UTOPIA Feasibility Assessment

Eleven City Build

May 13, 2004

DEAN & COMPANY

STRATEGY CONSULTANTS

WASHINGTON, D.C.

Agenda

Overview Demand Benchmarks Cost Benchmarks Sensitivities & Scenarios

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DEAN & COMPANY

Summary
Dean & Company have evaluated the feasibility of UTOPIAs Eleven City Build with an emphasis on the Phase 1 plan. We have evaluated Phase 1 on a standalone basis. It is our understanding that the future phases will follow, based on Phase 1. While it represents a smaller footprint, the Phase 1 plan remains feasible, given the fundamentals:
Conservative and Expected take rates are within the achievable range given the experience of other broadband overbuilders and competitive service providers. Planned build out rates are conservative, particularly since the scope of construction is lower than the 18 city plan The Open Access, IP-based business model remains consistent with the evolution of competition and technology in the telephone, internet, and video services markets Wholesale price levels are sufficiently low for service providers to become profitable on UTOPIA, and are comparable to or more attractive than wholesale access over the incumbent telephone and cable networks. This holds even considering the price pressure on local and long distance telephone services placed by voice-over-IP services. Active/Ethernet technology choice is well-suited over the long term for UTOPIAs model, leverages a broad supplier base, and has minimal risk of obsolescence by other technologies, including wireless Projected capital and operating costs are within the range of comparable projects, and take into account the important costs drivers for FTTH/B networks (e.g. aerial vs. buried mix, replacement lifecycles). The Phase 1 plan is large enough that fixed costs (e.g. NOC) are lower on a per-subscriber basis than the costs that are driven by homes passed (terminal costs) and by subscriber density (distribution, maintenance) - i.e. Phase 1 is large enough to achieve required economies of scale in construction and operation.

DEAN & COMPANY

Summary - continued
The primary areas of risk relate to the competitive environment:
The competitive response from Comcast and Qwest may be escalated relative to the plan assumptions, potentially driving down market price levels, increasing churn, and/or putting pressure on recovery of installation fees. While the service providers on UTOPIAs network bear the initial impact of these pressures, they could ultimately flow through to UTOPIA in order to maintain service provider profit margins as an incentive to continue their marketing efforts. The smaller footprint means that UTOPIA is more dependent on the success of fewer retail service provider tenants in the first 2-3 years, vs.the larger build where the diversity of service providers could expand more quickly. On the positive side, the smaller footprint will facilitate tighter operational coordination in signing up and provisioning subscribers between UTOPIA and its initial retail service providers, one of the concerns in the larger build plan. The usage-tiered wholesale pricing model for data services is well-structured to capture the value of increasing data traffic over the long term. This traffic can be expected to grow dramatically with increased internet use and migration of voice and video service to internet protocols. However, customer acceptance of usage-based pricing is uncertain given historical experience and counter-marketing by incumbent service providers.

The Phase 1 plan has a high degree of robustness to these risks

Downside sensitivity analysis and scenarios show sufficient cash flow to meet the projected debt obligations across the full range of cases we examined. In cases that combine multiple downsides: take rates lower than the conservative view, price war lasting 3 years or more that flows through to UTOPIA, and construction and operating cost overruns of 10% and 20% respectively, additional funding of $1MM to $12MM would be required over the 3rd to 5th year of operation. Past that point, UTOPIA would generate positive cash surplus even in outcomes with combined downsides. While UTOPIA has no control over the competitive environment, UTOPIA is in a position to proactively manage project costs and retail tenant performance. Success in managing these two areas of risk would keep the potential for additional funding to a level under $1-2 MM.

