Defining Bandwidth Trading & Discussing Potential Scenarios for Obtaining Bandwidth

1. Defining Bandwidth Trading & Discussing Potential Scenarios for Obtaining Bandwidth Prepared by: F. Scott Yeager syeager@fyi-net.com FYI-Net, LLP 3403 Marquart St. Suite 200 Houston, Texas 77027 713.892.8394 “The future belongs to those who see possibilities before they become obvious.” - Theodore Levitt, The Marketing Imagination Contact syeager@fyi-net.com

2. Bandwidth Risk Management Tools Price Flexibility Customer is paying too much for bandwidth Volume Flexibility Customer has too much or too little bandwidth Customer’s Bandwidth Demand Profile Utilization over Time % Time • Allows More Efficient Allocation of Bandwidth • Creates Incremental Bandwidth “Headroom” • Provides Framework for Tiered QoS Bandwidth Allocation Embedded Financial Products Network asset financing options or offering other value added services Monetizations Customer wants to bring forward value in its bandwidth contract Contact syeager@fyi-net.com

3. The Promise of Bandwidth Trading Products delivered by Traders and Service Providers Market Index of Bandwidth $350 Cost Cap $300 Example Customer’s Bandwidth Cost with Price Protection $250 $/Mbps $200 Cost Floor $150 $100 2000 2003 2002 2001 • Transit costs depending on the amount used • Provides price protection within a specified range of prices • Rate cap to protect bandwidth cost exposure to usage peaks • Enhance earnings stability Contact syeager@fyi-net.com

4. Precursors for Rules to Change to create Bandwidth Market • Sellers must be willing to sell in a Trading Environment • Sellers must be willing to allow provisioning to occur via neutral 3rd parties with documentable proof of Delivery per Terms • Multiple Sellers must be willing to play by new rules and use 3rd party delivery approach • Buyers must be willing to buy in a new way • Buyers must have confidence in ability of market to deliver per agreed Terms • Buyers must see cost and delivery benefits to change buying patterns Contact syeager@fyi-net.com

5. Old Vs. New Approach to Buying Bandwidth Customer Carrier Bandwidth Provisioning How can I make my network work? Call Provisioning How can I connect my network for a Customer? The Old Rigid System I need someBandwidth Order Many Months P1 P2 P3 P4 P5 P6 The New Market P7 P8 P9 P10 P11 P12 FinancialPrice I need someBandwidth P13 P14 P15 P16 P17 P18 Prov1 Prov2 Prov3 Prov4 Prov5 Prov6 Customer BWTradingOrg. V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 PhysicalDelivery 6 Days V13 V14 V15 V16 V17 V18 P# V# Financial Player Physical Player 6 Seconds Contact syeager@fyi-net.com

6. Corp A Corp. Int’l . . . . . . Bandwidth requirement determined from utilization analysis Further analysis done to estimate future bandwidth needs RFP response process (Q&A, Tech Eval, Financial Eval, etc.) Business Unit Creates Bandwidth RFP Qwest World Com Level 3 . . . . . . Selected Vendor and continued price and SLA negotiation Provisioning, implementation, and handoff to MFST (local loop and backbone) Continued price and SLA negotiation Legal negotiating and contracting Hope that analysis and negotiation were “right” (I.e. don’t have too much or too little capacity. Not paying too much) Repeat Process for each Business Unit and each incremental bandwidth need Current Bandwidth Procurement Process Business units individually negotiate bandwidth requirements. Vendors have unknown pricing, non-standard SLA’s, long term contracts Weeks Months More Months Contact syeager@fyi-net.com

