the CRTC has the discretion to reject the requestedvariance or accept it in whole or in part.

On December 18, 2000, the CRTC in Orders 2000-1148 and1149 denied Bell Canada’s applications to increase the rates forvarious calling features. This denial has a revenue impact onBell Canada of approximately $50 million annually. OnDecember 22, 2000, Bell Canada filed an application with theCRTC seeking to vary these Orders as Bell Canada believesthese decisions are inconsistent with the parameters estab-lished for the current regulatory regime. Bell Canada hasrequested approval of the rates originally proposed.

On January 25, 2001, the CRTC issued Telecom Decision2001-23 regarding the terms and conditions of access byCanadian carriers to municipal property, as well as, the enti-tlement of municipalities to compensation for allowing

Canadian carriers to occupy municipal rights-of-way. Whilethis decision was limited to Vancouver, it is of importance toall carriers requiring access to municipal rights-of-way. By lim-iting municipalities to recovery of incremental costs, theCRTC has significantly reduced the potential charges appli-cable to Bell Canada and other carriers. It is difficult to assessthe financial implications of the decision at this time as it isexpected that other parties will be carefully considering theiroption to appeal.

On February 2, 2001, in Order 2001-100, the CRTC ruledthat savings realized by Bell Canada from recent reductions inthe Ontario Gross Receipts Tax qualify for exogenous treat-ment under the price cap regime. Accordingly, downwardprice cap adjustments will be made in 2001. No adjustmentswill be made to reflect savings associated with uncapped rev-enues and no adjustments will be made to reflect any savingsrealized in 1999. For 2000, the CRTC has ordered that the sav-ings associated with capped services should be amortized overtwo years beginning in 2001. The required price cap adjust-ment for 2001 will be in the order of 60 per cent of the total inyear savings to be realized.

WIRELESS FRAMEWORK

Licensing RequirementsAll of Bell Mobility’s wireless communications servicesdepend on the use of radio frequencies. Industry Canada plansand assigns the use of spectrum in Canada for various wirelesscommunications systems and, where licensing is required,considers applications from prospective public and privateoperators of such systems for licenses to operate those sys-tems. The Minister of Industry also has the authority tosuspend or revoke radio spectrum licenses, if the licenseholder has contravened the Radiocommunication Act, regula-tions or terms and conditions of its license and after giving theholder of the license a reasonable opportunity to make repre-sentations. Such revocation is rare and licenses are usuallyrenewed upon expiration. At this time, Bell Mobility knows ofno reason why its current radio licenses will not be renewed asthey expire.

Industry Canada typically assigns portions of the radiospectrum on a first-come, first-served basis. However, ininstances where the expressed demand for a given allocationof spectrum exceeds the amount available, a comparativeselection process has been used to identify which of the vari-ous proposed systems will be authorized, based on relative


merit. Bell Mobility was granted authority for its PCS networkin December 1995, following such a comparative selectionprocess. According to criteria announced by Industry Canadain June 1995, the successful applicants were to be judgedaccording to, among other things, financial capability, serviceinnovation, commitment to early and extensive deployment,technical, marketing and sales expertise and equipmentavailability.

In February 1996, Industry Canada announced the resultsof its review of the radio licensing process. Industry Canadaconcluded that a more streamlined version of the then cur-rent comparative process should be retained. At the sametime, Industry Canada announced its intention to establishan alternative competitive selection process incorporating abidding procedure in instances where reliance on marketforces is appropriate. Industry Canada released its AuctionFramework in August 1998 but reiterated that auctions wereonly one of many tools it might use to allocate spectrum.

Cellular LicenseThe current term of Bell Mobility’s cellular license will expireon March 31, 2001. The material terms and conditions of its cellular license include compliance with the Canadianownership and control requirements established in the Radio-communication Act and associated regulations, notification tothe Minister of Industry prior to any material change in own-ership or control in fact of Bell Mobility, and at least two percent of adjusted gross revenues (excluding intercarrier pay-ments, bad debts and third party commissions) of BellMobility for the period from April 1, 1996 to March 31, 2001must be invested in research and development related to wire-less telecommunications activities. Bell Mobility will berenewing its cellular licence effective April 1, 2001.

PCS LicenseIn December 1995, following a competitive licensing process,the Minister of Industry granted Bell Mobility one of fourlicenses to provide PCS in the 1.9 gigahertz (“GHz”) band forits operating territory. The terms and conditions applicable tosuch PCS licenses include requirements related to Canadianownership and control, the time frame for rolling out serviceacross Canada, a restriction on cellular-affiliated PCS licenseescommencing to provide PCS service in the 1.9 GHz band ineach of the 25 major metropolitan areas prior to the com-mencement of service by at least one PCS provider that is notaffiliated with a cellular licensee, resale of PCS and cellular ser-

vices and facilities to other PCS licensees, and research anddevelopment expenditures. The current term of Bell Mobil-ity’s PCS license will expire on April 30, 2001. Bell Mobilitywill be renewing its PCS license effective May 1, 2001.

Spectrum CapIn October 1998, Industry Canada issued Canada GazetteNotice DGTP-015-98 soliciting public comment on whetherto continue, modify or rescind the application of a limit onthe aggregate amount of spectrum that may be held by PCSproviders. At the time of the initial selection of PCS licenseesin December 1995, Industry Canada adopted a Spectrum CapPolicy (“Policy”) which was set at 40 megahertz (“MHz”) andconsisted of frequency assignments for PCS at 2 GHz, cellularradiotelephony and similar public high mobility radiotele-phony services. Bell Mobility currently has a license for25 MHz of cellular spectrum and 10 MHz of PCS spectrum.The stated objective of the Policy was to provide a greateropportunity for competition.

In November 1999, Industry Canada released its decisionin its Policy Review, and increased the spectrum cap from40 MHz to 55 MHz in any geographical area. In addition to theabove frequency assignments, the new aggregation limit alsoapplies to any future spectrum that may be identified for PCSin subsequent Industry Canada allocation proceedings. Thesame proceeding announced the timing of the release of aremaining 40 MHz of PCS spectrum which was held in reserveat the time of the awarding of PCS licenses in 1995.

PCS AuctionOn June 28, 2000, Industry Canada released its policy andlicensing procedures which governed the auction of the40 MHz of PCS spectrum held in reserve. Industry Canadadetermined that the spectrum would be subdivided into fourblocks of 10 MHz to be authorized as regional licenses. Thepolicy also determined that, subject to meeting Canadianownership and control regulations and the provisions of thePCS spectrum cap, any entity would be permitted to partici-pate in the auction. Existing competitors as well as newentrants participated in the auction which concluded on Feb-ruary 1, 2001. Bell Mobility, bidding on behalf of the BellWireless Alliance (“BWA”) partners (Aliant, MTS and Sasktel)paid approximately $720 million to acquire 20 licenses acrossCanada, including Alberta and British Columbia. This resultsin a $1.40/pop/Mhz of spectrum which compares to a price ofC$6.28/pop/Mhz in the recent U.S. auction. In the key South-

ern Ontario market, Bell Mobility acquired an additional20Mhz of PCS spectrum. Bell Mobility is now well positionedto begin the planning and deployment of its third generation(“3G”) wireless services.

ForbearanceIn December 1996, the CRTC confirmed an earlier decisionthat it was appropriate to forbear from regulating the rates forinterconnected switched mobile voice services (i.e., cellular,PCS and Enhanced Specialized Mobile Radio (“ESMR”)) otherthan wireless services provided in-house by the telephonecompanies. The CRTC determined, however, that all intercon-nected mobile service providers should remain subject to thestatutory requirement prohibiting them from discriminatingunjustly between customers. The CRTC also retained its juris-diction to impose conditions on the provision of anyinterconnected switched mobile voice service. Other services(i.e., paging, data radio network, airline passenger communi-cations and private and shared radio services) are subject tounconditional forbearance from regulation.

In October 1998, subsequent to an application from NB TelInc., (“NB Tel”), the CRTC forbore from the regulation of cel-lular and PCS services provided in-house by NB Tel andsubsequently approved the provision of current and futuremobile services by the federally regulated members of theStentor alliance.

Unbundling, Equal Access, Co-locationThe CRTC, in response to applications from Air Reach Integrated Network Ltd. and Sprint Canada Inc. (“SprintCanada”), initiated a proceeding to examine applying thesame type of mandated interconnection/access requirementsto WSPs as currently applies to wireline telephone companies.In Telecom Order 98-1092, issued on November 3, 1998, theCRTC decided not to impose any such requirements on WSPs.

Local Number PortabilityIn December 1998, Microcell applied to the CRTC to imposewireless local number portability on the industry. In Septem-ber 1999, the CRTC denied Microcell’s application.

Toll ContributionOn May 1, 1997, the CRTC issued Order 97-590 in which itdetermined that all WSP interexchange switched mobile voiceservices that originate or terminate on the telephone compa-nies’ public network would be subject to the payment of along distance contribution effective January 1, 1998. Bell


Mobility paid $1.7 million in long distance contribution for2000. Another result of this order is that cellular providers areno longer restricted from carrying on long distance betweenfixed landline stations.

The new contribution regime introduced by CRTC Tele-com Decision 2000-745, which became effective January 1,2001, applies to all Canadian telecommunications serviceproviders, including WSPs, with revenues over $10 million peryear. As a result, Bell Mobility’s contribution payments areestimated to increase in 2001 to between $40 to $50 million.Bell Canada and Bell Mobility requested that the CRTC varythe terms of its decision so that in 2001 WSPs would be sub-ject to a 1.5 per cent tax, which, if granted, would substantiallyreduce the negative impact for 2001. Bell Canada’s applicationis supported by Rogers Wireless Communications Inc.(“Rogers”) and Microcell.

Telephone Charges for 911 ServiceWSPs provide their customers with access to emergency 911service using the facilities of the wireline telephone compa-nies. Customers of the wireline telephone companiescurrently pay a per number monthly charge of $0.23 for accessto municipally provided 911 service. This charge includes theprovision of related features such as automatic location infor-mation to emergency answering centres. In an October 1999decision, the CRTC found that it would be appropriate forWSPs because they do not receive the same functionality asfixed location wireline customers, to only be charged 50 percent of the wireline 911 rate i.e. a monthly charge of $0.115 perwireless telephone number.

Enhanced Wireless 911 ServiceDue to technological limitations in wireline, wireless and 911answering centre platforms, when wireless customers call 911service they are only provided with a voice link to the emer-gency answering centre. This contrasts to wireline servicewhere databases, resident in the telephone network, providethe emergency answering centre with the subscriber’s tele-phone number for call back purposes, as well as withautomatic location information. In 1996 in the United States,the FCC mandated WSPs in that country to implementenhancements in wireless 911 service in two phases. Phase 1would provide the call back number of the originating wire-less telephone. Phase 2 would provide locational informationto a fairly precise degree. While both phases would result inWSPs incurring costs, Phase 2 is estimated to involve substan-

tial costs to retrofit wireless networks to accommodate thisrequirement. Due to technical and related regulatory difficul-ties, the proposed implementation dates have not been met,and have recently been extended.

In light of the FCC regulatory initiatives, Canadian emer-gency agencies have requested that the CRTC mandate similarrequirements on Canadian WSPs. In response, in 1997 theCanadian WSPs proposed the establishment of a jointWSP/emergency agencies/telephone companies workinggroup to examine the technical and regulatory considerationsinvolved. The CRTC and Industry Canada participate in theworking group as observers. The working group’s focus to datehas been on provision of the wireless call back number andcall routing refinements, similar to the Phase 1 enhancementin the United States. In the interim, Canadian emergencyagencies periodically request the CRTC to mandate the serviceon all WSPs. To date the CRTC has chosen to let the workinggroup address the relevant technical issues including the con-ducting of technical trials in various locations in Canada.

As a direct outcome of the working group’s activities,all WSPs, including Bell Mobility, are planning to conduct anenhanced wireless 911 trial in the Toronto region to providethe wireless call back number and improved location infor-mation in 2001.

Bundling and Joint MarketingAs permitted by Telecom Decision 98-4, Bell Canada and BellMobility are allowed to bundle their products and serviceswith other companies, including each other and subsidiariesand associated companies, such as Bell ExpressVu. However,if tariff services are included in the bundle, the service bundlemust be tariffed and pass an imputation test to ensure thatservices are not sold at prices below cost.

The relationship between Bell Canada, Bell Mobility andBell ExpressVu is expected to accelerate the delivery of bun-dled services, offer customers a single point of contact for theircommunication needs and improve overall cost structuresallowing all such companies to compete more effectively inthe marketplace.

DTH

Bell ExpressVu was awarded a broadcasting distributionlicence for its DTH satellite TV service by the CRTC in Decem-ber 1995 and began operation in September 1997. BellExpressVu’s licence and the CRTC’s Broadcasting DistributionRegulations mandate various requirements in terms of the ser-

vices that can be provided and how those services can be pack-aged. Bell ExpressVu’s licence allows it to provide service in allparts of Canada. Unlike cable companies, Bell ExpressVu doesnot have the price it charges for its basic service regulated bythe CRTC. Bell ExpressVu’s DTH services are provided throughthe NIMIQ DBS satellite operated by Telesat.

Bell ExpressVu has been granted a DTH pay-per-view pro-gramming licence by the CRTC and operates that businesspursuant to the terms and conditions specified in the licence.In addition, Bell ExpressVu has obtained a Satellite Relay Dis-tribution Undertaking broadcasting licence which allows it todistribute, via satellite, broadcasting programming services toterrestrial broadcasting distributors throughout Canada.

COMPETITION

WIREL INE

Bell Canada’s wireline services can be broadly classified underthe following categories:

Basic Access ServicesBasic access services are those services that allow Bell Canadato connect its customers to the network, e.g., basic local ser-vice. Bell Canada’s main competitors in basic access servicesinclude: AT&T Canada; Telus; Le Groupe Vidéotron Ltée(“Vidéotron”); and Call-Net. As discussed above, Bell Canada’sprices for basic access services are subject to price cap regula-tion. On May 1, 1997, the CRTC issued Telecom Decision 97-8,which established the framework for local competition. InTelecom Decision 97-8, the CRTC determined that:

• facilities-based entry into the local telephone marketwould be permitted;

• new entrants are carriers equal in status and the newframework must allow for the transition from a singlenetwork to one of inter-operable networks;

• all services of existing carriers and new entrants are to bemade available to competitors for resale, however whole-sale rates at a mandated discount are not required;

• new entrants’ retail prices will not be regulated;• new entrants will have access to subsidies that ILECs

receive to provide service in higher cost areas; and• new entrants must meet certain public interest require-

ments such as providing 911 and message relay service.With terms and conditions for providing local telecommuni-cations services now established, new entrants are makingtheir presence felt in this market. Many companies have been


approved by the CRTC to operate as competitive localexchange carriers (“CLECs”).

On March 4, 1999, AT&T Canada and MetroNet Commu-nications Corp., a provider of data and voice services targetingmedium and large business accounts in major Canadian cities,announced that they had entered into a definitive agreementto merge their respective companies in a transaction valued atapproximately $7 billion. The terms of the agreement wereapproved at a shareholders’ meeting in May 1999. The mergedcompany is called AT&T Canada.

Sprint Canada, an approved CLEC, is owned by Call-Net.Sprint Canada competes in various markets including local,long distance, wireless products with interconnections tointernational markets, data and Internet. Sprint Canada beganoffering local telephone service in Calgary, Vancouver,Toronto and Montréal in 1999.

Many regional companies have also received or registeredfor CLEC status. Axxent Corp., a reseller of Bell Canada’scentrex services, launched its own facilities-based local servicein the third quarter of 1999 in Toronto and Montréal.Vidéotron, an approved CLEC recently acquired by QuebecorInc. (“Quebecor”), operates in this market.

Telus has announced that it is putting a national fibre-optic network in place to deliver high speed data and Internetservices to business customers, including having a routeimmediately available through established agreements with360Networks Inc. (“360Networks”). Telus and 360Networks have also agreed to build a metropolitan fibre-optic infrastruc-ture in Toronto, to be owned and operated by Telus.

Wireless competitors (PCS and cellular license holders)have been positioning their services as alternatives to con-ventional wireline telephony in the local market. To this end,Telus recently acquired Clearnet Communications Inc. (“Clearnet”), a national digital wireless company. Servicesoffered by Telus Mobility, Microcell and Rogers/AT&T Canadahave strong branding programs and simple, flexible serviceplans.

Competitor ServicesCompetitor services are those services that Bell Canada pro-vides to competitors that are used in the provision ofcompetitive local and interexchange services. Many of theterms and conditions for local competition were determinedin Telecom Decision 97-15, which dealt with issues such as: co-location access; requirements to obtain or resell co-location

access; the type of equipment included in co-location and co-location sites. In addition, in Telecom Decision 97-8, ILECswere required to make local network components available tocompetitors on an unbundled basis, thus allowing competi-tors to provide service using a mix of their own facilities withthose of the ILECs. Bell Canada’s rates for these services aregenerally determined by a cost plus markup formula. OnNovember 30, 1998, the CRTC issued Telecom Decision 98-22in which the CRTC established the rates that Bell Canada cancharge CLECs to use its local access loops to compete in thelocal telephone service market. These rates were subsequentlyreduced in Telecom Decision 99-15 to reflect anticipated costefficiencies.

Options and FeaturesOptions and features are discretionary services offered by BellCanada to its customers, such as call waiting, calling numberidentification and call answer. These services currently pro-vide a substantial contribution to Bell Canada’s revenue baseand profitability. While these services are not capped, it isexpected that in the longer term, with facilities-based localcompetition, margins from these services will decline.

Local Pay TelephonesOn June 30, 1998, the CRTC issued Telecom Decision 98-8,opening the local pay telephone market to competition. Newentrants into the market must meet certain requirements as setout by the CRTC. Bell Canada filed proposed tariffs on August14, 1998 to allow competitors’ pay telephones access to itslocal network.

Rates charged by new entrants will not be regulated. How-ever, rates charged by Bell Canada and other former SCNMcompanies will continue to be monitored until, in the opin-ion of the CRTC, competition is sustainable. The CRTCintends to review the development of competition in thismarket in 2001.

Long Distance ServicesBell Canada’s major long distance competitors are all affiliatedwith U.S carriers. No two countries in the world share as muchinternational traffic as Canada and the United States.

Sprint Canada has a considerable base of residential andbusiness customers, and strong brand loyalty. Its market pres-ence in the United States, as well as in other parts of the world,is a key strength in the carriage of international traffic, includ-ing traffic between Canada and the United States. The

majority of this traffic originates and terminates in BellCanada territory. Other competitors include PrimusTelecommunications Canada (“Primus”) and Telus. In March1999, Primus acquired London Telecom Network Inc., anindependent long distance carrier. On May 31, 1999, AT&TCanada and Primus announced the consummation of a com-prehensive strategic alliance in the residential long distanceconsumer market in Canada. The agreement included the saleby AT&T Canada of its residential long distance customer baseand consumer assets to Primus. AT&T Canada retains a strongpresence in the business market.

In Telecom Decision 97-19 issued on December 18, 1997,the CRTC concluded that the long distance and toll-free mar-kets are now sufficiently competitive to protect the interestsof customers, and that it would be appropriate to forbear fromregulation of those services. As a result, Bell Canada is nolonger required to file and obtain CRTC approval of tariffsspecifying rates for such services. However, Bell Canada isrequired to provide the CRTC, and to make publicly available,rate schedules setting out the rates for North American basiclong distance service, and to update them within 14 days ofany change in such rates. In addition, the CRTC has placed acap on these schedules such that the weighted-average rate foreach schedule will not be allowed to increase. These condi-tions will be subject to review in 2001. Competition in thelong distance market in Canada has been price intensive,resulting from discount structures for term and volume con-tracts in the large business markets as well as from flat ratepricing in the residential and small business markets. BellCanada intends to continue to compete vigorously and iscommitted to being competitively priced in all markets.

Removal of the last remaining barrier to long distancecompetition took effect on October 1, 1998, when Teleglobe’sexclusive right to provide certain international telecommu-nications services ended. The CRTC released TelecomDecision 98-17 in October 1998, which established a new regulatory regime for international telecommunications ser-vices. The decision required that overseas carriers, includingresellers, obtain a license from the CRTC from January 1, 1999;to date, numerous parties have acquired licenses to provideinternational services, making for an intensely competi-tive market. The decision also eliminated traffic routingrestrictions which previously required the use of Canadianfacilities for overseas traffic.


Private Line and DataIn 1999, Bell Canada launched Bell Nexxia to provide broad-band and IP services to business customers. Bell Nexxia,directly and indirectly owns, controls and operates a newnational IP-Broadband network with over 100 points of pres-ence in key locations throughout Canada and the UnitedStates. Bell Nexxia offers Internet services including extranets,WANs, and managed networks packaged with traditionalvoice services.