DEAN & COMPANY

Agenda

Overview Demand Benchmarks Cost Benchmarks Sensitivities & Scenarios

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DEAN & COMPANY

Given the experiences of other municipalities and over-builders, UTOPIAs predicted take-rates over time are feasible
Take-Rates Over Time
One or More Services

Municipal Networks
80% 70% 60%
Provo

Overbuilder Networks
80% 70% 60% 50%
Utilicom SureWest Astound Altrio (business case) Everest Communications

Cedar Falls, IA

Harlan, IA

Spanish Forks

UTOPIA Plan Full Build Scottsboro, AL Newnan, GA Phase 1 Expected Phase 1 Conservative

UTOPIA Plan Full Build Phase 1 Expected Phase 1 Conservative RCN

50%

Knology

Take Rate 40% (Percent of 30% Homes Passed)

20% 10%
Bristol, VA

Ashland, OR Tacoma, WA Glasgow, KY

Take Rate 40% (Percent of 30% Homes Passed)

20% 10% 0%

0% 0 1 2 3 4 5 6 7 8

Years After Availability

Average Take Rates 16% 46% 36% 45% 41% 56% Average Take Rates 29% 42%

Years After Availability

43% 45%

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Expectations of selling service bundles are in line with other triple play networks
Overbuilder Customer Demand for Bundles
By Product Mix

100%
Any 1 18% Any 1 15% Any 1 20%

80%

1 to 2 services 37%

Percent of Subscribers 60% taking one, two, or three 40% services

Any 2 37%

Any 2 37%

Any 2 30%

A La Carte and 2 Product Bundles 50%

1 to 2 services 66%

20%

Triple Play 45%

Triple Play 48%

Triple Play 50%

2-3 Service Bundles 63%

3 Service Bundles 50%

Bundle 34%

0%
UTOPIA (2005) UTOPIA (2009) SureWest RCN Everest Harlan, IA

Source:Company statements, Dean & Company research

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The variation between the expected UTOPIA product mix and benchmarks are directionally consistent with differences in UTOPIAs market demographics and business model
Product Mix
2002 vs. UTOPIA Conservative Case Scenario
Voice
100% 90% 80% 70% 60%
Utopia 61% Utopia 92%

Video

Data

Utopia 77%

Percent of Customers

50% 40% 30% 20% 10%

RCN Astound Everest Knology Utilicom Ashland, OR Cedar Falls, IA Glasgow, KY Harlan, IA Newnan, GA Scottsboro, AL Tacoma, WA Utopia likely to come under benchmarks given their focus on video

RCN Astound Everest Knology Utilicom

Utopia likely to exceed benchmark average given their lesser focus on voice
Note:

Take rates decline over time. Ashland, OR; Glasgow, KY, and Tacoma, WA assume 12% of Internet customers do not have cable TV. Harlan, IA assumes 1% of Voice customers do not have cable TV.

RCN Astound Everest Knology Utilicom Ashland, OR Cedar Falls, IA Glasgow, KY Harlan, IA Newnan, GA Scottsboro, AL Tacoma, WA Utopia likely to exceed benchmarks given higher regional demand for internet

0%

Harlan, IA Newnan, GA

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UTOPIA has attractive residential market environment

Residential Service Intensity Comparisons

UTOPIA vs. the National Average Internet Penetration
% of HH
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
100%

Video Services Penetration

% of HH

U.S. Census % for all Utah 74%

90% 80% 70% 60% 50%

84%
15%

64%

54%

31%

Satellite

59% Dial-Up 43%

40% 30% 20%

69%

33% 10% 5%
UTOPIA Region

Cable

DSL Cable Modem

4% 7%
U.S. Average

10% 0% UTOPIA region U.S. Average

Internet services are the cornerstone for FTTH success

Source: UTOPIA Survey; U.S. Department of Commerce (2002) , MediaWeek
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Typical of older TCI cable systems implies upside for higher quality network

DEAN & COMPANY

UTOPIAs wholesale service charges are in a range where service providers have sufficient margin to be profitable
UTOPIA Revenue per Subscriber Benchmarks
Voice, Video, and Data Triple Play Example

$120
$98 $91

$100

$80

$/Month /HH

$60

Service Provider Gross Margin opportunity significantly greater than the 40% baseline needed for an attractive service provider business case

$40

$20

$40

$41

$0

National Average

UTOPIA Spend

Conservative Case ARPU (2005)1

Conservative Case ARPU (2008)

