Trends. A report on rural telecom technology

Trends A report on rural telecom technology Published July 2013

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INTRODUCTION This is a 2013 status report of the 1,072 members in NECA s Traffic Sensitive pool in 47 states, American Samoa and Guam. As this and past editions of Trends show, members have a proven record of steady progress in deploying new technologies capable of delivering both traditional voice and advanced services to their rural customers. They provide a variety of broadband-based solutions to help keep local businesses, educational institutions, and other customers connected: A company located in southern Idaho is actively extending fiber to digital loop carrier systems; cell towers; anchor institutions including schools, hospitals, and government offices; and other customers in its service area. A North Dakota member began offering customers free and reduced-price computers when they signed a two-year broadband contract. Over three years, it has sold more than 650 laptops and has increased broadband adoption substantially within its community. A Kansas member has deployed WiFi hotspots for customers at local parks, recreational centers, downtown offices and even football fields. The WiFi in these hotspots is free for all customers but limited to the bandwidth they pay for at home. For non-customers, a small, daily fee is charged. An Alabama member has built a digital literacy computer lab in its office. The lab is used to conduct classes for customers on how to log in to the Internet, use various social media websites and learn the basics of desktop applications. An Iowa member offers its customers an assortment of workshops, all of which reflect different uses of the company's services and products, such as high-speed Internet, computer networking and digital television. These companies, and many others in the TS pool, are working hard to increase broadband deployments and adoption, in spite of uncertainty over USF support due to recent FCC orders. For this report, we collected 2012 data from a variety of sources, including our interstate access tariff participants, our wire center tariff and settlement systems data, as well as periodic data requests targeting specific information. We update and maintain data submitted by members on an annual basis to track the progress of network technology deployment of TS pool members in rural America. NECA Trends A report on rural telecom technology 1

CHARACTERISTICS OF RURAL COMPANIES Each year local telephone companies under rate-of-return regulation can elect to participate in the NECA TS pool or file their own interstate access tariffs. As of January 2013, there were approximately 3.6 million lines in the TS pool. TS pool members continue to serve a small percentage of total U.S. access lines (3.9 percent), but their service territories cover nearly 40 percent of total U.S. land mass, or close to 1.4 million square miles (see Figure 1). Figure 1 Traffic Sensitive Pool Member Territories (in blue) 1Q 2013 (Map not to scale) Company serving area by square miles TS pool members serve small populations over large geographic areas (see Figure 2). Figure 2 Company Serving Area by Square Miles NECA Trends A report on rural telecom technology 2

Customer density per square mile Most TS pool member service areas do not enjoy the economies of scale afforded their large, non-rural counterparts who operate in urban areas and serve many thousands of access lines per square mile (see Figure 3). Figure 3 Customer Density per Square Mile Companies by line size Rural rate-of-return company customer bases are extremely small, averaging only 3,403 access lines per company (see Figure 4). Figure 4 Companies by Line Size Declining voice access lines The TS pool saw a 4.3 percent decline in voice access lines over last year. 1 This downward trend is part of an increasing industry-wide decline in voice access lines. Contributing to the decline are competition from cable operators offering Voice over Internet Protocol and customers substituting mobile service for land lines. 2 Customers increasingly are seeking a broadband-only service offering at a reasonable price. 3 1 Comparison of NECA Traffic Sensitive pool data for 2011 and 2012. 2 FCC Industry Analysis and Technology Division, WCB, Local Telephone Competition: Status as of December 31, 2011 (rel. Jan. 2013). 3 Current FCC Universal Service Funding does not provide high-cost support for broadband-only services provided by rate-of-return carriers. Wireline Competition Bureau Seeks Comment on Options to Promote Rural Broadband in Rate-of-Return Areas, Public Notice, DA 13-1112 (rel. May 16, 2013). NECA Trends A report on rural telecom technology 3

