PART ONE OF A FOUR-PART SERIES

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1 Driving The Network Forward Broadband InnovatoRS PART ONE OF A FOUR-PART SERIES

2 Broadband InnovatoRS PART 1 of 4» Driving The Network Forward Presented by The majority of US economic growth is driven by innovations in information technology. The global economy depends on telecommunication services, and the telecom industry is a vitally important contributor to our national economic performance. If there is any certainty in broadband policy, it's that more competition is better when it comes to communication services. More competition leads to lower prices, higher speeds, broader investments, better customer service and a virtuous cycle of innovation. Competitive carriers serve a wide variety of businesses offering innovative products to organizations of all sizes, even providing services to incumbent telecoms that simply would not exist without smaller competitive telecoms creating economic efficiencies in their quest to expand and differentiate their businesses. INVESTING IN INNOVATION Competitors to incumbent telecoms provide a large and growing portion of total wireline infrastructure investment: % OF TOTAL INVESTMENT 45% 40% 35% With the Telecom Act of 1996, a number of competitive carriers entered the market for voice, internet and data services, and a telecom investment boom ensued. Those investments laid the groundwork for future telecom services, allowing competitive telecoms to continue to invest, develop and deploy cutting edge technologies. In 2008, competitive carriers spent almost $17 billion nearly 40% of the total wireline investments in the US. By 2012, these carriers and cable operators increased their investments to 43% of total US wireline expenditures. Without a doubt, competitive carriers drive innovation forward and push the envelope of what can be done in the telecom sector. Source: S.M. Gately Consulting LLC, Feb. 2013

3 Ethernet Innovation 40 YEARS OF FLEXIBLE BANDWIDTH For decades, American businesses had no choice but to rely on outdated, expensive broadband services sold by the incumbents. But 10 years ago, upstart competitors began offering Ethernet service as an alternative. Unlike the incumbents legacy services, Ethernet is a plug and play technology that seamlessly integrates with businesses customers equipment and internal networks. Ethernet has revolutionized business broadband service. Ethernet offers a wide range of business services using a multitude of infrastructure, including copper wires (aka traditional telephone wires), fiber optic cable and wireless facilities. The fact that Ethernet can be deployed over traditional telephone wires is noteworthy because it allows carriers to quickly deploy Ethernet service where fiber is not currently available. Most US businesses do not have access to fiber, which has made Ethernet a must-have broadband solution. In hindsight, Ethernet sounds like a no brainer, but it required competition to become a reality. Business ethernet bandwidth surpassed legacy bandwidth in 2011: Despite steady growth, most businesses are still not served by fiber: 89.8% 2003 FIBER NO FIBER 63.9% 2012 Based on commercial buildings with 20+ employees. Source: Vertical Systems Group ENS Most customers buy service in the 10 sweet spot CURRENT TREND BANDWIDTH ETHERNET LEGACY Illustrative. Source: Vertical Systems Group ENS Illustrative. Source: Cisco IBSG, Gbps

4 CASE STUDY: TW TELECOM 2000: An early adopter of VoIP technologies it began integrating VoIP equipment into its network in early : A pioneer in the provision of Ethernet services for business customers, tw telecom s standardized Business Ethernet services connected customer locations across the metro area and scaled capacities to 1 Gigabit. 2012: Introduced Enhanced Performance Management for Ethernet Customers, a highly reliable, lowcost IT infrastructure service that enables customers to extend their IT infrastructure into the cloud. Customers can reduce IT capital costs while improving their ability to address quality of service issues. AWARD WINNING August 2012: Introduced a nationwide dynamic capacity service allowing customers to double or triple their bandwidth nearly instantly to adapt quickly to traffic demand. This game-changing capability was awarded the 2012 Best Carrier Ethernet Business Application in North America from the Metro Ethernet Forum. CASE STUDY: XO COMMUNICATIONS Early adopter of Metro Ethernet over a variety of physical layers (copper wires, microwave wireless, fiber optic cable) 2006: Deployed Ethernet over Copper (EoC) services. This groundbreaking technology utilizes the existing copper phone lines aggregated together through digital bonding to create a broadband connection. XO s significant investment in EoC has reinvigorated the use of America s copper infrastructure. FIRST IN THE U.S. Summer 2012: Announced that it was the first service provider in the US to deploy 100 Gbps technology on a coast-to-coast long-haul fiber network with plans to double and quadruple those speeds in the near future. November 2012: Accelerated EoC speeds to 100, giving nearly 2 million business locations access to much faster broadband speeds at competitive prices. INNOVATION SPOTLIGHT: NETWORK TECH Competitive carriers have financial incentives to invest in technologies that maximize their efficiencies. To gain market separation, competitive carriers take risks and invest more broadly in unproven technologies, effectively serving as technology incubators, nurturing the equipment manufacturers that ultimately provide the hardware on which the entire telecom industry relies. Telecoms purchase networking equipment from a variety of vendors, from large companies like Cisco and Juniper Networks to relatively smaller vendors like Ciena, Infinera, ADTRAN, Tellabs, Sonus Networks, Overture Networks, Actelis Networks, etc. Hypothetically, in the late 1990s, if a company like Ciena only had incumbent telecoms as customers, it might not exist today and its innovations could have been lost or long delayed. While it s difficult to quantify, without competitive carriers, there would be fewer innovations from fewer companies serving the telecom industry.