Average Retail Consumer Spend

UTOPIAs Wholesale ARPUs

Includes Access Charge

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DEAN & COMPANY

To evaluate service providers business cases, we assumed bundled offers similar to other triple play providers
Price Comparisons
Triple Play Packages
Modeled prices for UTOPIA Service Providers
$180 $160 $140 $120

Everest

RCN

SureWest

Price per Month

$100 $80 $60 $40 $20 $0

Basic
Price Price Local LocalPhone Phone Features Features LD LD--Free FreeMinutes Minutes Basic BasicCable CableChannels Channels Digital DigitalCable CableChannels Channels Internet Internet 100 100 1M 1M $82.05 $82.05 1 1line line 3 3

Mid
$119.45 $119.45 1 1line line 3 3 100 100 150 150 10 10M/Sec, M/Sec, 10G/Mo. 10G/Mo.

Premium
$153.48 $153.48 2 2lines lines 6 6 150 150 150 150 10 10M/Sec, M/Sec, 20G/Mo. 20G/Mo.

Full Circuit
$84.95 $84.95 1 1line line 0 0

Super Charged
$109.95 $109.95 1 1line line 6 6

Totally Wired
$139.95 $139.95 1 1line line 11 11

Totally Wired Plus

$149.95 $149.95 1 1line line 11 11 120 120 70+ 70+ 40+ 40+ 3M 3M

Resilink Gold
$135.00 $135.00 1 1line line 3 3

Resilink Platinum
$159.00 $159.00 2 2lines lines 4 4

Local
$109.95 $109.95 1 1line line 4 4including including voicemail voicemail 0 0 150 150 10M 10M

California
$119.95 $119.95 1 1line line 4 4including including voicemail voicemail 0 0 180 180 10M 10M

National
$142.90 $142.90 1 1line line 4 4including including voicemail voicemail Unlimited Unlimited 230 230+ + 10M 10M

70+ 70+ 40+ 40+ 256K 256K

70+ 70+ 40+ 40+ 1.5M 1.5M

70+ 70+ 40+ 40+ 3M 3M

81, 81,1 1box box 35 35 3M 3M

81, 81,2 2boxes boxes 35 35 3M 3M

Source: UTOPIA Model,company websites and representatives

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The first phase plan is large enough to support two to three service providers

Service Provider Business Case

Combination of Residential and Business Customers

$40

Conservative Case: 28,752 Connected Homes

Expected Case: 29,259 Connected Homes

Additional Subscribers Voice and Internet Triple Play

Phase 2: Phase 3: 51,167 82,587

$30

Service $20 Provider NPV ($MM) $10

Voice Only (Local + LD, Circuit switched) Internet Only

$0

Video Only (renting UTOPIA head-end)

($10) 0 10,000 20,000 30,000 40,000 50,000

Service Provider Customers (after ramp)

Note:

Based on proposed UTOPIA service charges as of April 2004 plan, assumes that service provider offer 20% discount to standard retail price
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VoIP offers will continue to provide service providers with sufficient margin for profitability
VoIP Pricing
Residential Calling Plans
$45 $40 $35 $30
$29.99 $24.99 $19.99 $19.95 $14.99 $34.99 $39.99

Monthly Charges

$25 $20 $15 $10 $5 $0

$12.25
$1.25

Access Charge Line Charge

$11.00

Regional Plan

National Plan

National Plan Packet 8 Unlimited Unlimited

Local

Regional1 Plan Vonage

National Plan

AT&T CallVantage2

UTOPIA Wholesale Pricing

Voice Glo Local Minutes LD Minutes LD Rate

1 2

Unlimited 0 3.9/minute

Unlimited Unlimited

Unlimited 500 3.9

Unlimited 500 3.9

Unlimited Unlimited Unlimited

Unlimited Unlimited

Includes a larger local area 6 months into offer at $19.99/month

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Households in the highest spending quintile spend 2x more on telecom services than those in the fifth quintile, with data and voice spending driving the majority of variation. This allows UTOPIA service providers to target heavy-spending customers offering high margins.
Relative Bill Size by Quintile UTOPIA Region
For Those Who Buy Service
$160