Nationally, AT&T Canada has been the Bell Canada seg-ment’s most significant competitor in the data servicesmarket, offering frame relay and asynchronous transfer mode(“ATM”) services to the business markets utilizing a Canada-wide ATM network. Moreover, AT&T Canada has created anetwork with national, high speed fibre-optic capabilitieswith bandwidth for delivery of local, long distance, data andInternet services.

Sprint Canada strengthened its position in the data ser-vices business with its 1998 acquisition of Fonorola Inc., along distance services reseller which had become a facilities-based carrier and had been constructing a national fibrenetwork. Its service offerings include managed and unman-aged private line and virtual private networks (“VPNs”) overframe relay.

Private line and data services had been competitive priorto 1979 on a non-interconnected basis and since 1979 for ser-vices connected to the public switched telephone network. In1996, the CRTC approved Bell Canada’s application for for-bearance from regulation of its Datapac and HyperStreamTM

services. In a separate decision later in 1996, the CRTC alsoapproved forbearance for electronic messaging and informa-tion services. In both decisions, the CRTC concluded that themarket for those services was highly competitive. On Decem-ber 18, 1997, the CRTC issued Telecom Decision 97-20 inwhich it noted that the interexchange analog and other voicegrade service sector, which it deemed to be distinct from thehigh capacity and digital data systems (“DDS”) service seg-ments, required continued regulation to protect the interestsof customers. With respect to the high capacity and DDS ser-vices, the CRTC acknowledged that the sources of competitivesupply had increased significantly and that there was evidenceof sufficient competitive supply to warrant forbearance on 20 specific routes. The CRTC also found that there were likelyother routes, which would qualify for forbearance, and pro-posed a process to address further forbearance on a route by

route basis. On May 12, 1999, the CRTC announced that for-bearance on additional routes would be granted based on theexistence of competing facilities on a route (competitors mustfile semi-annual reports identifying qualifying routes). In sub-sequent rulings the CRTC substantially extended the numberof forborne routes to cover most major routes in Bell Canada’sterritory.

The key drivers in the data market include growth in Inter-net access and applications using IP such as e-mail, Web sitedesign/hosting, and e-commerce. Demand for faster andhigher bandwidth access technologies, DSL and fibre accesssystems, applications such as broadcast video, requirementsfor managed corporate and campus networks (VPN and ATM)and alternatives to dedicated private line and circuit switchedservices are also increasing rapidly.

TerminalsBell Canada has experienced substantial competition from alarge number of companies in the provision of business andresidential terminal equipment in its operating territories,following CRTC decisions in the early 1980’s allowing the con-nection of customer-owned terminal equipment to itsfacilities.

WIRELESS

In 1985, Industry Canada awarded two cellular licenses ineach service area in Canada, which resulted in a highly com-petitive cellular industry in Canada. Increased competitionfrom the introduction of PCS and the development of newproducts and services has heightened market awareness andstimulated overall demand for wireless telecommunicationsservices.

In December 1995, Industry Canada awarded four licensesto provide PCS in the 1.9 GHz range to Rogers, to two new PCSentrants (Clearnet and Microcell) and to the shareholders ofMobility Personacom Canada Ltd. (“Mobility Canada”), acompany comprising the wireless affiliates or divisions ofCanada’s major wireline telephone companies, including BellMobility. Bell Mobility and Rogers each received a license for10 MHz of radio frequency spectrum, while subsidiaries ofClearnet and Microcell each received a license for 30 MHz ofradio frequency spectrum. In its initial PCS licensing process,Industry Canada declined to award all of the available spec-trum assigned to PCS, indicating at that time its intention tore-evaluate the need to allocate further PCS spectrum in twoyears. Further competition in the wireless market may also be

introduced in the future through the licensing of additionalPCS and cellular operators. For additional information, seeearlier disclosure under this Item 3 entitled “Regulation –Wireless – Framework – PCS Auction”. In addition to competingwith cellular and other existing wireless services, PCS is expectedto eventually compete with local wireline access services.

In November 1996, Microcell launched its PCS service inMontréal using global system for mobile telecommunications(“GSM”) digital technology. Microcell has rolled out its PCSnetwork in major urban areas in Ontario, Québec, BritishColumbia and Alberta and has signed an agreement withMobility Canada to permit Microcell customers to roam onthe analog network of Mobility Canada when outside ofMicrocell’s own serving area. Microcell is currently competingfor customers and for distribution channels directly againstBell Mobility’s cellular and PCS networks. Sprint Canadaholds an indirect interest in Microcell.

In November 1996, Rogers announced the launch of digi-tal PCS service on its 800 MHz network using its existing TimeDivision Multiple Access (“TDMA”) technology. At the sametime, Rogers and AT&T Canada entered into a long-termstrategic alliance which included the licensing of the AT&TTM

brand to Rogers for use in connection with the marketing ofits mobile wireless services. Effective January 17, 2000, Rogerschanged its brand name from Cantel AT&T to Rogers AT&TWireless. On November 30, 2000, Rogers announced plans tooverlay its TDMA network with a GSM network with inte-grated General Packet Radio Service packet data capabilitythroughout its nationwide digital coverage area, by July 1,2001. Rogers stated that the technology change was to betterposition itself to evolve towards full 3G wireless capabilities.GSM is the technology platform widely used throughoutEurope and Asia.

In October 1997, Clearnet launched its PCS service usingCode Division Multiple Access technology, which is the samePCS technology used by Bell Mobility. Clearnet has rolled outits PCS network in major urban areas in British Columbia,Alberta, Ontario and Québec and has signed an agreementwith Rogers to permit Clearnet customers to roam on theanalog network of Rogers when outside of Clearnet’s ownserving area. Clearnet is currently competing for customersand for distribution channels directly against Bell Mobility’scellular and PCS networks. Clearnet is also a SpecializedMobile Radio (“SMR”) operator that owns a national ESMRnetwork in Canada offering cellular-like service. Services


offered using ESMR may also compete with cellular service.ESMR refers to a low-powered ‘cellular-like’ communicationsservice supplied by converting analog trunk radio systemsinto an integrated digital transmission system. ESMRaddresses certain of the technical limitations of existing SMRsystems. In August 2000, Clearnet was acquired by Telus. As aresult of the acquisition of Clearnet, Telus Mobility wasrequired by Industry Canada to return radio spectrum previ-ously licensed to Telus Mobility and Clearnet in any regionswhere the merger resulted in the combined entity exceedingIndustry Canada’s spectrum cap.

On May 11, 1999, Mobility Canada announced a majorrestructuring of its organization, creating two groups ofwireless carriers able to compete anywhere in Canada forthe wireless business of national customers. The new agree-ment changes the wireless landscape in Canada by removingrestrictions that kept Mobility Canada members fromcompeting in each other’s territories. The new groups willeach be able to offer Canada-wide wireless service, eitherby selling network services to each other or through directcompetition.

The first new group is BWA, which covers Canada fromcoast-to-coast and includes Bell Mobility, Island Tel Mobility,MTT Mobility Inc., NB Tel Mobility, NewTel Mobility Limited,MTS Mobility Inc. (all affiliates of Bell Mobility) and SasktelMobility. The other group is represented by Telus Mobility.

Under the agreement, Mobility Canada will continue toprovide national wireless service for the duration of all exist-ing contracts with national customers. It will also continue itsrole as a provider of billing and settlement services for allmember companies.

Bell Mobility competes directly with Rogers, Telus Mobi-lity and Microcell for cellular and PCS customers, dealers andretail distribution outlets. Competition for subscribers is pri-marily on the basis of price, services and enhancementsoffered, the technical quality of the cellular and PCS system,customer service, distribution, coverage and capacity.

The combination of cellular and PCS licenses provides acompetitive advantage and favourably positions Bell Mobilityin the marketplace to benefit from accelerating wirelessmarket growth while maintaining its existing customer base.Bell Mobility intends to compete vigorously in the wirelessmarkets of the future, using its proven capabilities in thedeployment and operation of wireless networks, its marketingexpertise and its financial resources. It also intends to con-

tinue to enhance its existing wireless services as technologyevolves, to apply for new radio licenses and to deploy new ser-vices to the benefit of its customers.

DTH

Bell ExpressVu is the fifth largest broadcasting distributionundertaking in Canada. Bell ExpressVu’s main competitorscan be broadly divided into national and regional competitors.

Nationally, Bell ExpressVu competes against Star ChoiceTelevision Network Inc. (“Star Choice”), a DTH operatorowned by Shaw Communications Inc. (“Shaw”) throughCanadian Satellite Communications Inc. (“Cancom”). OnJanuary 25, 2001 Shaw and Cancom announced their conso-lidated financial results for the first quarter ending November30, 2000. StarChoice ended the quarter at 509,000 subscribersand reached 531,000 subscribers as at December 31, 2000.

Bell ExpressVu’s market share grew to 58 per cent atDecember 31, 2000. 65 per cent of new activations occurredfrom September 1 to November 30, 2000, and 70 per centduring the month of December.

Bell ExpressVu also competes with the existing larger cable Multiple System Operators (“MSOs”), Rogers, Shaw, Vidéotronand Cogeco Cable Inc., as well as with smaller local cable com-panies. Subscriber comparisons with these MSOs aremisleading, given the growth of DTH in Canada, as well as theexisting cable infrastructure throughout much of the urbanCanadian Market.

In some regions of Canada, Bell ExpressVu competes withdigital wireless operators such as Look Communications Inc.’sLook TV in Southern Ontario and Québec (in which TeleglobeInc. owns an interest) and Craig Wireless Communications inSaskatchewan. Each of these companies have less than100,000 subscribers.

C APITAL EXPENDITURES

Bell Canada continues to make large capital expenditures tomeet the demand for telecommunications services and theimprovement of such services.

Bell Canada’s consolidated capital expenditures for thepast three years are shown in Table 3.8.

During 2001, increased spending on capital expendituresis expected in relation to IP/Broadband initiatives and expan-sion, the PCS spectrum acquisition, increased digitalizationof Bell Canada’s wireless network, convergence initiatives, andcontinued development of Bell Canada’s High Speed accessinfrastructure.

ENVIRONMENT

Bell Canada monitors its operations to ensure their compli-ance with applicable environmental requirements andstandards and implements preventative and remedial actionas required. Bell Canada has put in place an environmentalmanagement and review system which identifies potentialenvironmental problems or opportunities, establishes acourse of action and ensures improvement through a feedbackprocess.

One of the key management and review system tools is theCorporate Environmental Plan which essentially details theenvironmental activities undertaken by the various businessunits within Bell Canada. The plan identifies, over a three-yearperiod, funding requirements, accountabilities and deliver-ables, and allows for the follow-up of Bell Canada’s progress inmeeting its objectives.

For the year ended December 31, 2000, a total amount of$10.35 million (89 per cent of which were expenses and 11 percent of which were capital expenditures) has been spent onenvironmental activities. For 2001, Bell Canada has budgeteda total amount of $12.1 million (79 per cent of which areexpenses and 21 per cent of which are capital expenditures)to ensure the proper application of its environmental policyand the minimisation of its various environmental risks.

In 1999, Bell Canada, along with other major North Amer-ican telecommunications companies, officially signed theEnvironmental Charter for the North American TelecommunicationsIndustry (“Environmental Charter”) at a formal United Nationsceremony.


3.8 Bell Canada (1) Capital Expenditures2000 1999 1998

Capital expenditures ($ millions)2,852 2,499 2,629

(1) Comprised of Bell Canada’s capital expenditures only.

The Environmental Charter identifies principles that willguide the telecommunications industry in its search for newtechnology, products and services and in conducting its busi-ness in a more ecological manner. Each of the signatorycompanies will seek opportunities to provide environmentalleadership and innovation and will promote the use oftelecommunications technology where it could make a posi-tive difference to the environment.

Bell Globemedia

GENERAL

Bell Globemedia is an Internet-powered media and commu-nications company which operates in an emerging marketcharacterized by the convergence of various content and con-nectivity businesses which were previously distinct. It bringstogether: CTV, which operates the CTV Television Networkand several specialty and pay channels; The Globe and Mail,a print and electronic national newspaper; and Sympatico-Lycos, a Canadian Internet portal, packaging content andInternet tools across a network of Internet sites to deliver inte-grated information, communications and entertainmentservices to Canadians.

CT V

CTV’s principal business is the operation of conventional television broadcasting stations. CTV operates the CTV Tele-vision Network, a private English-language national televisionnetwork, through wholly-owned television stations acrossCanada and through affiliation agreements with non-ownedtelevision stations. CTV holds and operates licences for tele-vision broadcasting undertakings in Toronto, Ottawa,Sudbury, Sault Ste. Marie, North Bay, Timmins and Kitchener,Ontario; Saskatoon, Regina, Yorkton and Prince Albert,Saskatchewan; Calgary, Lethbridge and Edmonton, Alberta;Halifax and Sydney, Nova Scotia; Moncton and Saint John,New Brunswick and Vancouver, British Columbia. In addi-tion, CTV holds licences for and operates rebroadcastingfacilities in Ontario, Saskatchewan, Alberta, Nova Scotia, NewBrunswick and Prince Edward Island which allow CTV toextend the reach of its broadcasting operations in these areas.CTV’s principal source of revenue is the sale of airtime forcommercials to be aired on its television stations.

In March 2000, CTV became the controlling shareholderof NetStar and now has ownership interests in and manages

several specialty and pay channels, including CTV Newsnet,The Comedy Network, Outdoor Life Network, CTV Sportsnet,Talk TV, TSN, RDS and Discovery Channel. These specialtychannels derive revenues from advertising and from sub-scription payments set at a monthly rate per subscriber asdetermined by contract with the distributor of the service. Asa condition of CRTC approval of CTV’s investment in NetStar,CTV is required to divest its interest in CTV Sportsnet.

CTV is also involved in the production and distribution oftelevision programs. CTV’s production and distribution rev-enue is generated primarily from the production ofcommercials for advertisers and the sale of programs and dis-tribution rights.

CTV’s television operations have grown primarily throughacquisitions as well as by winning licences through competi-tive applications.

BELL GLOBEMEDIA PUBLISHING

The Globe and Mail is an English-language print and elec-tronic daily Canadian national newspaper publishing oneToronto and one national edition each day, six days a week,from six locations. Total circulation amounts to approxi-mately 355,000 copies per day and total readership can reachup to 1.2 million persons per day.

Revenues from print are primarily advertising revenuesrepresenting 82 per cent of total revenues. Circulation rev-enues represent 14 per cent of total revenues while theremaining four per cent is generated from other sources.

Despite a decline in advertising revenues in 1999 follow-ing the launch of The National Post, a rebound in the growthin advertising revenues in 2000 allowed The Globe and Mailto achieve a cumulative average growth in newspaper adver-tising revenue of seven per cent over the 1997 to 2000 period.The ability to maintain growth is dependant on general eco-nomic conditions as well as the ability to maintain marketshare. To date, The Globe and Mail’s market share of advertis-ing volume against its key competitors in the Torontomarketplace remains constant at 31 per cent.

The key cost elements associated with the newspaper divi-sion are the cost of editorial and staff, newsprint, capacityexpansion and the number of copies circulated. At currentlevels, printing represents approximately 25 per cent of totaloperating costs while compensation and newsprint represent29 per cent and 14 per cent respectively. By the end of fiscal2000, the cost per tonne for newsprint had increased over 10

per cent from the beginning of the year. Similar increases areexpected for 2001.

All printing is performed on a contract basis with longterm agreements in place at all six printing locations. Accord-ingly, capital requirements are generally restricted to systemimprovements and are not required for printing plant expan-sion. Bell Globemedia Publishing expects that the next tenfiscal years will necessitate system improvements amountingto $35-40 million in total while the replacement and modifi-cation program should cost somewhere between $5 millionand $10 million per year.

Globe Interactive operates a number of popular Internetmedia properties in the Finance, News and Careers categorieswhich extensively leverage the Globe brand.

The Finance category sites include Globefund, Globein-vestor, RobTV.com, Globe and mail.com/business. These sitesoffer co-branded solutions through globe advisor and contentsyndication through ROB 1000 Corporate Data and CanadianMutual Fund Data.

In the careers category, Workopolis.com represents themeeting place of recruiters and candidates generating revenues from partnerships, postings and e-solutions.

S YMPATICO-LYCOS

Sympatico-Lycos is a Canadian Web communications, com-merce and media company which owns and operates anetwork of national and local Canadian Internet media prop-erties, including sympatico.ca, tripod.ca, calgaryplus.ca,edmontonplus.ca, montrealplus.ca, quebecplus.ca, vancou-verplus.ca and toronto.com (owned in partnership withTorstar Corp.), canada411.ca and Yellowpages.ca. Sympatico-Lycos provides, through such network of properties, anintegrated collection of local, national and global Internetcontent, as well as several products and services, includingWeb search and directory services, Internet communicationand personalization features, personal Web publishing, andvarious other Internet-based products and services for theconsumer and small-office/home office market in Canada.

Sympatico-Lycos seeks to draw a large number of viewersto its network of properties by providing a one-stop destina-tion for communications, information and e-commerce products and services on the Web. According to Media Metrix,the sympatico.ca property alone attracted approximately four million Canadian visitors during December 2000.


Sympatico-Lycos makes its network of properties availablewithout charge to users, and generates revenue primarilythrough the sale of advertisements, promotions, sponsor-ships, placement fees, electronic commerce and by thelicensing of its products and technology.

Sympatico-Lycos was created in April of 2000, and isowned 71 per cent by Bell Globemedia and 29 per cent byLycos, Inc. (“Lycos”).

Sympatico-Lycos’ network of properties has become anaccepted advertising medium for many Canadian andinternational companies seeking a Canadian audience. Adver-tising revenue is generated by placing banner advertisementsand sponsorship links on Web pages that are displayed onSympatico-Lycos’ various Web properties. From each adver-tisement, a viewer can link directly to the advertiser’s Web site,thus affording the advertiser the opportunity to interactdirectly with a potential customer. Advertising arrangementsrange from: (i) “run of site” arrangements under which anadvertiser is provided with a number of impressions (animpression is a one-on-one view of an advertisement by theend user), the exact placement of which is at Sympatico-Lycos’discretion; (ii) a “key word” arrangement under which anadvertiser purchases the right to advertise in connection withspecified word searches; or (iii) a “targeted” arrangementunder which an advertiser purchases a specified number ofimpressions in, becomes a time-limited sponsor of, or pur-chases a streaming audio or video advertisement on, one ofthe topical areas of Sympatico-Lycos’ network of properties oron a specified Web-page or service.

The advertising on Sympatico-Lycos’ network of propertiesis sold through its internal advertising sales force as well asthrough several key sales channels. Sympatico-Lycos hasentered into strategic sales agency arrangements for the saleand bundling of its products and services, including arrange-ments with Bell ActiMedia’s offline directory advertising salesforce in Canada and Lycos’ sales force in the United States.

Sympatico-Lycos enters into arrangements with both localand national merchants to develop, produce and promote avariety of information and/or transactional-based websites forsuch merchants, enabling them to promote and/or offer theirproducts and services online. Sympatico-Lycos also enters intoarrangements involving integration of merchants’ productsand services into Sympatico-Lycos’ network of properties,making them available for sale to Sympatico-Lycos’ users.Under these arrangements, Sympatico-Lycos generally

receives a fixed and recurring monthly fee and, where appli-cable, a share of the proceeds from resulting sales.

Sympatico-Lycos licenses its products and technology andprovides related consultative services to third parties seekingto enhance the value of their Internet products and services.Sympatico-Lycos typically receives a license fee and, whereapplicable, a share of the advertising revenues, subscriptionfees or proceeds from product sales received by licensees.

REGUL ATION

CTV is subject to the provisions of the Broadcasting Act. Formore information on the Broadcasting Act, see earlier disclo-sure under this Item 3 entitled “Bell Canada-Regulation-Broadcasting Act”.

CTV filed an application with the CRTC in late 2000 torenew its broadcasting programming licences. A public hear-ing on the application will be held starting on April 17, 2001,with a decision by the CRTC expected later in the year.TheCRTC plans to consider a number of issues, including: cross-media ownership, peak time and priority programming,regional reflection, local reflection and service to the visuallyimpaired.

When CTV’s acquisition of NetStar was approved by theCRTC in March 2000, the CRTC directed CTV to divest itsinterest in CTV SportsNet within 12 months. On February 21, 2001, the CRTC denied CTV’s application toextend the deadline by which it must divest its interest in CTVSportsNet. CTV must confirm by March 24, 2001 that it nolonger manages CTV SportsNet directly or indirectly, and nolonger votes the shares of other shareholders through a votingtrust agreement or otherwise.

Pursuant to the provisions of the Income Tax Act, the costof advertising in a newspaper is deductible for the advertiser’stax purposes if the newspaper qualifies as a Canadian news-paper. In order to qualify as a Canadian newspaper, The Globeand Mail must generally be held by a corporation incorpo-rated under the laws of Canada, of which the chairperson andat least three quarters of the directors are Canadian citizensand which is not controlled by non-Canadians. As at the dateof this Annual Information Form, The Globe and Mail quali-fies as a Canadian newspaper.

