Exponential Increase in Worldwide Fiber Optic Capacity is Matched by the Exponential Expansion in Internet Applications and Users, NationsBanc Montgomery Securities Analyst Tells Investors.

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 17, 1998--Emerging long-distance companies are in the process of installing an exponential increase in super low-cost, high-capacity fiber optic cable that will enable strong improvements in Internet reliability and security, a NationsBanc Montgomery Securities industry analyst told investors.

"Capacity per capital dollar is increasing exponentially, and the new networks have a commensurately lower cost structure than the existing networks. We are seeing the necessary capacity increase for the transition from voice to image-based communications on a mass scale over the next three years." said William D. Vogel, a telecommunications industry analyst for NationsBanc Montgomery Securities.

Vogel's comments came at the 28th Annual NationBanc Montgomery Securities Investment Conference, which is running this week in San Francisco. The conference, which is the firm's largest to date, features 245 companies with a combined market capitalization of $1.6 trillion making presentations to more than 1,900 portfolio managers. These managers represent 280 different institutions with a combined $3.5 trillion in assets under management.

Vogel said that terrestrial long-distance networks constructed in 1985 were built at a cost of $12.40 per fiber mile, but that the new land-based networks being built today cost only seven cents per fiber mile. The cost of building undersea fiber networks showed a similarly dramatic price decline.

Meanwhile, the capacity of the new networks dwarfs the old systems. Networks built in 1985 are capable of handling the equivalent of 6,000 simultaneous phone calls, while today's networks are capable of handling more than two million simultaneous calls.

With these networks in place, Internet users now accustomed to the slow speed of dial-up connections will soon be able to access the Internet at a speed of more than 1.5 megabits per second, when these fiber optic cables are coupled with high-speed local access options now being rolled out, such as cable modems and ADSL service. Eventually, access speed will reach three-to-four megabits per second necessary to support MPEG-2 studio quality video and audio, Vogel predicted.

Vogel said that some investors worry that this additional capacity will cause an oversupply in the marketplace. Vogel countered that perception, saying "I'm certain that once all the bright minds in Silicon Valley see the kind of capacity that is coming on line, they will unveil a host of applications to use it. Bandwidth has been the single most important constraint in the designing of software."

Among the types of uses Vogel expects to see on the Internet are full-motion video - which will require transmission speeds of at least three megabits per second. "We have not seen a change in mass market communications of this magnitude since the transition from radio to television," said Vogel. "Text and still image based web browsing are like the black-and-white era in television."

In addition, Vogel believes that the improved reliability and security of the fiber optic cables resulting from the massive increase in bandwidth occurring in 1999 and 2000 will cause businesses to shift transmission of mission-critical data from relatively expensive private networks to the Internet.

Vogel believes that the new operators, with vastly lower cost structures, will price their services quite aggressively compared to the incumbent long-distance players, namely AT&T, WorldCom/MCI and Sprint.

Vogel recommends that investors buy several baskets of stocks to participate in this sweeping change in the long haul transmission networks. First, he recommends that investors buy the stocks of all the "Baby Bells," namely Ameritech Corporation, Bell Atlantic Corporation, BellSouth Corporation, SBC Communications and US West Inc., as well as GTE Corp. Vogel believes these companies will benefit from a "bandwidth-driven secular improvement in average revenue per customer." It's these companies that have the strategically critical customer facing facility which gives control over the pace of new product and version introductions once the wide bandwidth platform has been established.

Secondly, Vogel recommends investing in the emerging long distance carriers with the low cost and capacity advantages, such as Qwest Communications(1), IXC Communications(1), Frontier Corporation, Pacific Gateway Exchange(1) and Teleglobe International, Inc. Each of these firms is benefiting from the pricing umbrella established by the incumbent long distance oligopoly.

Lastly, Vogel believes that two companies, WorldCom(1) and Winstar Communications(1), are "seamlessly integrated local and long-distance carriers" that can provide customers with end-to-end services while enjoying the lowest cost to serve customers because they have the lowest dependence on third parties to serve their customers. He recommends that investors buy both stocks.

NationsBanc Montgomery Securities LLC (NMS), a subsidiary of NationsBank Corporation, is a full-service investment bank and brokerage firm with approximately $900 million of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets). Other services include M&A advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and the primary dealer.

Through NationsBank, NMS clients can also access products and services that include senior bank debt, bridge financing, real estate banking, treasury management, trade finance and risk management (derivatives products and foreign exchange).

NMS is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange. NMS employs more than 2,700 investment professionals. (1) NationsBanc Montgomery Securities LLC currently maintains a

market in this security. NationsBanc Montgomery Securities LLC

was manager or co-manager of a public offering and/or has

performed investment banking or other services for this company

in the last three years.