7. Bandwidth Procurement using a Bandwidth Trading Organization (BWTradingOrg.) Corp Corp. Int’l . . . . . . • Daily index based pricing (buy and sell) • Standard SLA terms • Short/long term BWTradingOrg. Market Customer and/or BOS- enabled application determines requirement for more bandwidth Bandwidth capacity, term, and market price selected from BWTradingOrg. Marketplace BWTradingOrg. provisions across pooling points for selected capacity, term, and price Minutes/ Days Handoff to Cust. Predefined Standard QoS and SLA’s Customer requires more capacity Customer Sells Excess Capacity via BWTradingOrg. Market Place Customer ends up with too much capacity Contact syeager@fyi-net.com

8. PBX AT&T CLEC Switch Multi-IXC Fiber Network Patch Panel ILEC Switch Local Loop and Long Haul networks connected via Pooling Points in each city to allow End User to access lowest cost providers of Bandwidth via the Pooling Points Customer BW Trading Org. Pooling Point Copper Fiber Optic Dedicated Switched Used Unused ILEC CLEC Contact syeager@fyi-net.com Diverse Routed MAN

9. How do you get all Providers to Deliver Bandwidth to Customers via Trading Organizations?Need the Pooling Point Concept to be Physically/Legally in place in the market. BWTradingOrg. Carrier 1 Carrier 2 PoolingPoint PoolingPoint Customer Customer LocalLoop LocalLoop Carrier 3 • Characteristics: • Price transparency via indexes • Instant provisioning of circuits • Standard SLA • Benefits: • Increased flexibility - Reduced provisioning time - Bandwidth on demand • Scalability Carrier 4 Carrier ... Contact syeager@fyi-net.com

10. What does the Pooling Point Technology look like? Digital Cross-connects or Optical Switches Contact syeager@fyi-net.com

11. Access Point Access Point Longhaul Backbone Edge Switch Edge Switch Pooling Point ( Access Point Access Point Edge Switch Edge Switch Pooling Point Metropolitan Area Architecture Core Switch DWDM Connection to Longhaul Westbound SONET or DWDM Eastbound SONET or DWDM Contact syeager@fyi-net.com

12. Pooling Points must be defined in relation to Local Loop Fiber, Carrier Hotels and Multiple Providers who could connect Contact syeager@fyi-net.com

13. Bandwidth Trading using Pooling Point Approach Contact syeager@fyi-net.com

14. Los Angeles New York Denver Chicago BWTO BWTO BWTO Pooling Point Pooling Point Pooling Point Pooling Point Carrier A Carrier A Carrier A Carrier B Carrier B Carrier B Carrier C Carrier C Carrier C Bandwidth Buyer Bandwidth Buyer Delivering Bandwidth using Pooling Point Approach & Targeted PP Infrastructure Atlanta Baltimore Boston Chicago Dallas Denver Houston Las Vegas Los Angles Miami New Orleans New York Philadelphia Portland London Paris Amsterdam Frankfurt Brussels Dusseldorf Targeted Pooling Point Locations: Salt Lake San Francisco San Jose Seattle Washington DC Contact syeager@fyi-net.com

15. Pooling Points Targeted Cities with Pooling Points Pooling Point Network Seattle Amsterdam London Portland Brussels Tokyo Paris Dusseldorf Boston Frankfurt New York Salt Lake City Chicago Philadelphia Denver San Francisco Washington San Jose Las Vegas Los Angeles Atlanta Dallas New Orleans Houston Miami • Enables Switching Between Independent Networks; Connects Metro Loops • Enables Robust Scalability 10 25 Contact syeager@fyi-net.com

16. Bandwidth available at TDM/SONET/Wavelength Layer limited to City Locations with 3rd Party Neutral Pooling Points Seattle London Boston Chicago New York Salt Lake City Philadelphia Denver San Jose Las Vegas Washington D.C. Phoenix Los Angeles Atlanta Tokyo Dallas Houston Miami Potential for liquid Bandwidth Trading limited to Pooling Point Locations for City Pair Trading (Go to Enron & LightTrade for most recent lists of Pooling Point Locations) Contact syeager@fyi-net.com