COMPETITION

The Internet is driving the convergence of new media (e.g.graphical, audio and video digital media), and established

media, including publishing and broadcasting. While con-vergence remains at its early stages, industry participants havebegun to position themselves for the new environment. Thisis not a trend limited to Canada but is occurring around theworld. Some competitors have chosen to proceed withstrategies similar to that of BCE ensuring a presence in a broadcross-sector of industry segments, while others have decidedto focus more narrowly on content development, for example.The creation of Bell Globemedia is a positive pro-competitiveresponse to this rapidly changing environment positioningBCE to compete more effectively in the Internet age.

Each of Bell Globemedia’s component businesses faces vig-orous competition from well-financed, and in many cases,well-established competitors in their respective core markets.

Based on industry rating surveys, CTV’s broadcastoperations enjoy a significant market position within theirbroadcast areas. However, CTV encounters substantial com-petition for viewers and corresponding advertising revenuesin markets it serves from the Canadian Broadcasting Corpo-ration and CanWest Global Communication Corp.(“CanWest”). CTV also competes with Chum Limited, whichhas a multi-regional presence, and other Canadian and for-eign conventional and specialty broadcasters. Thiscompetition has intensified over recent years. Market frag-mentation has increased over the last decade as a result of theintroduction of additional television services, the expandedreach of existing signals and increased use of VCRs. Thedeployment of digital capability will further extend thechoices available to Canadian viewers as new Canadian andforeign services are made available.

The Globe and Mail competes with a broad range of printmedia for subscriber and advertising revenues. Before 1998,The Globe and Mail was the only national newspaper inCanada. Since the launch of the National Post in that year andthe launch of several transit papers in the key Toronto market,competition has intensified. The Globe and Mail also vies forsubscribers and advertisers with The Toronto Star owned byTorstar Corp., Quebecor’s Sun Media newspaper chain, Can-West’s recently acquired Hollinger newspaper chain(numerous community newspapers across Canada in additionto the National Post) and dozens of independent communitynewspapers.

The market for Internet products and services, and forInternet advertising and e-commerce services served in connection with such products and services, is highly com-


petitive. Sympatico-Lycos believes the principal competitivefactors in this market are brand recognition, performance,ease of use, relevance of content, variety of value-added andpersonalizable services and products and quality of end usersupport.

Several companies currently offer competitive online products and services to Sympatico-Lycos’ target market.These competitors currently include Yahoo.com, MicrosoftCorporation (“Microsoft”)’s MSN and America Online. Aswell, a number of companies have and will continue to offerlocalized Internet content and services. Sympatico-Lycos’competitors in this local market include Telus and Quebecor’sCanoe. As Sympatico-Lycos expands its offering of Internetproducts and services, it will be competing with a greaternumber of Internet and media companies, including compa-nies offering both wireline and wireless communicationsservices and features as well as companies involved in the broad-cast, distribution and communication of content and relatedservices.

Teleglobe

GENERAL

Through operating subsidiaries of Teleglobe Inc., Teleglobeprovides comprehensive global communications and e-busi-ness services including Internet connectivity, high speed datatransmission, broadband, broadcast, voice and other value-added services on a wholesale and retail basis. Teleglobe servesover 1,000 customers, with approximately 50 per cent of such customers being Internet service, application content andbroadband providers, approximately 30 per cent of such cus-tomers being carriers and approximately 10 per cent of suchcustomers being multinational corporations.

In 1999, Teleglobe announced a projected U.S.$5 billioninvestment to build the GlobeSystemTM network, a globalInternet, voice, data and video network integrating optical,packet and fiber technology to deliver services globally. Teleglobe invested U.S.$537.8 million in 2000 and U.S.$435.1 million in 1999 in this network. Already, Tele-globe’s network connects directly or indirectly toapproximately 240 countries and territories throughout theworld.

PRINCIPAL MARKET S

Teleglobe has structured its regional operations to be managedlocally, while benefitting from centralized financial, network,

information technology and product development. Teleglobeenters new markets primarily by hiring experienced local pro-fessionals who understand the relevant markets. Teleglobemarkets its products and services through its sales forcelocated in over 50 countries as well as through agents andresellers.

North America. Teleglobe has an array of international anddomestic operating authorizations from the FCC in theUnited States and a full facilities-based license from the CRTCas well as the authority to provide services on a resale basis inCanada. These licenses and authorizations allow Teleglobe topenetrate the market segments of carriers, resellers, ISPs, con-tent providers and broadcasters, businesses and consumers.Teleglobe provides communications and e-business services,ranging from traditional voice, data and broadcast services toInternet, transmission, content and other value added ser-vices. These global services are offered to most of the majorNorth American carriers by Teleglobe carrier services, throughnumerous sales offices in the United States and Canada. InCanada, Bell Canada and Telus are among Teleglobe’s largestcustomers.

Europe. In Europe, Teleglobe has sales offices and variouslicenses and authorizations in 15 countries to operate as aninternational and domestic facilities-based carrier. Teleglobe’sprincipal markets in Europe include Denmark, France, Ger-many, Italy, Norway, Spain, Sweden and the United Kingdom.Its customer base includes incumbent and emerging carriers, ISPs, resellers/distributors, large corporations and broadcasters.

Asia/Pacific. Teleglobe has sales offices in eleven countries ofthe Asia/Pacific region and licenses and authorizations in fivecountries to operate as an international facilities-based carrier.In Hong Kong, Japan, Korea, Malaysia and the Philippines,Teleglobe’s principal markets in Asia/Pacific, Teleglobe offersvarious telecommunications services to incumbent and alter-native carriers, resellers, ISPs and broadcasters, such asbi-lateral switched transit, digital transit, Internet,international private line (“IPL”) and broadcast services.

Latin America. Teleglobe has sales offices in seven countries ofLatin America and authorizations in six countries to operateas an international facilities-based carrier and provide Inter-net, data and corporate voice services mainly to large

corporations and ISPs, with its principal markets beingArgentina, Brazil, Colombia and Mexico.

Rest of the World. Teleglobe has sales offices in eight countriesof the rest of the world, a market division that includes Africa,Eastern Europe, the Middle-East and the Indian Sub-Conti-nent. In India, the United Arab Emirates and Saudi Arabia,Teleglobe’s principal markets in the rest of the world, Tele-globe provides mainly switched voice and Internet services tocarriers, ISPs and resellers.

GLOBAL NET WORK – GLOBES YS TEM

Teleglobe has built an extensive global telecommunicationsnetwork and maintains information systems which allow fornetwork optimization, least cost routing and the centraliza-tion of processing functions. Linking approximately 240countries and territories, Teleglobe’s network combines ter-restrial cables, multiple international submarine cables andearth stations providing access to satellite systems, all ofwhich make use of a comprehensive range of modern tech-nologies. This network is supported by extensive monitoringand other technical systems principally located at Teleglobe’sInternational Network Operating Centres in Montréal(Québec) and Amsterdam (Netherlands) and at its InternetOperating Center in Reston (Virginia).

Network Strategy. The GlobeSystem network is expected toprovide Teleglobe with cost competitive network capacity andservice platforms on a seamless global basis. Teleglobe’s strat-egy is to increase capacity to meet global demand for dataservices in a cost effective manner by investing in next gener-ation optical equipment. Teleglobe’s network is beingdesigned in 10 gigabits per second (“Gbps”) wavelengthswhich are expected to be implemented in increments to takeadvantage of reductions in optical networking equipmentcosts. The GlobeSystem network’s design is based on directlyfusing optical wavelengths to routers and ATM platforms aswell as intelligent network management systems that areexpected to enable customers to select service parameters ondemand, thereby enabling Teleglobe to provide “bandwidthon demand” services. Teleglobe is actively working with anumber of technology suppliers, including Nortel Networksfor dense wave division multiplexing (“DWDM”) and syn-chronous digital hierarchy/synchronous optical networkequipment in its initial network expansion. In addition, it isworking with Cisco Systems, Inc. (“Cisco”) to connect gigabit


switch routers onto the wavelengths in Teleglobe’s Europeanand North American fiber networks. Teleglobe has alsoinvested in the InktomiTM platform for caching and distribut-ing content at the edges of Teleglobe’s network. Teleglobe isalso investing in terrestrial and submarine fiber systemsaround the world to reduce costs by migrating from leased toowned facilities. These investments are expected to increaseTeleglobe’s global capacity by more than 200-fold.

To reduce access costs, increase reach and improve servicecapabilities, Teleglobe is investing in its own points of pres-ence (“POPs”) and metro access rings. In 2001, Teleglobeintends to increase the number of full service POPs from 29 to60 with over 46,450 square meters (500,000 square feet) oftelecommunications conditioned space. Once completed, theGlobeSystem network is expected to provide carriers, ISPs,business customers and content providers direct networkaccess from 110 major cities worldwide to deliver a broad rangeof services.

Teleglobe has also announced its intention to enter thehosting and content distribution business with the construc-tion of Internet Data Centres (“IDCs”) in nine locations,although not all nine of such IDCs are expected to be com-pleted in 2001. These IDC’s will serve not only as an expectedsource of value added service revenues but also are expectedto provide an incentive for customers to keep their networkbusiness on Teleglobe’s network.

Internet Network. Teleglobe operates an extensive Internetbackbone peered with the U.S. and European backbones andproviding international connectivity in over 100 countries.Teleglobe’s IP network is present at all major network accesspoints and Internet business exchanges. In addition to its ownPOPs, Teleglobe has POPs in 23 telehouses and exchangesaround the world. Approximately 15 per cent of global routesare directly reachable through Teleglobe without the need totransit other backbone networks.

This network is supported by more than 300 Cisco routersrunning up to OC-48 levels. While most of Teleglobe’s Inter-net customer base is accessed via cable, past innovations havefocused on improving satellite-based connectivity services. Infact, Teleglobe’s Internet access service is satellite-based in 76of the countries where it offers Internet connectivity with alarge portion of such satellite connectivity being providedwith asymmetrical links.

Teleglobe’s facilities are also composed of ATM switchesthat are located in several major cities in North America andEurope.

Broadcasting. Teleglobe has distinct International TelevisionAccess Centers (“ITACs”) in London (U.K.), Los Angeles (Cal-ifornia), New York City (New York), Toronto (Ontario) andWashington (D.C.) which provide international video broad-cast services.

Voice Network. Teleglobe’s switching facilities include back-bone international switching centers (or “gateways”) inCanada, located in Burnaby (British Columbia), Montréal(Québec) and Toronto (Ontario), in the United Kingdom,located in London and in the United States, located in NewYork City (New York) where outbound traffic is routedthrough submarine cable routes or Teleglobe’s satellite earthstations and inbound traffic is collected from such cable andsatellite facilities. These switching centers use DMS-300, DMS-250/300, DMS-500 and DMS-100E digital telephone switchesfrom Nortel Networks and other equipment necessary forhandling international traffic. Teleglobe has added a largerbackbone international switch in London (U.K.) as well asbackbone international switches in Los Angeles (California),Newark (New Jersey) and Tokyo (Japan). Teleglobe also ownsand operates regional switches manufactured by Ericsson Tele-com A.B. located in Copenhagen (Denmark), Frankfurt(Germany), Madrid (Spain), Milan (Italy) and Paris (France).The software in Teleglobe’s switches provides feedback aboutinbound and outbound traffic to Teleglobe’s network man-agement software and to its billing system. The reportingsoftware provides vendor and customer usage reports, whichallows Teleglobe to seek the cost-effective routing of traffic andto target customers who might absorb increased levels of traf-fic. Multiple redundant routes are used to decrease the risk oflosing connectivity in case of a network failure.

Cable Facilities. Teleglobe’s cable facilities include cable sta-tions as well as ownership interests and indefeasible rights ofuse (“IRUs”) in terrestrial and undersea cables. Teleglobe’scable stations at Pennant Point (Nova Scotia) and Port Alberni(British Columbia) serve as landing points for transatlanticand transpacific cable systems respectively. Teleglobe has own-ership interests in cable systems in North America and Europeas well as in the Atlantic, Indian and Pacific oceans and theCaribbean, Mediterranean and North seas. As at December 31,

2000, Teleglobe had ownership rights or IRUs in more than100 cable systems and cable segments. Subsea capacity as atDecember 2000 was approximately 22.1 Gbps.

Investment Programs. The GlobeSystem program has outlinedfive major investment programs for each of the following geo-graphic regions:

North America. By the end of 2001, Teleglobe expects to havereplaced a large portion of its U.S. leased network with 10 Gbps wavelengths. These wavelengths are expected to coverthe continental U.S. (17,702 route kilometers or 11,000 routemiles) and interconnect seamlessly with BCE Nexxia Corpo-ration’s network at New York City (New York), Chicago (Illinois) and Seattle (Washington). Existing POP locations inNorth America at Chicago (Illinois), Los Angeles (California)(2), Miami (Florida), Montréal (Québec), New York City (NewYork) (2), Newark (New Jersey), Seattle (Washington), Toronto(Ontario) and Vancouver (British Columbia) are expected tobe augmented this year with additional POPs in Atlanta (Geor-gia), Chicago (Illinois), Dallas (Texas), Denver (Colorado),Houston (Texas), Los Angeles (California), Miami (Florida),New York City (New York), San Diego (California), San Fran-cisco (California), Seattle (Washington) and Washington(D.C.).

Europe. Teleglobe’s first European fiber rings were delivered in2000 and turned up between Amsterdam (Netherlands),Frankfurt (Germany), London (U.K.) and Paris (France). By theend of 2001, Teleglobe expects that rings will have beenturned up between these cities and Berlin (Germany), Copen-hagen (Denmark), Dusseldorf (Germany), Hamburg(Germany), Munich (Germany), Oslo (Norway), Prague(Czech Republic), Stockholm (Sweden) and Stuttgart (Ger-many). Existing POPs in Copenhagen (Denmark), Madrid(Spain), Milan (Italy), Vienna (Austria) and Zurich (Switzer-land) are expected to be augmented with POPs in Brussels(Belgium), Frankfurt (Germany), Geneva (Switzerland),London (U.K.), Lyon (France), Milan (Italy), Paris (France) andZurich (Switzerland).

Transatlantic. Teleglobe has purchased two fiber pairs in FLAGAtlantic that are expected to ultimately provide 400 Gbps ofcapacity between Europe and the United States, in addition tocurrent capacity which exceeds 60 STM-1s. Delivery of thefirst capacity is expected in June 2001.


Latin and South America. Existing cable investments in thisregion are being augmented with the purchase of two wave-lengths of capacity on the Atlantica cable from 360Networksoperating at 10 Gbps. This capacity complements Teleglobe’sownership in other regional systems such as Americas-2,Maya-1 and Panam. Existing POP sites in Bogota (Colombia),Buenos Aires (Argentina), Panama City (Panama), Rio deJaneiro (Brazil), San Juan (Puerto Rico) and São Paulo (Brazil)are expected to be augmented with additional sites in Bogota(Colombia), Caracas (Venezuela), Mexico City (Mexico) andSantiago (Chile).

Asia/Pacific. Teleglobe has invested in China-U.S and Japan-U.S. cables and ACPN-II. In addition, Teleglobe was an investorpartner in the Australia- Japan cable. Plans are still being final-ized for additional cross-Pacific capacity in 2002 as well asadditional Asian POP sites. In addition to investing in China-U.S. and Japan-U.S. cables, Teleglobe has acquired capacity onPacific Crossing-1, which it intends to use to serve theAsia/Pacific region in 2001. The transpacific segment isexpected to be extended into the middle of Asia through Tele-globe’s “initial party” investment level in the APCN-II cablesystem, which is expected to be completed in 2002. Likewise,the transpacific segment is expected to be extended to Aus-tralia through Teleglobe’s investment in the Australia-Japancable, expected to be completed in 2001.

Internet Data Centres. Teleglobe offers a hosting and contentdistribution product line used by multinational companies tofacilitate eBusiness transactions using practices, systems andtechnologies that are supported by service level agreements.Teleglobe expects to provide rich media platforms that spanacross multiple countries and has developed relationshipswith technology partners including Cap Gemini Ernst &Young, EMC Corporation, Inktomi Corporation, SunMicrosystems, Inc. and Cisco. Teleglobe expects to open Inter-net Data Centres (“IDCs”) around the world that are expectedto initially provide more than 37,160 square metres (400,000square feet) of space and to co-locate its POPs directly at eachIDC.

Satellite Facilities. Teleglobe’s satellite facilities include satel-lite earth stations as well as Teleglobe Inc.’s participation inINTELSATTM and New Skies Satellites, N.V. (“New Skies”). Tele-globe operates satellite earth stations at Lake Cowichan(British Columbia), Pennant Point (Nova Scotia) and Weir

(Québec) in Canada and Bogota (Colombia), Panama City(Panama), Rio de Janeiro (Brazil), San Juan (Puerto Rico) andSão Paulo (Brazil) in the rest of the Americas. These stationstransmit and receive messages via INTELSAT, INTERSPUTNIK,EUTELSAT, PanAmSat and Orion satellites over the Pacific andAtlantic oceans and also provide back-to-back connectivity toNorth American domestic satellites.

As a signatory to INTELSAT, Teleglobe Inc. has the right touse the INTELSAT satellite system and the obligation to payappropriate utilization charges according to the organization’stariffs. As a signatory, Teleglobe Inc. also contributes to theorganization’s capital expenditures and receives compensa-tion for use of capital assets based upon its proportionateinvestment share. This investment share, or proportionateinterest, is established on the basis of Teleglobe Inc.’s and itsaffiliates’ expected utilization of the system and adjustedupwards or downwards according to actual usage on a yearlybasis. At the present time, Teleglobe Inc.’s interest in INTELSATis approximately three per cent, allowing Teleglobe Inc. tohold a seat on INTELSAT’s Board of Governors until July 2001.This percentage ownership in INTELSAT is expected to decreaseafter the expected privatization of INTELSAT by July 2001.

Teleglobe Inc. also holds an interest of approximately two per cent in New Skies, a limited liability company operat-ing five satellites. New Skies competes directly with INTELSATand other satellite operators. New Skies has recently com-pleted an initial public offering and Teleglobe Inc. could sell aportion or all of its interest in New Skies in the future.

Information Technology. Teleglobe has built an informationtechnology (“IT”) infrastructure to support its national andinternational operations. Teleglobe’s systems allow its variousoperating entities to carry a high volume of traffic and to billcustomers. Teleglobe maintains programming and manage-ment information personnel, as well as contract programmersdedicated to the maintenance, operation and continueddevelopment of Teleglobe’s management information sys-tems, network management systems and operational supportsystems. All IT activities in Teleglobe are centralized in onesingle IT department headed by a Chief Information Officer.

REGUL ATION

The following summary of regulatory developments and leg-islation does not purport to describe all present and proposedlaws and regulations affecting the telecommunications indus-

try. Other existing laws and regulations are currently (or maybecome) the subject of judicial proceedings, legislative hear-ings and administrative proposals which could change, invarying degrees, the manner in which the telecommunica-tions industry operates.

Canada – Regulatory Framework & Licensing Regime. UntilOctober 1, 1998, Teleglobe Canada Inc. (“Teleglobe Canada”),a predecessor of Teleglobe Inc., was the sole authorized Cana-dian operator of facilities to provide Canada/overseastelecommunications services. On October 1, 1998, the CRTCissued Telecom Decision CRTC 98-17 that changed the regu-latory framework governing the provision of internationalservices in Canada. With this decision, the CRTC introduceda licensing regime that applies to all Canadian internationalservice providers. The CRTC decision also eliminated the rulesprohibiting the routing of Canada-Canada calls and Canada-overseas calls through the United States, thereby removing alltraffic routing restrictions. Finally, the CRTC maintained theprice based regulatory regime that applied specifically to Tele-globe Canada except with respect to Canada-Canada andCanada-U.S. traffic. However, on September 28, 1999, theCRTC issued Telecom Decision 99-14 to forebear from regula-tion Teleglobe Inc.’s and its subsidiaries’ international directdistance dialing (“IDDD”) telephone services.

The licensing regime defined in Telecom Decision CRTC98-17, effective January 1, 1999 and revised on December 17,1999, establishes two classes of international telecommuni-cations service providers: (a) Class A licensees are those whooperate telecommunications facilities, whether owned bythem or leased from a separate facilities provider, used intransporting basic telecommunications service traffic betweenCanada and another country; those who operate telecommu-nications equipment that converts basic international trafficfrom circuit-switched minutes originating in Canada to non-circuit switched traffic, or from non-circuit switched traffic tocircuit-switched minutes terminating in Canada, regardless ofwhether the licensee is responsible for the international trans-port; or those who perform both of the functions describedabove; and (b) Class B licensees are those who neither operatetelecommunications facilities owned by them or leased froma separate facilities provider used in transporting basictelecommunications service traffic between Canada andanother country; nor operate telecommunications equipmentthat converts basic international traffic from circuit-switched


minutes originating in Canada to non-circuit switched traffic,or from non-circuit switched traffic to circuit-switched minutes terminating in Canada. Among other things, it pre-scribes, as conditions of license, a basic prohibition for alllicensees from engaging in anti-competitive conduct, and arequirement for Class A licensees to file certain information asto the basic international traffic they carry and the agree-ments and arrangements they enter into with foreign serviceproviders. Teleglobe holds a Class A license. This license isgranted for a term of five years and is renewable under certain conditions.