RURAL TECHNOLOGY PROGRESS As the above statistics show, pool members serve small customer bases spread over vast geographical areas, requiring more resources per customer than their larger counterparts. Rural telephone companies are meeting customers needs, but regulatory uncertainty presents a challenge in continuing to improve and modernize their local communications networks to transport many services, including voice, Internet access and video content. There are many issues unique to serving rural markets. Many members have found offering advanced services is not just a question of local broadband network availability, but also bandwidth capacity. The high cost of last mile, second mile and middle mile backbone connections over great distances is an obstacle to serving low-density rural markets. 4 Another concern is the more difficult issue of meeting customer expectations for access to content-rich high-speed Internet and entertainment sources, such as Internet Protocol television, at affordable prices. Gaining access to and paying a premium for video content are issues given the low density of subscribers in rural markets. 5 Broadband adoption As a result of these and other issues, broadband adoption is lagging behind deployment rates. 6 A recent Pew Research Report cited the cost of subscribing to broadband service as a reason for non-adoption. 7 The 2012 Pew report shows broadband adoption at the national average of 78 percent. An NTIA report on the differences in household broadband adoption shows a significantly smaller portion of rural Americans subscribe to broadband only 57 percent. 8 However, the overall average broadband adoption rate for TS pool members customers is higher at 67 percent. 9 The distribution of retail broadband subscribers in the TS pool categorized by service tier (downstream speed) is shown in Figure 5. 10 Figure 5 Distribution of Rural Broadband Subscribers by Downstream Speed 4 See e.g., National Exchange Carrier Association, Inc., Middle Mile Broadband Cost Study (2001), executive summary available at https://www.neca.org/publicinterior.aspx?id=107. 5 See e.g., National Exchange Carrier Association, Inc., The Packet Train Needs to Stop at Every Door (2006), executive summary available at www.neca.org/workarea/downloadasset.aspx?id=182. 6 Adoption refers to the number of inhabitants/households that subscribe to broadband service. Some reports refer to adoption as the take rate. Deployment refers to the number of households to which broadband infrastructure and service have been made available. 7 Pew Research Center s Internet & American Life Project (rel. Apr. 13, 2012) http://pewinternet.org/reports/2012/digital-differences.aspx. 8 NTIA, Differences in Broadband Adoption (rel. Nov. 2011). 9 Percentage is calculated by dividing the number of broadband lines by the number of residential and single line business lines. 10 Broadband service includes DSL, FTTx, fixed wireless, and cable modem. NECA Trends A report on rural telecom technology 4

Virtually half (49.9 percent) of the broadband customers subscribe to services with speeds below 4 Mbps. The other half (50.1 percent) of the broadband customers subscribe to broadband services with speeds of 4 Mbps or greater. While broadband speeds in rural areas have increased in recent years, they still lag behind speeds in the urban and suburban markets. Broadband continues growing NECA member companies deploy broadband in a variety of ways, including various Digital Subscriber Line technologies, Fiber to the Premises and other broadband technologies including fixed wireless, cable modem and satellite. Figure 6 below shows the overall broadband line totals, with 2.1 million broadband lines for 2012: 1.6 million DSL, 406,000 FTTP, and 107,000 served by other broadband technologies. Figure 6 TS Pool Broadband Line Growth Digital subscriber line Asymmetric Digital Subscriber Line and Very High Speed DSL make use of existing copper phone lines and transmit voice, data, and (where sufficient bandwidth is available) video traffic at high speeds. 11 This has the potential to transform the rural public voice network into a broadband network capable of handling virtually all modes of telecommunications. NECA s tariff offers many varieties of DSL to adapt to the diverse needs of rural telephone company customers. From the basic voice-data ADSL to the high-speed service providing transport for multimedia content such as games and videos, TS pool members are embracing this technology, deploying close to 1.6 million DSL lines to their customers. Virtually all TS pool members offer DSL services (see data chart at the end of this report). 12 Table 1 TS Pool Members DSL Deployment DSL Deployment 2012 2011 % change No. of members deploying DSL 1040 1025 1% DSL* loops deployed 1.59M 1.58M <1% * ADSL, VDSL and others 11 International Telecommunication Union standards: ADSL up to 8 Mbps (ITU-T G.992.1), ADSL2 up to 12 Mbps (ITU-T G.992.3), and ADSL2+ up to 24 Mbps downstream (ITU-T G.992.5). 12 The 1,040 TS pool members that offer DSL services include companies who do not participate in NECA s F.C.C. Tariff No. 5 for DSL services and offer DSL on a de-tariffed common carriage basis. NECA Trends A report on rural telecom technology 5