$146.31
$140
$33.22

$120 $100

$113.68
$24.77

Monthly Spending per Household

$88.16
$80 $60 $40
$52.89 $60.20 $47.66 $37.26 $32.66 $28.43 $17.95

Average = $98.49

$76.26
$16.82

$68.03
$12.35

Internet Phone

$20 $0 Quintile:
Percentage of People Who Take Service Internet Phone Cable

$41.25

$32.95

$26.78

$27.25

Cable

1
94% 100% 67%

2
76% 99% 76%

3
77% 98% 71%

4
61% 97% 49%

5
40% 74% 7%

Source: UTOPIA survey

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Agenda

Overview Demand Benchmarks Cost Benchmarks Sensitivities & Scenarios

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UTOPIAs scale-adjusted projected network operations cost is comparable to other operators

Network Operating Expense Comparison NOC and Field
$ per Home Passed
$100

$/ Home Passed/ Month

UTOPIA Phase 1 Expected

$10

UTOPIA Phase 3 Expected

RCN Typical MSO

Qwest 90% Scale

$1 10,000

Log/Log Log/Log

100,000

1,000,000

10,000,000

100,000,000

Total Homes Passed

Note: NOC costs include asset management, headend, co-location, and interconnect expense. Field expenses include field maintenance and electronics maintenance.

Source: UTOPIA cost and revenue model, April 2004; company statements; Dean & Company research
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UTOPIAs planned fiber construction costs are consistent with our experience

Fiber Construction Costs

Benchmarks

Aerial Fiber
$40
$37 $37 $32

Underground Fiber
$300
$264

$250
$200 $177

$30 $200

$/Mile (000s) $20

$17

$/Mile (000s)

$150
$99

$100 $10 $50

$93 $80

$0

Public Utility District Telecommunications Study

UTOPIA

Beltway Cable Services

Cable Overbuilder

$0

Public Seattle, Palo Alto Utility Washington District Telecommunications Study

UTOPIA

TCS Communications

Beltway Cable Services

Note: Contingency has been excluded

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UTOPIAs projections for total capital cost per subscriber are in the range of other broadband and fiber network overbuilds
Capital Cost Comparison
Distribution, Core, NOC, NIU
$10,000
$9,000 $8,000 $7,000 $6,000 $5,000
Chiliclothe Telephone VDSL Hometown, Morris MN FTTH Palo Alto FTTH Ashland, OR HFC RCN HFC Palo Alto FTTH Murray Electric HFC Harlan, IA American Broadband HFC Scottsboro, AL HFC Corning Estimate FTTH in New Housing Development Everest HFC

Actual Build Costs Planned Build Costs UTOPIA 18 City Build Phase 1 Expected

Capital Cost per Subscriber (Log Scale)

$4,000

$3,000

Eagle BB FTTH Kutztown, PA FTTH

$2,000

$1,000 20%
Note:

30%

40%

50%

60%

70%

80%

Palo Alto costs include core network and subscriber drops but not headend Capital cost per subscriber defined as cumulative capital expenditures over installed subscriber base

Penetration Subs per Home Passed

Source: UTOPIA Business Model, Palo Alto business case, company websites
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UTOPIAs build-out rate appears to be achievable

Build-Out Rate Benchmarks

2,000,000 1,800,000 1,600,000 1,400,000 1,200,000

RCN (includes acquisitions in years 4 & 5)

Homes Passed

1,000,000 800,000

Altrio - plan
600,000 400,000 200,000 0 0

UTOPIA 18 city build

Phase 3 Phase 2 Phase 1

10

Years of Operations

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FTTH deployments appear to be roughly split between Active/Ethernet vs Passive/ATM

FTTH Deployments
2002 Active
80-100K Grant County - WA (ZIPP) WIN - Sacramento WA (include HFC drops) Lyse Tele - Norway Fastweb - Italy B2 - Sweden Competisys - American Canyon/CA

