10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 0-23253

ITC^DELTACOM, INC.

(Exact name of registrant as specified in its charter)

Delaware	58-2301135
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7037 Old Madison Pike, Huntsville, Alabama	35806
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(256) 382-5900

Securities registered pursuant to Section 12(b) of the Act:

Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ¨                    Accelerated filer  ¨                    Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant at June 30, 2006, based upon the last reported sale price of the registrant’s common stock on the National Market System of The Nasdaq Stock Market, Inc. on that date, was approximately $37,000,000.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

The number of shares of the registrant’s common stock outstanding on March 1, 2007 was 18,766,942.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in this Form 10-K as indicated herein:

Document	Part of 10-K into which incorporated
Proxy Statement relating to Registrant’s 2007 Annual Meeting of Stockholders	Part III

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	23
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	29
Item 3.	Legal Proceedings	29
Item 4.	Submission of Matters to a Vote of Security Holders	34
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Selected Financial Data	38
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 8.	Financial Statements and Supplementary Data	64
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	64
Item 9A.	Controls and Procedures	64
Item 9B.	Other Information	64
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	65
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13.	Certain Relationships and Related Transactions, and Director Independence	65
Item 14.	Principal Accountant Fees and Services	65
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	66
Index to Consolidated Financial Statements		F-1

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “may,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “continue” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, liquidity, revenues, cash flows and other operating results, business strategy, financing plans, forecasted trends related to the markets in which we operate, legal proceedings and similar matters are forward-looking statements. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Our results could be materially different from our expectations because of various risks, including the risks discussed in this report under “Business–Regulation” and “Risk Factors.”

3

PART I

We have derived some of the information contained in this report concerning the markets and industry in which we operate from publicly available information and from industry sources. Although we believe that this publicly available information and the information provided by these industry sources are reliable, we have not independently verified the accuracy of any of this information.

Unless we indicate otherwise, references in this report to “we,” “us,” “our” and “ITC^DeltaCom” mean ITC^DeltaCom, Inc. and its subsidiaries. Unless we indicate otherwise, we have rounded dollar amounts over $1 million to the nearest hundred thousand dollars and dollar amounts less than $1 million to the nearest thousand dollars.

Unless we indicate otherwise, the common stock share amounts set forth in this report have been adjusted to give effect to the one-for-three reverse split of the common stock that we implemented on September 13, 2005.

Item 1. Business.

Overview

We are one of the largest facilities-based competitive providers of integrated communications services, primarily to businesses and governments, in our primary eight-state market, which encompasses Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. We provide comprehensive voice and data communications services, including local exchange, long distance, high-speed or broadband data communications, and Internet access connectivity, and sell customer premise equipment to our end-user customers. We offer these services primarily over our owned network facilities and also use leased network facilities to extend our market coverage. In addition, we own, operate and manage an extensive fiber optic network with significant transmission capacity that we use for our own voice and data traffic and selectively sell to other communications providers on a wholesale basis.

As of December 31, 2006, we marketed and sold our integrated communications services through 44 branch offices, had installed for our customers over 442,000 access lines and had approximately 300 colocations of our network equipment in over 250 central offices of incumbent local telephone companies in the markets we serve. As of the same date, our fiber optic network of 11,811 route miles extended from New York to Florida and from Georgia to Texas and principally cover portions of our primary eight-state market.

We are incorporated in Delaware. Our principal executive offices are located at 7037 Old Madison Pike, Huntsville, Alabama 35806, and our telephone number at that address is (256)382-5900. We relocated our principal executive offices to Huntsville from West Point, Georgia, in the first quarter of 2006. We maintain a corporate Internet web site at www.deltacom.com. We make available free of charge through our web site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after we electronically file or furnish these reports with the SEC. The contents of our web site are not a part of this report. The SEC maintains an Internet web site at www.sec.gov that contains reports, proxy statements and other information regarding ITC^DeltaCom.

Developments in 2006

Overview. During 2006, we focused on improving our operating performance and enhancing our liquidity. As part of these ongoing initiatives, we:

• increased the number of our core, facilities-based retail business lines in service (including both UNE-T and UNE lines) by approximately 45,750 net lines, representing 18% growth over 2005, and increased those lines as a percentage of total retail business lines in service from 68% to 75%;

4

• reduced our cost of services and equipment as a percentage of total operating revenues to 50% from 51.5% by eliminating excess costs from our network;

• added approximately 65 employees to our local retail sales force following the addition of approximately 100 employees to our local retail sales force in 2005;

• reduced our selling, operations and administration expenses by 6.5% from 2005 of which 3.9% of the decline was attributable to executive severance and special consulting fees that were incurred in 2005 that were not incurred in 2006 and 2.6% resulted from improved collections of accounts receivable, reductions in property taxes and reductions in non-sales personnel costs;

• improved our liquidity through the sale to institutional investors of $21 million principal amount of first lien notes with the same terms and the same July 26, 2009 maturity date as the first lien notes we issued in connection with the refinancing of our senior secured indebtedness in July 2005.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about these developments.

Our Business Strategy

Our primary objective is to be the leading provider of high-quality integrated communications services in each of our major service areas in the southeastern United States, principally by using our network facilities to offer local, long distance, Internet access and data services to small, medium-sized and large business enterprises, governmental agencies and other carriers. We deliver high-value bundled and individual services tailored to the needs of our customers and conveniently billed on a single invoice.

The key elements of our business strategy include:

• deploying a locally based sales force and customer service team in each of our markets to assist customers in selecting the bundle of services that will best meet their needs;

• emphasizing service to high-margin end-user customers, including businesses and governmental agencies, while selectively targeting stable carrier customers;

• taking advantage of our extensive deployment of voice and data switches, colocations and transmission equipment, as well as long-haul fiber optic network facilities, to increase penetration in our current markets; and

• continuing our focus on improving our operational efficiency, enhancing our liquidity and strengthening our balance sheet.

Our business strategy for 2007 will increasingly focus on a solutions-based consultative sales approach to achieve greater penetration in our existing markets. We will seek to differentiate ourselves from our competitors and capitalize on our existing support and service infrastructure by leveraging our flagship offering Simpli-Business. We also will continue current initiatives to develop and implement operating systems to improve customer service by reducing installation and repair times.

Services

We deliver integrated voice and data communications services to end-user customers and other communications providers in the southeastern United States.

Bundled Services Approach. We offer our integrated communications services in a high-quality bundle to small, medium-sized and large businesses at attractive prices. When economically advantageous for us to do so, we seek to bundle our integrated communications services together with sales of customer premise equipment and related installation and maintenance services as our Simpli-Business offering. Our targeted customers often will have multiple vendors for voice and data communications services, each of which may be billed separately.

5

Unlike many of these vendors, we are able to provide a single digital T-1 transmission line over which we offer a comprehensive package of local telephone, long distance, Internet access and other integrated communications services. We believe that our bundle of services provides an especially attractive means of delivering communications solutions when combined with our ability to provide, install and maintain the customer premise equipment our customers require to operate their businesses efficiently.

Integrated Communications Services. We offer integrated voice and data communications services to end users on a retail basis. We refer to these services, which we describe in more detail below, as our “integrated communications” services. Revenues from these services represented approximately 78% of our total operating revenues for 2006.

Local Services. We offer a wide range of local services, including premium local voice services, such as voicemail, universal messaging and directory assistance. We also offer all local CLASS (Custom Local Area Signaling Services) features, such as, call forwarding, return call, hunting, call pick-up, repeat dialing and speed dialing services. We provide our local services primarily over digital T-1 transmission lines, which have 24 available channels. We also provide various protocol options including primary rate interface, or PRI, lines, which have 24 channels of which 23 are voice channels. In response to regulatory developments, we have de-emphasized our single-line local services offerings in all markets.

Access Trunks. We offer access trunks to customers that own and operate switching equipment on their own premises. The trunks enable the switching equipment of our customers to be connected to our network over a digital T-1 transmission line. These connections provide customers with local and long distance calling capacity on any of the T-1’s 24 available channels.

Long Distance Services. We offer both domestic and international switched and dedicated long distance services, including “1+” outbound dialing, inbound toll-free and calling card services. Many of our small and medium-sized business customers prefer to purchase our long distance services as part of a bundle that includes some of our other integrated communications services offerings.

Enhanced Services. We offer conference calling services, including toll-free and operator-assisted access, sub-conferencing and transcription services, and enhanced calling card services, which provide features such as voicemail and faxmail, voice-activated speed dialing, conference calling and network voice messaging. We also provide customized solutions tailored to the customer’s needs through a network system, referred to as an “intelligent peripheral,” that facilitates flexible interactions between the user and a network.

Frame Relay Services. We offer frame relay services on various network elements and switching platforms. These services offer customers an efficient method of data transport at speeds equivalent to those available over a digital T-1 transmission line. Our frame relay services allow customers to meet their data transfer needs more efficiently for applications that include Internet access, local area network interconnection and complex systems network architectures.

Private Line Services. We offer private line services that provide dedicated communications connections between multiple locations of our end-user customers to transmit voice, video or data in a variety of bandwidths.

Internet Access. We offer dedicated Internet access via private line and frame relay connectivity that provides high-performance, cost-efficient interconnection of multiple local area networks or legacy systems.

ATM Services. We offer high-bandwidth, low-delay, connection-oriented switching and multiplexing techniques for data transfer, which are known as “ATM” services. ATM allows for the simultaneous high-speed transfer of voice, data and video in a manner that is more efficient than traditional methods.

MPLS. We offer MPLS based IP-VPN services by equipping our core IP network with the ability to provide IP-VPN standard services. The capabilities of this offering drive the ability to provide prioritized traffic based on customer specific requirements with multi-tiered service levels.

6

Wholesale Services. We offer wholesale communications services to other communications businesses. We refer to these services as our “wholesale services.” Revenues from these services represented approximately 17% of our total operating revenues for 2006 and are generated from sales to a limited number of other communications companies.

Broadband Transport Services. Our broadband transport services allow other communications companies to transport the traffic of their customers between local access and transport areas, which are geographic areas composed of contiguous local exchanges. Some of the communications companies that purchase our broadband transport services own transmission facilities, such as fiber optic cables, while others do not own these facilities. Through our broadband transport services, we route the voice and data communications of the customers of our communications company-customers over a long-haul circuit, through a switch and into a receiving terminal on our network. We then transmit the voice or data communication over a long-haul circuit on our network to a terminal, where it exits our network. Our customers then route the communication through another switch and onto the facilities of a local carrier, which terminates the communication to the intended recipient.

We offer our broadband transport services in varying degrees of speed and size. Our customers use some of our services for very high capacity, inter-city connectivity and specialized high-speed data networking. We connect our network to the facilities of our customers either by local carrier or by a direct connection. We typically bill our broadband transport services customers a fixed monthly rate that generally is based upon the capacity and length of the circuit we provide, regardless of the amount of capacity that the customer actually uses.