Fiber to the Premises / Home In addition to DSL, TS pool members are deploying fiber technology in their networks (see Table 2). This technology enables high speed broadband transmission over a fiber optic link between an optical terminal and the end user or a node close to the end user. Fiber loops facilitate two-way transmission with bandwidths up to 1 Gbps or even higher to each end user. Some companies view deploying fiber loops as a way to increase broadband adoption and to future proof their access networks, since they know future bandwidth requirements will increase as new services are introduced. A report by the Association of Communications Engineers showed fiber loops can also go greater distances at a lower overall cost than copper loops. 13 A key characteristic of fiber systems once deployed is the ability to easily scale bandwidth with little to no outside plant construction or extensive engineering, resulting in overall lower long-term cost to deliver data speeds ranging from 1 Mbps to 1 Gbps or greater at distances of at least 12 miles. Fiber also has the added benefit over time of lowering ongoing maintenance costs for outside plant loop distribution systems. As a result, deployment of fiber cable is generally an attractive low-cost alternative when rural carriers face the need to deploy new cable or upgrade aged copper cable loop systems to meet current and future customer demand for advanced services. 14 Table 2 TS Pool Members Fiber Loop Deployment Fiber Deployment 2012 2011 % change No. of members deploying fiber loops 520 495 5% FTTP/FTTH* loops deployed 405,634 362,500 9% * FTTP = fiber to the premises; FTTH = fiber to the home In 2012, the FTTH Council reported over 9 million FTTH households connected in the U.S. 15 About two thirds of FTTH deployments are provided by the largest telecommunications companies and the remainder by other companies, including RLECs, competitive local exchange carriers and other providers. Other broadband technologies Additionally, NECA member companies deploy a variety of other broadband technologies, including fixed licensed and unlicensed wireless broadband technologies, WiFi or WiMax, Hybrid Fiber-Coax, cable modem and satellite. Table 3 TS Pool Members Deploying Other Broadband Technologies Other Technology Deployment 2012 2011 % change No. of members deploying other broadband technologies 145 136 6% Other broadband* loops deployed 107,219 93,000 9% * Fixed Wireless, Cable Modem and Satellite 13 See Joint Comments by NECA, et al., WC Docket No. 10-90 (filed July 12, 2010), App. B, Association of Communications Engineers, Good Engineering Practices Relative to Broadband Deployment in Rural Areas (ACE Report). 14 Id. at 8. 15 FTTH Council, FTTH Growth Stays on Track as Connections Rise to 9 million North American Households, at http://www.ftthcouncil.org/p/bl/et/blogid=3&blogaid=6 RVA LLC Market Research and Consulting (Sept. 2012). NECA Trends A report on rural telecom technology 6

ATM deployments Asynchronous Transfer Mode is a high-performance packet switching and multiplexing technology integrating voice, data and video services. ATM technology is widely deployed in both public and private networks and has been the leading technology for integrating DSL services within the local exchange. ATM is an important advanced services technology deployed for DSL traffic aggregation by over one half of TS pool members (see Figure 7). After rising steadily, ATM deployment has leveled off in favor of Ethernet solutions. Figure 7 TS Pool Members Deploying ATM 1999 2012 IP and Ethernet deployments Ethernet is a widely deployed, low-cost packet technology that can be used to transport voice, data and video services. This technology is growing in importance as wireless carriers request an easy-to-scale low-cost wireline broadband transport to connect cell towers in rural markets to their network voice and data switches. As of 2012, 80 percent of pool members have deployed Ethernet technology in their networks (see Figure 8). Figure 8 TS Pool Members Deploying Ethernet 2003 2012 NECA s Ethernet Transport Service allows members to offer customers high speed (10 Mbps to 1 Gbps) broadband access service. Between 2007 and 2012, the percentage of TS pool members offering Ethernet transmission services rose from 18 percent to 49 percent. NECA Trends A report on rural telecom technology 7

Switching technologies Two thirds of the companies in the TS pool use remote voice switches with connections to larger network concentration points such as host switches (see Figure 9). Remote switches are a cost-efficient method of serving geographically dispersed subscribers. TS pool members have 5,490 switching systems to handle voice communications in support of their business and residential customers, an average of 665 lines per switch. The average company has five switches. These averages have varied little in the past 20 years. Figure 9 Switching Systems in Rural Areas Rural telephone companies are upgrading voice switching systems, replacing them with lower-cost softswitch technology (IP enabled switches). These switches can also be used to provide integrated voice and broadband services to customers over a common network. Five hundred fifty two (51 percent) TS pool members have deployed softswitches; while 58 have plans to add a softswitch in 2013 (see Figure 10). Figure 10 IP Enabled Switch (Softswitch) Deployment by TS Pool Members Most softswitches support Ethernet and IP interfaces plus legacy TDM interfaces, making the technology ideal for the migration of rural networks from circuit to packet switching. Softswitch vendors have options for RLECs to consider, from completely replacing their switched network with packet devices to using a more seamless migration approach allowing selective replacement of legacy switches. The latter involves configuring the local network to support the packet network interfaces, while maintaining the integrity of existing switch network devices over a common IP-enabled network platform. Migration from the TDM switch environment to packet switching requires an initial replacement of core devices such as the central processor and switch fabric of the voice network switch, while leaving all the line units and other peripherals in place. Over time, as subscribers are transferred from traditional voice NECA Trends A report on rural telecom technology 8