Passive/PON
10-20K Palo Alto Utility - Palo Alto, CA

Ethernet/ IP

<10K Few

40-60K Bell South - Dunwoody, GA (trial) Blair Tel. - NE Rye Tel - Colorado City, CO NexTech - KA Itex Communications - TX Baldwin Telecom - WI Bristol Utilities - VA Hometown Solutions - Morris, MN Kutztown, PA SBC - Mission Bay, CA

ATM

Source: Dean & Company Analysis, KMI estimates

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Active fiber Ethernet solutions have the advantage of support by established suppliers, and Cisco in particular
FTTH Technology Suppliers
Partial List APON New
AllOptic One Path Optical Solutions Paceon Quantum Bridge Salira Terawave WWP Riverstone Optical Access Extreme Networks + + + + + + + + + +

EPON

A-Active

E-Active

Resolution into a stable market likely to wait until RBOCs begin large scale deployment
+ + + + +

Established
NEC Illuminant Nortel Cisco Pirelli Lucent Alcatel Marconi

Leverages existing metro-optical equipment markets

+ + + + +

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Agenda

Overview Demand Benchmarks Cost Benchmarks Sensitivities & Scenarios

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The various cases test the Phase 1 plans ability to withstand competitive pressures, demand declines, and cost overruns
Phase 1 Downside Scenarios
Details

Plan Plan

Escalated Escalated Competitive Competitive Response Response Marketing War

50% recovery of premise wiring Residential Churn: 25% Business Churn: 20%

Assumptions Assumptions Downside Downside

Demand Assumptions

100% recovery of premise wiring Residential Churn: 16% Business Churn: 9% No price war

100% recovery of premise wiring Residential Churn: 16% Business Churn: 9% No price war

All-out: Marketing War + Price War

Additional 20% price discount for 3 years (on top of 20% discount already assumed) passed through to UTOPIA

Cost Assumptions

Expected operating cost level Expected product mix Expected CapEx costs

Expected operating cost level Expected product mix Expected CapEx costs

20% higher operating costs 10% Higher CapEx costs Cap on growth in revenue per subscriber for data (Data mix frozen in Year 5)

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The business case has been tested at three different take rate scenarios

Take Rate Scenarios

Most likely outcome in this range
Expected Case Conservative Case

60%

50%

40%

Take Rate (% of homes passed that take 1 or more services)

30%

20%
Downside ramp (e.g. retail providers drop the ball)

10%

0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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The UTOPIA business model looks robust in all but the most negative cases

Scenario Overview
Key Financials

Escalated Competitive Response Take Rate

Expected
Minimum Debt Coverage1 Construction Loan Bond Largest Annual Cash Deficit Largest Cumulative Cash Deficit 1.75 (2008) $80.65MM $85MM 1.69 (2008) $83.5MM $86MM 1.65 (2008) $86.0MM $88MM

Plan

Marketing War

All-Out

Assumptions Downside
1.48 (2008) $85.1MM $88MM

Combined Downside and Competitive Response2

1.39 (2008) $91.2MM $91MM $4.3MM (2007) $4.7MM (2008)

Conservative Case
Minimum Debt Coverage1 Construction Loan Bond Largest Annual Cash Deficit Largest Cumulative Cash Deficit 1.44 (2008) $77.25MM $85MM 1.31 (2008) $81.0MM $90MM 1.29 (2008) $82.4MM $91MM $3.0MM (2008) $0.2MM (2008) 1.17 (2008) $82.35MM $91MM $3.8MM (2008) $2.9MM (2009) 1.11 (2008) $87.95MM $91MM $4.9MM (2007) $11.3MM (2010)

Downside

Note:
1

Minimum Debt Coverage1 Construction Loan Bond Largest Annual Cash Deficit Largest Cumulative Cash Deficit

1.39 (2008) $79.00MM $87.0MM

1.30 (2008) $82.6MM $91.0MM $3.0MM (2008) $0.1MM (2009)

1.30 (2008) $83.6MM $91.0MM $3.0MM (2008) $1.5MM (2009)

1.18 (2008) $84.3MM $91.0MM $3.7MM (2008) $4.8MM (2009)

1.12 (2008) $89.0MM $91.0MM $5.9MM (2007) $12.4MM (2010)

