© Copyright 2005 Frost & Sullivan. All Rights Reserved. Trends in U.S. Small Business Telecom Services Markets Opportunities Arise for Telecom Service Providers Even as Small Businesses Work to Cut Operational Costs Telecommunications Group “Rising operational costs such as energy prices, employee benefit implementation expenses, and business insurance premiums are compelling small businesses to streamline expenditures on a large scale. These expenses are extending a two-fold impact on technology budgets for small organizations.”

© Copyright 2005 Frost & Sullivan. All Rights Reserved. Industry Trends Wireless mobile services accounted for nearly a third of total small business spending on voice, data, and wireless Nearly half of all small businesses consider wireless services most likely to be included in a bundle With the exception of Qwest, all major incumbent local exchange carriers (ILECs) (BellSouth, SBC, Sprint, and Verizon) are positioned to offer wireline and wireless packages as well as advanced wireless applications Others such as ALLTEL and TDS Telecom also have a strong wireless play Both competitive local exchange carriers (CLECs) as well as cable operators lack wireless mobile assets

© Copyright 2005 Frost & Sullivan. All Rights Reserved. Industry Trends (Cont’d) Within the CLEC market, facilities-based carriers are expected to gain greater traction CLECs are also likely to garner a share of the managed services market Overall, majority of Tier-I CLECs remain focused on medium and large enterprises including wholesale carriers Among cable operators, few such as Cox Communications are making inroads into the small business segment Multiple service operator's share of the total market is likely to continue to remain below that of CLECs

© Copyright 2005 Frost & Sullivan. All Rights Reserved. Industry Trends (Cont’d) ILECs such as TDS Telecom, Commonwealth, and Citizens are also expanding presence through out-of-market CLEC units XO, Time Warner Telecom, US LEC, and others are largely focused on mid to large-sized enterprises as well as carriers’ carrier markets Providers such as Covad and New Edge Networks further add to the complex competitive structure in the small business markets Other competitive layers include: ISPs, equipment vendors, and value-added resellers Final layer includes niche players such as security services vendors, storage providers, hosting providers, and standalone VoIP providers

© Copyright 2005 Frost & Sullivan. All Rights Reserved. Key Features Frost & Sullivan Provides: Detailed insights into recent developments and trends Opportunities, challenges, and strategic demand recommendations Analyst insights on ‘hot topics’ and emerging opportunities in the telecom services market Market sizing and in-depth end-user analysis Market forecasts and analysis by product type, end-user application and geographic region

© Copyright 2005 Frost & Sullivan. All Rights Reserved. What We Offer Coverage: United States Proven methodology encompassing extensive primary and secondary data and research Focused information and strategies that cover business and technology issues Credible data and analysis highlighting industry dynamics Winning strategies to help you create precise business plans

© Copyright 2005 Frost & Sullivan. All Rights Reserved. Who Will Benefit? Current Market Participants Find out how you compare to the competition Assess current and future drivers and restraints Determine and exploit market share opportunities through new end-user application demand New Entrants Analyze challenges associated with the industry Calculate forecasts for end-user growth potential Position yourself to capitalize on the market’s unmet needs Investment Community Analyze long-term strategies of participating companies Determine which participants will outperform the competition Assess attractiveness of investing in the telecom services markets

© Copyright 2005 Frost & Sullivan. All Rights Reserved. AT&T Broadwing Cincinnati Bell Global Crossing MCI Sprint Incumbent Local Exchange Carriers ALLTEL BellSouth CenturyTel Commonwealth Telephone Enterprises Madison River Qwest SBC TDS Telecom Verizon Key Market Participants Competitive Local Exchange Carriers Birch Telecom Cbeyond Choice One Communications Citizens and Electric Lightwave CTSI (owned by Commonwealth) Covad ITC^DeltaCom McLeod USA Mpower Communications New Edge Networks NuVox Communications Sage Telecom SureWest Communications Time Warner Telecom US LEC XO Communications (acquired Allegiance) Z-Tel (now called Trinsic)

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