Canada – The Telecommunications Act. The Act, as amended inMay 1998 to implement Canada’s commitments under theWorld Trade Organization multilateral agreement on trade inbasic telecommunication services reached on February 15,1997 (the “WTO Agreement”), applies to all defined Canadiantelecommunications common carriers, and to the provisionof international services to other telecommunications serviceproviders. The Act defines the broad objectives of the Cana-dian telecommunications policy and empowers theGovernment of Canada to issue to the CRTC directions ofgeneral application with respect to any of these objectives.The Act gives the CRTC discretion to establish a licensingregime for telecommunications service providers of interna-tional telecommunications services. The CRTC also hasdiscretion to specify classes of telecommunications serviceproviders required to obtain a license before providing inter-national telecommunications services as well as to specify aclass of international telecommunications services whichlicensed telecommunications service providers are permittedto provide. In addition, the CRTC has the power to establishthe form, manner and information required in an interna-tional license application and to set the fees which mustaccompany such license application. The Act provides thatthe term of an international license may not exceed ten yearson its issuance or renewal and that a license is not transferableexcept with the consent of the CRTC. The Government ofCanada has the power to vary, rescind or refer back CRTC deci-sions. The CRTC may itself review and rescind or vary anydecision made by it. An appeal of a CRTC decision on a ques-tion of law or jurisdiction may be brought with leave beforethe Federal Court of Appeal. The CRTC has the power toexempt any class of carriers from the application of the Act,and to refrain from regulating classes of services where this

would be consistent with the objectives of the Act. The latterconcept is generally known as the power of forbearance. TheAct limits eligibility to operate as a telecommunicationscommon carrier (a “Canadian carrier”) to corporations incor-porated in Canada that are Canadian-owned and controlled.These ownership restrictions do not apply in respect of theownership or operation of international submarine cables orearth stations that provide telecommunications services bymeans of satellites. Resellers are exempted from the applica-tion of the Act, except for the provision of internationalservices.

Canada – The Teleglobe Act. Teleglobe Canada was establishedunder the Teleglobe Act in 1987, as the successor corporation tothe rights and obligations of the Canadian Crown corporationresponsible for the provision of overseas telecommunicationsservices. The Teleglobe Act was amended in May 1998 in orderto implement Canada’s commitments under the WTO Agree-ment and to repeal provisions that were inconsistent with theend of Teleglobe Canada’s exclusive mandate. As a result ofthese modifications, Teleglobe Inc. and its subsidiaries aregenerally subject to rules similar to those applicable to othertelecommunications service providers under the Act.

Canada – CRTC. In its role as Canadian regulator, the CRTCapproves tariffs for Teleglobe’s regulated telecommunicationsservices and periodically issues directives which affect theaccounting treatment of specific items in Teleglobe’saccounts. In addition, the CRTC, in Telecom Decision CRTC96-2 dated February 21, 1996, approved a new regulatoryframework based on price regulation instead of the rate-of-return regulation to which Teleglobe Canada was subject priorthereto.

Canada – Licenses. The Act and the Radiocommunication Actrequire that a carrier must have a license for each of its satel-lite earth station sites and international undersea cablelanding sites in Canada in order to operate such facilities andto carry traffic between Canada and any foreign country, orbetween countries through Canada. Teleglobe holds suchlicenses as are required by its business. The radio transmissionlicenses are renewable annually. The undersea cable landinglicenses are granted for periods of ten or 20 years and expire atvarious dates between 2001 and 2013. The holding of suchlicenses is subject to certain terms and conditions, with whichTeleglobe is in compliance.

United States – Overview. The FCC exercises authority over allinterstate and international facilities-based and resale servicesoffered by Teleglobe USA Inc. (“Teleglobe USA”) and its oper-ating affiliates. Services that originate and terminate withinthe same state, also known as intrastate services, are regulatedby state regulatory commissions.

United States – General Federal Requirements. Under the Com-munications Act of 1934, as amended (the “CommunicationsAct”) and the FCC’s rules, all international carriers arerequired to obtain authority under Section 214 of the Com-munications Act prior to initiating international commoncarrier services, and must file and maintain tariffs containingthe rates, terms, and conditions applicable to their services.Domestic interstate common carriers are not required toobtain Section 214 or other authority from the FCC for theprovision of domestic interstate telecommunications services.

United States – International Services. With respect to interna-tional services, Teleglobe USA has obtained all necessarySection 214 authorizations from the FCC to acquire, own andoperate international transmission facilities, to resell the ser-vices of other U.S. carriers for the provision of internationalswitched services and IPL services, and to use the intercon-nection arrangements and network assets of TeleglobeCanada, L.P. Teleglobe USA has filed international tariffs withthe FCC.

Additionally, the FCC has established different levels ofregulation for dominant and non-dominant carriers. Tele-globe USA is presently classified as a non-dominant carrier forboth domestic and international services on all routes, includ-ing Canada. In connection with the acquisition by BCE Inc.of all of Teleglobe Inc.’s outstanding common shares it or itsaffiliates did not already own however, Teleglobe USA and itscommon carrier affiliates are now subject to the FCC’s domi-nant carrier regulation with respect to U.S.-Canada traffic. Theprimary effect of dominant carrier regulation is to imposeadditional FCC reporting and tariffing obligations. Teleglobedoes not expect these measures to materially affect Teleglobe’sability to compete on the U.S.-Canada route with U.S. carrierswhich are classified as non-dominant.

The FCC permits the resale of international switched ser-vices and the resale of private lines for the provision of servicesinterconnected to the public switched telephone networks,generally referred to as international simple resale (“ISR”). U.S.carriers may provide ISR on routes as permitted by the FCC.


With regard to some carriers, Teleglobe USA must conductits international business in compliance with the FCC’s inter-national settlements policy (the “FCC Policy”). The FCCcurrently applies the FCC Policy to contracts with dominantcarriers in offshore markets, but does not apply the FCC Policyto contracts with most new and emerging offshore carriers.Where it does apply, the FCC Policy establishes the permissi-ble boundaries for U.S.-based carriers and their affectedforeign correspondents to settle the cost of terminating eachother’s traffic over their respective networks. The precise termsof settlement are established in a correspondent agreement,also referred to as an operating agreement. Among otherterms, the operating agreement establishes the types of servicecovered by the agreement, the division of revenues betweenthe carrier that bills for the call and the carrier that terminatesthe call at the other end, the frequency of settlements (i.e.,monthly or quarterly), the currency in which payments willbe made, the formula for calculating traffic flows betweencountries, technical standards, procedures for the settlementof disputes, the effective date of the agreement and the termof the agreement.

The FCC issued an international accounting rate orderaimed at reducing accounting rates by adopting a three-tieredsystem of benchmarks, which was upheld by the U.S. Court ofAppeals in January 1999. Under this policy, U.S. carriers nego-tiating with overseas correspondents to exchange traffic willbe required to use the specified benchmarks as the target forthe negotiated settlement rate between the two carriers. TheOrder establishes a three-tiered system of benchmarks, withdifferent rates to be applied based on each country’s level ofdevelopment (calculated from World Bank and ITU data). Ifsuccessful, the effect of this order could significantly reduceTeleglobe USA’s costs. At the same time, these accounting ratescould strengthen the ability of Teleglobe USA’s competitors toreduce their own costs and more effectively compete withTeleglobe USA and other Teleglobe affiliates.

United States – Federal Legislation. The 1996 Telecommunica-tions Act is intended to, among other things, establishcompetition to ILECs as a national policy by expressly pro-hibiting any legal barriers to competition in intrastate orinterstate communications services under state and local laws.The 1996 Telecommunications Act further empowers the FCC,after notice and an opportunity for comment, to preempt theenforcement of any statute, regulation or legal requirement

that prohibits, or has the effect of prohibiting, the ability ofany entity to provide any intrastate or interstate communica-tions service. The 1996 Telecommunications Act also establishescertain requirements, including interconnection require-ments, the offering of local network elements on anunbundled basis and other ILEC obligations with respect toresale, number portability, dialing parity, access to rights-of-way and reciprocal compensation.

Certain provisions of the 1996 Telecommunications Actcould materially affect the growth and operation of thetelecommunications industry and the services provided byTeleglobe USA. There are currently in process numerous pro-ceedings under the 1996 Telecommunications Act . Certainsections of the 1996 Telecommunications Act and the FCC’srules have been, and likely will continue to be, judicially chal-lenged. Teleglobe USA is unable to predict the outcome ofsuch rulemakings or litigation or the substantive effect (finan-cial or otherwise) of the new legislation and the rulemakingson the operations of Teleglobe USA.

United States – Effect of Foreign Laws on Certain Carrier Activi-ties. Teleglobe USA engages in certain lawful activities in theUnited States which would be restricted were they performedin other countries. Teleglobe is engaged in the provision of“callback” services, as a minor element of its business mix,which permits callers in a foreign country to place interna-tional long distance calls using Teleglobe USA’s U.S. network.Callback services have been explicitly authorized by the FCCfor several years except with respect to countries that prohibitthe activity. In the course of its activities, Teleglobe USA entersinto marketing and resale arrangements with different serviceproviders. Teleglobe USA has no control or knowledge what-soever, on such service providers or agents who may decide tomarket callback services in a country that prohibits such ser-vices. Teleglobe USA is not presently involved in anyproceeding or inquiry regarding its callback services, nor is it aware of any country in which its callback activities have beencalled into question.

Teleglobe is also exploring the use of Internet technologyin provision of value added voice services, a practice whichhas raised issues similar to callback in some countries. To theextent Teleglobe is engaged in voice over the Internet activi-ties, it does so consistently with national laws.

United States – Arrangements with U.S. Carriers. Teleglobe’sU.S. carrier affiliates are classified by the FCC as non-domi-

nant and they may freely contract with other U.S. carriers. OnFebruary 3, 1998, Teleglobe USA received authority from theFCC to use owned or leased facilities between the UnitedStates and Canada to interconnect the switched networks ofTeleglobe USA and Teleglobe Canada, L.P.

Rest of the World. Teleglobe is also subject to regulation incountries in which it operates in connection with Teleglobe’scarrier services and other telecommunications service activi-ties. The policies of the national governments and regulatoryauthorities of these countries may have a positive or negativeimpact on Teleglobe’s ability to conduct business in suchlocations.

Teleglobe currently expects that the European UnionMember States will continue to implement more liberaltelecommunications policies and to address market entryissues. Important issues remain with respect to the rates andterms of service for interconnection of emerging carrier net-works with those of incumbent operators and the availabilityof fully unbundled local loops and other network elementsnecessary to deploy broadband capabilities to end users.

In Asia, Teleglobe has benefited from deregulation in Japanand Hong Kong, although issues relating to the regulation ofinterconnection in Japan remain a challenge.

Elsewhere in Asia, China’s efforts to join the WTO willestablish the opportunities for foreign telecommunicationsinvestment in China over the next several years. China inprinciple has agreed to liberalize its telecommunications mar-kets and to permit varying levels of non-controlling foreigninvestment in facilities-based operators over time. In order forthat agreement to be put into effect, however, a consensus ofWTO members must agree to accept it.

COMPETITION

The global communications and e-business industry is highlycompetitive and subject to the introduction of new servicesfacilitated by rapid technological change and market liberal-ization. International telecommunications providers competeon the basis of price and pricing plans, customer service, trans-mission quality, reliability and availability, breadth of serviceofferings and availability of value-added services. As Tele-globe’s network expands to serve a broader range ofcustomers, Teleglobe expects to encounter increasing compe-tition from a variety of major local and internationalcommunications companies. Many of Teleglobe’s competitors


and potential competitors upon deregulation or expansion,have significantly greater financial, technological and otherresources than Teleglobe. Internationally, Teleglobe competeswith incumbent providers, some of which have special regu-latory status or the exclusive right to sell particular servicesand virtually all of whom have historically dominated theirmarkets and accordingly have existing customer relationships.In addition, Teleglobe may be dependent upon these incum-bent providers to obtain facilities.

In certain circumstances, significant resources are requiredto obtain the regulatory approvals necessary to operate in aparticular country and to obtain access to, and interconnectwith, the incumbent’s network. Foreign competitors may alsopossess a better understanding of their local areas, and therecan be no assurance that, notwithstanding Teleglobe’s effortsto hire local employees in each market, Teleglobe can obtainsimilar levels of local knowledge. However, such competitorsare sometimes each other’s customers for certain specificroutes and for certain categories of products. Moreover, Tele-globe may face additional competition from existing andfuture global alliances and mergers among the largest telecom-munications carriers.

Teleglobe also faces competition from companies offeringresold international telecommunications services. Teleglobeexpects that competition from such resellers will increase inthe future in tandem with increasing deregulation of telecom-munications markets worldwide. Teleglobe’s ability tocompete effectively will depend on its continued ability tomaintain high quality, market-driven services at competitiveprices.

Internationally, the continuing market liberalization ofthe telecommunications industry has had a direct impact on the number of players in the market. This increase in thenumber of facilities-based international carriers is not onlyseen in the liberalization leader countries but more recently,in Latin and South America, Asia/Pacific and additional west-ern European countries.

In Canada, the elimination of the routing restrictions onISR and international switched hubbing and the implemen-tation of a streamlined process for the licensing ofinternational telecommunications service providers have sub-jected the Canadian IDDD market to unprecedented andintensifying levels of competition from Canadian and foreigninternational telecommunications service providers withgreater financial resources and larger breadth of service offer-

ings than those of Teleglobe. While Teleglobe is still subject toregulation and tariff filings on most of its Canadian services,the CRTC decided in 1999 to forbear from regulating Tele-globe’s IDDD service, its largest gross revenue producingtelephone service.

Technological changes, tied with competitive forces, mayaffect all aspects of telecommunications, including networkselection and access. Recent advances in technology, such asDWDM, are expected to help accommodate bandwidthexpansion requirements by significantly expanding, in a costeffective manner, capacity and size. In the United States, pri-vate companies are building North American terrestrialtransmission systems which employ DWDM technology forcommercial sale to telecom carriers, ISPs and resellers. As is thecase in submarine systems, these terrestrial providers alreadyhave significant capacity and in the near future are expectedto offer substantial bandwidth at declining prices. High-capacity fiber-optic cables, mobile telecommunications, com-pression technologies and satellites also allow greaterflexibility for consumers in their selection of a telecommuni-cations provider, without committing them to a particularnetwork. As high-capacity fiber-optic network technology isdeveloped, international carriers may promote new cable sys-tems, which will compete with Teleglobe’s bandwidth serviceofferings.

With respect to satellite transmission capacity, INTELSATis facing competition from other satellite systems and under-sea cables. Private cables that are not owned by the traditionalinternational service providers nor by INTELSAT signatoriesmay provide effective competition to INTELSAT service formarkets served by Teleglobe. Liberalized regulation of domes-tic and international telecommunications markets is alsoresulting in the emergence of competitors to INTELSAT for theprovision of international service in the form of alternativesatellite systems and services as well as satellite resale opera-tions. In many countries, including the United States, separatesatellite systems, such as PanAmSatTM, are allowed to provideservice to the end-user directly by bypassing the traditionalservice providers. Evidence of this competitive pressure is thecreation of New Skies, the first step in INTELSAT’s restructur-ing. INTELSAT has announced plans to privatize by July 2001.

C APITAL EXPENDITURES

The global communications business in which Teleglobe com-petes is capital intensive. For the year ended December 31,

2000, Teleglobe’s capital expenditures were approximatelyU.S.$538 million. Teleglobe anticipates capital expendituresfor 2001 to reach U.S.$1.75 billion. Capital expenditures areprimarily funded from existing cash flow, credit facilities andBCE. More than three-quarters of this amount has been allo-cated to the continued deployment of the GlobeSystemnetwork, the construction of IDCs and the growth of Tele-globe’s cable and fiber facilities to expand Teleglobe’s networkcapacity and bandwidth in order to meet the growth indemand for both existing and new services. The remainingfunds will be used for information systems and intelligentproduct platforms.

Due to the nature of its business, Teleglobe does not needto spend a material portion of its total capital expenditures onenvironmental protection requirements.

BCE Emergis

GENERAL

BCE Emergis provides B2B e-commerce solutions. It marketsits e-commerce solutions to leaders in selected industry verti-cals such as major banks, telecommunications providers, andinsurance companies and other payors of healthcare claims inorder to create B2B exchanges among a large number of theircustomers, suppliers and other business partners. BCE Emergisis the leading B2B e-commerce company in Canada and itsgoal is to become a leading B2B e-commerce company in itstargeted markets in North America.

BCE Emergis offers a suite of technologies that provide itscustomers with the components necessary to implement acomprehensive e-commerce solution. BCE Emergis’ solutionsinclude electronic invoice and bill payment and presentment,e-procurement, e-customer relationship management solu-tions, selling and business document exchange solutions,e-payments, transaction processing and security solutions.These services are used by BCE Emergis’ clients internally andare often marketed by them to their customers, suppliers andother business partners.

BCE Emergis’ network-centric e-commerce solutions resideon the Internet and are accessible through a web browser.These network-centric solutions allow BCE Emergis’ clients toaccess a comprehensive suite of e-commerce services withoutthe up-front costs and delays associated with building an in-house e-commerce infrastructure.


BCE Emergis’ services are based on technologies developedinternally, technologies that have been acquired throughacquisitions, and technologies provided by technology part-ners such as Ariba, Inc., Entrust Technologies Inc. andMicrosoft.

RECENT DEVELOPMENT S

In January 2001, BCE Emergis announced a strategic agree-ment with J.P Morgan Treasury Services, a unit of J.P. MorganChase & Co., for the implementation of BCE Emergis’ B2Belectronic invoice presentment and payment solution. J.P.Morgan Chase will use BCE Emergis’ e-Invoicing solution todeliver account analyses and invoice statements to its treasuryservices clients globally and will offer it to its corporate,middle market, financial institution and net marketplacewholesale banking clients to use with their trading partners.

On December 21, 2000, BCE Emergis announced the saleof its Transport business to Descartes Systems Group Inc.(“Descartes”), a publicly-traded company based in Waterloo,Ontario. The purchase price for the transaction was $68 mil-lion consisting of $25 million in cash plus 1.388 million sharesof Descartes. As a result of the transaction, BCE Emergis willown approximately three per cent of the issued and outstand-ing shares of Descartes.

In September 2000, BCE Emergis, together with BellCanada, Canadian Imperial Bank of Commerce, Scotiabank,and La Confédération des caisses populaires et d’économieDesjardins du Québec (“Desjardins”), announced plans tolaunch a new e-procurement company, Procuron Inc.(“Procuron”). Procuron will use combined purchasing vol-umes along with world-class strategic sourcing ande-commerce expertise to provide Canadian businesses with anational B2B exchange for buying business products and ser-vices, including office equipment and supplies, furniture,computer hardware and accessories, travel, and courier ser-vices. The five main participants anticipate spendingapproximately $1 billion through Procuron in the first year ofoperation.

On September 20, 2000, BCE Emergis completed its acqui-sition of InvoiceLink Corporation (“InvoiceLink”), a privatelyheld company and a technology leader in Web-based invoic-ing and payment solutions for B2B applications. Under theterms of the agreement, BCE Emergis acquired InvoiceLink forU.S. $88.3 million paid in BCE Emergis shares and options.

On March 28, 2000, BCE Emergis completed the acquisi-tion of Rockville, Maryland based United Payors and UnitedProviders, Inc. (“UP&UP”) for approximately U.S. $550 mil-lion. This acquisition highlights BCE Emergis’ commitmentto expanding its presence in the United States and the health-care vertical. UP&UP provides claim-processing services toinsurance companies and healthcare providers over a networkconnecting over 2,900 hospitals, 14,000 ancillary healthcarefacilities and over 150,000 physicians throughout the UnitedStates. In 1999, UP&UP’s customers processed over U.S. $3 bil-lion of healthcare claims using UP&UP’s solutions andgenerated revenues to UP&UP of U.S. $107.8 million.

COMPETITION

The e-commerce industry is, and will continue to be, highlycompetitive. Although BCE Emergis does not believe thatthere is a single competitor offering an integrated suite incor-porating all of its services, it faces competition for each of itsindividual services. Firms such as CommerceOne, Inc. andOracle Corporation offer competing services in the emerginge-procurement marketplace. CyberCash, Inc. and others offere-payment solutions. In electronic bill presentment, BCEEmergis competes with organizations such as CheckFree Cor-poration and BottomLine Technologies, Inc. in the UnitedStates, and the Cebra Inc./Electronic Post Office venture inCanada. VeriSign, Inc. is BCE Emergis’ principal competitor inthe security services arena.