Minimum cash balances $500K

After Dynamic Cities Deferral 2 Includes Price War

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Incumbents frequently respond to overbuilders by cutting price and escalating marketing efforts
Competitive Response
Altrio Altrio

Municipality/ Municipality/ Overbuilder Overbuilder

Ashland, Ashland,OR OR Astound Astound

Adelphia Adelphia Charter Charter SBC SBC Verizon Verizon Charter CharterCommunications Communications AT&T AT&T Broadband Broadband Pacific PacificBell Bell Qwest Qwest Charter CharterCommunications Communications Charter CharterCommunications Communications Charter CharterCommunications Communications TCI TCICommunications Communications

Competitor(s) Competitor(s)

Lowered LoweredRates Rates

50% 50%discounts discounts (limited (limitedtime) time) 25% 25% lower lower

-- $200 $200incentives incentives -- Loyalty Loyaltybonus bonusof ofevery everythird thirdmonth monthfree free

Marketing Marketing

Political Political Upgraded Upgraded Lobbying Lobbying Network Network

x x

No No Action Action

-- Went Went door-to-door door-to-door right right before before AFN AFN came came through through -- Instant Instantinstalls installs -- Special customer service centers to dissuade Special customer service centers to dissuade customers customers from from cancelling cancelling service service x x

Bristol, Bristol,VA VA Cedar CedarFalls, Falls,IA IA Coldwater, Coldwater,MI MI Everest Everest Communications Communications

Time Time Warner Warner SBC SBC Comcast ComcastCable Cable AT&T AT&T Time Time Warner Warner TCI TCICommunications Communications Comcast Comcast BellSouth BellSouth Charter CharterCommunications Communications Charter CharterCommunications Communications Bell BellSouth South Charter Communications Charter Communications CableVision CableVision Verizon Verizon Charter CharterCommunications Communications Pacific PacificBell Bell AT&T AT&T Broadband Broadband AT&T AT&T Broadband Broadband Comcast Comcast

Glasgow, Glasgow,KY KY Grande Grande Communications Communications Harlan, Harlan,IA IA Knology Knology LaGrange, LaGrange,GA GA Newnan, Newnan,GA GA RCN RCN Scottsboro, Scottsboro,AL AL SureWest SureWest Tacoma, Tacoma,WA WA WOW WOW
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Lowered -- Expanded Lowered rates rates Expanded services services (14% (14% lower lower than than national national average) average) Lowered Lowered rates rates to to -- Eliminated Eliminatedmonthly monthlyfees feesfor foradditional additionaloutlets outlets $5/month -- Eliminated $5/month Eliminated franchise franchise fee fee pass pass through through -- Added Added additional additional channels channels 20% -- $200 20% lower lower $200incentive incentiveto toreturn return(more (moreif ifwrite writeaatestimonial) testimonial) -- 50% 50%discount discountfor forsigning signingup upfor for1 1year year -- Invested in marketing efforts Invested in marketing efforts -- Incumbent Incumbentmonopolizes monopolizesterrestrially terrestriallydelivered deliveredprogramming programming& &won't won'tsell sell -- local local regional regional sports sports network network Lowered Lowered rates rates by by $16-$28/month $16-$28/month 17% 17% lower lower ($20 ($20 lower lowerthan than surrounding surrounding areas) areas) Predatory PredatoryPricing Pricing

x x x x

x x

Purchased Purchased by by Glasgow GlasgowPlant PlantBoard Board

-- Expanded Expanded basic basic package package -- Expanded Expanded offerings offerings (compressed (compressed digital digital service) service) -- Selling Sellingblocks blocksof oflong longdistance distance x x

x x x x Joint Joint Venture Venture

10-15% 10-15% lower lower 50%-66% 50%-66% lower lower (limited (limitedtime time predatory predatory pricing) pricing) 20% 20% lower lower 50% 50%discount discount (limited (limitedtime) time)