circuit switch peripherals to the new softswitch, those peripherals may be retired. In most cases, the transition is transparent to the end user. For all TS pool members to make the TDM-to-all-IP conversion will take time. Companies with fiber loops and a softswitch are likely closer to being all-ip ready. During the TDM-to-all-IP conversion, companies will need to ensure continuing service to customers with a variety of CPE devices, and it is highly likely companies will need to maintain both TDM and IP networks. Other issues include ensuring call quality and voice features for customers who continue to rely on POTS, ISDN, Centrex, and home monitoring services. Companies also need to provide mandated call features such as CPNI, LNP, CALEA, dialing parity and E-911, as well as meet new network requirements to integrate broadband, wireless, and wireline network transport over a common IP-enabled network platform. Middle mile facilities Middle mile refers to the transmission facility between the ISP affiliate and an Internet backbone provider. Middle mile data collected from TS Pool members indicates the bulk of middle mile capacity (98.5 percent) is Ethernet and SONET over fiber. Figure 11 shows the percentage of middle mile bandwidth (Mbps) by facility technology. This is based on a sample of 761 facilities. Figure 11 Middle Mile Facilities Percentages Based on Facility Capacity by Technology Using the same sample, Figure 12 shows the percentages of middle mile facilities based on the quantities of each facility technology. Figure 12 Middle Mile Facilities Percentages Based on Quantity of Facility Technology NECA Trends A report on rural telecom technology 9

Figure 13 shows the percentages of middle mile facilities based on the quantities of facility technology, grouped by the number of broadband lines served by a company. Small companies are less able to take advantage of the lower-cost SONET or Ethernet Middle Mile. Figure 13 Middle Mile Facilities Percentages Based on Quantity of Facility Technology, Grouped by Company Size Bandwidth requirements are increasing Industry sources project a long-term need for higher speeds per subscriber in the U.S. to accommodate new services. For example, the number one goal of the FCC s National Broadband Plan is for at least 100 million U.S. homes to have affordable access to actual download speeds of at least 100 Mbps. 16 Also, the FCC, in its OBI Technical Paper No.1, said bandwidth projections are found to be doubling every three to four years. 17 The ACE Report projections indicate doubling of bandwidth every three years. 18 As customers bandwidth needs increase, additional middle mile capacity is required. In fact, middle mile bandwidth capacity needs have doubled from 2011 to 2012. Wireless access technologies TS pool member companies are using fixed wireless-based services to provide broadband services to complement their wireline network. A number of companies have implemented new licensed and unlicensed wireless technology to replace outdated legacy fixed Basic Exchange Telephone Radio Services and Rural Radio Services, which traditionally have been used to provide local exchange service in inaccessible areas. Recent data from TS pool members demonstrates their affiliates use of wireless capabilities and deployment of broadband wireless services to supplement fixed landline facilities, i.e., DSL and fiber. Table 4 summarizes rural wireless access availability. 16 The Federal Communications Commission, Connecting America: the National Broadband Plan (rel. Mar. 16, 2010). 17 Broadband Assessment Model, Model Documentation, FCC (rel. Mar. 2010) (BAM); The Broadband Availability Gap, OBI Technical Paper No. 1 (rel. Apr. 2010). 18 ACE Report at 3. NECA Trends A report on rural telecom technology 10