Local Interconnection Services. We provide local communications services to Internet service providers on a wholesale basis. These services include primary rate interface connectivity between our network and the network of the Internet service provider, as well as equipment colocation services that permit the Internet service provider to colocate its modems, routers or network servers with our network equipment.

Operator and Directory Assistance Services. We provide nationwide operator and directory assistance services to a number of other communications companies through our redundant call centers in Anniston and Alexander City, Alabama. In addition to traditional directory assistance, we provide enhanced assistance services, such as movie listings, stock quotes, weather information, horoscopes and yellow pages. We also provide these enhanced services on a nationwide basis.

Other. Our wholesale services also include a limited amount of switched termination services that we provide to other communications companies. These services primarily include wholesale sales of domestic long distance services.

Equipment Sales and Related Services. We sell, install and perform on-site maintenance of equipment, such as telephones and private branch exchanges. We offer these services, which we refer to as our “equipment sales and related services,” in all of the markets in which we offer integrated communications services.

Revenues from these services represented approximately 5% of our total operating revenues for 2006 and are primarily generated from sales to our integrated communications services customers.

Facilities

Our switching facilities and related electronics and our fiber optic network enable us to offer our integrated communications services and our wholesale services at competitive prices tailored to the customer’s specific needs.

Switching Facilities. Our networking design, together with our interconnection agreements with the incumbent local telephone companies, such as BellSouth, has enabled us to be a facilities-based provider of local and long distance telephone services in all of our markets.

7

Our switches are the primary electronic components that connect customers to our network and transmit voice communications over our network. Our primary switching facilities for voice communications consist of twelve Nortel DMS-500 switch sites and ten Lucent 5E switch sites. Our Nortel DMS-500 switches, which are capable of handling both local and long distance voice and data traffic, are installed in the following locations:

• Gulfport, Mississippi;

• Montgomery, Birmingham and Anniston, Alabama;

• Nashville, Tennessee;

• Atlanta, Georgia;

• Columbia, South Carolina;

• Greensboro, North Carolina; and

• Jacksonville, Ocala, Orlando and West Palm Beach, Florida.

Our Lucent 5E switch sites, which are capable of handling local voice and data traffic, are installed in the following locations:

• Greenville, Charleston and Columbia, South Carolina;

• Charlotte, Greensboro, Raleigh, Greenville and Wilmington, North Carolina; and

• Orlando and Tampa, Florida.

In addition to our switching platform, we also have colocated communications equipment in various markets in the southern United States. Colocation enables us to provide remote facilities-based local and long distance services in markets where we do not have switches by using our switches in other locations as hosts. To provide these remote services, we use our fiber optic network and leased facilities to connect our remote equipment to our switches when it is economically and operationally advantageous for us to do so.

Fiber Optic Network. As of December 31, 2006, we owned 11,811 route miles of a fiber optic network that extended from New York to Florida and principally covered portions of our primary eight-state market. We have built or acquired our network through direct construction, acquisition of BTI Telecom Corp. including its network in 2003, and long-term dark fiber leases or indefeasible rights-of-use agreements. We extend the geographic reach of our network and seek to reduce our dependence on incumbent local telephone companies in some markets through strategic relationships with regional public utilities pursuant to which we market, sell and use transmission capacity on networks that are owned and operated by the utilities. As of December 31, 2006, our network extended to over 200 points of presence. These points of presence are located in most major population centers in the areas covered by our fiber optic network and in a significant number of smaller towns and communities. We intend to focus most of our future capital expenditures on investments that we believe will enable us to acquire additional customers and generate increased operating revenues.

We have implemented electronic redundancy, which enables traffic to be rerouted to another fiber in the same fiber sheath in the event of a partial fiber cut or electronic failure, over a portion of our network. In addition, as of December 31, 2006, approximately 70% of our network traffic was protected by geographical diverse routing, a network design also called a “self healing ring,” which enables traffic to be rerouted in the event of a total cable cut to an entirely different fiber optic cable.

In integrating the ITC^DeltaCom and BTI networks, we have transitioned a substantial portion of each company’s voice and data traffic from previously leased long-haul facilities to our combined owned fiber optic network, redeployed or eliminated redundant switches and other network facilities, eliminated related duplicative back office and other administrative functions, and experienced related operational efficiencies.

8

Sales and Marketing

Integrated Communications Services and Equipment Sales and Related Services. We provide our integrated communications services and our equipment sales and related services through two primary sales channels, which consist of our direct sales force and our network of independent dealers and sales agents.

Direct Sales. We focus our sales efforts for our integrated communications services and our equipment sales and related services on businesses in the southeastern United States. We conducted our direct sales efforts through 44 branch offices as of December 31, 2006.

We market our integrated communications services and our equipment sales and related services through a direct sales force composed of sales personnel, technical consultants and technicians. We derive the vast majority of our revenues for our integrated communications services and our equipment sales and related services from our direct sales efforts. We base our marketing strategy upon the conviction that customers prefer to have one company accountable for all of their communications services. Each branch office, through the support of the technical consultant, provides technical assistance for the products and services it sells. Our customers are assured that they will have a point of contact, 24 hours a day, seven days a week, to support all of the services they receive from us.

Our sales personnel make direct calls to prospective business customers, conduct an analysis of each prospect’s usage history and service needs and, based on consultations with the prospect, present a tailored service package intended to improve the prospect’s communications capabilities and costs. Sales personnel locate potential business customers principally through customer referrals, market research, telemarketing, and networking alliances, such as endorsement agreements with trade associations and local chambers of commerce. Our sales personnel work closely with our network engineers and information systems consultants to design new service products and applications. Our branch offices are primarily responsible for coordinating service and customer premise equipment installation activities. Technicians survey customer premises to assess power and space requirements and to coordinate delivery, installation and testing of equipment.

Our integrated communications services contracts generally provide for payment in arrears of a flat fee in advance for local telephone, data and Internet services. The agreements also generally provide that the customer may terminate the affected service without a charge for early termination upon the occurrence of a substantial and prolonged outage arising from causes within our control, and for other specified causes. The agreements for long distance services generally provide that the customer must use at least a minimum amount, measured by dollars or minutes of use, of switched long distance services each month for the term of the agreement. We also offer our switched long distance services bundled together with some of our other integrated communications services under agreements providing for a recurring fixed monthly fee and a specified maximum number of long distance minutes of use. For example, our Simplici-T Plus offering provides local, long distance and dynamically allocated Internet services over one digital T-1 transmission line for a fixed monthly fee that is invoiced on a single bill.

Independent Dealer and Agent Sales. We have an established network of independent dealers and agents to market our integrated communications services and equipment sales and related services. As of December 31, 2006, we had eight dealer managers located in our direct sales offices to manage our independent dealer and agent sales forces. The dealer managers are responsible for recruiting new dealers to market our services and supporting new sales made by the dealers. As with our direct sales force, our independent dealers and agents have access to our technical consultants and technicians for sales support. This access enables our dealers and agents to be more effective in their sales efforts and ultimately to present a better bundle of services for the customer. We also support dealers and agents through our order management and support infrastructure. Our authorized dealers and agents receive commissions based on services sold, usage volume and customer retention.

Wholesale Services. We market our broadband transport and other wholesale services through a dedicated direct sales force. We generally enter into master lease agreements with our broadband transport services

9

customers that have terms ranging from one to five years. Our broadband transport customers purchase the capacity they require under the terms specified in the master agreements.

Competition

The communications industry is highly competitive. We compete primarily on the basis of the price, availability, reliability, variety and quality of our offerings and on the quality of our customer service. Our ability to compete effectively depends on our ability to maintain high-quality services at prices generally equal to or below those charged by our competitors. Price competition in the integrated communications services and broadband transport services markets generally has been intense and is expected to increase. Our competitors include, among others, various “competitive carriers” like us, as well as larger providers such as AT&T Corp., which recently acquired BellSouth Corporation, Sprint, and Verizon Communications Inc. These larger providers have substantially greater infrastructures, financial, personnel, technical, marketing and other resources, larger numbers of established customers and more prominent name recognition than ITC^DeltaCom. These companies also operate more extensive transmission networks than we do. Companies such as Level 3 Communications, Inc., which recently acquired Broadwing Corporation, and Qwest Communications International Inc. have constructed nationwide fiber optic systems, including routes through portions of the southern United States in which we operate our fiber optic network. The recent merger of AT&T Corp. and BellSouth will significantly enhance the competitive resources of AT&T within the former BellSouth territory. We increasingly face competition in the local and long distance market from local carriers, resellers, cable companies, wireless carriers and satellite carriers, and may compete with electric utilities. We also may increasingly face competition from businesses offering long distance data and voice services over the Internet. These businesses could enjoy a significant cost advantage because currently they generally do not pay carrier access charges and are subject to less regulation than traditional carriers.

We face significant competition from competitive carriers that are similar to us, principally in terms of size, structure and market share. Some of these carriers already have established local operations in some of our current and target markets. Others are not as well-situated as we are in the markets in which we offer service. Many competitive carriers are struggling financially and we expect further consolidation of carriers in the markets we serve. We cannot predict which of these carriers will be able to continue to compete effectively against us.

We also compete in the provision of local services against the incumbent local telephone company in each market, which is AT&T in a large majority of our market areas due to AT&T’s recent acquisition of BellSouth. The acquisition of BellSouth by AT&T likely will result in more intense competition in our markets. Incumbent carriers enjoy substantial competitive advantages arising from their historical monopoly position in the local telephone market, including pre-existing customer relationships with all or substantially all end-users. We are highly dependent on incumbent carriers for local network facilities and wholesale services required for us to assemble our own local services. AT&T’s recent acquisition of BellSouth is expected to amplify the advantages these incumbent carriers previously enjoyed independently. We also will face increased competition to the extent that AT&T and other incumbent carriers compete in each other’s markets. Wireless communications providers are competing with wireline local telephone service providers, which further increases competition. The acquisition of BellSouth by AT&T should enhance the competitiveness of AT&T Wireless (formerly Cingular Wireless) both as a replacement for wireline service and as a component of bundled services provided by AT&T.

The convergence of local and long distance marketing has resulted in other carriers offering integrated communications services. For example, competitive carriers typically offer bundled local, long distance and internet services to their customers. Cable companies also have entered the market for these services, primarily by using Voice over Internet Protocol, or VoIP, applications. Cable companies and other providers also are expected to increase their competitive position through the offering of wireless broadband and other services. We cannot predict whether or how quickly these new offerings will penetrate the markets we serve or the rate at which the wireless service will substitute for wireline service in the future in both residential and business markets. We also compete with numerous direct marketers, telemarketers and equipment vendors and installers with respect to portions of our business.

10

Regional Bell operating companies such as AT&T have extensive fiber optic cable, switching and other network facilities in their regions that they can use to provide communications services throughout the country. By offering bundled services in our markets, AT&T is able to offer substantially the same integrated local and long distance services as we do and will have a significant competitive advantage over us in marketing those services to its existing local customers.

