1. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 1 VoIP Market Growth: Poised for Takeoff Myrle McNeal SVP Local Voice Services

2. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 2 Where we’re going… While we have advanced VoIP a long way in the past several years… …we are just starting to move the mark… …but the prospects for significant growth is higher than ever!

3. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 3 Where are we today? Gartner Survey: 50% of businesses surveyed are still only investigating whether to adopt IP telephony. But almost 75% of those who have adopted VoIP are extremely satisfied with their choice. iSuppli Report: In 2005, VoIP equipment revenue is expected to be $12.9 bln, up 60% from 2004. Worldwide VoIP equipment revenue to reach $24.5 bln in 2010. Residential segment will grow 650% from $1.4 bln in 2004 to $10.6 bln in 2010 IDC: US Business VoIP Market - $3B in ’04 going to $20B in 2009 JupiterResearch: Forecasts 20.4 mln US households will subscribe to a VoIP by 2010

4. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 4 How can we grow in 2006?

5. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 5 VoIP Research Overview Q2 & Q3 2004 2004 Q4 2004 & Q1 2005 Q2 & Q3 2005 Q4 2005 & Q1 2006

6. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 6 Phase 1 Key Learnings Unaided awareness of VoIP is low. 60% of respondents have never heard of VoIP. After hearing a description of VoIP, the number who would consider switching was surprisingly high. 71% indicated that they are open to considering switching to VoIP. While price has been an important factor in gaining the early adopters, price discounts alone will not win the mass market. Discounts of more than 25% off current phone bills may raise concerns about quality and reliability. Features alone will not drive adoption.

7. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 7 Phase 2 Key Learnings Unaided awareness of VoIP has increased, but familiarity barely budged. The message is getting through but consumers are confused. Among the mass market, interest in switching is essentially flat. 70% are satisfied with their current service.

8. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 8 Phase 2 Key Learnings When asked to rate specific reasons as to why respondents haven’t signed up for VoIP, the top 5 most important reasons were: Satisfaction with current phone service. Haven’t received a special offer to Sign-Up. Not sure how much it (VoIP) costs. Not familiar with any companies offering VoIP. Concerned with quality/reliability of VoIP.

9. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 9 Phase 2 Key Learnings Price discounts alone will not win the mass market. Discounts of more than 25% off current phone bills may raise concerns about quality and reliability. Compelling offers must address key consumer needs: Reliability: Guarantee / Pay to Switch Back / Cancel at Any Time Counter Short Term Risk: Up Front Free Period or Item /Get Paid to Use Long Term Value: Tenure Rewards / Loyalty Benefits No current offers address key consumer needs.

10. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 10 VoIP Basics…How to Succeed For consumers, don’t forget the basics of your VoIP service offering… Product Price Distribution Promotion

11. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 11 Offers to Consider Top 5 – and ONLY – promotional offers that moved the ball forward… Sign up for VoIP and get one or more other communications services FREE for one year. Sign up for VoIP and receive a consumer product of high-net perceived value FREE each month for one year. Sign up for VoIP and get the first six months FREE. Sign up for VoIP and get your choice of a FREE gift with a pre-paid or multi-year plan. Sign up for VoIP and get FREE Phone for Life after paying 12 monthly installments of $83.50.

12. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 12 How to Succed With Business VoIP The SMB Market is aware of and interested in VoIP products…but is underserved –They don’t know where to turn for answers Products are not differentiated –Feature sets of competing offers are very similar Its tough to buy! –Traditional SMB sales channels are not doing the job. Sales forces and channel partners are not well prepared No one is taking a portfolio approach –Sales teams are in silos, unable to sell solutions to SMBs TCO can drive sales but no one is talking about it –For the customer, economics drive the purchase decision…but providers insist on selling features.

13. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 13 How we will win in 2006 Moving the mark for VoIP… Finding the right marketing mix FCC has made safety a “table stakes” issue Increasing public profile for VoIP: awareness continues to rise! Simultaneous consumer and enterprise adoption Potential breakout catalysts like wireless/wireline integration are just around the corner

14. Proprietary and Confidential. Do not distribute.  2005 Level 3 Communications, Inc All Rights Reserved. Page 14