Table 4 Rural Wireless Access Rural Wireless Access No. of companies Wireless broadband in own study areas 111 Wireless broadband outside own study areas 319 WiMAX and LTE 30 Unlicensed wireless (e.g, WiFi) 259 Mobile services (e.g, cellular) 332 Affiliated operations: wireless, video, and data In addition to traditional regulated operations, TS pool members often use affiliates to provide nonregulated information, entertainment and mobile radio services to their end user customers. The same low density market issues that affect telephone operations make most rural markets unattractive to larger information and entertainment service providers. Wireless expansion in rural networks Since 2010, FCC Spectrum Auctions have been limited and there have been few opportunities for broadband deployments and minimal NECA member participation. 19 Three NECA pool members participated in the FCC Wireless Auction of Broadband Radio Service Spectrum (Auction 86) in 2009. 20 Two members provisionally won four licenses. Previously, more than 500 companies, through affiliates, consortiums and partnerships, bid for spectrum in FCC Auctions 73 and 78 in 2008. Technology and standards are now completed or at the stage where members are expanding the use of LTE and WiMAX technologies using these spectra. See Table 5 for wireless expansion in rural networks. Wireless expansion in rural networks Table 5 Rural Wireless Activity Pool member affiliates participating in recent FCC spectrum auctions No. of companies No. of licenses awarded NECA pool members 2008 & 2009 394 504 Affiliates offering Direct Broadcast Satellite video services and Internet Access service 170 Video technologies TS pool members and affiliates are offering a variety of services over the broadband network to stimulate demand for broadband services and increase adoption. Video on demand, over-the-top video services, gaming, home networking and security are examples of current trials and services. Companies are also increasing network capacities and broadband speeds offered to customers to support OTT video. Three hundred companies report IPTV deployment; 43 more companies plan to deploy IPTV in 2013. Companies and affiliates offering DSL with a video component or option have a DSL adoption rate 25 percent higher than companies offering DSL without access to any video services. 19 See http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=901 for 2012 Mobility Fund Auction; http://wireless.fcc.gov/auctions/default.htm?job=auctions_home for information on 2010 Auctions. 20 See http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=86 for information on Auction 86. NECA Trends A report on rural telecom technology 11

Internet Service Provider services Internet access services are provided by 756 affiliate companies within their own serving areas. Two hundred seventy of these ISPs also provide ISP services in other serving areas. Rural call quality and completion issues Call quality and completion issues in rural markets continue to be persistent industry problems. To help identify the scope and causes of these problems, test calling studies 21 were conducted, which indicated a relatively high call failure rate of 16 percent. Further testing initiated using testing telephone numbers provided by telephone companies located in rural and non-rural markets also indicated failure rates for calls to rural test lines were 13 times higher than calls to non-rural test lines. TS pool members deploy next generation networks You ve read in the preceding pages how NECA s TS pool members are deploying next-generation IP networks and providing a full range of voice and broadband services to meet their customers needs. These companies are also anticipating their customers future needs, designing the next generation network and planning for the additional bandwidth needed to provide advanced services. Members continue to deploy IP applications as part of their next generation network. Several vendors offer a hosted VoIP application to allow rural telephone companies to start small. IP networks work best in a bursty mode, which gives file transfers and e-mail a higher probability of being successful. They do not work as well with continuous real-time data streams, such as voice and video. Because of this, quality of service and packet traffic engineering are becoming increasingly important as the core network transitions from SONET, ATM, and TDM to Ethernet. TS pool members continue to play a key role in providing wireline backhaul for wireless (mobile) carriers. Wireless carriers depend on the rural wireline network to provide state of the art high speed data and packet networks to interconnect cell sites to mobile switching centers. 21 The Rural Associations conducted Test Call Projects in August 2011 and April 2012. See Letter from Jill Canfield, NTCA, to Marlene H. Dortch, FCC, WC Docket No. 07-135 (filed Oct. 7, 2011); Letter from Colin Sandy, NECA, to Marlene H. Dortch, FCC, WC Docket No. 07-135 (filed May 21, 2012). NECA Trends A report on rural telecom technology 12

CONCLUSION This report shows that TS pool members continue to make progress evolving their joint use networks to provide the services their customers want today, and also to meet the communication needs of tomorrow over a common IP-enabled broadband network platform. In doing so, rural carriers face significant challenges serving customers in high-cost, low-density markets, as well as uncertainty over USF support due to recent FCC orders. Rural carriers also face significant issues with the high cost of last mile, second mile and middle mile transport, critical components of broadband Internet connectivity, as well as video content. Finally, bandwidth and network enhancements must be capable of supporting the required applications of the future for video, home management including medical needs, security, smart grid, education and all of the many new services customers will require. NECA Trends A report on rural telecom technology 13