A continuing trend toward consolidation, mergers, acquisitions and strategic alliances in the communications industry has increased the level of competition we face. In December 2006, AT&T, which previously was acquired by SBC Communications, Inc., completed its acquisition of BellSouth. Earlier in 2006, Verizon Communications completed its acquisition of MCI. These mergers resulted in the combination of some of the largest carriers in the telecommunications industry. In addition, as reflected in the earlier acquisitions of Cable and Wireless USA, Inc. by SAVVIS, Inc., KMC Telecom Corp. by CenturyTel, Inc., Broadwing and TelCove by Level 3, Talk America by Cavalier, Xspedius by Time Warner Telecom, and US LEC by PAETEC, substantial consolidation has taken place among competitive carriers. We expect this trend to continue. We expect market power for U.S. telecommunications services to be further consolidated among the incumbent carriers and for business and residential customer choice to be significantly reduced in many areas.

A recent trend toward deregulation, particularly in connection with incumbent carriers and service providers that use VoIP applications, could increase the level of competition we face in our markets and, in turn, adversely affect our operating results. Incumbent carriers and, in particular, the regional Bell operating companies continue to seek deregulation for many of their services at both the federal and state levels. These efforts have been successful in some states. To the extent their efforts are successful, these companies will gain additional pricing flexibility, which could affect our ability to compete with them. The recent emergence of service providers that use VoIP applications also could present a competitive challenge. Because key aspects of the regulatory status of VoIP applications remain unsettled, providers of such applications may be able to avoid costly regulatory requirements, including the payment of intercarrier compensation. This could impede our ability to compete with these providers on the basis of price. More generally, the emergence of new service providers, such as cable companies that use VoIP applications, will increase competition, which could adversely affect our ability to succeed in the marketplace for communications and related services.

Two of the largest incumbent carriers, AT&T and Verizon, have announced that they are continuing to invest substantial funds in upgrading their networks to accommodate the transmission of video content in real-time and other data-rich applications such as interactive gaming. These carriers may seek to use their investments to compete against cable companies in the provision of bundled voice, video and high-speed data services. Although we understand that this strategy is directed principally toward the provision of services to residential customers, any increase in the market power of these carriers in this segment could improve the ability of these carriers to increase their efforts to attract the small and medium-sized businesses we serve. We cannot predict the extent to which additional investments by these carriers will affect our competitive position in the markets we serve.

The growing availability of wireless Internet access and the use of Internet Protocol-enabled services for voice and data transmissions will continue to increase the number of services with which we must compete. For example, some municipal authorities are providing, or have enlisted third parties to provide, wireless Internet access, or Wi-Fi service, throughout their jurisdictions. These Wi-Fi services, when combined with VoIP or other advanced applications, can enable users to communicate by phone, access the Internet, or engage in other broadband activities, typically at a minimal flat-rate charge. We cannot predict the extent to which municipal Wi-Fi networks will succeed or replace services that today are provided by carriers such as us.

Regulation

Overview. Our services are subject to federal, state and local regulation. Through our wholly-owned subsidiaries, we hold numerous federal and state regulatory authorizations. The Federal Communications Commission, or FCC, exercises jurisdiction over telecommunications common carriers to the extent that they

11

provide, originate or terminate interstate or international communications. The FCC also establishes rules and has other authority over some issues related to local telephone competition. State regulatory commissions retain jurisdiction over telecommunications carriers to the extent that they provide, originate or terminate intrastate communications. Local governments may require us to obtain licenses, permits or franchises to use the public rights-of-way necessary to install and operate our networks.

Federal Regulation. We are classified as a non-dominant carrier by the FCC and, as a result, are subject to relatively limited regulation of our interstate and international services. Some general policies and rules of the FCC apply to us, and we are subject to some FCC reporting requirements, but the FCC generally does not review our billing rates. We possess the operating authority required by the FCC to conduct our long distance business as it is currently conducted. As a non-dominant carrier, we may install and operate additional facilities for the transmission of domestic interstate communications without prior FCC authorization, except to the extent that radio licenses are required. The following discussion summarizes some specific areas of federal regulation that directly or indirectly affect our business.

Local Competition. The FCC’s role with respect to local telephone competition arises principally from the Communications Act, as amended by the Telecommunications Act of 1996. The Communications Act preempts state and local laws to the extent that they prevent competition in the provision of any telecommunications service. Subject to this limitation, state and local governments retain telecommunications regulatory authority over intrastate telecommunications. The Communications Act imposes a variety of duties on local carriers, including competitive carriers such as ITC^DeltaCom, to promote competition in the provision of local telephone services. These duties include requirements for local carriers to:

• interconnect with other telecommunications carriers;

• complete calls originated by customers of competing carriers on a reciprocal basis;

• permit the resale of their services;

• permit users to retain their telephone numbers when changing carriers; and

• provide competing carriers access to poles, ducts, conduits and rights-of-way at regulated prices.

Incumbent carriers also are subject to additional duties. These duties include obligations of incumbent carriers to:

• offer interconnection on a non-discriminatory basis;

• offer colocation of competitors’ equipment at their premises on a non-discriminatory basis;

• make available some of their network facilities, features and capabilities on non-discriminatory, cost-based terms; and

• offer wholesale versions of their retail services for resale at discounted rates.

Collectively, these requirements recognize that local telephone service competition is dependent upon cost-based and non-discriminatory interconnection with, and use of, some elements of incumbent carrier networks and facilities under specified circumstances. Failure to achieve and maintain such arrangements could have a material adverse effect on our ability to provide competitive local telephone services. Under the Communications Act, incumbent carriers are required to negotiate in good faith with carriers requesting any or all of the foregoing arrangements.

In conjunction with the FCC approval of the AT&T merger with BellSouth, AT&T made certain merger commitments that are enforceable by the FCC. The merger commitments will be in effect for a 42-month period following the merger or in the case of some special access provisions for 48 months. The commitments address the following areas that may affect the business relationship between AT&T and competitive local telephone companies: availability and pricing of UNEs, the rates, terms and conditions for special access services, the reduction of transaction costs associated with interconnection agreements, transit costs, net neutrality, divestiture

12

of limited facilities, the discontinuance of audits relating to enhanced extended links, not to petition the FCC to forbear from the application of its regulations, and Tunney Act conditions. We are unable to determine the ultimate impact of the merger commitments pending a final order from the FCC and additional analysis of opportunities resulting from the commitments. Although we expect the commitments to partially mitigate certain operating risk during their duration, we are unable to determine the extent of the impact at this time.

Among other interconnection agreements, we entered into interconnection agreements with BellSouth, before it was acquired by AT&T, in 1999 that enabled us to provide local service in all nine of the former-BellSouth states on either a resale basis or by purchasing all unbundled network elements required to provide local service without using facilities we own. These interconnection agreements also allow us to purchase unbundled network elements, or UNEs, including UNE-Transport and UNE-Loops, that we use to provide services over our own facilities. The initial term of these interconnection agreements expired in June 2003, and renew on a month-to-month basis thereafter. In August 2005, following negotiations and arbitration, we and BellSouth entered into a new interconnection agreement in Georgia having a 42-month term. In November 2006, we and BellSouth entered a new 42-month interconnection agreement that has been approved by the North Carolina Commission. We currently are engaged in arbitration processes concerning the rates and terms of new agreements with AT&T (BellSouth) in Alabama, Florida, Louisiana and Tennessee. We expect to seek new interconnection agreements for these states during 2007. There is no assurance that we can agree with AT&T on mutually acceptable terms. In addition, we will seek new agreements with AT&T in South Carolina, Mississippi and Kentucky through negotiations or by exercising our right to adopt agreements AT&T has with other carriers. We expect that we will continue to operate under the terms of the existing agreements in these states until we enter into new agreements. We expect, but cannot assure, that each new AT&T interconnection agreement to which we are or will be a party will provide us with the ability to provide local service in the nine states in the former BellSouth territory on a reasonable commercial basis.

In August 2003, the FCC adopted changes to the rules defining the circumstances under which incumbent carriers must make network elements available to competitive carriers at cost-based rates. These rule changes were appealed by both incumbent carriers and competitive carriers to a federal court of appeals, which, in March 2004, vacated and remanded to the FCC several aspects of those changes. In February 2005, the FCC issued a decision in response to the court’s March 2004 ruling. That decision, which is known as the Triennial Review Remand Order, became effective on March 11, 2005, but again was appealed. In June 2006, a federal court of appeals upheld the TRRO. The TRRO revised the rules for when incumbent carriers must unbundle and make available to competitive carriers various types of UNEs, including high-capacity loops and interoffice transport. The following sets forth information about the application of the new rules.

UNE Loops

DS0 Loops. A DS0 loop is a single, voice-grade channel. Typically, individual business lines are DS0 loops. Incumbent carriers must make DS0 loops available on an unlimited basis at cost-based, or UNE, rates.

DS1 Loops. A DS1 loop is a digital loop with a total speed of 1.544 megabytes per second, which is the equivalent of 24 DS0s. Multiple voice lines and Internet access can be provided to a customer over a single DS1 loop. We understand the FCC’s new rules to require that incumbent carriers make available to competitive carriers DS1 loops at UNE rates in the majority of incumbent carrier central offices.

DS3 Loops. A DS3 loop is a digital loop with a total speed of 44.736 megabytes per second. We understand the FCC’s new rules to require that incumbent carriers make available to competitive carriers DS3 loops at UNE rates in the majority of incumbent carrier central offices.

OCn Loops and Dark Fiber. Under the FCC’s new rules, incumbent carriers are not required to provide optical capacity loops or dark fiber loops as UNEs. Optical capacity loops, referred to as OCn loops, are very high-capacity digital loops ranging in capacity from OC3 loops, which are the equivalent of three DS3 loops, to OC192.

13

Incumbent carriers are not required to provide some mass market broadband loop facilities and functionality to competitive carriers as UNEs. In particular, incumbent carriers are not required to make newly-deployed fiber-to-the-home, or FTTH, loops available as UNEs and are only required to provide the equivalent of DS0 capacity on any FTTH loop built over an existing copper loop. At least one incumbent carrier outside of our primary service region has sought and obtained additional regulatory relief from any remaining obligation to make FTTH loops and other network elements available to competitive carriers in a particular market. Other incumbent carriers have sought, and in the future are expected to seek, similar relief in the regions in which they provide service. The FCC already has held that incumbent carriers are not required to unbundle and make available to competitive carriers fiber-to-the-curb, or FTTC, loops. We cannot predict whether the FCC will permit incumbent carriers to obtain further regulatory relief, particularly in our primary service region in which we may rely on incumbent carriers most for network elements and other services.

UNE Transport

DS1 Transport. Whether transport is available as a UNE is determined on a route-by-route basis. Incumbent carriers must make transport at UNE rates available at DS1 capacity levels between any two incumbent carrier central offices unless both central offices either serve more than 38,000 business lines or have four or more fiber-based colocators.