-- $300 $300to toswitch switch -- Threatened Threatened contractors contractors working working with with RCN, RCN, leading leading contractors contractors to to charge charge higher higher prices prices -- Offered Offered$200 $200to toSEPB SEPBcustomers customerswho whoswitch switchCATV CATV -- "Amnesty "AmnestyProgram": Program":forgave forgaveSEPB SEPBcustomers' customers'old olddebts debtsto toFalcon Falconor orCharter Charter -- SBC SBCis isbundling bundling4 4services services(DBS, (DBS,LD/Local, LD/Local,DSL/Dial-up, DSL/Dial-up,wireless) wireless) -- Funded Fundedreports reportsabout aboutClick's Click'slack lackof ofsuccess success -- Free FreePPV PPV -- Free Free digital digital upgrade upgrade DEAN & COMPANY

x x

x x

x x

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Highly competitive markets can see churn levels over 2% per month

Churn Benchmarks
Residential

Monthly Average Churn

8% 7% 6% 5%

Monthly Churn Over Time

2.5%
2.10% 2.40%
Cable

5%8%

2.0%

2.00% 2.00% 1.70%

DirecTV

1.5%

UTOPIA Expected Case (Residential)

Churn 4% Rate
3% 2% 1% 0%
2%3% 2.6% 2.5% 2.4% 2.4% 1.7%

Churn Rate
1.0%
0.80%
1.5% 1.4% 1.2%

1.20%

1.25%

1.25%

EchoStar 1.50%

1.00%

1.00%

1.10%

UTOPIA Expected (Business)

0.5%

0.60%

CLECs Digital Cable1

Wireless

Cable

EchoStar

Earthlink/ AOL

AT&T LD

DirecTV

Typical RBO (precompetition) UTOPIA (Residential)

0.0% 1995

1996

1997

1998

1999

2000

2001

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Scenario Comparison: Business Plan

Expected vs. Conservative vs. Downside First 8 Years Debt Coverage
$20
Expected Conservative

End-of-Year Cash Position

$25

$15

Revenue Available for Debt Service

Expected

$20

Downside

$15

$10

Downside

$MM
$5
Conservative Expected

Total Debt

$MM $10
$5

Conservative Downside

$0

$0

Requires Additional (e.g., City) Capital

($5) 2004 2005 2006 2007 2008 2009 2010 2011

($5) 2004 2005 2006 2007 2008 2009 2010 2011

Year

Year

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Scenario Comparison: Marketing War

Expected vs. Conservative vs. Downside First 8 Years Debt Coverage
$20
Expected

End-of-Year Cash Position

$20

$15

Conservative

Revenue Available for Debt Service

Downside

Expected

$15

$10

Downside

$10

$MM
$5

Total Debt
Conservative Expected

$MM
$5

Conservative Downside

$0

$0

Requires Additional (e.g., City) Capital

($5) 2004 2005 2006 2007 2008 2009 2010 2011

($5) 2004 2005 2006 2007 2008 2009 2010 2011

Year

Year

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Scenario Comparison: Combined Downside

Expected vs. Conservative vs. Downside First 8 Years Debt Coverage
$15
Expected Conservative

End-of-Year Cash Position

$10

Revenue Available for Debt Service

Downside

$5

$10

Total Debt

$MM

$5

Downside Conservative Expected

$0

Requires Additional (e.g., City) Capital Expected

$MM
($5)

$0

($10)
Conservative Downside

($5) 2004 2005 2006 2007 2008 2009 2010 2011

($15) 2004 2005 2006 2007 2008 2009 2010 2011

Year

Year

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Real value creation relies on proactive management of complementors and economic development
Jumpstarting Value
Broadband Economic Development

Pro-active Community Strategy Required

Tele-work In-region ecommerce e-government e-education e-health e-utilities

Broadband-enabled centers of excellence Telemedicine Software development

Net Value Creation Employment Wages Home Value Quality of Life

0
Shift of local commerce and taxes out of region via ecommerce Net employment loss in Incumbent service providers Broadband Highway Out-of-Town

New Services High Speed internet Digital cable Price/quality competition Choice of providers

Broadband Service Zone (Individual Subscriber Optimized)

Broadband Village (Regionally Optimized)

Broadband Corridor (Export-Led)

Network/Community Effects

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