GLOSSARY Asymmetric Digital Subscriber Line (ADSL) An access technology that allows voice and high speed data to be sent simultaneously over local exchange facilities. The capability is asymmetric because the downstream data speed (to the end user customer) is higher than the upstream speed. Asynchronous Transfer Mode (ATM) A packet communications technology that allows high-speed transmission of voice, video, and data over one common network infrastructure. ATM processes information in fixed length data cells (packets), minimizing transmission delays. ATM customers are typically information service providers who need large, high-speed packet data delivery capabilities. Broadband Radio Service (BRS) A commercial flexible-use service that accommodates a variety of fixed, portable, and mobile services, including high-speed broadband services (including Internet access), video programming, and cellularized communications services. Basic Exchange Telephone Radio System (BETRS) A fixed radio service where a multiplexed, digital radio link is used as the last segment of the local loop to provide wireless telephone service to subscribers in remote areas. BETRS technology was developed in the mid 1980s and allows up to four subscribers to use a single radio channel pair simultaneously, without interfering with one another. Broadband Loop Carrier (BLC) The latest generation of digital loop carrier systems, which combine all the functionality of a DLC, a DSLAM, and a media gateway on a single platform. BLC systems support all the features and services supported by DLC and DSLAM systems and also add capabilities to provide fiber to the premises services, Ethernet services and Ethernet routing. Communications Assistance for Law Enforcement Act (CALEA) Outlines telecommunications carriers duty to cooperate in monitoring communications for law enforcement purposes (e.g., wire-tapping). CALEA obligations apply to any person or entity that provides a service that replaces a substantial portion of local telephone exchange service, including providers of facilities-based broadband Internet access and interconnected Voice over Internet Protocol service. 22 Competitive Local Exchange Carrier (CLEC) A local exchange carrier that provides some or all of the interstate exchange access services used to send traffic to or from an end user and does not fall within the definition of Incumbent Local Exchange Carrier. Digital Loop Carrier (DLC) A system that uses digital technology to develop multiple communication channels that are equivalent to those provided over copper pairs. Current generation systems typically use fiber transmission facilities between the serving wire center and the remote digital terminal located in the loop. Digital Subscriber Line (DSL) A technology that brings high-bandwidth information services to the home or small business over regular copper lines. DSL technology enables a loop to simultaneously carry voice, which takes little bandwidth, and high speed data. Digital Subscriber Line Access Multiplexer (DSLAM) A packet multiplexer used for a variety of DSL technologies. It serves to multiplex data packets from many DSL subscribers and transmit them over one or more high speed circuits. Ethernet A local area network technology that connects computers, printers, servers, etc., in a physical location. Carrier Ethernet equipment provides reliable Ethernet connectivity beyond the LAN through the telecommunications network. Ethernet uses twisted pair (copper), fiber optic, and coaxial cable and may also use wireless connectivity or transport. 22 47 C.F.R. 64.2200-2203; and Pub. L. No.103-414,108 stat.4279 (1994); and FCC Report No. ET 98-8. NECA Trends A report on rural telecom technology 14

Fiber to the Home (FTTH) A technology which uses a high speed fiber connection to the home or business for transport of voice, data, and video services. Variations include Fiber to the Building, Fiber to the Curb, Fiber to the Node, and Fiber to the Premises. The primary difference between the systems depends on the location of the remote optical network unit. Internet Protocol (IP) The method by which packet data is sent from one computer to another. Every server, router, and switch in an IP network is uniquely identified by at least one IP address. Internet Protocol Television (IPTV) A system for delivering digital television service to subscribers via a broadband connection using the Internet Protocol suite. IPTV often includes Video on Demand and Personal Video Recording services. It also may be combined with Internet access and voice services, and is often called Triple Play. Triple Play is typically provided by a broadband operator using a single converged infrastructure. Local Area Network (LAN) A computer network covering a limited geographic area, typically a single building. Most LANs are based on switched Ethernet technology running at 10, 100, or 1,000 Mbps (1 Gbps). A local area network may serve as few as two or three users (in a small business or home network) or thousands of users. Local Number Portability (LNP) The ability to transfer an existing fixed-line telephone number assigned by a local exchange carrier and reassign it to another carrier. In most cases, there are limitations to transferability with regards to geography, service area coverage and technology. Long Term Evolution (LTE) The latest standard in the mobile network technology tree that produced the GSM/EDGE and UMTS/HSxPA network technologies. The LTE specification provides downlink peak rates of at least 100 Mbps, an uplink of at least 50 Mbps and RAN round-trip times of less than 10 ms. LTE supports scalable carrier bandwidths, from 1.4 MHz to 20 MHz and supports both frequency division duplexing and time division duplexing. Plain Old Telephone Service (POTS) The voice-grade telephone service that remains the basic form of residential and small business service connection to the telephone network in most parts of the world. Softswitch A generic name for a next generation network infrastructure based on packet switching. Softswitch technology solutions enable all types of packet protocols (VoIP, data or video) to be served on a single software-controlled packet switching platform. Softswitch technology separates the call control functions of a telephone, data or video call from the transport function that carries the call. The call control functions will generally include call routing, admission control, connection control and signaling internetworking (e.g., converting SS7 signaling to SIP packet protocol). The softswitch functions can be in discrete network devices or integrated into a single network device. While the softswitch was initially developed to replace the legacy voice switch, the softswitch now also includes packet data routing functionality and can serve as the core of a broadband network. Synchronous Optical Network (SONET) An industry standard technology capable of transmitting multiple digital signals of varying capacities on fiber optic facilities. Ideally, SONET facilities are configured in a physical ring for redundancy and recovery purposes. Time-Division Multiplexing (TDM) A technique for transmitting multiple digitally encoded data, voice, and/or video signals simultaneously over a single communications medium by interleaving a portion of each signal one after another in specific time slots. Traffic Sensitive (TS) Pool The pool that NECA administers for the portion of the network where costs vary according to usage. Pool members apply the TS tariff rate elements: Traffic Sensitive Switched and Traffic Sensitive Special Access, including DSL and other broadband services. Very high speed Digital Subscriber Line (VDSL) a faster generation of ADSL, with downstream speeds up to 100 Mbps. Copper loops must be 1,600 feet or less to achieve speeds of 100 Mbps. NECA Trends A report on rural telecom technology 15

