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					Evaluating the Business Case for
Investment in Infrastructure



Carmen M. Perez
President
January 27, 2009
The availability of current infrastructure is highly dependent
on geography; certain routes are clearly in need of
additional capacity, whereas others are under-utilized

       Metro Utilization Example                        •   Optimization of capacity is an
                                                            area of focus
3500                                                        –   Accurate forecasts critically
                                            3024                important
3000               2736        2830
                                                 2556   •   FiberNet currently in process
2500                                                        of adding significant capacity
2000                               1824                     in certain markets
1500
                                                        •   Economics dictate how
       1200            1143a                                capacity is added
1000       801
                                                            –   Overbuilding fiber in certain
 500                                                            routes
                                                            –   Adding DWDM equipment in
   0                                                            others
        2005         2006         2007          2008

                 STSs Available    In Service


   2
    Business case for investment in infrastructure based on view of
    the price/demand in future and modeling of options
               Drivers                             Considerations
•        Strong price pressure               •   Competitive landscape
         – 70% declines from 2002            •   Customer’s desire to own
         – Price per Mb/s will continue to       infrastructure vs lease
           fall                                  capacity
•        Shorter customer contract           •   Demand for Ethernet / IP
         terms                                   based services
         – 24 to 36 months versus 48 to          – Investments must allow
           60 months                                 flexibility
•        Utilization rates           •           Must ensure most cost-
                                                 effective solutions
•        Sales forecasts
                                     •           Business cases reflect higher
•        Historical growth rates                 hurdle rates and shorter
•        Technology changing rapidly             payback periods
         – Depreciating over shorter lives

     3
Investment in infrastructure is FiberNet’s core business. . .


     •   Business strategy should guide asset ownership
         decisions
     •   Managing and operating infrastructure should be a
         core strength
     •   Technology will continue to evolve rapidly in the next
         decades
         – Owners of infrastructure must manage continuously changing
           technologies
     •   Remember lessons learned from the past
         – Risks of over-builds / excess capacity
         – Risks of valuation of assets
         – Risks of obsolete inventories




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