DS3 Transport. Access to DS3 capacity-level transport is more limited than access to DS1 transport. Incumbent carriers must make transport at UNE rates available at DS3 capacity levels between any two incumbent carrier central offices unless both central offices either serve more than 24,000 business lines or have three or more fiber-based colocators.

Dark Fiber Transport. Dark fiber transport is available under the same conditions as DS3 transport.

Incumbent carriers are not required to provide access to transport at greater than DS3 capacity levels. Incumbent carriers also are not required to provide transport at any capacity level to connect an incumbent carrier central office with a competitive carrier’s facilities.

In addition to addressing high-capacity loops and transport, the TRRO confirmed the eventual elimination of mass market local switching as a UNE, thereby phasing out the availability of UNE-P at cost-based rates to competitive carriers such as us. Although we have an embedded base of UNE-P customers, we have moved a substantial number of our existing UNE-P customers to other provisioning arrangements where we have facilities and where it has been advantageous for us to do so. We also entered into commercial agreements with BellSouth, Embarq (formerly known as Sprint) and Verizon that allowed us to continue serving UNE-P customers. The Embarq and Verizon commercial agreements will expire in March 2007 and May 2008, respectively. We are seeking to renew our agreement with Embarq. We have entered into a new commercial agreement with BellSouth (now AT&T) that expires December 31, 2007. We are unable to determine the effect, if any, that the expiration of the commercial agreements will have on our results of operations and financial condition. We cannot predict whether we will be able to negotiate new commercial agreements upon the expiration of the existing commercial agreements or, if we are able to enter into replacement commercial agreements, whether the terms of new agreements will be as favorable to us as the terms of our existing agreements.

The FCC confirmed in the TRRO that the availability of special access services for competitive carriers does not excuse incumbent carriers from the requirement to make available prescribed UNEs at rates based on the FCC’s “Total Element Long Run Incremental Cost,” or TELRIC, pricing methodology. Although AT&T agreed to certain commitments in its merger with BellSouth that could provide stability in TELRIC-priced services for 42 months following the merger, we are unable at this time to assess the ultimate financial and operational impact of these commitments.

TELRIC Pricing. The FCC has initiated a re-examination of its TELRIC pricing methodology for network elements. The FCC has proposed a number of changes to these pricing rules that would be unfavorable to us.

14

Legislation has been proposed in Congress in the past and may be proposed in the future that would further restrict the access of competitive carriers to incumbent carriers’ network elements. Future restrictions on, or reductions in, the network elements available to us, or any increase in the cost to us of such network elements, could have a material adverse effect on our business.

Broadband. In the future, an important element of providing competitive local service may be the ability to offer customers high-speed broadband local connections. In 2005, the FCC reduced the number and types of unbundled network elements, such as FTTC and FTTH, that incumbent carriers must make available to competitive carriers to enable them to provide broadband services to customers using incumbent carrier networks. These restrictions were largely upheld by a federal court of appeals.

In other proceedings affecting broadband policy, the FCC has determined that facilities-based wireline broadband Internet access service, which includes DSL service, is an “information service” that is subject to reduced regulation. As a practical matter, this means that facilities-based wireline providers such as AT&T are not required to make available to competitors such as us the underlying transmission capability necessary for us to provide broadband Internet access service to consumers. To provide this service, therefore, we have to rely solely on our own facilities or enter into commercial agreements with other carriers for the use of their facilities. Although the FCC’s regulatory classification of facilities-based wireline broadband Internet access service has been appealed, we cannot predict the outcome of this appeal or the effect it may have on us and on our competitors.

The FCC has sought comment on a number of other regulatory proposals that could affect the speed and manner in which our competitors deploy high-speed broadband local services. One such proposal would change the rules by which incumbent telephone companies, like AT&T, decommission those copper loops that they no longer need and, instead, would make that copper available to competitors for use in broadband and other service applications. We cannot predict the outcome of these proposals at the FCC or in the courts or the effect they will have on our business and the industry. We also cannot predict the effect, if any, that the deployment of next-generation broadband wireless services will have on our business and the industry.

As a condition of its merger with BellSouth, AT&T has committed to accelerate deployment of fiber optic facilities and residential broadband services. These deployments may increase competition for small business customers in areas where AT&T broadband has not previously been available.

Congress also has considered in the past, and may consider in the future, legislation that would further deregulate aspects of facilities-based wireline and wireless broadband networks, whether provided by incumbent local carriers, cable companies, or other entities. We may be at a significant competitive disadvantage if we are unable to meet the future demands of our customers for broadband local access on a timely basis at competitive rates.

Internet Protocol-Enabled Services. The FCC is considering clarifications and changes to the prospective regulatory status of services and applications using the Internet Protocol, including VoIP offerings. VoIP is an application that manages the delivery of voice information across data networks, including the Internet, using Internet Protocol. Rather than send voice information across traditional circuits, VoIP sends voice information in digital form using discrete packets that are routed in the same manner as data packets. VoIP is widely viewed as a more cost-effective alternative to traditional circuit-switched telephone service. Because VoIP can be deployed by carriers in various capacities, and because it is widely considered a next-generation communications service, many aspects of its regulatory classification have not yet been determined.

The FCC has issued a series of rulings in connection with the regulatory treatment of VoIP, but many of those rulings have been narrowly tailored and others have addressed only discrete issues. The FCC has issued three declaratory rulings in connection with the regulatory treatment of VoIP. In one case, the FCC held that a computer-to-computer VoIP application provided by Pulver.com is an unregulated information service, in part because it does not include a transmission component, offers computing capabilities and is free to its users. In

15

another case, the FCC reached a different conclusion, holding that AT&T’s use of VoIP to transmit the long-haul portion of certain calls constitutes a telecommunications service, thus subjecting it to regulation, because the calls use ordinary customer premises equipment with no enhanced functionality, originate and terminate on the public switched telephone network and undergo no net protocol conversion and provide no enhanced functionality to end users. In a third case, which involved the VoIP application of Vonage, the FCC preempted the authority of the State of Minnesota (and presumably all other states) to regulate Vonage’s use of the application, ruling that Vonage’s VoIP application, and others like it, is an interstate service subject only to federal regulation. The FCC, however, refused to rule in the Vonage case whether Vonage’s VoIP application is a telecommunications service or an information service, thus leaving open the question of the extent to which VoIP service will be subject to federal regulation. An appeal of the FCC’s decision in the Vonage case is pending.

The FCC also has applied discrete regulatory obligations such as compliance with E-911 rules, the provision of network access to authorized law enforcement personnel, and the payment of universal service fund obligations on providers of interconnected VoIP service. The application of some of these requirements to providers of interconnected VoIP service has been appealed to reviewing courts, and we cannot predict the outcome of those appeals. In addition, a number of other petitions addressing the application of existing regulations to VoIP and other Internet Protocol services have been filed at the FCC and are pending. The FCC also has initiated a more generic rulemaking to address the many regulatory issues raised by the development and growth of VoIP services, and has expressly reserved the right to reconsider its declaratory and other rulings in the generic proceeding. We cannot predict the outcome of this and related proceedings on our business or the industry.

Congress also has considered in the past, and may consider in the future, legislation addressing VoIP. We cannot at this time predict if or when such legislation will be enacted, or its effect on our business or the industry.

Intercarrier Compensation. The FCC regulates the interstate access rates charged by local carriers for the origination and termination of interstate long distance traffic. These access rates make up a significant portion of the cost of providing long distance service. The FCC has adopted policy changes that over time are reducing incumbent carriers’ access rates, which has the effect of lowering the cost of providing long distance service, especially to business customers. In addition, the FCC has adopted rules that require competitive carriers to reduce gradually the levels of their tariffed access charges until those charges are no greater than those of the incumbent carriers with which they compete. In March 2005, the FCC initiated a proceeding designed to examine and reform comprehensively intercarrier compensation, including access charges, in the telecommunications market. Intercarrier compensation typically is the largest single expense incurred by companies that provide telecommunications services, including us. Further FCC action in this area may reduce most access charges in the future or shift all forms of intercarrier compensation to flat-rate pricing. We cannot predict at this time the result of this proceeding, the full impact of the FCC’s decisions in this area, or the effect these decisions will have on our business or the industry.

The FCC has granted incumbent carriers some flexibility in pricing their interstate special and switched access services. Under this pricing scheme, local carriers may establish pricing zones based on access traffic density and charge different prices for access provided in each zone. The FCC recently has been granting incumbent carriers additional pricing flexibility on a market-by-market basis as local competition develops in their markets. This pricing flexibility could place us at a competitive disadvantage, either as a purchaser of access for our long distance services or as a vendor of access to other carriers or end-user customers.

In April 2001, the FCC issued a ruling changing the compensation mechanism for traffic exchanged between telecommunications carriers that is destined for Internet service providers. In doing so, the FCC prescribed a new rate structure for this traffic and prescribed gradually reduced caps for its compensation. In the course of our business, we may exchange the traffic of Internet service providers with other carriers. The FCC’s ruling in connection with such traffic affected a large number of carriers, including us, and further developments in this area could have a significant effect on the industry and on us. Although a federal court remanded that FCC decision for further consideration, the court did not reverse the decision, so it remains in effect. In March 2005, in the context of its generic proceeding on intercarrier compensation, the FCC sought comment on broad policy

16

changes that could harmonize the rate structure and levels of all forms of intercarrier compensation, and ultimately could eliminate most forms of carrier-to-carrier payments for interconnected traffic, including traffic destined for Internet service providers.

Universal Service. Access charges historically have been used to subsidize universal telephone service. Together with access and other intercarrier compensation reform, the FCC in recent years has changed the methodology used to subsidize universal telephone service and achieve other related public policy goals. Any reform in connection with intercarrier compensation necessarily will require revisions to the FCC’s policies governing universal service. Because the effects of these revisions are uncertain, the fees we pay to subsidize universal service may increase or decrease substantially in the future.

Detariffing. The FCC required non-dominant long distance companies, including us, to detariff interstate long distance domestic and international services in 2001. In 2001, the FCC also permitted competitive local carriers, including us, to choose either to detariff the interstate access services that competitive carriers sell to long distance companies originating or terminating traffic from or to their local customers, or to maintain tariffs but comply with rate caps. Tariffs set forth the rates, terms and conditions for service and must be updated or amended when rates are adjusted or products are added or removed. Before detariffing, we filed tariffs with the FCC to govern our relationship with most of our long distance customers and with long distance companies that originated or terminated traffic from or to our local customers. The detariffing process has required us, among other things, to post these rates, terms and conditions on our Internet web site instead of filing them as tariffs with the FCC. Because detariffing precludes us from filing our tariffs with the FCC, some may argue that we are no longer subject to the “filed rate doctrine,” under which the filed tariff controls all contractual disputes between a carrier and its customers. The detariffing process has effectively required us to enter into individual contracts with each of our customers and to notify our customers when rates are adjusted or products are added or removed. This process increases our costs of doing business. Detariffing may expose us to legal liabilities and costs if we no longer can rely on the filed rate doctrine to settle contract disputes with our customers.