Voice over Internet Protocol (VoIP) A technology that allows users to make telephone calls using a broadband Internet connection instead of a regular (or analog) phone line. Wireless Fidelity (WiFi) A Wireless Local Area Network specified by the Institute of Electronic and Electrical Engineers as 802.11b. Worldwide Interoperability for Microwave Access (WiMAX) WiMAX is a standards-based (IEEE 802.16) technology which may be used in the delivery of last mile wireless broadband, as an alternative to cable and DSL. NECA Trends A report on rural telecom technology 16

TS POOL MEMBER COMPANIES 2012 VIEW BROADBAND CAPABILITIES NETWORK TECHNOLOGIES Jurisdiction Companies Switches Access Lines Provide DSL Service DSL Access Lines Provide FTTP service FTTP Access Lines Provide Other Broadband Technologies Other Broadband Access Lines Provide ATM Service Deploy ATM in Network Provide Ethernet Service** Deploy Ethernet in the Network Provide SONET Service** Alabama 20 76 85,011 96% 35,632 45% 5,052 20% 314 14% 20% 67% 100% 0% 75% Alaska 19 89 94,108 74% 34,450 21% 1,016 32% 609 16% 37% 58% 79% 32% 47% American Samoa 1 4 9,074 * * * * * * * * * * * * Arizona 12 40 32,766 100% 9,508 67% 1,886 42% 47 25% 75% 75% 83% 42% 92% Arkansas 19 114 63,470 89% 30,214 42% 3,550 0% 0 11% 63% 58% 79% 32% 89% California 13 19 59,976 100% 32,575 38% 949 15% 194 31% 92% 85% 77% 15% 92% Colorado 24 34 29,568 79% 11,972 46% 3,823 17% 247 13% 75% 50% 83% 4% 54% Florida 6 12 53,029 100% 24,310 50% 892 0% 0 17% 83% 67% 100% 17% 100% Georgia 24 60 134,435 100% 51,292 71% 24,234 13% 5,979 7% 75% 59% 83% 0% 79% Guam 1 3 43,348 * * * * * * * * * * * * Hawaii 1 11 1,989 * * * * * * * * * * * * Idaho 14 51 29,920 100% 16,058 71% 807 29% 1,859 29% 71% 71% 100% 57% 86% Illinois 37 107 48,838 97% 24,621 38% 3,410 14% 2,612 13% 27% 26% 62% 0% 51% Indiana 32 74 83,422 100% 40,296 53% 11,522 6% 191 27% 63% 42% 72% 0% 75% Iowa 143 300 166,255 92% 70,578 37% 34,351 12% 5,912 1% 36% 31% 71% 1% 54% Kansas 32 81 86,851 88% 33,482 75% 26,605 16% 1,508 19% 56% 72% 94% 9% 78% Kentucky 12 151 106,294 100% 42,710 67% 14,300 8% 184 33% 75% 67% 75% 0% 92% Louisiana 9 57 29,993 89% 10,277 56% 12,551 11% 5,954 11% 56% 78% 89% 0% 67% Maine 16 107 62,343 100% 30,995 31% 675 0% 0 31% 81% 50% 75% 13% 100% Maryland 1 1 5,359 * * * * * * * * * * * * Massachusetts 2 2 2,547 * * * * * * * * * * * * Michigan 32 110 67,557 94% 33,749 34% 3,685 13% 4,965 16% 53% 50% 81% 3% 63% Minnesota 75 278 223,328 93% 107,947 48% 31,918 5% 5,847 15% 52% 31% 75% 11% 69% Mississippi 