Leading Competitive Local Exchange Carriers Offer Incumbent Carriers Proposal to Promote Facilities-Based Competition

Business Wire, May 6, 2004

Business Editors/High-Tech Writers

WASHINGTON--(BUSINESS WIRE)--May 6, 2004

A group of the nation's leading facilities-based Competitive Local Exchange Carriers (CLECs) announced a proposal to incumbent local exchange carriers that would promote facilities-based competition, which currently delivers innovative services, lower prices and more choices for millions of businesses across the country. This proposal, which was recently presented to Verizon Communications Inc. (NYSE: VZ), SBC Communications Inc. (NYSE: SBC), BellSouth Corporation (NYSE: BLS), Qwest Communications International Inc. (NYSE: Q) and Sprint (NYSE: FON) - collectively the "ILECs" - was made in response to the Federal Communications Commission's call for negotiations to "provide certainty and preserve the benefits of competition" after a federal appeals court's ruling vacating and remanding portions of the FCC's unbundling rules.

The CLECs making this proposal, Allegiance Telecom (OTCBB: ALGXQ.OB), KMC Telecom, NewSouth Communications, NuVox Communications, XO Communications, Inc. (OTCBB: XOCM.OB), and Xspedius Communications, are offering a joint proposal that would promote commercially viable access to the ILECs' high speed local loops and transmission facilities. Under the proposal, the facilities-based CLECs will agree to pay negotiated prices for high capacity dedicated transmission facilities in exchange for guaranteed access to those dedicated facilities used primarily to serve small to medium sized business customers. The CLEC proposal focuses on access to network elements utilized by facilities-based providers to extend the reach of their networks to serve business customers, in contrast to previous proposals that have focused principally on the unbundled network element platform (UNE-P) used to serve mass market customers.

The facilities-based CLECs are proposing a long-term, five-year minimum, agreement that provides certainty for high capacity transport facilities used to supply services to business customers. The proposal compensates ILECs fairly and provides financial incentives for further facilities-based network investment and deployment. The proposal further recommends that the industry work together to develop systems and processes for electronic ordering and transfer among alternative carriers' facilities. Specifically, the proposal includes:

-- Access to transport facilities with a capacity of 45 MB will

be made available at negotiated rates. In addition, access to

dark fiber facilities will be made available at negotiated

rates.

-- Access to T1 transport facilities, which typically are used to

serve business customers, will continue to be made available

at existing state approved cost-based rates.

-- The above pricing framework would apply for all transport

connections, without the need for completion of the extensive

state commission impairment proceedings. Even though those

proceedings demonstrated that the ILECs were not eligible for

increased pricing on over 95% of local transport routes, the

joint proposal applies higher negotiated rates to all

transport routes in the spirit of compromise and in order to

eliminate the need for additional state proceedings.

-- Unbundled local loops, which were not affected by the court's

decision, will remain ubiquitously available according to the

FCC's unbundling rules.

-- In addition, the CLECs are willing to negotiate terms to

implement the FCC's compromises on combinations of high

capacity facilities and on access to optical facilities.

The CLECs have extended the offer to the ILECs and are waiting for a response to the joint proposal. Up to this point, ILECs have been playing a game of brinksmanship with business customers by threatening to replace all high capacity unbundled network elements, with significantly higher priced tariff services, without engaging in the negotiations called for by the FCC. They have failed to offer any viable commercial alternative for competitive carriers.

According to a report released by the Small Business Administration in March 2004, facilities based CLECs serve twenty two percent of the small business customers in the United States. Since the passage of the Telecommunications Act of 1996, these carriers have invested over $75 billion to build advanced networks to deliver broadband services and bring increased choices and savings for consumers and businesses. Increased competition saves consumers approximately $10 billion each year. In 2003, competition saved small and medium-sized businesses more than $4 billion. Today annual revenue from the CLEC industry approaches $46 billion and CLECs employ over 60,000 persons primarily in high tech skilled jobs. A negotiated settlement would ensure the continuation of this competition, which has brought more choices, innovative services and cost savings for businesses.

About Allegiance Telecom

Allegiance Telecom is a facilities-based national local exchange carrier headquartered in Dallas, Texas. As the leader in competitive local service for medium and small businesses, Allegiance offers "One source for business telecom(TM)" - a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services and a full suite of customer premise communications equipment and service offerings. Allegiance serves 36 major metropolitan areas in the U.S. with its single source provider approach. Allegiance's common stock is traded on the Over the Counter Bulletin Board under the symbol ALGXQ.OB. On February 13, 2004, Allegiance selected XO Communications, Inc. as the winning bidder to purchase substantially all of the assets of Allegiance Telecom.