Phoenix Center 2001 US Telecoms Symposium

2. Phoenix Center 2001 US Telecoms Symposium Substitutes or Compliments? –How Much Of A Contestable Effect Does “Convergence” From New Technology Really Have On Incumbents’ Strategic Behavior? Daniel Gonzalez Vice President, External Affairs July 11, 2001

3. Overview • XO’s Facilities-based Perspective • Incumbent Anti-Competitive Strategic Behavior has Not Changed Even as Competitors Continue to Deploy Multiple Access Technologies • Despite ILEC Anti-Competitive Behavior - - Local Competition is Sustainable • Federal and State Regulatory Oversight and Enforcement Activity is Critical to Ensuring Deployment of Alternative “Last Mile” Access Facilities

4. XO Communications • Facilities-based CLEC (formerly NEXTLINK) founded by Craig McCaw • Operate in 62 U.S. markets, majority of top 30 • XO Network Assets • IP-based Long Haul Network • Metro Area Fiber Ring Networks • Largest holder of Fixed Wireless (LMDS) Spectrum in North America

5. Providing a Complete Product Portfolio

6. XO Network Assets Map Key DIA POPs Data Centers Core Backbone & Peering POPs DSL POPs Broadband Spectrum Licenses Metro Area Network* Intercity Fiber Network OC-192 *Some Portions are Under Construction

7. End to End Connectivity Fixed Wireless SONET Fixed Wireless 3rd Party DSL

8. Convergence Has Yet to Alter the Existing ILEC Bottleneck • While XO builds out its network infrastructure, it continues to remain highly dependent on ILEC “last mile” bottleneck facilities to service end user customers. • Access to ILEC unbundled network elements is critical for continued growth and development of local competition.

9. Last Mile Facility Deployment • Technology agnostic effort to reduce XO’s dependency on ILEC facilities and ensure quality service for end user customers • Last Mile facilities, however, cannot be ubiquitously built overnight • Last Mile Deployment Challenges: • Municipal Rights of Way • Building Access • Roof Rights (fixed wireless) • Zoning • Economics (capital intensive)

10. ILEC Anti-Competitive Behavior Continues • ILEC Anti-Competitive Practices Force XO to Order High Cap Facilities as Special Access Rather Than UNEs • Verizon rejects UNE high cap orders (as facilities not available) and forces CLECs to resubmit as special access. • ILEC Provisioning of High Cap Special Access Circuits is Awful • Verizon’s own data for FOC delivery performance - - 18%-52% on-time performance in D.C. (1/01-5/01) • Verizon South on-time performance – 50% to 85% on DS3s • SBC/Ameritech – issues FOCs without determining if facilities actually exist on over 50% of FOCs issued to XO in the Midwest.

11. ILEC Anti-Competitive Behavior • ILECs continue to engage in anti-competitive behavior in provisioning facilities • In BellSouth territory, if a customer’s line goes down or has trouble before cut over to XO, BellSouth refuses to repair the line because an order to switch service providers was submitted. BellSouth’s winback department then offers to fix the line and give the customer a lower rate to stay.

12. ILEC Anti-Competitive Behavior • ILEC UNE Provisioning Problems Continue • SBC’s provisioning of UNEs in California is typical of problems experienced with ILECs across the country • DS-1 Repair – PacBell Data – “Percentage of Customer Trouble Not Resolved Within Estimated Time- 68.85% -5/01 • Mean Time to Repair- SBC fails to dispatch repair technicians on a timely fashion, prematurely closing tickets • Repeat Troubles- XO experiences instances of repeat troubles - 22.12% on DS-1 facilities w/in 30 days • Jeopardy Notices- SBC routinely fails to provide XO with jeopardy notices when SBC is not going to meet its confirmed Due Date – no means to provide CLECs with a mechanized prior notice for DS1 unbundled loop facilities

13. ILEC Anti-Competitive Behavior Conversion of Special Access Circuits to UNEs • ILECs have been intransigent in implementing FCC’s requirements regarding EELs • BellSouth has perfected foot dragging process by: • Requiring lengthy negotiations of EEL amendments • Delaying requested circuit conversions for 8 months • Not agreeing to appropriate credits for converted circuits • Threatening CLECs with a “leaky PBX” charge on converted circuits • Establishing EEL installation intervals 5x that of comparable access • Not implementing a clear process for EEL orders; and • Establishing maintenance and repair intervals that are longer for EELs than comparable access circuits.

14. ILEC Anti-Competitive Behavior DSL: • ILECs are not providing access to DSL capable loops on a non-discriminatory basis • SBC often rejects CLEC orders for DSL capable loops based on erroneous pre-qualification information, thus placing CLECs at a competitive disadvantage vis-à-vis SBC’s data affiliate • Anti-competitive practices have diminished DSL competition and allowed ILECs to raise DSL prices and increase ILEC revenue • Contrary to FCC requirements, some ILECs are refusing to resell DSL services to competitors on a wholesale basis when offering it on a retail basis • In Missouri, SBC has apparently refused to resell DSL services on a wholesale basis

15. Local Competition can Succeed with Effective Regulatory Oversight • Vibrant and robust competition that exists today in both the long distance and wireless markets is self evident. • Both of these markets required FCC intervention--at every critical juncture--to spur competition. • Regulators must provide the level playing field necessary for CLECs to continue network deployment of alternative “last mile” access facilities • For starters, FCC should immediately adopt national performance standards and meaningful penalties for UNEs and Special Access facilities.