15 48 37,462 100% 16,796 40% 389 0% 0 38% 53% 19% 80% 0% 73% Missouri 34 133 90,674 94% 41,392 44% 7,864 21% 528 6% 68% 53% 85% 0% 65% Montana 14 183 84,037 100% 45,239 71% 6,892 50% 1,957 21% 86% 64% 93% 36% 100% Nebraska 36 194 78,482 86% 33,707 69% 8,804 8% 4,725 3% 64% 33% 89% 11% 67% Nevada 8 28 26,298 100% 9,087 50% 2,465 0% 0 38% 88% 50% 88% 25% 88% New Hampshire 9 32 37,955 100% 17,373 56% 1,244 0% 0 44% 78% 78% 100% 0% 100% New Jersey 1 2 4,702 * * * * * * * * * * * * New Mexico 12 70 32,616 100% 11,225 58% 1,924 25% 206 8% 58% 50% 92% 17% 75% New York 31 85 115,124 100% 52,203 32% 1,620 16% 5,365 19% 65% 48% 74% 0% 81% North Carolina 12 124 127,199 100% 57,477 58% 11,699 8% 2,289 67% 92% 83% 67% 33% 100% North Dakota 20 259 142,339 95% 48,311 57% 40,214 38% 887 29% 71% 76% 76% 19% 71% Ohio 33 25 51,420 97% 19,413 36% 5,317 3% 4,054 9% 58% 52% 67% 0% 67% Oklahoma 34 252 137,801 97% 68,292 44% 6,934 15% 3,169 21% 53% 41% 79% 9% 82% Oregon 27 59 58,821 93% 26,899 67% 8,948 7% 1,940 11% 78% 48% 81% 0% 63% Pennsylvania 19 735 48,947 100% 18,127 42% 7,014 11% 1,256 21% 58% 33% 68% 21% 79% South Carolina 9 122 67,022 89% 28,698 56% 10,030 11% 104 56% 100% 67% 78% 22% 100% South Dakota 29 180 110,224 97% 37,218 55% 21,458 24% 10,252 14% 66% 45% 72% 17% 86% Tennessee 16 560 183,002 100% 90,184 63% 5,213 0% 0 31% 50% 69% 94% 0% 94% Texas 41 300 187,976 98% 69,930 71% 28,255 34% 27,672 22% 66% 56% 100% 10% 90% Utah 11 68 61,895 91% 29,091 73% 5,965 27% 837 9% 45% 100% 91% 9% 73% Vermont 8 37 47,183 100% 24,928 38% 1,153 0% 0 75% 88% 50% 100% 25% 75% Virginia 15 63 68,172 100% 34,039 33% 2,653 0% 0 27% 60% 67% 53% 13% 53% Washington 19 53 62,295 89% 36,507 47% 895 5% 648 32% 47% 63% 74% 5% 47% West Virginia 6 6 14,901 100% 6,538 33% 706 17% 7 17% 33% 17% 83% 17% 67% Wisconsin 62 183 233,327 100% 100,393 61% 35,179 6% 881 23% 61% 45% 92% 3% 81% Wyoming 5 23 18,955 100% 8,734 80% 1,139 40% 20 40% 40% 100% 100% 40% 80% 1,072 5,490 3,648,310 96% 1,592,644 52% 405,634 15% 107,219 18% 58% 49% 80% 9% 72% * Individual data withheld to maintain company confidentiality. All data included in totals. ** TS pooling companies offering ATM, Ethernet and SONET services to their customers and are listed in NECA's FCC Wire Center Tariff # 4. *** Includes broadband technologies such as fixed wireless, licensed wireless, unlicensed wireless, WiFi or WiMAX, cable modem and satellite. NECA Trends A report on rural telecom technology 17 Deploy SONET in the Network

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