Telecommunications Reform Needed to Protect Consumers, SBC President Bill Daley Says.

Business Editors & Technology Writers

CHICAGO--(BUSINESS WIRE)--Sept. 13, 2002

Below-cost wholesale pricing, high-speed Internet access,

long-distance competition cited

SBC (NYSE:SBC) President Bill Daley today identified three steps needed to help stabilize the nation's ailing telecommunications sector and protect consumers from further uncertainty and disruption.

Daley focused on three critical areas that need to be addressed for the well-being of the sector and the national economy: below-cost wholesale pricing which jeopardizes the future of universally available, affordable phone service; an unlevel broadband regulation that threatens the availability of high-speed Internet service; and increased competition in the long distance market.

"As troubled as things are now...for millions of American consumers and investors...telecommunications is poised to get much worse. Unless the industry and the policymakers act wisely...the sick companies that are now circling the drain are threatening to drag the healthier ones with them," Daley said in remarks to the Bond Club of Chicago.

"If that occurs, it would be an unmitigated disaster for the concept of universal service...for the security of the nation's telecommunications infrastructure...and for an economy struggling to pull itself out of the doldrums."

Daley singled out one policy created by well-intentioned regulators to spur competition in the local phone market, which he said is "today harming, not helping, development of healthy, sustainable competition."

He said the heavily discounted pricing of the so-called UNE-P, (unbundled network element platform) is forcing established companies to sell parts of their networks to other companies at prices well below cost and therefore creating a disincentive for more companies to invest in viable networks and build sustainable businesses.

In the long term, Daley said, consumers will suffer, not benefit, from these heavy discounts because they drain the resources that established companies such as SBC need to maintain high-quality, low-cost universal service.

"Another issue that needs national attention is broadband," Daley said. "We need to make sure that the emerging high speed Internet service marketplace is regulated fairly and evenly, or we risk choking off full competition.

"In a nutshell, broadband is dominated by cable companies, which are unregulated monopolies," Daley said. "Companies like SBC offer DSL service, which is our version of broadband. Despite the fact that cable has a two-to-one edge over DSL nationally, only phone company-provided DSL is regulated, and pervasively so.

"Federal regulators are working to remove the disparity treatment between the two services. Once that happens, it will reinvigorate the broadband market. It will not only spur greater deployment of DSL, but accelerated deployment of the next generation broadband services that phone companies today are hesitant to fully deploy."

Turning to long distance, Daley said, "We hope and expect to be in long distance in Illinois sometime early next year. I won't underestimate our competitors' ability to continue slow-rolling this process, but I think we can finally see light at the end of the tunnel."

SBC Communications Inc. (www.sbc.com) is one of the world's leading data, voice and Internet services providers. Through its world-class network and its subsidiaries' trusted brands - SBC Southwestern Bell, SBC Ameritech, SBC Pacific Bell, SBC Nevada Bell, SBC SNET and Sterling Commerce - SBC companies provide a full range of voice, data, networking and e-business services, as well as directory advertising and publishing. A Fortune 27 company, America's leading provider of high-speed DSL Internet Access services, and one of the nation's leading Internet Service Providers, SBC companies currently serve nearly 60 million access lines nationwide. In addition, SBC owns 60 percent of America's second largest wireless company - Cingular Wireless - which serves more than 21 million wireless customers. Internationally, SBC has telecommunications investments in 28 countries.