5 VOICE SERVICE Innovation DEFINING THE TELECOM ECOSYSTEM There was once a time when telephone services weren t as varied or innovative as they are today. The current competitive market for phone services has created a robust ecosystem of telephony products, and competitive carriers are key players that need to differentiate their services and constantly increase their products value for customers. Almost two decades ago, competitive carriers were among the first service providers to combine voice and data in order to provide more value to their customers, maximizing what people could do with their telecom services. CASE STUDY: CBEYOND FIRST IN THE WORLD 1999: Launched as the world s first 100% VoIPbased local phone network targeting the small to mid-sized enterprise market. CASE STUDY: EARTHLINK 1994: Became the first telecom to offer unlimited access at a flat rate on Internet services. EarthLink introduced one of the first flat-rate nationwide VoIP services. First telecom to have 100% of its customers receive online billing statements. One of the first VoIP service providers to adopt SIP (Session Initiation Protocol) standards and launch SIP trunking capabilities. AWARD WINNING 2005: Received Frost & Sullivan s Product Differentiation Innovation Award within the US small business telecom services market. SIP has become the industry standard which enables small businesses to control their real-time multimedia communications without sacrificing quality or money. - Chris Gatch, Cbeyond CTO Today EarthLink is a leading provider of cloud services/managed services, and the only provider to deliver an advanced packetized network (MPLS) over blended access, including DSL, T1, Ethernet and Fiber. AWARD WINNING 2011: Received two Product of the Year Awards for Innovation in 2011, chosen by the editors of Internet Telephony Magazine for EarthLink s Complete Hosted Voice and its Complete SIP Trunking solutions. 2012: Earned 2012 Cloud Computing Excellence Award from Cloud Computing Magazine for EarthLink Cloud Hosting Product 2013: Ranked #1 Managed Service Provider by MSPmentor; Tops 6th Annual List of World s Top 501 Managed Service Providers

6 INNOVATION SPOTLIGHT: VOICE TECH Competitive carriers have partnered with audio innovators like Dolby Laboratories to create the most advanced telephony solutions possible. BT and Dolby have been working together to develop a conference calling solution that creates a spatial audio scene so that hundreds of call participants can hear where voices are coming from in a virtual room. BT will be the first telecom to offer this kind of specialized audio technology, developed specifically to make conference call meetings more engaging and productive by improving sound quality with the most high-end, state-of-the-art audio technologies available. Without a diverse and competitive telecom market, this kind of innovative product might never be created and the productivity of the wider economy that relies on communication services could be negatively affected. The Broadband Coalition represents America s innovative broadband providers. For innovations like the ones examined in this document to continue, the Federal Communications Commission rules on competitive policies need to be updated to reflect the technology changes taking place today. For more information on how to maintain an innovative broadband environment, visit thebroadbandcoalition.com INNOVATION IN THE CLOUD Looking to the future, competitive carriers will continue to push the frontiers of technology. The McKinsey Global Institute identifies cloud technology among a dozen disruptive technologies, and competitive telecoms have been at the forefront, vigorously developing cloud services. XO won 2012 Product of the Year Awards for its Concentric Cloud Contact Center and its hosted PBX solutions. BT offers a first-of-its-kind cloud platform for bioscientists to access supercomputers for pharmaceutical research and advanced scientific collaboration tools. Carriers like BT and tw telecom have also developed network management services that can optimize the performance of critical applications in real time, allowing for more efficient on-demand capabilities. Software Defined Networking (SDN) is just starting to gain traction in the telecom market, and competitive carriers like tw telecom and Level 3 are active members of the Open Networking Foundation which is dedicated to developing the standards for this new paradigm of networking management. The flexible and nimble technology cultures at competitive carriers allow them to aggregate a wide variety of communication technologies so that their customers don t need to be worried about the underlying infrastructure allowing an ever growing number of tech companies to focus on building more and more products on the bleeding edge of technology.

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