Customer Proprietary Network Information and Privacy. The Communications Act and the FCC’s rules require carriers to implement measures to prevent the unauthorized disclosure of Customer Proprietary Network Information, or CPNI. Additional measures to protect CPNI and consumer privacy are proposed from time to time, and both Congress and the FCC currently are considering such additional measures. These developments appear to be part of a broader trend to protect consumer information as it continues to migrate toward electronic formats. We cannot predict whether additional requirements governing CPNI or other consumer data will be enacted, or whether such additional requirements will affect our ability to market or provide our services to current and future customers.

Internet Neutrality. The FCC and Congress are considering the extent to which owners of network infrastructure should be permitted to prioritize data packets on their networks through commercial arrangements or based on other preferences. Whether such prioritization or preferences can be given and on what terms remains the subject of considerable debate among regulators and companies within the telecommunications industry. The FCC has promulgated four principles in a policy statement intended to address this issue, but these principles are broadly worded, and subject to a range of interpretation. The FCC thus far has imposed additional Internet neutrality, or “Net Neutrality” obligations only on AT&T in connection with its recent merger with BellSouth, but those obligations are narrowly tailored and are expected to expire by the end of 2008 or sooner. The effects of these and other Net Neutrality obligations on us, our competitors and on the industry is not clear and we cannot predict what they may be in the future.

Other Federal Regulation. The FCC imposes prior approval requirements on transfers of control and assignments of radio licenses and operating authorizations. The FCC has the authority generally to condition, modify, cancel, terminate, revoke or decline to renew licenses and operating authority for failure to comply with federal laws and the FCC’s rules, regulations and policies. Fines or other penalties also may be imposed for such violations. The FCC or third parties may raise issues with regard to our compliance with applicable laws and regulations.

17

State Regulation. We are subject to various state laws and regulations. Most state public utility commissions require providers such as us to obtain authority from the commission before initiating service in the state. In most states we also are required to file tariffs or price lists setting forth the terms, conditions and prices for certain services that are classified as intrastate and to update or amend our tariffs when we adjust our rates or add new products. We also are subject to various reporting and record-keeping requirements. In addition, some states are ordering the detariffing of services, which may impede our reliance on the filed rate doctrine and increase our costs of doing business.

We have authority to offer intrastate long distance services in all 50 U.S. states. We have obtained authority to provide long distance service in states outside of our current and target markets to enhance our ability to attract business customers that maintain offices, or have employees who travel, outside of our markets.

We provide local services in our region by reselling the retail local services of the incumbent carrier in a given territory and, in some established markets, using incumbent network elements and our own local switching facilities. As of December 31, 2006, we possessed authority to provide local telephone services in Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia and the District of Columbia.

Many issues remain open regarding how new local telephone carriers will be regulated at the state level. For example, although the Communications Act preempts the ability of states to prohibit local service competition, the Communications Act preserves the ability of states to impose reasonable terms and conditions of service and other regulatory requirements. The scope of state regulation will continue to be refined through rules and policy decisions made by public utility commissions as well as court appeals that are now pending.

State public utility commissions have responsibility under the Communications Act to oversee relationships between incumbent carriers and their new competitors with respect to such competitors’ use of the incumbent carriers’ network elements and wholesale local services. Public utility commissions arbitrate interconnection agreements between the incumbent carriers and competitive carriers such as us when necessary. Under the Communications Act, the decisions of state public utility commissions with regard to interconnection disputes may be appealed to federal courts.

There remain important unresolved issues regarding the scope of the authority of public utility commissions and the extent to which the commissions will adopt policies that promote local telephone service competition. For example, although the FCC recently preempted the ability of states to regulate some aspects of VoIP services, the FCC’s decision has been appealed, and it is difficult to predict how this and other matters will affect our ability to pursue our business plan.

States also regulate the intrastate carrier access services of incumbent carriers. We are required to pay access charges to incumbent carriers when they originate or terminate our intrastate long distance traffic. Our business could be harmed by high access charges, particularly to the extent that incumbent carriers do not incur the same level of costs with respect to their own intrastate long distance services or to the extent that they are able to offer their long distance affiliates better access pricing. Some states also regulate the intrastate access charges of competitive carriers. In addition, states may be developing intrastate universal service charges parallel to the interstate charges created by the FCC. For example, incumbent carriers such as AT&T advocate the formation of state-level funds that would be supported by potentially large payments by businesses such as us based on their total intrastate revenues. Another issue is raised by the use by some incumbent carriers, with the approval of the applicable public utility commissions, of extended local area calling that converts otherwise competitive intrastate toll service to local service. States also are or may be addressing various intraLATA dialing parity issues that may affect competition. In addition, state legislatures are passing new laws that remove some issues from state regulatory authority and, in general, apply less regulation and oversight to incumbent carriers. Our business could be harmed by these actions.

18

We also will be affected by how states regulate the retail prices of the incumbent carriers with which we compete. As the degree of intrastate competition increases, states are offering incumbent carriers increasing pricing flexibility and deregulation of particular services deemed to be competitive. This flexibility and deregulation may present the incumbent carriers with an opportunity to subsidize services that compete with our services with revenues generated from their non-competitive services, thereby allowing them to offer competitive services at prices lower than most or all of their competitors. AT&T has obtained authority to create affiliates that would operate on a much less regulated basis and, therefore, could provide significant competition in addition to the traditional AT&T local services. We cannot predict the extent to which these developments may affect our business.

Many states also require prior approval for transfers of control of certified carriers, corporate reorganizations, acquisitions of telecommunications operations, assignment of carrier assets, carrier stock offerings and incurrence by carriers of significant debt obligations. Certificates of authority generally can be conditioned, modified, canceled, terminated or revoked by state regulatory authorities for failure to comply with state law or the rules, regulations and policies of state regulatory authorities. State regulators also may impose fines or other penalties for such violations. Public utility commissions or third parties may raise issues with regard to our compliance with applicable laws or regulations.

Local Government Authorizations and Related Rights-of-Way. We are required to obtain street use and construction permits and licenses or franchises to install and expand our fiber optic network using municipal rights-of-way. In some municipalities where we have installed network equipment, we are required to pay license or franchise fees based on a percentage of gross revenues or a per linear foot basis. Following the expiration of existing franchises, these fees may not remain at their current levels. In many markets, the incumbent carriers do not pay these franchise fees or pay fees that are substantially less than those required to be paid by us, although the Communications Act requires that, in the future, such fees be applied in a competitively neutral manner. To the extent that our competitors do not pay the same level of fees that we do, we could be at a competitive disadvantage. Termination of the existing franchise or license agreements before their expiration dates, or a failure to renew the franchise or license agreements, and a requirement that we remove the corresponding portion of our facilities or abandon the corresponding portion of our network, could harm our business. In addition, we would be adversely affected if we are unable to obtain additional authorizations for any new network construction on reasonable terms.

A number of states are considering reforming their laws and regulations governing the issuance of franchises and permits by local governmental authorities, and some states already have enacted laws authorizing some types of entities to secure a state-wide franchise. The FCC also has adopted new rules to govern state and local franchising processes, although these new rules are expected to be subject of further debate and judicial review. Congress also has considered from time to time, and may consider in the future, various proposals intended to reform the relationship between federal, state and local governments in connection with the franchising process. We cannot predict how these issues will be resolved, or the extent to which these developments will affect our ability to compete. Unresolved issues also exist regarding the ability of new local service providers to gain access to commercial office buildings to serve tenants.

Employees

As of December 31, 2006, we had approximately 1,975 employees, of whom approximately 1,950 were full-time employees. None of our employees is represented by a union or covered by a collective bargaining agreement. We believe that our relationship with our employees is generally good. In connection with the construction and maintenance of our fiber optic network and the conduct of our other business operations, we use third-party contractors, some of whose employees may be represented by unions or covered by collective bargaining agreements.

19

Directors and Executive Officers

The table below shows information about our directors and executive officers as of March 1, 2007:

Name	Age	Position
Randall E. Curran	52	Chief Executive Officer and Director
Richard E. Fish, Jr.	41	Executive Vice President and Chief Financial Officer
J. Thomas Mullis	63	Senior Vice President-Legal and Regulatory, General Counsel and Secretary
Sara L. Plunkett	57	Senior Vice President-Finance
John Almeida, Jr.	36	Director
John J. DeLucca	63	Director
Clyde A. Heintzelman	68	Director
Michael E. Leitner	39	Director
R. Gerald McCarley	67	Director
Thomas E. McInerney	65	Chairman of the Board of Directors
Sanjay Swani	40	Director
Philip M. Tseng	30	Director

Randall E. Curran has served as our Chief Executive Officer and as a director since February 2005. He previously served as Chairman and Chief Executive Officer of ICG Communications, Inc., a competitive telecommunications company, from September 2000 until December 2003. Before joining ICG Communications, Mr. Curran served as Chairman, President and Chief Executive Officer of Thermadyne Holdings Corporation, a global manufacturer of welding and cutting products. During 2004, he was engaged in management consulting with both FTI Consulting, Inc. and his own firm. Mr. Curran served with Thermadyne and its predecessor companies since 1981 in various positions, including Chief Operating Officer and Senior Vice President-Chief Financial Officer. Early in his career, he worked at Cooper Industries and with the accounting firm of Arthur Andersen & Co. Mr. Curran received a Bachelor of Arts degree in economics from DePauw University and a Master of Business Administration degree from Loyola University in Chicago.

Richard E. Fish, Jr. has served as our Chief Financial Officer since April 2005 and as an Executive Vice President since February 2006. Mr. Fish previously served as our Chief Administrative Officer from February 2005 until April 2005. Before joining our company, Mr. Fish served from November 2000 to October 2004 as Executive Vice President and Chief Financial Officer for ICG Communications. Before assuming that position, Mr. Fish served from September 1999 to November 2000 as ICG Communication’s Senior Vice President of Finance. Before his service with ICG Communications, Mr. Fish served from 1994 to 1999 in various finance, regulatory, operational and business development positions with AT&T Local Services and Teleport Communications Group, a telecommunications service provider which became a subsidiary of AT&T. Before his service with AT&T and Teleport Communications Group, Mr. Fish served from 1987 to 1994 with the accounting firm of Arthur Andersen & Co.

J. Thomas Mullis has served as our Senior Vice President-Legal and Regulatory, General Counsel and Secretary since March 1997. Mr. Mullis served as General Counsel and Secretary of DeltaCom, Inc., the predecessor of one of our wholly-owned subsidiaries, which was a provider of long distance telecommunications services, from May 1985 to March 1997 and as Executive Vice President of DeltaCom from January 1994 to November 1996. From November 1996 to March 1997, he also served as Senior Vice President of DeltaCom. From January 1990 to December 1993, Mr. Mullis was President, General Counsel and Secretary of Southern Interexchange Services, Inc., a switched services carrier, and Southern Interexchange Facilities, Inc., a private line carriers’ carrier. Mr. Mullis served as an executive officer of ITC^DeltaCom on and before the date we filed for protection from creditors under Chapter 11 of the United States bankruptcy code in June 2002.

