We have two core billing platforms. Standard voice products are being billed through the Arbor Billing system, from Lucent Technologies. Advanced voice services, data and other services are being billed through our own proprietary billing system called Faturamento e Cobrança, or FTC, developed to bill services which are collected directly by us from the customer.

In the fourth quarter of 1999, we began directly billing and collecting payments from our domestic and international long-distance telephony customers on a trial basis. We then pay the fixed-line and cellular companies the applicable interconnection charges for such long-distance calls. See "Division of Revenues and Access Fees".

We officially implemented direct billing in the first quarter of 2000. Prior to that time, we did not directly bill traditional telephone services to our end-user customers. Instead, the fixed-line providers were obligated to provide billing and collection services at no cost to us. The regional fixed line companies and the cellular companies billed customers for all domestic and international long-distance calls, collected payments from customers and transferred to us payments for all interregional, certain intra-regional and all international long-distance calls carried by us. All other telecommunications and related services provided by us, including "800" and "900" telephony, have been and continue being billed directly by us.

Before 2000, we used the settlement procedures inherited from the Telebrás System. All long-distance call records were tariffed by Embratel and sent to the fixed-line and cellular companies. They billed and collected on our behalf. We also calculated the interconnection and access cost. Using this information, the fixed-line and cellular companies made the net payment to us. This process was based on informal procedures and unclear definitions. It resulted in increased disputes with respect to such payments. During 2000, this situation improved through negotiations with the fixed-line and cellular companies. Currently, we have the fixed-to-cellular revenue dispute and significant issues with one fixed-line company.

The process of implementing direct billing of traditional telephone services represented a major challenge and opportunity for us. It significantly changed the magnitude of the billing and customer service requirements. We moved from processing a monthly average of 70,000 invoices in 1999 to approximately 8 million invoices in 2000, and expect to invoice an average of 11 million invoices per month in 2001, in an estimated potential fixed-line telephone market with over 35 million customers.
During 2000, we achieved important improvements in the performance of our standard voice products platform. We increased our flexibility to create new products and decreased the time to market them.

One of the challenges we face is to maintain up-to-date customer data for the subscribers of the fixed-line companies. For these customers, we previously did not have direct customer database and had to rely on information provided by the fixed-line companies, which in turn were required to provide it under Anatel regulation. Even though data was provided by the fixed-line providers, we have been experiencing problems in the quality of the data supplied, which impacted our ability to bill during the year of 2000.

We have also worked to enhance the collection systems and procedures. We have increased our ability to block services to non-paying customers and improved fraud management.

We believe that there are strategic advantages in directly billing all our customers. We believe that the ultimate benefit of this change will be a substantial reduction in the collection period once the initial challenges of implementation are fully resolved. Additionally, we have direct communication to our customers on a regular basis. At the same time, there was an increase in sales, general and administration expenses due to the cost of directly billing millions of customers. Although we are employing various strategies to minimize this increase in cost, we face risks associated with controlling the costs of billing, ensuring the quality and accuracy of billing, maintaining the customer information database and collecting from a large customer base.