| The long distance telecommunications industry is intensely competitive. In many of the markets targeted by the Company there are numerous entities which
are currently competing for the same residential and carrier customers and others which have announced their intention to enter those markets.
International and interstate telecommunications providers compete on the basis of price, customer service, transmission quality, breadth of service offerings
and value-added services. Residential customers frequently change long distance providers in response to competitors' offerings of lower rates or promotional
incentives, and, in general, because the Company is a dial-around provider, the Company's customers can switch carriers at any time. In addition, the
availability of dial-around long distance services has made it possible for residential customers to use the services of a variety of competing long
distance providers without the necessity of switching carriers. The Company's carrier customers generally also use the services of a number of international
long distance telecommunications providers. The Company believes that competition in its international and interstate long distance markets is likely
to increase as these markets continue to experience decreased regulation and has new technologies are applied to telecommunications. Prices for long distance calls in several of the markets in which the Company competes have declined in recent years and are likely to continue to decrease. The U.S. based international telecommunications services market is dominated by AT&T;, MCI and Sprint. The Company also competes with numerous other carriers in certain markets, some of which focus their efforts on the same customers targeted by the Company. Recent and pending deregulation initiatives in the U.S. and other countries may encourage additional new entrants. The Telecommunications Act of 1996 (the "Telecommunications Act" or the "1996 Act"),
permits and is designed to promote additional competition in the intrastate, interstate and international telecommunications markets by both U.S. based and
foreign companies, including the RBOCs. In addition, pursuant to the terms of the WTO Agreement on basic telecommunications, countries who are signatories to the agreement have committed, to varying degrees, to allow access to their domestic and international markets to competing telecommunications providers, to allow foreign ownership interests in existing telecommunications providers and to establish regulatory schemes and policies designed to accommodate telecommunications competition. The Company also is likely to be subject to additional competition as a result of mergers or the formation of alliances among some of the largest telecommunications carriers. Many of the Company's competitors are significantly larger, have substantially greater financial, technical and marketing resources than the Company, own or control larger networks, transmission and termination facilities, offer a broader variety of services than the Company, and have strong name recognition, brand loyalty, and long-standing relationships with many of the Company's target customers. In addition, many of the Company's competitors enjoy economies of scale that can result in a lower cost structure for transmission and other costs of providing services, which could cause significant pricing pressures withinthe long distance telecommunications industry. If the Company's competitors were to devote significant additional resources to the provision of international long distance services to the Company's target customer base, the Company's business, results of operations and financial condition could be materially adversely affected. |