In BCE Emergis’ targeted vertical markets, it competes withcompanies providing an array of services within a given indus-try, such as WebMD Corporation in eHealth. In some areas, itmay compete with internal groups of major organizations.

BCE Emergis expects that other competitors will developover time. Some of these will be companies that are not cur-rently in its markets, others will be new companies, and otherscould be ventures between current clients and competitors.

BCE Emergis believes that the principal competitive factorsin its industry include:

• quality of services;• technical and strategic expertise;• ability to provide end-to-end solutions;• speed of development and implementation of solutions;• value of services compared to cost;• brand-recognition and size of the firm;• strategic alliances and commercial relationships; and• expansion of existing technologies.

BCE Ventures

BCE Ventures combines, for management purposes, all thenon-core assets of BCE.

BCI

BCI owns, develops and operates advanced communicationscompanies in markets outside Canada, with a focus on LatinAmerica. On November 16, 2000, BCI, América Móvil and SBCInternational announced the closing of the September 25,2000 joint venture agreement and the formation of TelecomAméricas, a new facilities-based communications company,which will serve as the partners’ principal vehicle for expan-sion in Latin America. For a more complete description of theTelecom Américas transaction, see earlier disclosure underItem 2 “General Development of BCE-Recent Developments”.

Under Telecom Américas’ shareholders agreement, BCIand América Móvil both have veto power over fundamentaldecisions about Telecom Américas, including the approval ofbusiness plans, material changes to corporate strategy, acqui-sitions, divestitures or mergers and the issuance of equity ordebt.

Pursuant to the joint venture agreement and upon receiptof the necessary approvals, América Móvil has undertaken tocontribute to Telecom Américas, at no further cost, its 60 percent interest in the Argentine broadband company, Techtel-LMDS Comunicaciones Interativas S.A. In addition, onFebruary 12, 2001, Telecom Américas entered into an agree-ment to acquire a 100 per cent economic interest in Tess, acellular operator in the Brazilian State of São Paulo, for a totalconsideration of U.S. $950 million. Under the terms of theTess agreement, certain voting rights remain with the ven-dors. The transaction, which is subject to lender andregulatory approvals, is expected to close before the end of thefirst quarter of 2001. As at December 31, 2000, BCI’s invest-ments consisted of Brazilian and Spanish American mobileand broadband operations held through Telecom Américas, Latin American CLEC operations and Asian mobile operations, covering a combined total of approximately341 million licensed POPs and approximately 94 million pro-portionate POPs.

BCI’s mobile operations in Brazil include B-Band cellularoperations of (i) ATL in the states of Rio de Janeiro and EspiritoSanto; (ii) Americel S.A. in seven states in central-westernBrazil; and (iii) Telet S.A. in the state of Rio Grande do Sul,


covering a combined total of approximately 42 millionlicensed POPs. BCI’s broadband operations in Brazil are car-ried on by Canbras Communications Corp. and consistprimarily of cable television services and the pursuit of oppor-tunities in high speed Internet access, ISP and wholesale datatransport service markets. BCI’s Spanish American mobileoperations include the wireless telecommunications servicesprovided by Comunicación Celular S.A. – Comcel S.A.(“Comcel”) in the eastern region of Colombia and by Occi-dente y Caribe Celular S.A. – Occel S.A. (Comcel’s subsidiary)in the western region, with an estimated combined total ofapproximately 35 million licensed POPs. BCI’s Latin Ameri-can broadband operations are carried on by Genesis Telecom,C.A. and Comunicaciones 2163, C.A. in Venezuela and coverapproximately 22 million licensed POPs. BCI’s CLEC opera-tions in Latin America include the fixed telephony and valueadded services of Axtel in Mexico, fixed telephony and valueadded services of Vésper S.A. and Vésper São Paulo S.A. in thenortheast region and the São Paulo state in Brazil, respectively,as well as the ISP services of Vento Ltda. in Brazil, with an esti-mated combined total of 219 million licensed POPs. AtDecember 31, 2000, BCI’s sole operation in the Asia-Pacificregion was the Taiwanese PCS provider KG Telecommunica-tions Co., Ltd. (“KG Telecom”) with an estimated total ofapproximately 22 million licensed POPs.

BCI streamlined and sharpened the focus of its portfolio in1999 and 2000 by divesting its interests in Tata Communica-tions Limited in India, in Yantai Bell TelecommunicationsEngineering Company, Ltd., Shandong Hehua Bell Telecom-munications Engineering Company, Ltd., and ShandongRenwa Bell Telecommunications Engineering Company, Ltd.in China, and in Hansol M.com Co. Ltd. in Korea. On Febru-ary 23, 2001, BCI concluded the sale announced on August 31,2000 of its 20 per cent interest in KG Telecom for gross pro-ceeds of approximately $785 million.

In February 2001, BCI announced that the September 25,2000 agreement to sell its interests in the Vésper companies toVelocom Inc. (“Velocom”) was terminated. The agreementhad been subject to the parties obtaining regulatory and otherconsents, and Velocom securing necessary financing. Velo-com failed to conclude the necessary financing by the datespecified in the agreement. The termination of the agreementpreserves BCI’s contractual rights, while creating the flexibil-ity to pursue a variety of alternatives. BCI is currentlyexploring a range of strategic alternatives regarding its inter-

est in the Vésper companies, including the possible sale ofsuch ownership interest. Pursuant to the Joint Venture Agree-ment, if BCI concludes a sale of the Vésper Companies priorto June 30, 2001, BCI is committed to contribute to TelecomAméricas the proceeds from such sale, net of any additionalcapital that BCI invested subsequent to September 25, 2000 insatisfaction of U.S. $575 million promissory notes payable toTelecom Américas pursuant to the joint venture agreement(the “Special Notes”). In the event that the Vésper companiesare not sold by June 30, 2001, and are not otherwise acquiredby Telecom Américas, BCI is required to contribute to TelecomAméricas a minimum of U.S. $300 million and a maximum ofU.S. $575 million in satisfaction of the Special Notes. In theevent that BCI contributes less than the maximum amount, acorresponding portion of the Special Notes would be can-celled and BCI’s ownership in Telecom Américas would bereduced proportionately, but in any event to not less than40.1 per cent.

BCI is also exploring a range of strategic alternativesregarding its interest in Axtel, including the possible sale ofsuch ownership interest.

TELESAT

Telesat is the owner/operator of the Canadian domestic satel-lite communications system. It provides broadcast distribu-tion and telecommunication services to over 250 customers.Telesat currently owns a total of four satellites: AnikTM E1,Anik E2, and NimiqTM and Anik F1. Nimiq, Canada’s first directbroadcast satellite, was launched in 1999. Nimiq broadcastssignals for Bell ExpressVu’s DTH television service. In Novem-ber 2000, Telesat launched Anik F1, one of the world’s mostpowerful communications satellites. Anik F1 provides full cov-erage of North and South America. Telesat currently has onesatellite under construction, Anik F2, which is expected to belaunched in 2002 and should provide full North America cov-erage in the traditional C and Ku-band frequency ranges inaddition to a multi-media payload.

BUSINESS SEGMENT S

Telesat provides satellite-based services through four strategicbusiness units:

Broadcast Services. Broadcast services, which provided 55 percent ($150.2 million) of Telesat’s 2000 revenues, are comprisedof point-to-point and point-to-multi-point satellite broadcastdistribution of television programs and video signals. Cus-

tomers in this segment include major Canadian broadcasters,cable television companies, video distribution/reseller com-panies, Star Choice and Bell ExpressVu.

Business Networks Services. Telesat provides satellite-basedwireless data networks nationwide to a broad range of financial, retail, industrial and commercial companies andgovernment organizations, which require applications includ-ing point-of-sale, video conferencing, distance education,LAN-to-LAN connectivity, Internet and intranet requirementsand private voice networks. Revenue from this business unitwas 27 per cent ($73.3 million) of Telesat’s total revenues in2000.

Carrier Services. Telesat provides satellite voice and data trans-mission services to individual telephone companies to extendtheir services to remote areas of Canada. Revenue from thisbusiness unit was six per cent ($17.3 million) of Telesat’s total revenues in 2000.

International Consulting Programs. Telesat has developed awide range of specialized services designed to assist satelliteoperators, spacecraft manufacturers and companies involvedin the field of satellite communications around the world.This business unit provided 12 per cent ($31.6 million) of Tele-sat’s total revenues in 2000.

Effective March 1, 2000 the Canadian satellite services marketwas liberalized. Therefore, Telesat expects that competitionwill develop from the major U.S. satellite operators selling ser-vices in Canada utilizing their satellites with North Americancoverage. Telesat has mitigated this risk by signing existingCanadian customers to long-term contracts. Telesat alsoactively competes with terrestrial competitors such asCanada’s telephone carriers and service resellers in virtuallyall of its markets. Telesat focuses on market segments andniches best suited to satellite technology. Telesat also managesTMI Communications and Company, Limited Partnership(“TMI Communications”), a mobile satellite service company.BCE holds a 100 per cent equity interest in TMI Communica-tions Inc., the general partner of TMI Communications.

On January 15, 2001, TMI Communications and MotientCorporation announced a joint venture in which they willjoin with financial partners in the creation of a new combinedentity provisionally called Mobile Satellite Ventures (“MSV”).Subject to appropriate regulatory approvals, the planned jointventure will integrate the two companies’ mobile satellite


operations, along with U.S.$50 million in new investmentfrom Columbia Capital, Spectrum Equity Investors andTelcom Ventures L.L.C. TMI Communication’s satellite will betransferred to a new entity, Mobile Satellite Ventures (Canada)Inc., of which TMI Communications will hold a 53.3 per centinterest. Non-satellite assets of TMI Communications will betransferred to MSV. Under the terms of the agreement, TMICommunications will receive U.S.$19 million and a 27.2 percent interest in MSV.

CGI

GENERAL

CGI operations are divided among three strategic businessunits (“SBUs”), namely Canada, U.S. and International. All of CGI’s strategic business units provide end-to-end IT servicesto CGI’s five industry sectors, namely telecommunications,financial services, manufacturing/distribution/retail, govern-ments, as well as utilities and services. However, outside ofEurope, the International SBU serves primarily the telecom-munications and financial services industries.

CGI provides a range of IT services including outsourcing,systems integration and consulting. CGI’s primary focus islarge scale systems integration and outsourcing contracts.Outsourcing revenue represented approximately 62 per centof CGI’s fiscal 2000 revenue, systems integration represented23 per cent and consulting represented 15 per cent. CGI gen-erated 75 per cent of total revenue from higher value addedservices such as IT planning, business process engineering,systems architecture, systems development and maintenance.The remaining 25 per cent is comprised of facilities manage-ment services including data centres, help desks, call centresand desktop services.

RECENT DEVELOPMENT S

On February 21, 2001, CGI and IMRglobal, Corp. (“IMR-global”), an IT consulting and systems integration company,signed a definitive merger agreement for the acquisition byCGI of IMRglobal for U.S.$438 million. Under the terms of thedefinitive agreement, IMRglobal shareholders will receive1.5974 Class A Subordinate Shares of CGI for each IMRglobalcommon share. CGI’s majority individual shareholders havedecided to exercise their pre-emptive rights in order to main-tain their Class B voting interests at current levels. BCE Inc.has decided not to exercise its pre-emptive right to acquireadditional Class A Subordinate Shares and has indicated to

CGI that it will decide prior to closing of the merger whetheror not it will exercise its pre-emptive right for Multiple VotingClass B Shares.

After the end of fiscal 2000, Canadian financial servicesleader Desjardins announced that it had selected CGI as its ITpartner, as part of a 10 year strategic agreement worth morethan $1 billion to CGI. A formal contractual agreement isexpected to be signed by the spring of 2001.

On October 4, 2000, CGI finalized the acquisition of C.U.Processing Inc., a U.S. – based provider of information systemsmanagement services to North American credit unions, withannual revenues of approximately CDN$37 million.

On November 27, 2000, CGI finalized a transaction whereby it acquired a 49 per cent equity interest in Canadianbased AGTI Consulting Services Inc., a Montréal-based strate-gic IT consulting firm with more than 225 senior consultants.CGI also increases its equity ownership in IT consulting firmConseillers en informatique d’affaires Inc. to 49 per cent from35 per cent.

On December 1, 2000, CGI made a public offer to acquireall of the issued and outstanding common shares of Star DataSystems Inc., a TSETM-listed provider of IT services and solu-tions to the financial services industry. The transaction,implemented by way of a share exchange takeover bid, wascompleted on January 22, 2001.

EXCEL

Excel provides long distance and wireless telecommunica-tions, Internet access and paging services to both residentialand commercial customers in the United States. In addition,since March 1999, Excel also provides residential long distance, Internet access and home TV services in Canadathrough Excel Telecommunications (Canada) Inc. In November2000, Excel commenced providing telecommunications and

Internet services in the United Kingdom through Excel Com-munications (UK) Limited, doing business in the U.K. as E.T.I.Excel has developed several marketing channels whichinclude direct sales to residential, commercial and wholesalecustomers through marketing representatives, dealers and/ordirect sales personnel. These multiple distribution channelswhich target both residential and commercial customers area key element of Excel’s business strategy. During the courseof 2000, Excel’s “commercial” distribution channels weretransferred back to Excel from Teleglobe and now operateunder the name eMeritus.

OTHERS

BCE Ventures also manages on behalf of BCE certain BCEinvestments including Telereal Inc., Bimcor Inc. and BCE Cap-ital Inc. as well as Look Communications Inc. and TeleglobeMarine (U.S.) Inc.

Employees

Table 3.9 sets out the number of employees of BCE as ofDecember 31, 2000.

Litigation

WAGE PRACTICES INVES TIGATION

On November 2, 2000, the Federal Court allowed BellCanada’s application for judicial review of the CanadianHuman Rights Tribunal’s (‘‘Tribunal’’) determination that itcould proceed with an inquiry into the 1994 pay equitycomplaints filed by members of the Communications, Energyand Paperworkers Union of Canada and the CanadianTelephone Employees’ Association. The Federal Court foundthat the Tribunal lacks institutional independence andprohibited further proceedings in the matter. The CanadianHuman Rights Commission has appealed this decision to the


3.9 BCE – EmployeesAs of December 31 2000 1999 1998

Bell Canada segment 55,195 43,995(1) 46,031(1)

Teleglobe 4,623 n/a n/aBell Globemedia 3,014 n/a n/aBCE Emergis 2,096 1,147 379

Other operations 9,982 9,741 7,081TOTAL 74,910 54,883 53,491

(1) Excluding Aliant.

Federal Court of Appeal. Hearings before the Tribunal intothe merits of the case are now suspended. Unless the matteris otherwise resolved, hearings and any appeals could lastseveral years.

US WES T, UNIC AL AND SONIGEM L IT IGATION

Bell Canada instituted an action for trade-mark infringementseeking a permanent injunction and damages against USWest, Inc. (which has merged with Qwest CommunicationsInternational Inc.) (‘‘US West’’), Unical Enterprises, Inc.(‘‘Unical’’) and Sonigem Products Inc. (‘‘Sonigem’’) on Febru-ary 11, 2000 in the Federal Court of Canada. The action allegesthat the Defendants’ sales in Canada of telephones andanswering machines bearing among others the marks ‘‘North-western Bell’’ and the logo ‘‘Bell-in-a-circle design’’ infringeBell Canada’s exclusive rights to Bell trade-marks in Canada.

In their Statements of Defense and Counterclaims, theDefendants allege that Bell Canada’s trade-marks are invalidand not distinctive of Bell Canada’s products and services andare seeking damages of $135 million and punitive damages of$500,000 from Bell Canada for allegedly interfering with theirbusinesses.

The Defendants’ counterclaims, if successful, should nothave a material adverse impact on Bell Canada’s consolidatedfinancial position. Bell Canada is of the view that thesecounterclaims are without merit and intends to pursue itsoriginal action and vigorously defend itself against thesecounterclaims.

IR ID IUM

Iridium LLC (‘‘Iridium’’) developed a global wireless systemdesigned to enable customers to send and receive telephonecalls virtually anywhere in the world. Iridium has initiatedproceedings under Chapter 11 of the U.S. Bankruptcy Codewhich are ongoing. Iridium Canada Inc. (‘‘Iridium Canada’’),a wholly-owned subsidiary of Bell Mobility, is a shareholderor Iridium. A group of banks and financial institutions led bythe Chase Manhattan Bank are creditors in the bankruptcyproceedings and have asserted claims in connection with aU.S. $800 million syndicated loan to an Iridium subsidiary. InJune 2000, the Chase Manhattan Bank on behalf of itself andthis group (the ‘‘Plaintiffs’’), instituted an action in the U.S.District Court, District of Delaware, against sixteen share-holders of Iridium, including Iridium Canada, alleging failureto make capital contributions. The amount of the claimagainst Iridium Canada was U.S. $10 million and Iridium

Canada has filed an Answer to the claim. The Plaintiffs haverecently amended their action against a number of share-holders of Iridium, including Iridium Canada, allegingfraudulent and negligent misrepresentation and claiming thateach are jointly and severally liable for U.S. $800 million.Iridium Canada is of the view that the amended claim iswithout merit and intends to vigorously defend itself.

BELL GLOBEMEDIA CL ASS ACTION L AWSUIT S

On February 9, 2001, Bell Globemedia Publishing Inc., a sub-sidiary of Bell Globemedia Inc., was added as a defendant to aclass action lawsuit in respect of copyright infringement. Therelief claimed includes damages of $100,000,000 as well asinjunctive relief. A motion for partial summary judgment oncertain issues is scheduled to be heard in May 2001.

TELEGLOBE INC. CL ASS ACTION L AWSUIT S

In the third quarter of 2000, several class action lawsuits werefiled in the United States District Court for the Southern Dis-trict of New York against Teleglobe Inc. and certain formerofficers of Teleglobe Inc. alleging that certain misrepresenta-tions and omissions were made between February 11, 1999and July 29, 1999. Teleglobe Inc. considers these lawsuits to bewithout merit and will defend itself vigorously.

BCE is also a defendant in various suits, claims and pro-ceedings which arise in the normal course of business.

Certain Contracts

SHAREHOLDERS ’ AGREEMENT

BCE Inc. and SBC have entered into a shareholders’ agreement(the “Shareholders’ Agreement”). Pursuant to the Sharehold-ers’ Agreement, the initial Board of Directors of BCH, thecompany which holds all of the outstanding voting shares of BellCanada, and Bell Canada is comprised of 10 directors, eightnominated by BCE Inc.. (four management nominees and fourindependent directors from among the members of the Boardof Directors of BCE Inc.) and two nominated by SBC. SBC isentitled to appoint the Chief Financial Officer of Bell Canada and of Bell Mobility as well as a senior officer incharge of product management and product development atBell Canada, and there is a two-way exchange of approximately15 professionals. SBC is also entitled to nominate one directorto the Board of Directors of Bell Mobility.

Pursuant to the Shareholders’ Agreement, at any time fromJuly 1, 2002 until December 31, 2002, and at anytime from July 1, 2004 until December 31, 2004, (i) SBC shall have the

option to sell all of its shares in BCH (“Shares”) to BCE Inc.;and (ii) BCE Inc. shall have the right to purchase all of SBC’sShares, in each case, at the fair market value of the Shares mul-tiplied by 1.25.

The Shareholders’ Agreement provides that in the eventthere is a change of control of SBC, BCE Inc. shall have theright to purchase SBC’s Shares at a price equal to the fairmarket value of the Shares. In the event there is a change ofcontrol of BCE Inc., SBC shall have the right to sell its Shares toBCE Inc. at a price equal to: (i) if the change of control occurson or before the fifth anniversary of the closing date, thehigher of: (A) $5.1 billion plus interest thereon at a rate of 15per cent per year compounded annually less the amounts ofall dividends and reductions of stated capital received by SBC;(B) the fair market value of the Shares multiplied by 1.25 and(C) the consideration paid for the Shares pursuant to thechange of control transaction and (ii) if the change of controloccurs after the fifth anniversary of the closing date, thehigher of: (X) the fair market value of the Shares and (Y) theamount of consideration payable or paid to BCE Inc. that isattributable to the Shares.

The Shareholders’ Agreement provides BCE Inc. and SBCwith other customary rights, including rights of first refusaland rights of first offer.