17. Chicago New York San Francisco Atlanta Los Angeles Carrier A Dallas Carrier B Carrier C Carrier D Example: Using Pooling Points to build a National Backbone Network Enabling Carrier & Router Diversity Options Contact syeager@fyi-net.com

18. Example of use for Pooling Points: Connecting Storage Providers across Pooling Points Typical Buyers: CLECs, ILECs, ISPs, and Large Enterprises Enterprise ISP Dedicated Local Facilities Dedicated Local Facilities ILEC City A City B PP Pooling Point Service Demarc OC-12 or OC-48 CLEC BWTradingOrg. Intelligent Network (BWTO) Pooling Point Service Demarc PP OC-12 or OC-48 BWTO Carrier 1 BWTradingOrg. Circuit Facility Assignment Demarc BWTradingOrg. Circuit Facility Assignment Demarc Carrier 2 CFA CFA CLEC or ILEC CLEC or ILEC CLEC or ILEC Service Demarc CLEC or ILEC Service Demarc Carrier 3 DS3 DS3 DS3 DS3 CPE CPE Customer Premise Equipment (CPE) Carrier 4 Buyer Buyer Typical Long Haul Carriers, Are Both Buyers and Sellers Connecting Storage Providers within the same pooling point. SPoP SPoP SPoP SPoP SPoP SPoP Contact syeager@fyi-net.com

19. Example: Using Bandwidth Trading to access Nation Wide Storage SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP SPoP Contact syeager@fyi-net.com

20. Customers could choose to trade IP Bandwidth if the industry were to define standard contracts and SLA’s and define the Demarcation of the Service offerings Managed CPE Managed CPE BWTradingOrg. Collocation and coordinated local loop from LEC/CLEC Demarc Demarc DS3 OC3c OC12c BWTO T1/E1 DS3 Remote Office/ Business Partner Last Mile Corporate Location Internet Contact syeager@fyi-net.com

21. Video External Content Intranet IP LAN Internet Host Mainframe SNA Public Voice Private Voice Enterprise VoicePBX Historically, Multiple Voice & Data Access lines are necessary to provide access to each type of service required by the user at the desktop Customer Data Demarc Internet, ISP Contact syeager@fyi-net.com Voice Demarc

22. Metro Connectivity: Customer access to the BW Trading Org. Pooling Point could allow the Customer to have access to multiple services. Some entity could becomes the “Information Utility”by providing Multiple Feed types per single Special Access Connection Floor A Special Access Service to all users in a building via the infrastructure BW Trading Org. buys from ILEC/CLEC Floor B Floor C BW Trading Org. Pooling Points IXC Contact syeager@fyi-net.com

23. Ultimate goal: All services via one connection, each service at lowest market price via trading approach, QoS value determined per application by user Private IP Intranet BW Trading Org. Pooling Points to provide access to Multiple Networks & Services via Deal Bench Customer Content Provider Closed, User Group $ $ Internet Connection Private Voice & Public Voice Network Intra Enterprise Video Network SNA Host Network Contact syeager@fyi-net.com

24. PBX CLEC Public Network Patch Panel Seattle Portland Rochester Albany Minneapolis Buffalo White Plains Hartford Boston New Haven Norwalk Detroit Stamford New York Sacramento New Jersey No. Chicago New Jersey Ctrl. Cleveland Philadelphia San Francisco Pittsburgh Wilmington Indianapolis Oakland Denver Baltimore San Jose Washington St. Louis Richmond Carrier X Los Angeles Orange County Memphis San Diego Phoenix Atlanta Dallas Austin ILEC Orlando Switch Houston Tampa Miami Discussion: How can Universities Participate? Connect to Pooling Points and buy bandwidth on Demand at TDM and IP layer in Metro and Long Haul applications. CLEC Facilities Bypass via Fiber to IXC Customer IXC Loss of Switched Access Revenues Copper Fiber Optic Dedicated Switched Used Unused ILEC CLEC Contact syeager@fyi-net.com Diverse Routed MAN