November 4, 1997

Thank you for interest in PhoneMiser. It's clear from your careful assessment of Long Distance rate comparisons that you've put a lot of time into your consideration of the product. Of course, we'd be happier if you came to a different conclusion - but more about that later.

In the meantime, I'd like to offer some clarification to several of the excellent points you raised, based on our fledgling experience in the retail marketplace. As you probably know, PhoneMiser is very new to the consumer LD marketplace, and as such is really a work in progress. Much of our ability to offer choice and real discounts in Long Distance is intimately bound up with our relationships - both in place and prospective - with our partner LD carriers. This allows us the ability to continually introduce new rates, lower rates, and different options to several categories of consumers. But not necessarily all at once, and unfortunately not as quickly as we would otherwise like. Great ideas take time to find their own operational level, and while we're very proud of how far we've come, we are also aware of how far there is to go. And as I'm sure you can appreciate, it's harder to go far when you're being shot at from the sidelines.

Here are several points that I feel merit your attention:

1. As you say, PhoneMiser is not for everyone. Users who call exclusively within the continental US during night hours and who have an aggressive discount plan probably will not see savings with PhoneMiser to justify purchasing the product. However, users like me who call domestically and internationally at all hours can save a huge amount. Our current customers report to us that their average phone bills were $200 before PhoneMiser.

2. Savings are extremely hard to predict because people's calling habits vary so much. Most discount long distance companies as well as the "big three" base their savings claims on AT&T's "basic" (i.e. highest) rates. We chose not to do this. Our payback calculation assumes $60 of long distance charges with a 50/50 mix of day and evening calling at $0.25/min and $0.10/min respectively, netting about $30/month savings. The savings are actually understated because neither the minimum call duration nor one minute increments are factored in. Be that as it may, we realize that users have widely varying calling patterns and that actual savings will also vary greatly from individual to individual. That's why we offer the service free for the initial period and why we have posted the Interactive Rate Finder on our web site.

3. PhoneMiser requires a Windows95 PC with Pentium and 16MB of memory. The owners of such PCs are more likely than the average consumer to have higher long distance bills and more various calling patterns. According to IDC, consumers with PCs in the home spend in excess of $60/month on long distance service. My mother, who definitely does not fit the PhoneMiser target customer profile, doesn't own a PC.

4. PhoneMiser will not route calls over "dial around" carriers with "casual caller" surcharges. PhoneMiser places calls using the CICs of our partner LD carriers which are available for a given subscriber based on location. The rates charged have been negotiated by MediaCom with the carriers on behalf of our subscribers and are not available except to PhoneMiser customers.

5. We have redesigned our Interactive Rate Finder to let prospective customers determine PhoneMiser's savings based on their actual calling habits. Take the long distance portion of an actual phone bill and see if PhoneMiser would save you money. If it does, you will know that based on your actual calling habits PhoneMiser is good for you. If not, don't buy it. You are welcome to send all the visitors to your site to our Interactive Rate Finder where they can check out the savings for themselves.

6. Your rate comparisons don't take into consideration international calling - an area where PhoneMiser customers are seeing truly significant savings. Nor do they consider short duration domestic calls. In general, phone companies offering "dime plans" have poor international rates. With PhoneMiser I find I am consistently using three phone companies depending on where I am calling. No other service I am aware of offers this kind of benefit.

7. Short calls are another big factor. I used to use VARTEC at $0.10/minute, $5/month fee. On my last pre-Phonemiser bill, 10 out of 21 domestic long distance calls were listed as 3 minutes, meaning they were less, probably much less, than that. The incidence of reaching answering machines or voice mail is very high for many people. Services which have a charge per call (Quest in your comparison, for instance) really sock it to users who get a machine.

8. Your Cost Calculator does not take either of these factors into consideration. Again, our Interactive Rate Finder will let anyone enter items from their actual phone bill and get a comparison of what they would have paid with PhoneMiser.

9. We have recently introduced a software version of PhoneMiser that is available by free download from our web site. This software will allow users to originate calls from their PC (using the modem to dial) with PhoneMiser LCR rates. This will also be available on CD-ROM with a small fee to cover CD-ROM production, shipping and handling.

10. We have lowered the price of the hardware adapter to $49.95. The adapter's purpose is to let people dial from their phones in the normal way.

11. The initial period of use is free. For purchasers of our PhoneMiser Personal Edition (sold at Egghead and other retail chains) this period is three months. For the free software version the period is one month. Any user who does not see sufficient savings may cancel the service at no cost within this period.

Eli, we're on the same side as you are. We want to save customers money on their phone bills and believe that only by doing so can we justify the purchase and use of our service. You would do a service to those who check with you for advice about telecommunications if you were to clarify your assessment of PhoneMiser to say that users with small long distance bills and no international content are not likely to benefit, while those with higher bills and a mix of domestic and international calls may benefit greatly. In any event, any prospective PhoneMiser user should check our Interactive Rate Finder to see if PhoneMiser fits their calling habits before they buy.

We believe that's fair and we are happy to stand to that test. If we save a user money we are a good service for that user, otherwise not.

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