Forward-Looking Statements

Certain statements contained in this section and in other sec-tions of this Annual Information Form, including statementscontained in BCE Inc.’s management’s discussion and analy-sis of financial condition and results of operationsincorporated by reference in this Annual Information Form,constitute forward-looking statements. In addition, otherwritten or oral statements which constitute forward-lookingstatements may be made from time to time by or on behalf ofone or more of BCE Inc. and its subsidiaries, joint ventures,and significantly influenced companies (the “BCE Groupcompanies”). These forward-looking statements relate to thefuture financial condition, results of operations or business ofthe BCE Group companies. These statements may be based oncurrent expectations and estimates about the markets inwhich the BCE Group companies operate and management’sbeliefs and assumptions regarding these markets. In somecases forward-looking statements may be identified by wordssuch as “anticipate”, “could”, “expect”, “seek”, “may”,“intend”, “will”, and similar expressions. These statements are


subject to important risks and uncertainties which are diffi-cult to predict and assumptions which may prove to beinaccurate. The results or events predicted in the forward-looking statements contained in this Annual InformationForm and in such other written or oral statements which maysubsequently be made, may differ materially from actualresults or events. Some of the factors which could cause resultsor events to differ materially from current expectations arediscussed below under the heading “Risk Factors” and othercautionary factors are outlined elsewhere in this Annual Infor-mation Form. The risk factors discussed below relate to BCEInc.’s five business segments: Bell Canada; Bell Globemedia;Teleglobe; BCE Emergis and BCE Ventures. BCE Inc. disclaimsany intention or obligation to update or revise any forward-looking statements, whether as a result of new information,future events, or otherwise. In particular, forward-lookingstatements do not reflect the potential impact of any mergers,acquisitions, other business combinations or divestitures thatmay be completed after such statements are made.

RISK FACTORS

GENERAL

The future operating results of the BCE Group companies maybe affected by various trends and factors which must be man-aged in order to achieve favourable operating results. Inaddition, there are trends and factors beyond the BCE Groupcompanies’ control which affect their operations. Such trendsand factors include adverse changes in the conditions in thespecific markets for the BCE Group companies’ products andservices, the conditions in the broader market for communi-cations and the conditions in the domestic or global economygenerally. Recently, the slowdown in global economic activ-ity, particularly in the United States, has made the overallglobal and Canadian economic environment more uncertainand could have an important impact on the demand for prod-ucts and services and on the financial performance of the BCEGroup companies. However, it is not possible for the BCEGroup companies to accurately predict economic fluctuationsand the impact of such fluctuations on their performance.

The BCE Group companies participate in a highly volatileand rapidly growing telecommunications industry which ischaracterized by vigorous competition for market share andrapid technological development. These factors could resultin aggressive pricing practices and growing competition bothfrom start-up and well capitalized companies.

The success of the BCE Group companies is largely depend-ent upon their ability to attract and retain highly skilledpersonnel and the loss of the services of key persons couldmaterially harm their businesses and operating results. Com-petition in the recruitment of highly qualified personnel inthe communications and technology industries is intense andthe turnover rate for them is high. No assurance can be giventhat the BCE Group companies will be able to retain keyemployees or that it will be able to attract qualified personnelin the future. It is possible that additional incentives may berequired and that some initiatives may be jeopardized if skillshortages occur.

In addition, changes in laws or regulations, includingthose governing broadcasting and the Internet, as well as generally the uncertainties related to the Internet, includingits impact on network capacity and the Internet economygrowing at a slower pace than is currently anticipated, couldalso have a material adverse effect on the BCE Group compa-nies’ business, operating results and financial condition.

Finally, all BCE Group companies are subject to the risksrelated to pending or future litigation or regulatory initiativesor proceedings.

Strategies and AcquisitionsBCE recently completed the acquisition of Teleglobe Inc. andCTV and has also created a Canadian multi-media company,Bell Globemedia, with Thomson and Woodbridge. BCE hasalso reorganized its operations under five business segments:Bell Canada; Bell Globemedia; Teleglobe; BCE Emergis andBCE Ventures. Following such initiatives, BCE has developednew business strategies and priorities. However, there is nocertainty that BCE’s strategies (including its convergence,bundling, billing and branding strategies) and acquisitionswill yield the expected benefits, revenue and earnings projec-tions, synergies and growth prospects. Furthermore, there isno certainty that the BCE Group companies will be successfulin making additional acquisitions, realizing synergies and/orintegrating the operations of acquired businesses in an effec-tive manner.

Stock Price VolatilityThe common shares of BCE Inc. have in the past experiencedprice volatility generally due to certain announcements affect-ing BCE Inc. and the BCE Group companies. Variationsbetween BCE Inc.’s actual or anticipated financial results andthe published expectations of financial analysts may also con-

tribute to this volatility. In addition, the stock market hasexperienced extreme price fluctuations that have affected themarket price of many technology companies in particular andthat have often been unrelated to the operating performanceof these companies. These factors, as well as general economicand political conditions, may also have a material adverseeffect on the market price of BCE Inc.’s common shares.

BELL C ANADA

Expenditures, Capital and Demand for ServicesThe level of expenditures necessary to expand operations,increase the number of subscribers, provide new services,update networks and maintain or improve quality of service,the availability and cost of capital required to fund suchexpenditures, and the extent of demand for telephone accesslines, optional services, basic long distance services, wirelessservices, Internet services and other new and emerging ser-vices, in the markets served by Bell Canada and Aliant andtheir subsidiaries and significantly influenced companies (the“Bell Canada Group companies”), constitute factors whichcould materially affect their results of operations and finan-cial condition in the future. The level of expenditures couldmaterially increase as the Bell Canada Group companies seekto expand the scope and scale of their businesses beyond tra-ditional territories and service offerings. Furthermore, as theBell Canada Group companies incur additional expendituresto update their networks, products and services to remaincompetitive, they may be exposed to incremental financialrisks associated with newer technologies that are subject toaccelerated obsolescence. To the extent that the Bell CanadaGroup companies fail to make the necessary and appropriateexpenditures on new and existing capital programs, they maycease to be competitive in the markets in which they competeand/or may have incurred substantial capital expenditures toacquire assets with little commercial or economic value.

An increasingly important driver for network and infra-structure investments is the growth of Internet traffic. Thistraffic is driven by residential and business Internet usage andhas overtaken the volume of voice telephony traffic on manyroutes. It is uncertain to what extent this traffic will continueto exhibit high growth rates as high speed access services aredeployed and bandwidth intensive applications, such asvideo, are increasingly downloaded by users. Significantupgrades to network capacity will be required to sustain ser-


vice levels if Internet data growth rates remain as high as theyare today.

Economic Fluctuations The Bell Canada Group companies’ performance is affected bythe general condition of the economy, with demand for ser-vices and the amount of use tending to decline wheneconomic growth and retail activity decline. Recently, theslowdown in global economic activity, particularly in theUnited States, has made the overall economic environmentmore uncertain and could have an important impact on theperformance of the Canadian economy. However, it is notpossible for the Bell Canada Group companies to accuratelypredict economic fluctuations and the impact of such fluctu-ations on their performance.

It should be noted that voice telephony revenues are gen-erally linked to fairly stable economic factors such aspopulation changes, housing starts and general economicactivity levels. Internet traffic is likely to be related to morevariable factors such as consumer discretionary spending onentertainment, the adoption of e-business and other on-lineactivities.

Increasing Competition With the advent of competition in the local service market in1998, all parts of the Bell Canada Group companies’ busi-nesses are facing substantial and intensifying competition.Factors such as product pricing and service are under contin-ued pressure while the necessity to reduce costs is ongoing.The Bell Canada Group companies must not only try to antic-ipate, but must also respond promptly to, continuous andrapid developments in their businesses and their markets.

In addition, the significant growth and size, as well as theincreasing global scope, of the telecommunications industryare attracting new entrants and encouraging parties otherthan existing participants to expand their services and theirmarkets. Mergers and acquisitions, as well as alliances andjoint ventures, are creating new or larger participants withbroad skills and significant resources which will furtherimpact the competitive landscape. Current and future com-petitors are coming not just from within Canada, but alsoglobally, and include not only major telecommunicationscompanies, such as Telus, AT&T Canada and Sprint Canada,but also cable companies (such as Vidéotron), Internet com-panies, WSPs, CLECs and other companies that offer networkservices, such as providers of business information systems

and systems integrators, as well as an increasing number ofother companies that deal with or have access to customersthrough various communications networks. Many of thesecompanies are significant in size and resources and have a sig-nificant market presence with brand recognition and existingcustomer relationships. A notable example is the entry intoInternet telephony by Cisco, which is primarily an equipmentmanufacturer rather than a communications service provider.

Internet access services are especially competitive, andCanada has among the lowest prices for Internet access ser-vices in the world. Bell Canada is the largest provider ofInternet access services in Canada, and cable television com-pany competitors are aggressively pricing their services.Competitive pressure leads to Internet access pricing that islargely independent of usage patterns. Costs to Bell Canada,however, depend on the amount of traffic a user generates andthe location of the server that stores the web site the uservisits. Such costs continue to increase and are beyond the abil-ity of Bell Canada to control or to accurately predict.

The Canadian wireless telecommunications industry ishighly competitive. Bell Mobility competes directly with otherWSPs with aggressive product and service introductions, pric-ing and marketing. Bell Mobility expects competition tocontinue to increase through the development of new tech-nologies, products and services, and through consolidationsin the Canadian telecommunications industry. For example,in the third quarter of 2000, Telus and Clearnet announcedthat Telus had acquired substantially all of the outstandingcommon shares of Clearnet thereby creating a larger WSP and,accordingly, a potentially more significant competitor to BellMobility.

Bell Mobility launched PCS service in October 1997. BellMobility is continuing to incur significant costs to develop aPCS customer base including capital expenditures, promo-tional offerings and handset subsidies. Competition is intensein the PCS market with at least four PCS service providers ineach service area. In addition, increases in Bell Mobility’s PCScustomer base will result in the reduction, over time, of BellMobility’s existing cellular customer base. In particular, BellMobility has focused on migrating its existing high-usage cel-lular customers to PCS.

As previously discussed in this Annual Information Form,Bell Mobility announced on February 1, 2001 that it had suc-cessfully bid on 20 new PCS spectrum licenses for an aggregatebid price of approximately $720 million. Bell Mobility’s appli-

cation to bid in the spectrum auction was submitted on behalfof itself and its BWA partners. Under joint agreementsbetween Bell Mobility and each of the BWA partners, each ofthe parties will assume ownership of the spectrum in theirrespective operating regions, following payment of allamounts due to Bell Mobility and Industry Canada processingthe license transfers, and each will provide access to the otheralliance partners. Among the licenses provisionally awardedto Bell Mobility are three 10 MHz licenses in both Alberta andBritish Columbia. Bell Mobility intends to work with MTS toroll out wireless services in British Columbia and Alberta. Thisroll-out will result in substantial capital expenditures requiredfor the construction of a network in these provinces. Further-more, the expected level of expenditures associated with thisnetwork expansion could increase as Bell Mobility will seek togain adequate network coverage and secure new customers. Inaddition to Bell Mobility, four other bidders, including Rogersand Telus Mobility, were provisional license winners. Rogerswas the provisional winner of 23 licenses (at an aggregate bidprice of approximately $394 million) and Telus Mobility offive licenses (at an aggregate bid price of approximately $356million). Both Rogers and Telus Mobility were provisionallyawarded licenses in Bell Mobility’s current operating regionsthereby increasing the potential for competition and marketshare losses in such areas. Although the new licenses provi-sionally awarded to Bell Mobility provide it with thepossibility to launch new technologies, services and applica-tions (such as 3G technology) and to geographically expandits operations (including, in particular, in British Columbiaand Alberta), there is no certainty that such additional licenses will result in the successful deployment of such newtechnologies, services and applications, a successful geo-graphical expansion and, in general, in an improvement inBell Mobility’s financial condition and results of operations.

The market for paging services in Canada is also highlycompetitive. Bell Mobility currently competes with numerouslocal and national paging companies.

Bell Mobility is a participant in Mobility Canada, whichwas owned and operated by the wireless affiliates or divisionsof Canada’s major telephone companies. In May 1999, Mobil-ity Canada announced a significant restructuring of itsorganization, creating two groups of carriers which can com-pete anywhere in the country to bring the fast-evolvingbenefits of wireless communications to national customers.The new agreement, which was implemented in the first quar-


ter of 2000, changes the wireless landscape in Canada byremoving restrictions that kept Mobility Canada membersfrom competing in each other’s territories. The new groupswill each be able to offer Canada-wide wireless service, eitherby selling network services to each other or competing head-to-head. Although the new arrangement will permit BellMobility to expand its business from a territorial perspective,it will also have the effect of increasing competition in the ter-ritory in which Bell Mobility currently operates. There can beno assurance that Bell Mobility will be able to successfullyexpand its operations geographically or that it will be able tosuccessfully compete with new competitors in its traditionalterritory. These factors could, in the future, have a materialadverse effect on Bell Mobility’s financial condition andresults of operations.

Technology The telecommunications industry, as with many others, ischaracterized by rapidly changing technology with therelated changes in customer demands and the need for newproducts and services at competitive prices. Technologicaldevelopments are also shortening product life cycles and facil-itating convergence of different segments of the increasinglyglobal information industry. The Bell Canada Group compa-nies’ future success will be impacted by their ability toanticipate, invest in and implement new technologies withthe levels of service and prices that consumers demand. Tech-nological advances may also affect the Bell Canada Groupcompanies’ level of earnings by shortening the useful life ofsome of their assets. Furthermore, technological advancesmay well emerge that reduce or replace the costs of plant andequipment and eliminate or reduce barriers that deter othercompanies from competing in particular market segments.

DSL technology is changing and associated service stan-dards are evolving. It is possible that carriers and equipmentmanufacturers may in the future adopt a standard that isincompatible with Bell Canada’s DSL services with the poten-tial for loss of customers, increased capital expenditures andstranded assets.

The Bell Canada Group companies’ high speed Internetconnectivity objectives are subject to the uncertainties result-ing from the magnitude of the deployment of the necessarytechnology, the uncertainties related to the novel nature ofthe relevant technology and to obtaining the necessarymunicipal or private rights-of-way.

On February 5, 2001, BCE Inc. announced that it wastaking a major step forward in its media convergence strategyby announcing plans to develop a new technology, code-named “ComboBox”, that is expected to integrate high speedInternet access with satellite television and enhanced digitalstorage. This proposal would permit BCE Inc. to combine itsBell ExpressVu service with its Sympatico High Speed EditionDSL Internet access service along with content from BellGlobemedia. BCE Inc. also announced that trials are expectedlater in 2001 with a commercial service launch expected in2002. There can be no assurance that this new proposed tech-nology will be developed according to anticipated schedules,that it will perform according to expectations, or that it willachieve commercial acceptance.

The wireless telecommunications industry is experiencingsignificant technological change, as evidenced by the increas-ing pace of digital and other upgrades to existing analogwireless systems, evolving industry standards, ongoingimprovements in the capacity and quality of digital technol-ogy, shorter development cycles for new products andenhancements to and changes in end-user requirements andpreferences. Such continuing technological advances make itdifficult to predict the extent of future competition with cel-lular, PCS and paging services. As a result, there can be noassurance that existing, proposed or as yet undeveloped tech-nologies will not become dominant in the future and rendercellular, PCS or paging systems less profitable or even obsolete.

The operations of Bell Mobility depend in part upon thesuccessful deployment of continually evolving wireless com-munications technologies, which will require significantcapital expenditures to deploy. There can be no assurance thatsuch technologies will be developed according to anticipatedschedules, that they will perform according to expectations,or that they will achieve commercial acceptance. Bell Mobilitymay be required to make more capital expenditures than arecurrently expected if suppliers fail to meet anticipated sched-ules, if a technology’s performance falls short of expectations,or if commercial success is not achieved.

In 2001, Bell Mobility plans to begin the trial and deploy-ment of the initial phase of 3G digital wireless technology inits network. Bell Mobility may incur significant capital expen-ditures to deploy this technology, with no guarantees as to itsperformance or its acceptance in the marketplace.

Regulatory EnvironmentIn addition to continued intense competition across all linesof business, coupled with the rapid evolution of technologi-cal change, the Bell Canada Group companies are subject toevolving regulatory policies in the form of decisions by vari-ous regulatory agencies including the CRTC. Many of thesedecisions balance competitor requests for access to the ILECs’essential facilities and other network infrastructure with therights of the ILECs to compete on a reasonably unencumberedbasis. More recently, telecommunications service providersseeking physical access to customers on reasonable terms haveincreasingly found themselves in disputes with gatekeepers,either land/building owners/developers impeding access toprivate property or municipalities impeding access to publicrights-of-way. Policy decisions in all of these areas will continue to evolve.

In addition to these types of risks, Bell Canada and Aliantare nearing the end of the four year price caps regime thatcommenced January 1,1998. The nature and extent of thechanges to the current price caps regime are unknown at thistime. However, the CRTC is expected to commence a pro-ceeding in the first quarter of 2001 designed to establish theframework that will apply for 2002 and beyond.

On November 30, 2000, the CRTC announced fundamen-tal changes to the current contribution regime designed tomaintain affordable local residential service rates in high costserving areas in Canada. In essence, the CRTC prescribed anew national contribution fund and a new contribution col-lection mechanism broadly applicable to telecommunicationsservice providers. Effective January 1, 2001, a percentage ofrevenue collection mechanism has replaced the per-minutemechanism previously imposed on long distance carriers. BellCanada and certain WSPs have requested the CRTC to varycertain aspects of the decision. The unknown outcome of thisreview, the potential for problems in implementation of thenew mechanism, as well as the change, upcoming in 2002, toa new definition of the subsidy requirement, all contain cer-tain important elements of risk.

With the significant change in business strategy by BCEInc. towards content, e-commerce and connectivity, assess-ment of regulatory risk must increasingly take into accountregulatory decisions in the areas of wireless spectrum auc-tions, programming and carriage requirements under theBroadcasting Act, as well as copyright and other content relatedissues particularly over the Internet.


Wireless Regulation The operation of cellular, PCS and other radio-telecommuni-cations systems in Canada is subject to initial licensingrequirements and the oversight of Industry Canada. Operat-ing licenses are issued at the discretion of the Minister ofIndustry pursuant to the Radiocommunication Act. IndustryCanada grants cellular and PCS licenses for a maximum termof five years. Bell Mobility’s current cellular and PCS licenseswill expire on March 31, 2001 and April 30, 2001, respectively.Industry Canada has the authority at any time to require mod-ifications to the license conditions applicable to the provisionof such services in Canada to the extent necessary to ensurethe efficient and orderly development of radiocommunica-tion facilities and services in Canada. Industry Canada canrevoke a license at any time for failure to comply with itsterms. Based on discussions with Industry Canada, Bell Mobil-ity believes that its current cellular and PCS licenses will beextended for an additional one-year period on the same termsand conditions, including the same annual license fee. BellMobility understands that Industry Canada intends to circu-late for comment its position on license conditions for allWSPs for the next renewal period, including a proposed feestructure.

Use of Handsets in VehiclesMedia reports have suggested that the use of hand held cellu-lar units by drivers in vehicles may, in certain circumstances,result in an increased rate of accidents on the road. It is possi-ble that new legislation or regulations may, in the future, beadopted in order to address these perceived or actual concerns.Any such legislation or regulations could adversely affectWSPs through reduced network usage by subscribers in motorvehicles.

Radio Frequency Emission Concerns Media reports have suggested that certain radio frequencyemissions from cellular telephones may be linked to certainmedical conditions such as cancer. In addition, certain inter-est groups have requested investigations into claims thatdigital transmissions from handsets used in connection withdigital wireless technologies pose health concerns and causeinterference with hearing aids and other medical devices.There can be no assurance that the findings of such studieswill not have a material adverse effect on Bell Mobility’s busi-ness or will not lead to governmental regulation. The actual orperceived health risks of wireless communications devices

could adversely affect WSPs through reduced subscribergrowth, reduced network usage per subscriber, threat of prod-uct liability lawsuits or reduced availability of externalfinancing to the wireless communications industry.

Stratos Global CorporationAliant has guaranteed U.S. $150 million (approximately$225 million) of the obligations of Stratos Global Corporation(“Stratos”) incurred under credit facilities provided to Stratosby a syndicate of Canadian banks to finance the acquisitionby Stratos of the Inmarsat, VSAT and aeronautical businessesof British Telecommunications plc (the “BT A&M” assets). Theguarantee by Aliant assisted Stratos in securing the financingnecessary to complete this acquisition. Stratos’ credit facilitiescontain various covenants relating to future financial results.There can be no assurance that Stratos will meet thesecovenants and that Aliant will not become liable for Stratos’debt to the extent of the guarantee. Stratos faces challenges inbeing able to integrate the BT A&M business as it will approx-imately double the size of Stratos’ existing operations, placingpressure on operational and support systems.

BELL EXPRESS VU

Capital RequirementsBell ExpressVu expects to generate negative EBITDA pre sub-scriber acquisition costs for the next one to two years as itexpands its subscriber base. To date, Bell ExpressVu has fundedoperating losses through capital injections from BCE Inc. BellExpressVu believes that it will access sufficient sources of fund-ing to achieve its business plan. However, such access is basedon a business plan that is subject to various assumptions andestimates, including subscriber base, average revenue per sub-scriber and costs for acquiring new subscribers. If the businessplan is not achieved, greater losses than planned would occur,requiring Bell ExpressVu to seek additional financing. Thereis no assurance that Bell ExpressVu will be successful inobtaining such financing on favourable terms and conditions.

