connectivity outside the US

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1

The bottom line throughout this discussion is that neither the techies or
the capacity planners really make the divisions. The economics of running
cable is only a small factor. It goes to supply and demand. Scarcity
creates higher pricing. Look at the recent bids on the new cable???
Everyone wants a piece and some carriers would like to monopolize as much
bandwidth as possible to control the flow. The accountants and the
marketing types look to optimize their return early in the game.

What does that mean for the Internet? The overseas ISPs are building up
their resources. The only ISPs that can really afford to stay in the game
in a big way "over the long haul" are now the carriers themselves. The end
result??? The marketing and pricing strategies of the ISP and market are
being commercialized and in the overseas markets looking more like the
pricing strategies of the typical telephone service offering.The cost for
overseas cables are not going to be coming down in a big way over the next
couple of years. They will more likely go up. At least for our foreseeable
future. The next few years. The pent up demand is to great.

My humble opinion.

Mark T. Ansboury
Virtual Resources Inc.
Virtual Communications Inc.
E-mail: mark.ansboury@yesvirtual.com

2

Supply and demand - the cables which are being commissioned in late 98 and
99 look to be 100G loop designs in bot the Pacific and Atlantic
environments. The system price looks like remaining pretty constant -
around $500M give or take a few hundred mil - despite a 50 fold increase in
capacity. Its reasonable to expect a radical bottoming out of unit price
for IRUs sometime in 99 for these cables. What does that mean? The scarcity
premium in cable price which will be evident through 98 will be eliminated
in 99 and insterad you'll see a return to a technology-indexed unit price,
where the price will reflect the basic project costs And given the increase
in cable capacity due to WDM deployment you can expect a unit price drop.

The cost for