1. Broadband Wireless The Business Case for High Capacity Presented by: Paul S. Bachow February 20, 2001pbachow@bachow.com 610-660-4900

2. 2 Full Disclosure FD I have investments in the following wireless assets: 39Ghz Licenses 31 cities 35 million covered pops Public company equity Private company equity

3. 3 DSL vs. Fiber DSL and Fiber serve different: Markets Parts of the network Fiber has a transparent path to: Increasing capacity at ever falling costs Highest deliverable customer bandwidth

4. 4 Re-define Fixed Wireless There are two types of fixed wireless High capacity Fiber like Metro networks Licensed Low capacity DSL like Unlicensed Point to Multi-point

5. 5 High Capacity Wireless Wave Division Multiplex (WDM & DWDM) technology has drastically increased the capacity of fiber Without a WDM type technology wireless cannot compete with fiber YIG (Yttrium-Iron-Garnet) technology from companies like Verticom enable WDM type wireless capacity increases

6. 6 YIG Technology High capacity was: 16 T-1’s 2 years ago DS-3 1 1 year ago OC-3 2 months ago OC-6 now OC-12 9 months from now OC-24 2 years from now

7. 7 DSL is a failing business case 2.3 truck rolls per install $1,300 per residential sub of up front costs w/o sales commissions Will take years to reduce this cost Average residential rate $39.95 RBOCs can’t reach break even at $39.95 5.5 year payback assuming 50% gross margin

8. 8 DSL vs High Capacity High capacity competes with fiber, not DSL Low capacity wireless competes with DSL, not fiber Due to limited time the balance of this presentation will only focus on high capacity wireless

9. 9 The Wireless Business Case The marketplace is more competitive than ever Only all IP service business plans work 1700 competitors and each is focused on time to market Service prices are falling Winners will have the lowest cost structure

10. 10 How to Win Temporally Differentiate Unique services Broadest offering Fastest provisioning Is this a sustainable game plan?

11. 11 How to Win Permanently Become the low cost provider Simplifies your offering and network Allows you to compete on price Easier initial sales You can match competitors’ offers which reduces churn Allows you to remain in business

12. 12 Becoming a Lowest Cost Carrier Does not mean you charge the lowest prices Customers in a small office building not served by others should pay more You have less customers to spread your installation and equipment costs over You still need a business case to determine rates Let others take the losing deals

13. 13 Becoming a Lowest Cost Carrier Requires: a simple product offering a lean organization flexible equipment integrated equipment the lowest cost structure in the following 5 areas:

14. 14 Lowest Cost of: Equipment (on a cost per MBIT basis) Example: OC-3 links loaded Native IP Installation One install serving multiple customers Simple network design requires licensed freq. Operation All on net

15. 15 Lowest Cost of: Sales per add Use outside sales organizations already selling to your potential customer See what ARTT is doing with ISP’s, ASP’s and web hosting companies Back office Self provisioning of bandwidth increases Web based bill review

16. 16 Fiduciary Duty Requires most efficient use of capital Success based deployments, not field of dreams Payback analysis before all expenditures Flexible network, lowest chance of stranded costs Cash flow is the goal, not market share

17. 17 FCC has proposed partial spectrum leases A license holder will be able to lease part of their 39 Ghz spectrum Will enable multiple carriers without spectrum to day to incorporate licensed wireless in their network Should standardize the use of high capacity wireless in all domestic networks

18. 18 High Capacity 39 Ghz, a sustainable advantage Success based deployments Ability to re-deploy lower capacity equipment to new installs Easy to engineer, no coordination with others Low installation costs, simple to upgrade An end to end network increases gross margins and manageability