Anjali Joshi EVP, Engineering July 2002

1. Broadband Technology and Policy – A Service Provider Perspective Anjali Joshi EVP, Engineering July 2002

2. Today’s Discussion • Covad Today • Technology strategy • Impact of Policy Issues • What needs to be done to promote healthy competition

3. Covad Today

4. What We Do Today:Provide the Largest Broadband Internet Access and Services Network TechnologyBase: DSL Profile :About 360,000 customers Who We Sell To: Small/Med. Bus., Enterprises, Consumers Who We Sell Through:Internet Service Providers Enterprises Direct Business Model:Monthly Recurring Access & Service Revenues Covad’s Business National Broadband Services Provider

5. Cons Biz Biz Managed Security/VPNs TeleXtend TeleSpeed Broad Portfolio of Offerings Product Offering Customer Segmentation Voice Solutions Enterprise Increased Margin Contribution SMBs ~8 mm SoHo Market~37 mm TeleSoHo TeleSurfer Households ~100 mm TeleLink Potential Subscriber Base

6. Only National DSL Network • One National Network vs. Multiple Regional Networks • Over 99.99% Network Reliability • Over 3.5 million subscriber capacity

7. 47% CAGR GROWTH POTENTIAL Market Opportunity is Significant Consumers SMBs Lines (MM) SMBw/ Dial-up • 2001 Growth: 94% • 2002E Growth: 53% • 5-Year CAGR: 47% • 8 million SMBs • 60% still have dial-up Source: Forrester Research estimates and company research

8. Channel Strategy • Sell business services aggressively through both wholesale & direct channels • Strong effort to grow business direct channel - telesales, Websales, Field Sales • Consumer channel efforts focused on primarily large wholesale ISPs - e.g ELNK Direct Wholesale Consumer Business Price Sensitivity Product Focus

9. Technology Strategy

10. Value-Added Services Email DNS Web Hosting ... Voice IP ATM Local Regional National ATM ADSL SDSL IDSL ... DSL Layers of Network Capabilities

11. Covad Network Architecture

12. Covad DSL+IP

13. Covad Voice over DSL

14. ISP Verizon IXC SBC ASPs Qwest Retail End User CLEC / Service Provider Other US West Bell South The DSL Supply Chain • No upstream visibility • Inefficient manual processes • Difficult product to manage • Confusion on DSL availability • Difficulty in ordering • Long install cycles • Complex coordination Issues • Difficulty in managing multiple RBOCs

15. ISP Verizon IXC SBC ASPs Qwest Retail End User CLEC / Service Provider Other US West Bell South Systems Strategy OSS ARCHITECTURE Achieve completely automated, flexible & integrated Business Process flow OPEN, FLEXIBLE API seamless links with all partners, standard B2B interfaces and co-branded websites. OSS EDI LINKS Ensure timely & efficient provisioning of loops from ILEC suppliers by building EDI interfaces with their legacy systems

16. Benefitsto Partners Benefitsto Users • Automated order management, line provisioning • Full suite of services • Network Visibility • Ease of installation • Reliability of service • Superior customer support Automated OSS and Provisioning 1Q 01 1Q02 < 25 days < 10 days < 30 days < 20 days 64 % virtually all Operating Improvements: Consumer Interval Business Interval Consumer Self-installation

17. Regulatory and Policy Issues

18. The Logic Behind the 1996 Act The Problem: How do you entice a monopoly to “give up” a dominant market position? • Entry into local market requires cooperation of incumbent local telephone company • Absent a “carrot”, local telephone company has “nothing to gain and everything to lose” by cooperating Congress’s Solution • Enforceable interconnection and unbundled access • Provide carrot of long-distance entry

19. Why Unbundle? • Removing legal barriers not enough to foster competition • Local telephone companies enjoyed 60+ years of guaranteed monopoly status • New entrants cannot achieve these economies • Congress decided that phone companies needed to share economies with entrants • Result: Section 251 requires telephone companies to lease parts of their network • Competitors pay for access • Negotiated and arbitrated interconnection agreements

20. Unbundling the Local Network “Unbundled Local Loop” Unbundled Pursuant to FCC Regulations Fiber Central Office To Tandems and IXC Networks Copper Copper Feeder “Unbundled Transport” (DS3, OCx) Network Interface Device (NID) Drop CLEC Collocated Equipment Feeder Distribution Interface (FDI) March Collocation Order

21. The 1996 Act in Context Tandem Switch Long- Distance POP Home Tandem Switch CO Switch Office Tandem Switch 1984 AT&T Divestiture 1996 Act: Unbundled Network Elements

22. Elements ILECs Control that We Need • Local loops -- the copper wire to your home • High frequency portion of loop -- line sharing • Collocation -- how we connect to the copper • Transport -- links collocations and customers • Operational Support Systems -- loop quality, ordering, provisioning, maintenance

23. Key FCC Decisions Implementing the Act • First Local Competition Order (8 August 1996) http://www.fcc.gov/ccb/local_competition/fcc96325.html • Collocation and unbundling rules--includes DSL loops • Immediately challenged by local telephone companies; only fully reinstated in January 1999 • Collocation Order (31 March 1999) http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1999/fcc99048.pdf • Cageless collocation, switching equipment, non-discriminatory safety standards • UNE Remand Order (5 November 1999) http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1999/fcc99238.pdf • Access to loop information • Required by Supreme Court decision • Line Sharing Order (9 December 1999) http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1999/fcc99355.doc • Effective June 6, 2000 • Spectrum management standards

24. Regulatory Environment today • Tauzin-Dingell etc have created confusion • FCC Chairman has created fear, uncertainty and doubt • Some high-tech companies have lobbied in favor of RBOCs, anti-competitive positions • DC Circuit Court has cast a cloud over all UNEs on grounds contrary to the U.S. Supreme Court • FCC still remains supportive of the 1996 Act • US Supreme Court strongly supportive of FCC

25. What do we need? • Hold the 1996 Telecommunications Act stable • Monitor and enforce the rules stringently • FCC should not change the rules on unbundling • Structural separation would promote better use of copper assets and development of loop plant