Sara L. Plunkett has served as our Senior Vice President-Finance since July 2005 and as our Vice President-Finance from March 1997 until July 2005. She also served as our Treasurer from March 1997 through March

20

2000. Ms. Plunkett served as Vice President-Finance of DeltaCom, Inc., the predecessor of one of our wholly-owned subsidiaries, which was a provider of long distance telecommunications services, from October 1996 until March 1997. From May 1989 through October 1996, she served as Chief Financial Officer of DeltaCom. Ms. Plunkett served as an executive officer of ITC^DeltaCom on and before the date we filed for protection from creditors under Chapter 11 of the United States bankruptcy code in June 2002.

John Almeida, Jr., has served on the board of directors since October 2003. Mr. Almeida joined Welsh, Carson, Anderson & Stowe, a private equity firm, in 1999 and currently is a General Partner with that firm. Before joining Welsh, Carson, Anderson & Stowe, Mr. Almeida worked at Lehman Brothers, a global financial services firm, in the investment banking department from 1997 to 1999 and at the private equity firm Westbury Capital Partners from 1995 to 1997. Mr. Almeida served as a director of BTI from 2001 to 2003. Mr. Almeida also serves as a director of Local Insight Media, Inc. and Titan Outdoor Holdings, Inc.

John J. DeLucca has served on the board of directors since October 2002. Mr. DeLucca has served as Executive Vice President and Chief Financial Officer of REL Consultancy Group, a provider of financial consulting services to businesses, from 2003 until 2004. Mr. DeLucca previously served as Executive Vice President, Finance and Administration, and Chief Financial Officer of Coty Inc., a manufacturer and marketer of personal fragrances, from 1999 to February 2002 and as Senior Vice President and Treasurer of RJR Nabisco Inc., an international consumer products company, from 1993 to 1998. Mr. DeLucca also has served, among other positions, as Managing Director and Chief Financial Officer of Hascoe Associates, President and Chief Financial Officer of the Lexington Group, and Senior Vice President-Finance and Managing Director of The Trump Group. Mr. DeLucca currently serves as a director and chairman of the nominating committee and governance committee and as a member of the audit committee of Enzo Biochem, Inc., as a director and deputy chairman of the audit committee, and as a member of the nominating committee, the governance committee and the trading/risk committee of British Energy plc, as a director and a member of the audit committee of Endo Pharmaceuticals, Inc., as a director of Tier Technologies, Inc. and as a director of a private company.

Clyde A. Heintzelman has served on the board of directors since July 2005. Mr. Heintzelman served as the Chairman of the Board of Optelecom, Inc. from February 2000 to June 2003 and as its interim President and Chief Executive Officer from June 2001 to January 2002. From November 1999 to May 2001, he was President of Net2000 Communications, Inc. On November 16, 2001, Net2000 Communications and its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States bankruptcy code. From December 1998 to November 1999, Mr. Heintzelman served as the President and Chief Executive Officer of SAVVIS, Inc. (formerly SAVVIS Communications Corporation), a networking and Internet solutions company. Mr. Heintzelman currently serves as a director and chairman of the audit committee of SAVVIS, Inc., as a director and a member of the audit committee of Telecommunication Systems, Inc. and Chairman of the Board of Citel, an AIM listed company.

Michael E. Leitner has served on the board of directors since August 2005. Mr. Leitner is a Partner of Tennenbaum Capital Partners, LLC, a private investment firm, where he has worked since 2005. Before joining Tennenbaum Capital Partners, he served as a Senior Vice President of Corporate Development for WilTel Communications from 2004 to 2005. From 2000 to 2003, Mr. Leitner served as Vice President of Corporate Development of 360networks and Chief Executive Officer of 360networks’ Latin American-Caribbean long-distance business (GlobeNet Communications). From 1998 to 2000, Mr. Leitner was a Senior Director of Corporate Development for Microsoft Corporation. Mr. Leitner served as a Vice President in the Technology Mergers & Acquisitions group at Merrill Lynch, a global financial services firm, from 1994 to 1998.

R. Gerald McCarley served on the board of directors from January 2002 to October 2002. He was reappointed as a director in January 2003. Mr. McCarley is a retired partner of the accounting firm of Deloitte & Touche LLP. He retired from that firm in June 1999 after having served as an accounting and audit partner since 1980. Mr. McCarley joined a predecessor of Deloitte & Touche in 1967 and served in various positions before he was appointed a partner in 1980.

21

Thomas E. McInerney has served on the board of directors since October 2003 and as Chairman of the Board since February 2005. Mr. McInerney has been a General Partner of Welsh, Carson, Anderson & Stowe since 1986 and is a Managing Member or General Partner of the sole general partners of Welsh, Carson, Anderson & Stowe VIII, L.P. and other associated investment partnerships. Previously, Mr. McInerney co-founded and served as President and Chief Executive Officer of Dama Telecommunications Corp., a communications services company. Before co-founding Dama Telecommunications, Mr. McInerney worked in the financial services area at Automatic Data Processing, Inc. and was previously with the American Stock Exchange. Mr. McInerney served as a director of BTI from 2001 to 2003 and is currently a director of Centennial Communications Corporation, SAVVIS, Inc. and various private companies.

Sanjay Swani has served on the board of directors since October 2003. Mr. Swani joined Welsh, Carson, Anderson & Stowe in 1999 and has been a General Partner of that firm since 2001. Mr. Swani is a Managing Member or General Partner of the sole general partners of Welsh, Carson, Anderson & Stowe VIII, L.P. and other associated investment partnerships. From 1998 to 1999, Mr. Swani was a Principal at Fox Paine & Company, a San Francisco-based buyout firm. From 1994 to 1998, he served with Morgan Stanley & Co., a global financial services firm, in the mergers and acquisitions and debt capital markets areas. Mr. Swani served as a director of BTI from 2001 to 2003 and is currently a director of BancTec, Inc., Global Knowledge Networks, Inc., Valor Communications Group, Inc. and a private company.

Philip M. Tseng has served on the board of directors since February 2007. Mr. Tseng is a Principal of Tennenbaum Capital Partners LLC, a private investment firm, where he has worked since July 2004. Before joining Tennenbaum Capital Partners, from January 2000 to June 2002, Mr. Tseng was employed with Credit Suisse First Boston, an international investment banking firm, in the technology group and, from August 1998 to January 2000, with Deutsche Bank Alex Brown, an international investment banking firm, in the telecommunications group.

Chapter 11 Reorganization in 2002

Beginning in the third quarter of 2001, we initiated a strategic and operational restructuring intended to accelerate positive cash flow from operations by emphasizing our core retail services and reducing operating costs. In addition to de-emphasizing some non-core services, the key elements of this strategy included reduction of our employee base, consolidation of facilities and operations, and reduction of capital expenditures. We also sought to eliminate a substantial portion of our existing indebtedness and reduce our fixed interest costs.

To complete our reorganization expeditiously, we filed a voluntary petition for relief under Chapter 11 of the United States bankruptcy code on June 25, 2002. On October 17, 2002, the bankruptcy court entered an order confirming our plan of reorganization. We completed our reorganization under the plan on October 29, 2002. On October 29, 2002, we implemented “fresh start reporting” under the provisions of AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.” Under SOP 90-7, the reorganization value of ITC^DeltaCom was allocated to our assets and liabilities, our accumulated deficit was eliminated and our new equity was issued in accordance with our plan of reorganization as if we were a new reporting entity.

Additional Information

We have adopted a code of ethics applicable to our chief executive officer and other senior financial officers, who include our principal financial officer, principal accounting officer or controller, and persons performing similar functions. We will provide a copy of this code in print to any stockholder who requests a copy. Requests for copies should be directed to Corporate Secretary, ITC^DeltaCom, Inc., 7037 Old Madison Pike, Huntsville, Alabama 35806. To the extent required by SEC rules, we intend to disclose any amendments to this code and any waiver of a provision of the code for the benefit of our directors, principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our Internet web site at www.deltacom.com within five business days following any such amendment or waiver, or within any other period that may be required under SEC rules from time to time.

22

Item  1A. Risk Factors

Our business and operations are subject to a number of risks and uncertainties, including the following:

Our ability to comply with the financial covenants in our debt agreements depends primarily on our ability to generate substantial operating cash flow.

Our ability to comply with the financial covenants under the agreements governing our outstanding secured indebtedness will depend primarily on our success in generating substantial operating cash flow. Under our debt agreements, we are subject to a maximum capital expenditures covenant, a senior debt ratio covenant, a total leverage ratio covenant, an interest coverage ratio covenant, a minimum unrestricted cash covenant and a minimum consolidated EBITDA covenant, as EBITDA is defined for purposes of the agreements. Industry conditions and financial, business and other factors, including those we identify as risk factors in this report, will affect our ability to generate the cash flows we need to meet those financial tests and ratios. Our failure to meet the tests or ratios could result in a default and acceleration of repayment of the indebtedness under our credit facilities. If the maturity of our indebtedness were accelerated, we may not have sufficient funds to pay such indebtedness. In such event, our lenders would be entitled to proceed against the collateral securing the indebtedness, which includes substantially all of our assets.

Our substantial level of indebtedness could adversely affect our financial health and ability to compete.

As of March 1, 2007, we had $357.4 million of total long-term indebtedness, net of unamortized discount, including current portion. Our substantial level of indebtedness could have important consequences. For example, it may:

• increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations, because a significant portion of our borrowings will continue to be at variable rates of interest;

• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

• limit our ability to borrow additional funds to alleviate liquidity constraints, as a result of financial and other restrictive covenants in our indebtedness;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• place us at a competitive disadvantage relative to companies that have less indebtedness; and

• limit our ability to refinance our principal secured indebtedness, which matures in the third quarter of 2009.

In addition, we will be required either to repay or refinance a total of approximately $350 million principal amount of our outstanding secured indebtedness upon maturity during the third quarter of 2009. If principal payments due at maturity cannot be refinanced or extended, our cash flow may not be sufficient to repay all such indebtedness at the relevant times. Failure either to repay or refinance such indebtedness would result in a default and entitle our lenders to proceed against our assets securing the indebtedness.

Affiliates of Welsh, Carson, Anderson & Stowe own securities representing a majority of our voting power, which gives them the ability to exercise significant or controlling influence over major corporate actions by us.

The controlling affiliates of the investment funds that constitute Welsh, Carson, Anderson & Stowe, a private equity firm, have reported in SEC filings that such affiliates and the funds, as a group, beneficially own common stock and Series B preferred stock representing a majority of the voting power of our outstanding

23

capital stock. Based on their existing capital stock ownership, the members of this group currently have the right to control the outcome of actions involving our company or its assets that require stockholder approval. In addition, three of our nine directors are members of, or affiliated with members of, this group.

The Welsh, Carson, Anderson & Stowe group may have interests with respect to our company that differ from those of our other stockholders as a result of significant investments by the group in other communications companies.

