

"First, we announced our intention to lead the country in the deployment of the information highway.



"In December, we issued our technology requirements to potential suppliers for a new video-capable technology platform that will accelerate our entry into attractive markets for entertainment and interactive multimedia services. We expect Bell Atlantic's enhanced network will be ready to serve 8.75 million homes by the end of the year 2000. By the end of 1998, we plan to wire the top 20 markets in our Mid-Atlantic region. These investments will help establish Bell Atlantic as a world leader in what is clearly the high-growth opportunity for the 1990s and beyond--interactive, multimedia communications, entertainment and information services that address the vast, unfulfilled demand for customer choice, convenience and control.



"We will spend $11 billion over the next five years to rapidly build full- service networks capable of providing these services within the Bell Atlantic region. What's more, we will expand Bell Atlantic's global presence by developing attractive investment opportunities in Europe, Mexico and the Pacific Rim.

Telephone Company Provision of Video Dial Tone and Video Programming

Background:

"In 1987, the FCC initiated an inquiry into whether developments in the cable and telephone industries warranted changes in the rules prohibiting telephone companies such as the Network Services Companies from providing video programming in their respective service territories directly or indirectly through an affiliate.



"In November 1991, the FCC released a Further Notice of Proposed Rulemaking in these proceedings. In August 1992, the FCC issued an order permitting telephone companies such as the Network Services Companies to provide "video dial tone" service. Video dial tone permits telephone companies to provide video transport to multiple programmers on a non-discriminatory common carrier basis. The FCC has also ruled that neither telephone companies that provide video dial tone service, nor video programmers that use these services, are required to obtain local cable franchises. Other parties have appealed these orders, which remain in effect pending the outcome of the appeal.

"In late 1992, Bell Atlantic - New Jersey entered into agreements pursuant to which, pending regulatory approval, it would provide video dial tone transport services to two video programmers in New Jersey. As contemplated by its contract with Sammons Communications, Incorporated ("Sammons"), Bell Atlantic -New Jersey will deploy fiber optic technology that will enable Sammons and other video information providers to deliver video programming in three Morris County, New Jersey communities over a video dial tone platform. Bell Atlantic - New Jersey's contract with Future Vision of America Corporation ("Future Vision") contemplates that Bell Atlantic - New Jersey will deploy fiber optic technology in the Dover Township, New Jersey telephone network to establish a video dialtone platform that will allow Future Vision and other video information providers to deliver competitive video programming services in that community. Applications for approval to deploy these video dial tone systems are pending at the FCC.

"In December 1992, Bell Atlantic - Virginia and Bell Atlantic Video Services Company filed a lawsuit against the federal government in the United States District Court for the Eastern District of Virginia seeking to overturn the prohibition in the Cable Communications Policy Act of 1984 against LECs providing video programming in their respective service areas. In a decision rendered in August 1993 and clarified in October 1993, the court struck down this prohibition as a violation of the First Amendment's freedom of speech protections and enjoined its enforcement against the Company, the Network Services Companies and Bell Atlantic Video Services Company. This decision has been appealed to the United States Court of Appeals for the Fourth Circuit.

"In early 1993, the FCC granted the Company authority to test a new technology known as Asynchronous Digital Subscriber Line ("ADSL") for use in delivering video entertainment and information over existing copper telephone lines. Beginning in March 1993, the Company began a one-year technical trial of ADSL serving up to 400 Bell Atlantic employees in northern Virginia. In the Fall of 1993, Bell Atlantic petitioned the FCC for authorization to expand and convert this technical trial, upon its completion, into a six month market trial serving up to 2,000 customers. Bell Atlantic also requested authority to offer a commercial video dial tone service to customers served by 25 central offices in parts of northern Virginia and southern Maryland upon completion of the six month market trial. These applications are pending at the FCC.

"Third, we continued to make major strides in the public policy arena toward achieving the freedoms necessary to compete.



"Last summer, the state legislatures in Pennsylvania and Delaware authorized new regulatory frameworks that, when implemented, will give us the incentives to invest in new technology and services that will meet customer needs and provide long-term growth opportunities in a competitive environment. Plans for similar alternative regulation have been approved or are pending in all seven state jurisdictions. Moreover, all telephone subsidiaries have been afforded some degree of pricing flexibility for products and services subject to competition.



"Perhaps the most significant public policy development last year was our successful challenge to the provision of the 1984 Cable Act that prohibits Bell Atlantic from providing video programming in its traditional service territories. The District Court ruling opens lucrative new markets for Bell Atlantic as it expands consumer choice. It may prove to be a forerunner of even more change, as legislation proposing to lift remaining barriers to our full participation in the information marketplace makes its way through Congress."