DTH Market RisksThe success of Bell ExpressVu’s DTH business strategy is sub-ject to factors that are beyond its control and impossible topredict due, in part, to the limited history of digital DTH ser-vices in Canada. Consequently, the size of the Canadianmarket for digital DTH services, the rates of penetration of thatmarket, the churn rate, the extent and nature of the competi-tive environment and the ability of Bell ExpressVu to meet

revenue and cost expectations are uncertain. There is no assu-rance that a viable DTH market will develop in Canada or,even if such a market does develop, that Bell ExpressVu will beprofitable in delivering its DTH services.

CompetitionBell ExpressVu faces competition from other DTH satellite ser-vice providers, cable operators and other distributors, greymarket satellite service providers and other competitors suchas off-air television broadcasters. Bell ExpressVu’s DTH andcable competitors have pursued, and may continue to pursue,aggressive marketing campaigns and pricing policies targetingthe existing customers of Bell ExpressVu. Although BellExpressVu has, to date, been successful in increasing marketshare in the face of such competition, there is no assurancethat such success will continue nor that Bell ExpressVu will beable to increase average revenue per subscriber, increase itsshare of the pay-per-view market or maintain or reduce sub-scriber acquisition costs.

Satellite DefectsBell ExpressVu’s DTH services are provided through theNIMIQ DBS satellite operated by Telesat. Satellites are subjectto significant risks, including manufacturing defects, destruc-tion or damage that may prevent proper commercial use, or inthe loss of the satellite. Any such loss, damage or destructionof the satellite could have a material adverse impact on BellExpressVu’s business and profits.

BELL GLOBEMEDIA

Television broadcasting is comprised of a conventional televi-sion sector of free over-the-air television services and a sectorof specialty and pay television services delivered to subscribersby broadcast distribution undertakings, including cable andDTH operators. CTV operates in both the conventional andspecialty sectors. Commercial advertising is the only source ofrevenue for the conventional television sector while the spe-cialty sector is more dependent on subscriber revenues andbenefits from commercial advertising. Commercial advertis-ing, while being affected by normal economic cycles, is afunction of the viewing share in a given market, and viewingshare is in turn dependent on program content and thenumber of choices available. Market fragmentation hasincreased over the last decade as a result of the introductionof additional television services, the extended reach of exist-ing signals and the increased use of VCRs. The deployment of


digital capability will further extend the choices available overthe next years as new Canadian and foreign services are madeavailable. Furthermore, new web-based services available overthe Internet are expected to provide alternative niche servicesto consumers, continuing the fragmentation of the viewingmarket. Accordingly, reach and attractiveness of program-ming content are the two prominent variables in the abilityto generate revenues. However, there can be no assurance thatCTV will be able to maintain or increase its current ability toreach viewers with programming content that is satisfactoryto the public, nor that CTV will be able to maintain or increaseits current advertising revenues.

The Canadian advertising market is about $10 billion intotal with television and daily newspapers each accountingfor a 24 per cent share of the total market. Advertising isrelated to economic growth and tends to follow GDP. Accord-ingly, any economic down turn will impact Bell Globemedia’sability to generate revenue growth as approximately 73 percent of the Bell Globemedia’s revenue base from the televisionand print sectors is dependent on advertising revenues.

Within the television sector competition for highly ratedprogramming maintains cost pressure on program acquisi-tions. Recent decisions allowing CanWest/WIC to own twoconventional stations in the markets of Ontario and Vancou-ver along with completion of their national network acrossCanada will further the competition for programming andincrease costs.

In the print sector, competition from the launch of a newnational newspaper in Canada two years ago continues torequire substantial spending in distribution and marketingand impacts revenue growth through competitive pricing.This competition is expected to continue.

Bell Globemedia also operates a number of activitiesthrough Globe Interactive and a portal through Sympatico-Lycos. These businesses are, by their nature, relatively new andaccordingly subject to uncertain returns. Leveraging existingcontent through these new distribution channels requirescontinued investment in labour and technology whileattempting to grow share of revenues in an emerging market.

BCE Inc.’s content strategy, through Bell Globemedia,includes the expansion of the Bell brand and deepening rela-tionships with customers. However, there is no certainty thatthis strategy will prove to be successful.

TELEGLOBE

GlobeSystemIn an effort to accelerate its expansion strategy, Teleglobeannounced in May 1999 that it would build, at a cost ofapproximately U.S. $5 billion, the GlobeSystem network, aglobally integrated Internet, voice, data and video network.The GlobeSystem network is currently in its initial phase andTeleglobe has to date invested approximately U.S. $900 mil-lion in this project. Various risk factors are associated with theGlobeSystem network initiative including the following: theGlobeSystem network initiative requiring more capital thananticipated to complete; the GlobeSystem network not beingcompleted on schedule due to delays in the delivery of net-work components or delays in Teleglobe’s migration fromleased facilities; the potential higher network costs that such adelay may cause; the GlobeSystem network not providing theanticipated benefits; the unavailability of financing for BCEInc. and/or Teleglobe to complete the GlobeSystem networkand the inability of the GlobeSystem network to expand Tele-globe’s business as expected. Similar risk factors also apply toTeleglobe’s proposed deployment of IDCs. In order to reducethe execution and financial risks related to the GlobeSystemnetwork and accelerate its implementation schedule, Tele-globe may elect to make acquisitions and/or enter intoalliances or partnerships with other parties. However, there isno certainty that should Teleglobe choose to seek suchalliances or partnerships or to make such acquisitions that itwill be successful in consummating any of them. In light ofthe increasing importance of data to Teleglobe’s future rev-enues, the effective implementation of the GlobeSystemnetwork is crucial to the future success of Teleglobe. The fail-ure of Teleglobe to complete the GlobeSystem network or itsinability to significantly increase the revenues it receives fromdata would have a material adverse effect on its results of oper-ations and financial condition.

Financial Dependence on BCE Inc. and OthersIn March 2000, Teleglobe Inc., the parent company of theTeleglobe Communications group of companies representingthe Teleglobe segment, determined that, in light of its finan-cial results for the first quarter ending March 31, 2000,Teleglobe Inc. would be unable to comply with certain finan-cial covenants in Teleglobe Inc.’s existing term and revolvingcredit facilities. The existing banking syndicate agreed torelieve Teleglobe Inc. from the obligation to meet these finan-

cial covenants pending the re-negotiation of these credit facil-ities. However, the financing available under these facilitieswas reduced to U.S. $750 million. On June 21, 2000, BCE Inc.contributed U.S. $100 million to Teleglobe Inc. by way of aloan, which was converted into fourth series preferred sharesof Teleglobe Inc. on June 30, 2000. On July 24, 2000, TeleglobeInc. entered into new 364-day revolving credit facilities for anaggregate amount of U.S. $1.25 billion, pursuant to which BCEInc. confirmed to the lenders under such credit facilities thatit would under certain circumstances provide continuedfinancial assistance to Teleglobe Inc. including that, until thematurity of these facilities, BCE Inc. would from time to timeinject or cause to be injected into Teleglobe Inc. by way ofequity or quasi-equity sufficient funds, as required, to enableTeleglobe Inc. to meet at all times cash shortfalls, if any, in funding its capital expenditures program; provided, how-ever, that the financial commitment of BCE Inc. to TeleglobeInc. was limited to U.S. $900 million, exclusive of the U.S. $100 million BCE Inc. advanced to Teleglobe Inc. on June21, 2000. On January 31, 2001, BCE Inc. contributed a furtherU.S. $40 million to Teleglobe Inc. by way of a loan to allowTeleglobe Inc. to meet its financial covenants. These creditfacilities have been, and will continue to be, used in part forthe purpose of funding the Teleglobe segment’s capitalrequirements. There are no assurances that Teleglobe Inc. willbe able to either renew or replace these credit facilities upontheir maturity or find alternative sources of financing.

Going forward, Teleglobe may not have sufficient fundsavailable from its existing cash flow and from Teleglobe Inc.’scredit facilities in order to meet its obligations to make neces-sary capital expenditures (including but not limited to theGlobeSystem network) and pay other operating expenses, andmay need to rely on other financing sources to provide addi-tional funding in order to meet these obligations. The failureof BCE Inc. or any other financing sources to continue or pro-vide this funding would have a material adverse financialeffect on Teleglobe.

Other Risk FactorsOther risk factors concerning Teleglobe include without lim-itation: revenue fluctuations arising from the gain or loss ofcustomers and pricing pressures on voice services; difficultiesin integrating the operations of BCE and Teleglobe, includingachieving expected synergies from the integration; the abilityof Teleglobe to increase revenues from business segments


other than voice services (such as data and Internet services)in order to offset declining revenues and operating margins inthe voice business segment; the uncertainties related to thetransformation of Teleglobe from a voice-driven global carrierto a global data and Internet provider and BCE Inc.’s ability toquickly reposition Teleglobe as a relevant industry playerdespite the rapidly evolving business and competitive envi-ronment; uncertainties related to the Internet including itsexpected growth rate; increased competition from competi-tors with substantially greater financial, technical andmarketing resources, longer operating history with respect toparticular products and more established relationships; thepotential technological obsolescence of Teleglobe’s currentnetwork technologies and equipment; material adversechanges in economic and business conditions in the marketsTeleglobe serves; future regulatory actions and conditions inTeleglobe’s operating areas; the extent of demand for telecom-munications services; changes in applicable laws andregulations; fluctuations in foreign currencies which have anadverse impact on the financial results of Teleglobe; the fail-ure by Teleglobe to achieve its strategic objectives; and therelevant risk factors (excluding those relating to Bell Mobilityand the wireless industry) previously referred to under theheadings “Expenditures, capital and demand for services”,“Economic fluctuations”, “Increasing competition” and“Technology” under “Bell Canada”.

BCE EMERGIS

Adoption of e-commerceIn order for BCE Emergis to be successful, e-commerce mustcontinue to be widely adopted in a timely manner. BecauseB2B commerce, and communications over the Internet ingeneral, are new and evolving, it is difficult to predict the sizeof this market and its sustainable growth rate. To date, manybusinesses and consumers have been deterred from utilizingthe Internet for a variety of reasons. Businesses which haveinvested substantial resources in other methods of conduct-ing business may be reluctant to adopt new methods. Also,businesses with established patterns of purchasing goods andservices and effecting payments may be reluctant to change.To the extent that e-commerce continues to experience sig-nificant growth both in the number of users and the level ofuse, the Internet infrastructure may not be able to continue tosupport the demands placed on it by continued growth. Suchcontinued growth could affect the Internet’s technological

ability to effectively support the high volume of transactionsand any of these factors could materially harm the businessand operating results of BCE Emergis.

Acquisitions A key element of BCE Emergis’ growth strategy has been andcontinues to be to make strategic acquisitions. BCE Emergismay not be able to integrate the operations of recentlyacquired companies with its operations without encounter-ing difficulties, including the loss of key employees andcustomers, the disruption of its ongoing business and theinability to deal with possible inconsistencies in standards,controls, procedures and policies. There can be no assurancethat, in the future, acquisition candidates will be found onterms suitable to BCE Emergis, that BCE Emergis will have ade-quate resources to consummate any acquisition or that BCEEmergis will be successful in realizing synergies betweenacquired companies. Furthermore, acquisitions may alsoresult in potentially dilutive issuances of equity securities, theincurrence of debt, write-offs, integration costs and the amor-tization of expenses related to goodwill and other intangibleassets, all of which could have a material adverse effect on theresults of operation and financial condition of BCE Emergis.

Response to Industry’s Rapid Pace of ChangeIf BCE Emergis is unable to develop new technologies orenhancements to its existing services on a timely and cost-effective basis, or if its new services or enhancements do notachieve market acceptance, its sales may decline. The lifecycles of its services are difficult to predict because the marketfor its services is new and emerging and is characterized byrapid technological change and changing client needs. Theintroduction of services employing new technologies couldrender its existing services obsolete and unmarketable.

CompetitionThe e-commerce business is intensely competitive and BCEEmergis has many competitors with substantial financial,marketing, personnel and technological resources. Othercompanies offer services that may be considered by clients tobe acceptable alternatives to its services. Competitive pres-sures could reduce BCE Emergis’ market share or require it toreduce its prices, which would reduce its revenues andincrease its net losses.

Growth ManagementBCE Emergis has experienced rapid growth in its revenues andit intends to continue to grow its business significantly. Tosupport its growth plans, BCE Emergis will have to expand itsexisting management, operational, financial and humanresources and management information systems and controls.If BCE Emergis is not able to manage its growth successfully,BCE Emergis will not grow as planned which in turn couldmaterially harm its business and operating results.

Operating ResultsBCE Emergis has experienced losses in the past. Revenues inany quarter are substantially dependent on the quantity ofpurchases of services requested in that quarter by customers.Quarterly revenues are also difficult to forecast since themarket for e-commerce is rapidly evolving and BCE Emergis’revenues in any period are significantly affected by theannouncements and product offerings of BCE Emergis’ com-petitors as well as alternative technologies. BCE Emergis’quarterly operating results have fluctuated in the past and BCEEmergis expects them to continue to fluctuate in the future.Significant fluctuations in its quarterly operating results mayharm its business operations by making it difficult to imple-ment its business plan and achieve its budgeted results.

Strategic RelationshipsBCE Emergis relies on strategic relationships to increase itsclient base and, if these relationships fail, its business andoperating results could be materially harmed. One of BCEEmergis’ business strategies has been to enter into strategic orother similar collaborative relationships in order to reach alarger client base than would be achievable through its ownefforts. Failure of one or more of its strategic relationshipscould materially harm its business and operating results.

Defects or ErrorsBCE Emergis’ e-commerce services depend on sophisticatedsoftware and computing systems which often encounterdevelopment delays, and the underlying software may con-tain undetected errors or defects. Technologies supplied toBCE Emergis by third parties may also contain undetectederrors or defects. These defects could materially harm its busi-ness and operating results. BCE Emergis’ operations aredependent upon its ability to protect its computer equipmentand the information stored in its data centers against damagethat may be caused by fire, power loss, telecommunications


failures, unauthorized intrusion, computer viruses and dis-abling devices and other similar events. BCE Emergis is notparty to a disaster recovery agreement that provides an alter-native off-site computer system for use in such disastrousevents for all of its operation. There can be no assurance thata fire or other natural disaster, including national, regional orlocal telecommunications outages, would not result in a pro-longed outage of its operations.

Security and Privacy BreachesIf BCE Emergis is unable to protect the security and privacy ofits electronic transactions, its growth and the growth of the e-commerce market in general could be materially adverselyaffected. While BCE Emergis believes that BCE Emergis utilizesproven applications designed for premium data security andintegrity to process electronic transactions, there can be noassurance that its use of these applications will be sufficient toaddress changing market conditions or the security and pri-vacy concerns of existing and potential subscribers.

Intellectual PropertyBCE Emergis depends on its ability to develop and maintianthe proprietary aspects of its technology. BCE Emergis cannotbe certain that it will be able to enforce its rights or preventother parties from developing similar technology, duplicatingits intellectual property or designing around its intellectualproperty. It is also possible that in the future, third parties mayclaim that BCE Emergis or its current or potential future intel-lectual property infringes on their intellectual property. Anysuch claims, with or without merit, could materially harmBCE Emergis’ business and operating results.

Integrity of the Public Key CryptographyTechnologyBCE Emergis’ Internet security solutions depend on public keycryptography technology. Any significant advance in tech-niques for attacking cryptographic systems could render someor all of its existing Internet security solutions obsolete orunmarketable, which could reduce revenues from its securitysolutions and could materially harm its business and operat-ing results.

Government RegulationCurrent regulations and laws governing the telecommunica-tions industry generally do not apply to providers of datanetwork access and e-commerce services other than regula-tions applicable to businesses generally. Except for

government regulations in countries other than Canada andthe United States (which may affect the provision of certainof BCE Emergis’ services) and regulations governing its abilityto disclose the contents of communications by its clients,there are no government regulations pertaining to the pric-ing, service characteristics or capabilities, geographicdistribution or quality control features of BCE Emergis’ e-com-merce services. There exists, however, the risk thatgovernmental policies affecting the e-commerce industrycould be implemented by legislation, executive order, admin-istrative order or otherwise. If such policies are adopted, theycould materially harm BCE Emergis’ business and operatingresults.

BCE Emergis’ opportunities to maintain or expand exist-ing operations could be limited by substantial changes in theUnited States healthcare industry which could have a mate-rial adverse effect on BCE Emergis and could cause BCEEmergis to alter substantially its business objectives and meth-ods of operation.

Professional LiabilityBCE Emergis applies medical treatment guidelines in its uti-lization review and case management services. As a result, BCEEmergis could become subject to claims related to adversemedical consequences as a result of, or for the costs of, servicesdenied, and claims, such as malpractice, arising from theerrors or omissions of healthcare professionals. To the extentthat any such claims against BCE Emergis are successful andhave a material effect on BCE Emergis, they could materiallyharm its business and operating results.

BCE VENTURES

GeneralEffective December 1, 2000, BCE implemented a new structurewhereby non-core operations were grouped under the busi-ness segment designated BCE Ventures. This segmentincludes, without limitation, BCE’s investments in BCI, Tele-sat, CGI and Excel. Specific risks relating to each of thesecompanies are described below. However, the level of contri-bution of the BCE Ventures segment to BCE’s general financialcondition and results of operations will significantly dependon BCE’s ability to enhance the value of its investments underBCE Ventures (which could be achieved through the con-summation of alliances or partnerships), or to dispose ofinvestments which adversely impact its results.

BCIBCI holds the majority of its investments through TelecomAméricas, a joint venture with América Móvil and SBC Inter-national. BCI and América Móvil each hold a 44.3 per centinterest, and SBC International holds an 11.4 per cent interest,in the joint venture. The joint venture is subject to provisionswhich generally require the consent of BCI and América Móvilin order to make significant decisions about Telecom Améri-cas and its operating companies. Disagreements between thepartners could adversely affect the joint venture and its oper-ating companies.

Capital RequirementsThe majority of the operating companies in which BCI holdsownership interests, through Telecom Américas or otherwise(“the Operating Companies”), are in the start-up or earlygrowth stages. Consequently, capital is required to fund ongo-ing operations and investment activities such as license fees,network construction and other start-up costs. Capital mayalso be required for the acquisition of new properties by Tele-com Américas.

BCI expects most of the Operating Companies will requireadditional debt and equity financing to complete or expandthe construction of their networks. While BCI believes theOperating Companies will be able to secure debt financingfrom third parties and additional capital from their share-holders, there can be no assurance that such financing will beavailable on terms satisfactory to, or when required by, theOperating Companies.

Dependence Upon Cash Flow From OperatingCompanies BCI’s assets consist almost entirely of its shareholdings in theOperating Companies. Many of the Operating Companies arein the start-up stage and do not currently generate distrib-utable cash flows. There can be no assurance that theOperating Companies will become profitable or produce pos-itive cash flow. BCI may also be unable, whether by law orpursuant to contractual arrangements, to cause dividends orother distributions to be made to it.

Exchange RatesBCI reports its financial statements in Canadian dollars. Tele-com Américas and the Operating Companies all report inother currencies. Revenues generated by the Operating Com-panies will generally be paid to them in local currency.


However, many significant liabilities of these companies maybe payable in currencies other than the local currency (suchas U.S. dollar liabilities incurred for the financing of telecom-munications equipment purchases). As a result, anydevaluation in the local currencies relative to the currenciesin which such liabilities are payable could have a materialadverse effect on BCI. In some developing countries, signifi-cant devaluation relative to the Canadian and United Statesdollars have occurred in the past and may occur again in thefuture.

Telesat

Risk of Launch and In-orbit FailureWith regards to Telesat’s satellites, there is always a risk of alaunch failure or of an in-orbit failure. Telesat has been suc-cessful in all 13 of its launches and purchases launchinsurance. Telesat protects itself from in-orbit failure througha variety of measures including engineering satellites withspare capacity, redundancies on board and, where appropri-ate, purchasing in-orbit insurance.

Business Risks and CompetitionTelesat’s primary business activities (broadcast, telecommu-nications and carrier services) have been almost exclusivelydedicated to the Canadian domestic market. This market ischaracterized by increasing competition and rapid techno-logical development. With the loss of the Telesat monopolyon the fixed satellite service business in Canada on March 1,2000, Telesat is facing competition from U.S. – based opera-tors who may have greater financial resources than Telesat andcould capture a larger market share than that currently antic-ipated by Telesat. Telesat has mitigated the impact of thiscompetition by signing up the majority of its Canadian cus-tomers to long-term contracts prior to March 1, 2000.