The FCC may restrict our ability to provide local services and may increase the costs we incur to provide these services.

In February 2005, the FCC released an order limiting the number and types of unbundled network elements that incumbent local exchange carriers must make available to us and other competitive communications companies. The FCC’s order also eliminated the requirement that incumbent carriers make available to us and other competitive carriers local switching services for residential and small business customers. If these incumbent carriers do not continue to cooperate in facilitating an orderly transition to the new rules, our business could be adversely affected. If prices of the network elements that we use to provide our services increase or if those network elements are eliminated as a result of the implementation of the February 2005 order or any future consideration of this issue by the FCC, our cost of providing local exchange service could increase and have a significant adverse impact on our operating results and cash flows. Because of the February 2005 order, incumbent local telephone companies no longer are required to provide local switching services, which means that we can no longer rely on the Unbundled Network Element-Platform, or UNE-P, to provide local services to customers. The FCC’s order also limits the availability to us of some incumbent carrier dedicated transport services between central offices and broadband local loops. Although the FCC’s order permits carriers to enter into commercial agreements for network elements and provided for a transition period to the new rules, AT&T and the other incumbent carriers in our markets have not made, and are not expected to make, network elements available to us at the same rates they have in the past. Although AT&T made certain commitments relative to the availability and pricing of UNEs in connection with its merger with BellSouth, the financial impact of those commitments on us and other competitive carriers is uncertain.

The FCC also has proposed new rules that would change the existing cost-based method of pricing the services that we obtain from the incumbent local telephone companies. If adopted, the proposed rules would enable the incumbent local telephone companies to initiate proceedings before state public utility commissions to seek increased rates for unbundled network elements. If some elements in particular markets or on particular transport routes in those markets cease to be available to us at the existing cost-based rates, we could experience an increase in our cost of providing local exchange services, which would negatively affect our operating results and cash flows.

We are subject to a significant number of legal proceedings that could result in our payment of substantial monetary damages and could adversely affect our ability to provide services.

To maintain our fiber optic network, we have obtained easements, rights-of-way, franchises and licenses from various third parties, including actual and potential competitors, local governments, private landowners and others. We may not be able to continue to use or have access to all of our existing easements, rights-of-way, franchises and licenses or to renew or replace them after they expire. Third parties have initiated legal proceedings in a number of states challenging some of our significant licenses to use the rights-of-way of others, including our licenses to use the rights-of-way of Mississippi Power Company and Gulf Power Company. Proceedings that remain pending affect approximately 300 route miles of our network as of December 31, 2006 and, if resolved in a manner adverse to us, could affect additional portions of our network. We cannot predict whether additional portions of our network will become subject to similar legal proceedings in the future. If some of these or similar future challenges are successful, or if we are otherwise unsuccessful in maintaining or renewing our rights to use our network easements, rights-of-way, franchises and licenses, we may be compelled to abandon significant portions of our network, which would require us to incur additional expenditures, and to pay substantial monetary damages.

24

Our integrated communications services business is subject to significant competitive pressures that could restrict our ability to achieve or sustain operating profitability.

Our industry is highly competitive, and the level of competition, particularly with respect to pricing, is increasing. As a result of competitive pressures, we may not be able to achieve or sustain operating profitability, adequate market share or significant revenue growth in any of our markets. The prices we charge for our retail local, long distance and data services have declined significantly in recent years. AT&T, which recently acquired BellSouth, and the other incumbent local telephone companies in our markets offer substantially the same services we offer, in some cases at lower prices. These companies have substantially greater infrastructures, financial, personnel, technical, marketing and other resources, larger numbers of established customers and more prominent name recognition than we do. These advantages may increase as a result of recent and future consolidations in our industry. We expect to continue to face significant pricing and product competition from AT&T and the other large, established telephone companies that currently are the dominant providers of telecommunications services in our markets. We also will continue to face significant competitive product and pricing pressures from other types of communications businesses, including cable companies providing broadband Internet access and other integrated services providers, and from other companies like us that attempt to compete in the local services market.

We may be required to reduce further some or all of the prices we charge for our retail local, long distance and data services for the following reasons, which could adversely affect our ability to generate positive cash flows from operations:

• AT&T, our principal competitor in many of the markets we serve, has been authorized to offer in-region long distance services throughout its entire region, which will allow it to offer the same bundle of local, long distance and data services that we offer;

• the acquisitions of BellSouth by AT&T and of MCI by Verizon Communications have increased substantially the market power of these incumbent carriers, particularly of our principal competitor in many of the markets we serve and in the market for business customers in which we compete, and these mergers may accelerate other pending or future consolidations among our competitors;

• cable companies and providers of alternative forms of communication that rely on Voice over Internet Protocol or similar applications are increasingly attracting customers, and are expected to expand their target customer base from primarily residential customers to the small and medium-sized businesses we serve; and

• recent regulatory decisions have decreased regulatory oversight of incumbent local telephone companies, which may increase the benefits that these companies could experience from their long-standing customer relationships, greater financial and technical resources, and ability to subsidize local services with revenue from unrelated businesses.

The foregoing competitive pressures have contributed to a significant increase in our customer attrition over the past two years. We expect that these pressures will continue to adversely affect our ability to maintain existing customers and win new customers.

Our wholesale services, including our broadband transport services, continue to be adversely affected by pricing pressure, network overcapacity, service cancellations and other factors.

We have continued to experience adverse trends relating to our wholesale service offerings, including our broadband transport services, that have resulted primarily from a reduction in rates charged to our customers due to overcapacity in the broadband services business and from service cancellations by some customers, including customers of our local interconnection business. Pending or contemplated consolidations in our industry also may continue to affect adversely our wholesale services by improving the resources of the consolidating companies and reducing their demand for our services as those companies upgrade their own networks and consolidate their voice and data traffic on those networks. We expect that these factors will result in continued

25

declines in revenues and cash flows from our wholesale service offerings. Such declines will have a disproportionately adverse effect on our operating results, because of the higher gross margins associated with our wholesale services.

Our operating performance will suffer if we are not offered competitive rates for the access services we need to provide our long distance services.

We depend on other communications companies to originate and terminate a significant portion of the long distance traffic initiated by our customers. Our operating performance will suffer if we are not offered these access services at rates that are substantially equivalent to the costs of, and rates charged to, our competitors and permit profitable pricing of our long distance services. The charges for access services historically have made up a significant percentage of our overall cost of providing long distance service. Some of our Internet-based competitors generally have been exempt from these and other regulatory charges, which could give them a significant cost advantage in this area. The FCC currently is considering what charges, if any, should be assessed on long distance services provided over the Internet.

Our inability to maintain our network infrastructure, portions of which we do not own, could adversely affect our operating results.

We have effectively extended our network with minimal capital expenditures by entering into marketing and management agreements with public utility companies to sell long-haul private line services on the fiber optic networks owned by these companies. Under these agreements, we generally earn a commission based upon a percentage of the gross revenues generated by the sale of capacity on the utility’s networks. Any cancellation or non-renewal of any of these agreements, any adverse legal ruling with respect to our rights under any of these agreements, or any future failure by us to acquire and maintain similar network agreements in these or other markets as necessary could materially adversely affect our operations. In addition, some of our agreements with the public utility companies are nonexclusive, and our business would suffer from any reduction in the amount of capacity they make available to us.

Our ability to provide service also could be materially adversely affected by a cable cut, switch failure or other equipment failure along our fiber optic network or along any other fiber optic network on which we lease transmission capacity. A significant portion of our fiber optic network is not protected by electronic redundancy or geographical diverse routing. Lack of these safeguards could result in our inability to reroute traffic to another fiber in the same fiber sheath in the event of a partial fiber cut or electronics failure or to an entirely different fiber optic route, assuming capacity is available, in the event of a total cable cut or if we fail to maintain our rights-of-way on some routes. Our ability to utilize network infrastructure and continue to provide services also may be affected by regulatory developments in connection with Internet Neutrality, the outcome of which we cannot predict.

If we are unable to interconnect with AT&T following its acquisition of BellSouth and other incumbent carriers on acceptable terms, our ability to offer competitively-priced local telephone services will be adversely affected.

To provide local telephone services, we must interconnect with and resell the services of the incumbent carriers to supplement our own network facilities. The original term of many of our interconnection agreements with BellSouth expired in June 2003 and currently run month-to-month. Although we completed a new agreement with BellSouth (which has since been acquired by AT&T) in one state and are currently seeking new agreements in eight states, we may not be able to enter into new interconnection agreements with AT&T or other carriers on favorable terms, in a timely manner, or at all. Further, federal regulators have adopted substantial modifications to the requirements that obligate AT&T and other former monopoly local telephone companies to provide to us at cost-based rates the elements of their telephone networks that enable us to offer many of our services at competitive rates. If we are unable to enter into or maintain favorable interconnection agreements in our markets, our ability to provide local services on a competitive and profitable basis may be materially

26

adversely affected. Any successful effort by the incumbent carriers to deny or substantially limit our access to their network elements or wholesale services also would harm our ability to provide local telephone services.

We may not be able to retain the few large customers on which we depend for a significant percentage of our revenues.

We may not be able to retain our large customers, or we may be required to lower our prices significantly to retain them. Our ability to retain these customers may be adversely affected by pending or contemplated consolidations in our industry, adverse changes in our financial condition, increased competition, customer service issues and other events that may occur. The table below sets forth the approximate percentages of our total consolidated revenues generated in 2004, 2005 and 2006 by our five largest integrated communications services customers and our three largest wholesale services customers:

	Year Ended December 31,
	2006		2005		2004
Five largest integrated communications services customers	4.3	%	4.2	%	4.4	%
Three largest wholesale services customers	6.9	%	6.9	%	4.9	%

If we were to lose any of these customers or were compelled to lower our prices to retain these customers, our operating revenues and business could be adversely affected.

The local and long distance industries are subject to significant government regulation, which may change in a manner that is harmful to our business.

We are required to comply with telecommunications regulations implemented by federal, state and local governments. We are required to obtain authorizations from the FCC and state public utility commissions to offer some of our communications services, to file tariffs for many of our services and to comply with local license, franchise or permit requirements relating to installation and operation of our network. Many of these regulations continue to change. Any of the following events related to the manner in which our business is regulated could limit the types of services we provide or the terms on which we provide these services:

• our failure to maintain proper federal and state tariffs;

• our failure to maintain proper state certifications;

• our failure to comply with federal, state or local laws and regulations;

• our failure to obtain and maintain required licenses, franchises and permits;

• the imposition of burdensome license, franchise or permit requirements to operate in public rights-of-way; and

• the occurrence of burdensome or adverse regulatory requirements or developments.

Our failure to maintain adequate billing, customer service, information systems and data security could limit our ability to increase our services and, in some cases, expose us to potential liability.

