© x8 Inc. (Nasdaq: EGHT) 1 The Next Generation of IP Communication Applications Bryan R. Martin January 24, 2007 Internet Telephony Conference & Expo Fort Lauderdale, Florida TRY-VOIP

© x8 Inc. (Nasdaq: EGHT) 2 Who is 8x8? Founded – 1987 IPO – 1997 Nasdaq:EGHT Internet telephony innovator –Voice & video IP communication services sold under the “Packet8” brand. Providing IP communication services to more than 100,000 residential customers and more than 6,000 businesses Y E A R S O F E X C E L L E N C E 8 x 8, Inc.

© x8 Inc. (Nasdaq: EGHT) 3 Where did they go? Recent “disappearance” of 6 phone companies, 3 of them in the last 2 years alone –Verizon’s $6.75B purchase of MCI (2005) –Southwestern Bell Corporation (SBC) buying Pacific Telesis Group (PacBell) in 1997 –SBC buying Southern New England Telecommunications in 1998 –SBC buying Ameritech in 1999 –SBC buying AT&T in 2005 –at&t buying BellSouth in 2006

© x8 Inc. (Nasdaq: EGHT) 4 AT&T Park (formerly SBC Park and Pacific Bell Park)

© x8 Inc. (Nasdaq: EGHT) 5 Merging out of long-term strength? at&t: “Every 11 seconds a customer comes back to at&t after trying someone else.” –T 10-Q filed 11/2/2006: total switched access lines declined by 3.13M –31,556,926 seconds in a year –So if 2,868,811 customers came back, 5,998,811 customers left Therefore, every 5.26 seconds a customer leaves at&t to try someone else –“Retail access lines continued to decline due to increased competition, as customers disconnected both primary and additional lines and began using wireless and Voice over Internet Protocol (VoIP) technology offered by competitors and cable instead of phone lines for voice and data.” Verizon: Total access lines declined 6.9% in Q1

© x8 Inc. (Nasdaq: EGHT) 6 Internet Telephony Doing Great

© x8 Inc. (Nasdaq: EGHT) 7 Broadband Growth is Slowing Source: Pew Internet & American Life Project, Home Broadband Adoption 2006

© x8 Inc. (Nasdaq: EGHT) 8 End of the “First Wave” of Broadband Adoption Consumers get broadband for speed –Few consumers surveyed know exactly what connection speed they have at home (81%) 60% of dialup users are not currently interested in upgrading to broadband –22% of dialup users who do not want broadband at home have a high-speed connection at work –Dialup users who do not want to switch to broadband are older and have lower incomes than dialup users who express a desire to switch What we need is a new class of IP applications –Communications, entertainment, collaboration/telecommuting, education Survey data source: Pew Internet & American Life Project, Home Broadband Adoption 2006

© x8 Inc. (Nasdaq: EGHT) 9 Video over Analog Telephone Lines

© x8 Inc. (Nasdaq: EGHT) 10 Videophone on 8x8 VoIP Network 2004

© x8 Inc. (Nasdaq: EGHT) 11 Tango Video Terminal Adapter (VTA)

© x8 Inc. (Nasdaq: EGHT) 12 VTA will be used for every voice call

© x8 Inc. (Nasdaq: EGHT) 13 Government and IP Applications

© x8 Inc. (Nasdaq: EGHT) 14 The Good: State of California Governor Schwarzenegger’s Broadband Task Force – October 2006 –Identification of government-imposed barriers or obstacles to increasing broadband usage –Applications targeted: VoIP, videoconferencing, webcasting, streaming video technologies Leading by example: Governor Schwarzenegger’s use of these technologies California Public Utilities Commission (CPUC) –Very policy-friendly to VoIP and Internet applications –Commissioner Rachelle Chong

© x8 Inc. (Nasdaq: EGHT) 15 The Bad: The FCC Current leadership is replicating legacy policy –E911, Universal Service Under old FCC Leadership: –Pulver.com Free World Dialup order (2004) –AT&T phone-to-phone IP telephony services decision (2004) –Vonage order (2004) Under current FCC Leadership: –E911 requirements for IP-enabled service providers (2005) –Communications Assistance for Law Enforcement Act (2005) –Universal service contribution methodology (2006) 2006 policies have created complexities with the states

© x8 Inc. (Nasdaq: EGHT) 16 The Ugly: The Other States Policies under current FCC leadership have reopened theoretical arguments for intrastate regulation –State Corporation of Kansas (November 2006) –Connecticut Department of Public Utility Control (November 2006) Vague policies in the FCC’s Universal Service Order –Fixed VoIP services which know where their customers are may contribute to Universal Service based on actual revenues, but would no longer qualify for the preemptive effects of the Vonage order –Nomadic services may contribute based on a safe harbor of 64.9% of revenues E911 policies have also ignited state & local taxation / surcharges / fees

© x8 Inc. (Nasdaq: EGHT) 17 The Result: Increased Bills Packet8 bill in December 2006

© x8 Inc. (Nasdaq: EGHT) 18 The Result IP communication bills to end users are rapidly increasing The reason the FCC established a “safe harbor” in VoIP universal service was to ensure competitive neutrality with providers of other toll services –The FCC made clear in its universal service order that it could have found that 100% of interconnected VoIP services are attributable to interstate services A loss in one of the battleground states could create a landslide of state taxation and a “patchwork quilt” of local regulation

© x8 Inc. (Nasdaq: EGHT) 19 Conclusions Broadband is good The first wave of “easy” broadband adoption is over –Video is the low hanging fruit to drive the next wave for both communication and entertainment applications Government and regulators are central figures in the continued development –Technology will progress and evolve with or without them –Regulators must learn that we cannot continue to replicate legacy policies in the IP world Come see the next wave of video communication applications for yourself in booth #______ for more informationhttp://community.packet8.net/myblogs/bmartin