Provision of services into the United States and LatinAmerican markets is subject to certain risks such as changes inforeign government regulations and telecommunicationsstandards, licensing requirements, tariffs, taxes and other mat-ters. Latin American operations are also subject to risksassociated with economic and social instability, regulatoryand licensing restrictions, exchange controls and significantfluctuations in the value of foreign currencies. Telesat will facesignificant competition from other satellite companies,already providing services in these markets, which may have

the advantage of long-standing customer relationships andmay have greater financial resources than Telesat.

Governmental RegulationPrior to March 1, 2000, the CRTC regulated Telesat’s RF Chan-nel service rates under a form of rate of return regulation.Effective after this date, the CRTC approved an alternativeform of regulation for these service rates based on certain priceceilings. While the price ceiling levels were established basedon prevailing market conditions and are above current ratesfor certain of Telesat’s existing satellite services, there can beno assurance that these ceilings will be appropriate for servicesoffered on any future satellites operated by Telesat in Canada.The changes to the contribution regime decision issued by theCRTC in November 2000 will have a negative impact on Telesat’s expenses if it does not get overturned or modified bythe applications currently being filed by Telesat and otherintervenors.

In fiscal 1999, the U.S. State Department publishedamendments to the International Traffic in Arms Regulations(ITAR) which included satellites on the list of items requiringexport permits. These provisions have already had an impacton Telesat’s international consulting business.

CGI

Post Y2K SlowdownMany companies in the IT industry, including CGI, have expe-rienced a significant business slowdown following thebeginning of the year 2000. However, in the fall of 2000, cus-tomers have gradually resumed IT spending and CGI expectsthis IT spending to gradually increase throughout 2001. How-ever, it is not possible for BCE or CGI to accurately predictwhether and to what extent this turnaround will continue.

CompetitionThe IT services business is intensely competitive and CGI hasmany competitors with substantial financial, marketing, personnel and technological resources, competing for thesame contracts. Other companies offer services that may beconsidered by customers to be acceptable alternatives to CGI’sservices.

Principal competitors of CGI include IBM Global Services,EDS-Systemhouse Inc. and Accenture (formerly AndersenConsulting). CGI expects that other competitors may emergeover time. Some of these could be companies that are not currently active in its markets and others could be new com-

panies. Competitive pressures could reduce CGI’s marketshare or require it to reduce prices, which would reduce revenues.

Technological ChangesThe business markets in which CGI operates is characterizedby rapid technological changes, changing client needs, fre-quent new service introductions and evolving industrystandards. CGI’s future success will depend in significant parton its ability to anticipate industry standards, continue toapply advances in technologies, enhance its current servicesand develop and introduce new services on a timely basis thatkeep pace with technological developments and changingclient needs. However, there can be no assurance that CGI willbe successful in developing and marketing new services orenhancements that respond to technological change andachieve market acceptance.

Growth Through AcquisitionsA key element of CGI’s growth strategy has been strategicacquisitions. There can be no assurance that in the future,acquisition candidates will be found on acceptable terms orthat CGI will have adequate resources to consummate anyacquisition. Furthermore, acquisitions involve a number ofother special risks, including time and expenses associatedwith identifying and evaluating acquisitions, the diversion ofmanagement’s attention, the difficulty in integrating opera-tions, the difficulty in combining different company culturesand the potential loss of key employees and customers of theacquired company. In addition, customer satisfaction or per-formance problems at a single acquired firm could have amaterial adverse effect on the reputation of CGI as a whole.

Acquisitions may also result in potentially dilutiveissuances of equity securities, the incurrence of debt, write-offs, integration costs and the amortization of expensesrelated to goodwill and other intangible assets, all of whichcould have a material adverse effect on the results of operationand financial condition of CGI.

ExcelIn addition to certain of the risks faced by Teleglobe, the legalowner of Excel, the factors that could materially affect thefinancial condition and results of operations of Excel include,without limitation: Excel’s ability to continue to attract, maintain, and motivate a large base of marketing representa-tives who are Excel’s primary source of customers for Excel’s


products and services; the effects of vigorous competition inthe markets in which Excel operates including, but not lim-ited to, declining average revenue per minute and a decliningcustomer base, and increasing competition from the RegionalBell Operating Companies who are authorized to provideinterexchange services originating in any state in their respec-tive regions after demonstrating to the FCC and applicablestate regulatory agencies that such provision of services satis-fies specified competitive conditions; regulatory risks,including the impact of the 1996 Telecommunications Act; theimpact of technological change, new entrants and alternativetechnologies on Excel’s business, and dependence on avail-ability of transmission facilities; the costs and business risksrelated to entering and expanding new markets to providenew services; risks of international business; unexpectedresults of litigation filed against Excel, including but not lim-ited to the AT&T patent litigation; fluctuations in foreigncurrencies which have an adverse impact on the financialresults of Excel; risks associated with debt service require-ments, interest rate fluctuations and Excel’s degree of financialleverage and risks associated with complex IT systems, inclu-ding those related to billing and data processing operations.

I T E M 4 • S E L E C T E D F I N A N C I A L I N F O R M A -TION (CONSOLIDATED)a) Three-Year Data

See Table 4.1

b) Dividends

Common share dividends, which are declared and paid quar-terly have been adjusted to reflect the distribution of BCE

Inc.’s 35 per cent interest in Nortel Networks to BCE Inc.common shareholders in May 2000. The indicated annualdividend rate is $1.20. Dividends on the preferred shares aredeclared and paid quarterly.

ITEM 5 • MAN AGEMENT’S DISCUSSION AND AN ALYSIS

The information which appears under the heading “Manage-ment’s Discussion and Analysis” on pages 17 to 35 of the BCEInc. 2000 Annual Report, filed concurrently with this docu-ment, is incorporated herein by reference.

ITEM 6 • MARKET FOR THE SECURITIES OF BCE INC.

The information which appears under the heading “StockExchange Listings” on page 64 of the BCE Inc. 2000 AnnualReport, filed concurrently with this document, is incorpo-rated herein by reference.

ITEM 7 • DIRECTORS AND OFFICERS OF BCE INC.

As of February 28, 2001, directors and officers of BCE Inc. as agroup beneficially owned, directly or indirectly, or exercisedcontrol or direction over less than 0.1 per cent of any class ofvoting securities of BCE Inc. or its subsidiaries.

DIRECTORS

The information with respect to directors which appears onpage 4 and on pages 6 to 8 of the BCE Inc. Management ProxyCircular, under the headings “Election of directors” and

“Nominees for election as directors and their beneficial votingsecurities ownership”, is incorporated herein by reference.

All of the current directors have held their present posi-tions or other executive positions with the same or associatedfirms or organizations during the past five years or more withthe following exceptions: Mrs. Kaufman was, prior to July1997, a partner with Stikeman Elliott, barristers and solicitors;Mr. Kierans was, prior to October 1999, President and ChiefExecutive Officer of the C.D. Howe Institute; Mr. Levitt was,prior to February 2000, President and Chief Executive Officerof Imasco Limited and Mr. Newall was, prior to June 1998,Vice-Chairman and Chief Executive Officer and prior to May 1994, President and Chief Executive Officer of NOVA Cor-poration Ltd.

As required, BCE Inc.’s Board of Directors has an AuditCommittee. The members of the Audit Committee areJ.E. Newall (Chairman), D.S. Kaufman, T.E. Kierans, J. Maxwelland V.L. Young. BCE Inc. also has a Management Resourcesand Compensation Committee (“MRCC”). The members of the MRCC are R.J. Currie (Chairman), B.M. Levitt,J.H. McArthur and P.M. Tellier.


4.1 Three-year data($ millions)For the years ended December 31 2000 1999 1998

Selected consolidated financial dataTotal revenues 18,094 14,214 12,954Income from continuing operations 886 5,069 1,399Net earnings applicable to common shares 4,782 5,366 4,505Total assets 51,383 36,960 32,170Total long-term liabilities 14,615 9,862 10,349Cash dividends declared (common and preferred) 928 968 961

– per common share 1.24 1.36 1.36

OFFICERS

On February 28, 2001, the officers of BCE Inc. were as shownin Table 7.1.

All of the officers of BCE Inc. have held their present posi-tions or other executive positions with BCE Inc. or one ormore of BCE Inc.’s subsidiaries or associated companies duringthe past five years or more, with the following exceptions: Mr. Boychuk was, prior to September 1997, Co-Founder, Prin-cipal and Chief Operating Officer of Manitex Capital Inc.; Mr. Monty was, prior to October 1997, Vice-Chairman andChief Executive Officer of Nortel Networks; Mr. Pichette was,prior to January 2001, Principal of McKinsey & Company and,prior to June 1996, was Vice President and Chief FinancialOfficer of Call-Net; Mr. Sabia was, prior to October 1999, Exe-cutive Vice-President and Chief Financial Officer, CanadianNational Railway Company; and Mr. Scott was, prior to February 1999, Executive Vice-President and Chief FinancialOfficer of Nortel Networks.

ITEM 8 • ADDITION AL INFORMATION

BCE Inc. shall provide to any person or company, uponrequest to the Corporate Secretary of BCE Inc., at 1000, rue deLa Gauchetière Ouest, Bureau 3700, Montréal, QuébecH3B 4Y7:

(a) when the securities of BCE Inc. are in the course of a dis-tribution under a preliminary short form prospectus or a shortform prospectus:

(i) one copy of this Annual Information Form together withone copy of any document, or the pertinent pages of any doc-ument, incorporated by reference therein;

(ii) one copy of the comparative financial statements of BCEInc. for its most recently completed financial year togetherwith the accompanying report of the auditors thereon andone copy of any interim financial statements of BCE Inc. thathave been filed subsequent to the financial statements for itsmost recently completed financial year;

(iii) one copy of the BCE Inc. Notice of 2001 Annual andSpecial Meeting and Management Proxy Circular; and

(iv) one copy of any other documents that are incorporatedby reference into the preliminary short form prospectus or theshort form prospectus and are not required to be providedunder (i), (ii) or (iii) above; or

(b) at any other time, one copy of any documents referred toin (a)(i), (ii) and (iii) above, provided that BCE Inc. may require

the payment of a reasonable charge if the request is made bya person or company who is not a security holder of BCE Inc.

Additional information including directors’ and officers’remuneration and indebtedness, principal holders of BCEInc.’s securities, options to purchase securities and interests ofinsiders in material transactions, where applicable, is con-tained in the BCE Inc. Notice of 2001 Annual and SpecialMeeting and Management Proxy Circular. Additional finan-cial information is provided in BCE Inc.’s comparativefinancial statements for its most recently completed financialyear.

Information concerning BCE Inc., in addition to the doc-uments referred to in (a)(i) to (iv) above, is available uponrequest from the Vice President, Investor Relations of BellCanada, at the address indicated above. This additional infor-mation includes Management’s Discussion and Analysis ofthe First, Second and Third Quarter Results of BCE Inc. andBCE Inc.’s quarterly supplements to its earnings press releases.These documents, as well as BCE Inc.’s annual and quarterlyreports and news releases, are also available on BCE Inc.’s Website on the World Wide Web (www.bce.ca).

BCE Inc. also has toll free numbers for shareholderenquiries (1 800 561-0934) and for investor relations(1 800 339-6353).


7.1 BCE Inc. OfficersName Municipality of residence Offices of BCE Inc. presently held

Jean C. Monty Montréal, Québec Chairman and Chief Executive OfficerWilliam D. Anderson Westmount, Québec President – BCE VenturesMichael T. Boychuk Baie d’Urfé, Québec Corporate TreasurerPeter J. M. Nicholson Westmount, Québec Chief Strategy OfficerC. Wesley M. Scott Toronto, Ontario Chief Corporate OfficerPatrick Pichette* Saint-Lazare, Québec Executive Vice-President, Planning and Performance ManagementBarry W. Pickford Toronto, Ontario Vice-President, TaxationMarc J. Ryan Outremont, Québec Corporate SecretaryMichael J. Sabia Westmount, Québec PresidentMartine Turcotte Île-des-Sœurs, Québec Chief Legal OfficerSiim A. Vanaselja* Westmount, Québec Chief Financial Officer

*Appointed January 15, 2001


Percentage of Percentage ofvoting securities non-voting securities

(or Partnership (or PartnershipInterests) Interests)

held directly or held directly orJurisdiction indirectly by indirectly by

Subsidiary of Incorporation BCE BCE





Bell Canada SegmentBell Canada Canada 80 N/A

BCE Nexxia Inc. Canada 80 80Bell ActiMedia Inc. Canada 80 N/A

Sympatico Inc. Canada 80 N/ABell Distribution Inc. Canada 80 N/ABell Mobility Inc. Canada 80 N/A

Bell Mobility Cellular Inc. Canada 80 N/ABell Mobility Paging Inc. Canada 80 N/ABell Mobility Radio Inc. Canada 80 N/ASkytel Communications Corporation Canada 80 N/A

Télébec Ltée Québec 80 N/ATélébec Mobilité Inc. Canada 80 N/A

Northwestel Inc. Canada 80 N/ANorthwestel Mobility Inc. Canada 80 N/ANorthern Telephone Limited Ontario 75 N/AAliant Inc. Canada 45 N/A

Aliant Advanced Communications Inc. Canada 45 0Aliant Horizons Inc. Canada 45 0Aliant Information Technology Inc. Canada 45 N/AAliant Properties Inc. Canada 45 N/AAliant Telecom Inc. Canada 45 N/ABruncor Developments (Boston) Inc. Delaware 45 N/ABruncor Properties (Boston) Inc. Delaware 45 N/AFredericton Business Park Holdings I Ltd. New Brunswick 45 N/AIngenia Communications Corporation Canada 45 N/AInnovatia Inc. New Brunswick 45 0Island Tel Advanced Solutions Inc. Prince Edward Island 45 N/AIsland Telecom Inc. Prince Edward Island 45 N/AMaritime Tel & Tel Limited Nova Scotia 45 0MT&T Holdings Inc. Nova Scotia 45 N/AMT&T Leasing Inc. Nova Scotia 45 N/AMT&T Mobility Inc. Nova Scotia 45 N/ANBTel Inc. Canada 45 N/ANBTel Video Active Network Limited Canada 45 0NewTel Communications Inc. Canada 45 N/ANewTel Mobility Limited Canada 45 0Stratos Global Corporation Canada 30 N/AXwave Solution Corp. Texas 45 N/AXwave Solutions Inc. Newfoundland 45 0

Bell ExpressVu Inc. Canada 100 N/ABell ExpressVu Limited Partnership Ontario 100 N/ABell GlobemediaBell Globemedia Inc. (1) Canada 70 N/A

CTV Inc. Ontario 70 N/ANetStar Communications Inc. Canada 48 N/AAgincourt Productions Inc. Canada 70 70CTV Television Inc. Canada 70 N/ALandscape Entertainment Corp. Canada 35 N/AThe Comedy Network Inc. Canada 46 N/A

Sympatico-Lycos Inc. Ontario 50 N/ATeleglobeTeleglobe Inc. (2) Canada 100 100(3)

101-6555 Long Distance Corp. Canada 100 100Kabushiki Kaisha Teleglobe Japan Japan 100 N/AOptel Telecommunications, Inc. Delaware 100 N/ATelecom Vision Call Center Services,

General Partnership Québec 100 N/ATelecom Vision International Inc. Delaware 100 N/ATeleglobe Argentina S.A. Argentina 100 N/ATeleglobe Australia Pty Limited Australia 100 N/ATeleglobe B.V. Netherlands 100 N/ATeleglobe Belgium B.V.B.A./S.P.R.L. Belgium 100 N/ATeleglobe Canada Limited Partnership Québec 100 N/ATeleglobe Canada

Management Services Inc. Canada 100 N/ATeleglobe Chile, S.A. Chile 100 N/ATeleglobe Colombia S.A. Colombia 100 N/ATeleglobe Communication Services Inc. Canada 100 N/ATeleglobe Communications (Israel) Ltd. Israel 100 N/ATeleglobe Danmark A/S Denmark 100 N/ATeleglobe de Costa Rica TCR, S.A. Costa Rica 100 N/ATeleglobe de Panama, S.A. Panama 100 N/ATeleglobe de Venezuela, C.A. Venezuela 100 N/ATeleglobe El Salvador, S.A. de C.V. El Salvador 100 N/ATeleglobe France S.A.S. France 100 N/A

S C H E D U L E – C O R P O R AT E S T R U C T U R E

(1) Bell Globemedia Inc. was created on January 9, 2001.(2) 23% of the common shares of Teleglobe Inc. are owned indirectly by Bell Canada.(3) Upon the redemption of the Teleglobe Inc. third series preferred shares expected to be completed April 12, 2001.N/A = not applicable

(4) 23% of the common shares of Teleglobe Inc., the legal owner of Excel, are owned indirectly by Bell Canada.(5) 51% directly owned by Teleglobe Inc. and 49% indirectly owned by Bell Canada.N/A = not applicable










Teleglobe GmbH Germany 100 N/ATeleglobe GmbH Austria 100 N/ATeleglobe Guatemala, S.A. Guatemala 100 N/ATeleglobe Hong Kong Limited Hong Kong 100 N/ATeleglobe International

Communications, S.A. Spain 100 N/ATeleglobe International Corporation Delaware 100 N/ATeleglobe International (UK) Limited United Kingdom 100 N/ATeleglobe Ireland Ltd. Ireland 100 N/ATeleglobe Italia S.p.A. Italy 100 N/ATeleglobe Korea Inc. Korea 100 N/ATeleglobe Magyarorz ág Kft. Hungary 100 N/ATeleglobe Norge A/S Norway 100 N/ATeleglobe Obschestvo c O granichennoi

Otvetstvennoctu Russia 100 N/ATeleglobe Peru S.A. Peru 100 N/ATeleglobe S.R.L. Romania 100 N/ATeleglobe Services Japan, Inc. Japan 100 N/ATeleglobe Singapore Pte Ltd. Singapore 100 N/ATeleglobe spolecnost s

rucenim omezenym Czech Republic 100 N/ATeleglobe Spolka z

ograniczona odpowiedzialnoscia Poland 100 N/ATeleglobe Sverige AB Sweden 100 N/ATeleglobe Switzerland Ltd. Switzerland 100 N/ATeleglobe Taiwan Co., Ltd. Taiwan 100 N/ATeleglobe USA Inc. Delaware 100 N/ATG do Brasil Limitada Brazil 100 N/ATGO do Brasil Limitada Brazil 100 N/ATGO Dominicana, S.A. Dominican Republic 100 N/ATGO México, S.A. de C.V. Mexico 100 N/ATGO Telecommunication

South Africa (Pty) Ltd. South Africa 100 N/ATGO Telecomunicaçöes S.A. Portugal 100 N/Aup2 technologies Inc. Canada 100 N/Aup2 technologies USA Inc. Delaware 100 N/A

BCE EmergisBCE Emergis Inc. Canada 66 N/A

BCE Emergis Technologies Inc. Delaware 66 N/ABCE Emergis (US) Corp. Delaware 66 N/A

United Payors & United Providers, Inc. Delaware 66 N/ABCE VenturesBCE Ventures Inc. Canada 100 N/ABell Canada International Inc. Canada 74 N/ATelesat Canada Canada 100 N/AExcel Communications Group (4)

EMeritus Communications, Inc. Delaware 100 N/AExcel Communications, Inc. Delaware 100 N/AExcel Communications (UK) Limited United Kingdom 100 N/AExcel Communications Marketing, Inc. Delaware 100 N/AExcel Fulfillment Services, Inc. Delaware 100 N/AExcel Holdings, Inc. Delaware 100 N/AExcel Management Service, Inc. Delaware 100 N/AExcel Operations Marketing, Inc. Delaware 100 N/AExcel Operations, Inc. Delaware 100 N/AExcel Products, Inc. Delaware 100 N/AExcel Switch Facility, Inc. Delaware 100 N/AExcel Telecommunications

(Canada) Inc. (5) Canada 100 N/AExcel Telecommunications

of Virginia Inc. Virginia 100 N/AExcel Telecommunications, Inc. Texas 100 N/AExcel Telephone, Inc. Delaware 100 N/AExcel Teleservices, Inc. Delaware 100 N/AExcelcom, Inc. Delaware 100 N/ALong Distance L.L.C. Delaware 100 N/ALong Distance Wholesale Club Inc. Delaware 100 N/ANetwork Control Services, Inc. Delaware 100 N/APrime Business Communications Inc. Delaware 100 N/ATelco Billing, Inc. Delaware 100 N/ATelco Communications Group, Inc. Virginia 100 N/ATelco Holdings, L.L.C. Delaware 100 N/ATelco Network Services, Inc. Nevada 100 N/ATelco Switch Acquisition Inc. Nevada 100 N/ATelco Switch Corp. Delaware 100 N/ATelco Switch, Limited Partnership Nevada 100 N/ATelco Voice Network Inc. Nevada 100 N/A

S C H E D U L E – C O R P O R AT E S T R U C T U R E

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