We depend on sophisticated information and processing systems to grow, monitor costs, bill customers, provision customer orders and achieve operating efficiencies. Our inability to adequately identify all of our information and processing needs, to process the information effectively or accurately, to upgrade our systems as necessary, or to manage confidential customer data could have a material adverse effect on our operating results.

We also depend on operations support systems and other new carriers to order and receive network elements and wholesale services from the incumbent carriers. These systems are necessary for carriers like us to provide local service to customers on a timely and competitive basis. FCC rules, together with rules adopted by state public utility commissions, may not be implemented in a manner that will permit us effectively to order, receive

27

and provision network elements and other facilities necessary for us to provide many of our services. Existing and future federal and state laws and regulations also may affect the manner in which we are required to protect confidential customer data and other information, which could increase the cost of our operations and our potential liability if the security of our confidential customer data is breached.

We may be subject to damaging and disruptive intellectual property litigation.

We may be subject to infringement claims in the future. We may be unaware of filed patent applications and issued patents that could relate to our products and services. Intellectual property litigation could:

• be time-consuming and expensive;

• divert attention and resources away from our daily business;

• impede or prevent delivery of our products and services; and

• require us to pay significant royalties, licensing fees and damages.

Parties making claims of infringement may be able to obtain injunctive or other equitable relief that could effectively block our ability to provide our services and could cause us to pay substantial damages. In the event of a successful claim of infringement, we may need to obtain one or more licenses from third parties, which may not be available at a reasonable cost, if at all. The defense of any lawsuit could result in time-consuming and expensive litigation, regardless of the merits of such claims, and could also result in damages, license fees, royalty payments and restrictions on our ability to provide our services, any of which could harm our business.

We are subject to risks associated with rapid changes in technology.

Our business could suffer from unexpected developments in technology, or from our failure to adapt to these changes. The communications industry is subject to rapid and significant changes in technology, and we may be required to select one emerging technology over another. We will be unable to predict with any certainty, at the time we are required to make our investments, whether the technology we have chosen will prove to be the most economic, efficient or capable of attracting customer usage. If we choose the wrong technology, or if our competitors develop or select a superior technology, we could lose our existing customers and be unable to attract new customers, which would harm our business and operations.

Our success depends on our ability to attract and retain key personnel.

The loss of the services of our key personnel, or our inability to attract, recruit and retain sufficient or additional qualified personnel, could hurt our business. Our business is currently managed by a small number of key management and operating personnel, including our executive officers. Many members of our senior management team have extensive experience in the telecommunications industry. We do not maintain “key man” insurance on these employees. Because of current market conditions for our industry, our stock incentive program may not provide an adequate incentive to current or potential key employees to remain or become employed by us.

Our network or other ground facilities could be damaged by natural catastrophes or terrorism.

A major earthquake, tornado, hurricane, fire, terrorist attack on the United States, or other catastrophic event could damage our network, network operations center, central offices or corporate headquarters. Such an event could interrupt our service and harm our business in the affected areas. We do not have replacement or redundant facilities that we can use to provide alternative means of service to all customers or under every circumstance in the event of a catastrophic event. Any damage to our network could result in degradation of our service for some customers and could result in complete loss of service in affected areas.

Item 1B. Unresolved Staff Comments.

Not applicable.

28

Item 2. Properties.

We lease our corporate head quarters in Huntsville, Alabama, which we relocated from West Point, Georgia, in the first quarter of 2006.

We own switch sites in Anniston, Birmingham and Montgomery, Alabama and in Nashville, Tennessee. We lease space for our voice switch sites in the following locations:

• Jacksonville, Ocala, West Palm Beach, Tampa and Orlando, Florida;

• Atlanta, Georgia;

• Gulfport, Mississippi;

• Greensboro, Wilmington, Raleigh, Charlotte and Greenville, North Carolina; and

• Columbia, Charleston and Greenville, South Carolina.

The leases for these switch sites expire on various dates from 2007 to 2015.

We have constructed and own a multi-service facility in Anniston, Alabama, which functions as a centralized network operations and switch control center for our network and as an operator services center. We also lease a second operator services center in Alexander City, Alabama.

We operate branch offices through which we conduct our sales and marketing efforts in the following locations:

• Anniston, Birmingham, Dothan, Florence, Huntsville, Mobile and Montgomery, Alabama;

• Daytona, Ft. Lauderdale, Jacksonville, Miami, Ocala, Orlando, Pensacola, Tallahassee, Tampa and West Palm Beach, Florida;

• Albany, Atlanta (three offices), Augusta, Columbus, Macon and Savannah, Georgia;

• Baton Rouge and New Orleans, Louisiana;

• Biloxi, Greenwood, Hattiesburg, Jackson and Tupelo, Mississippi;

• Charlotte, Greensboro, Wilmington, Greenville, Fayetteville and Raleigh, North Carolina;

• Charleston, Columbia and Greenville, South Carolina; and

• Chattanooga, Knoxville and Nashville, Tennessee.

The leases for these branch offices expire on various dates from 2007 through 2016.

We also lease office space for various functions, including our head quarters in Huntsville, Alabama and information technology and engineering, in Anniston, Alabama and in Raleigh, North Carolina, and we own an administrative office in Arab, Alabama.

As part of our fiber optic network, we own or lease rights-of-way, land, and point-of-presence space throughout the southern United States.

Item 3. Legal Proceedings.

General. We are a party to legal proceedings in the ordinary course of our business, including disputes with contractors or vendors, which we believe are not material to our business.

Regulatory Proceedings. We are a party to numerous regulatory proceedings affecting the segments of the communications industry in which we operate, including regulatory proceedings before various state public utility commissions and the FCC, particularly in connection with actions by the regional Bell operating

29

companies. We anticipate that these companies will continue to pursue arbitration, litigation, regulations and legislation in states within our primary eight-state market to reduce regulatory oversight and state regulation over their rates and operations. These companies also are actively pursuing major changes in the federal communications laws through litigation and legislation that would adversely affect competitive carriers, including us. If successful, these initiatives could make it more difficult for us to compete with these companies and other incumbent carriers. We may not succeed in our challenges to these or other similar actions that would prevent or deter us from successfully competing with the incumbent carriers.

Proceedings Affecting Rights-of-Way. To maintain our fiber optic network, we have obtained easements, rights-of-way, franchises and licenses from various third parties, including actual and potential competitors, local governments, private real property owners and others. We may not be able to continue to use or have access to all of our existing easements, rights-of-way, franchises and licenses or to renew or replace them after they expire. Third parties have initiated legal proceedings in a number of states challenging some of our significant licenses to use the rights-of-way of others, including our licenses to use the rights-of-way of Mississippi Power Company and Gulf Power Company. Proceedings that remain pending affect approximately 300 route miles of our network as of December 31, 2006. Similar proceedings involving the rights-of-way of Georgia Power Company, Mississippi Power Company, Kansas City Southern Railroad and Illinois Central Railroad affecting approximately 1,300 route miles of our network were settled or dismissed during 2006 or in prior periods as discussed below. If some of these or similar future challenges are successful, or if we otherwise are unsuccessful in maintaining or renewing our rights to use our network easements, rights-of-way, franchises and licenses, we may be compelled to abandon significant portions of our network, which would require us to incur additional expenditures, and to pay substantial monetary damages. The results of these challenges, some of which are described below, are uncertain and, individually or in the aggregate, could have a material adverse effect on our results of operations or financial position.

Mississippi Power Company Rights-of-Way. A portion of our network runs through fiber optic cables owned by the Mississippi Power Company over its rights-of-way located in Jasper County, Mississippi. A proceeding involving Mississippi Power Company and several real property owners who have granted Mississippi Power Company rights-of-way in Jasper County resulted in a January 1999 order of the Mississippi Supreme Court holding that Mississippi Power Company could not permit third parties to use its rights-of-way at issue for any purpose other than in connection with providing electricity to customers of Mississippi Power Company. We became a party to the proceeding after the January 1999 order. The property owners sought compensatory damages equal to the profits or gross revenues received by us from our use of Mississippi Power Company’s rights-of-way in Jasper County and punitive damages for our use of the route. The Circuit Court of the First Judicial District of Jasper County entered an order directing us not to use that portion of our fiber optic network located on Mississippi Power Company’s rights-of-way in Jasper County, except in an emergency. In December 2005, a settlement agreement was entered. In January 2006, the order that restricted our use of the fiber optic network in Jasper County was vacated. As part of the settlement, substantially all of the property owners have dismissed their cases and granted Mississippi Power Company an easement that allows for our use for telecommunications purposes of Mississippi Power Company’s fiber optic cables installed over the properties.

We initiated civil suits in August 2001 and May 2002 in the United States District Court for the Southern District of Mississippi in which it sought a declaratory judgment confirming its continued use of fiber optic cables in Mississippi Power Company’s rights-of-way on 37 parcels of real property and 63 parcels of real property, respectively, or, alternatively, condemnation of the right to use the fiber optic cables upon payment of just compensation to the property owners. As a part of the settlement of the Jasper County proceedings discussed above, our suit for declaratory judgment and all of the remaining counterclaims in the 37-parcels proceeding has been dismissed. In February 2007, the United States District Court for the Southern District of Mississippi entered judgment granting to us the right to continued use of fiber optic cables in Mississippi Power Company’s rights-of-way against any remaining property owners named in the 63-parcels proceeding that were intended to be part of the settlement of the Jasper County proceedings, but had not voluntarily signed the easement required as part of that settlement. The 63-parcels proceeding has been dismissed against all other parties.

30

Some parties to the 37-parcels proceeding who had been dismissed from the proceeding before the Jasper County settlement are not bound by the settlement and have filed new proceedings against Mississippi Power Company and us. It is possible that additional parties who are not subject to the settlement also may file new proceedings. In October 2001, a civil action was filed in the Chancery Court of Lamar County, Mississippi, against Mississippi Power Company and us by two plaintiffs seeking to quiet and confirm title to real property, for ejectment and for an accounting. The plaintiffs are joint owners of a single parcel of real property located in Lamar County, Mississippi. Both plaintiffs also were defendants in the 37-parcels proceeding. The plaintiffs have not specified the amount of damages they are seeking. Similarly, in November 2004, another former defendant in the 37-parcels proceeding sued us and Mississippi Power Company in the Chancery Court of Jones County, Mississippi, to enjoin our use of fiber optic cables in Mississippi Power Company’s rights-of-way over the plaintiff’s property and to recover all property.

In December 2002, two civil actions were filed against Mississippi Power Company and us in the Circuit Court of Smith County, Mississippi, by a single attorney. The plaintiffs are real property owners and allege trespass on the basis that the documents granting Mississippi Power Company the rights to cross the plaintiffs’ property do not grant the right to Mississippi Power Company to allow third parties to use the rights-of-way for the transmission of telecommunications services of such third parties and that such use by third parties is prohibited under state law. One of the proceedings was previously dismissed, and as part of the settlement of the Jasper County proceedings discussed above, the other proceeding was transferred to the Circuit Court of the First Judicial District of Jasper County, Mississippi, and will be dismissed as part of the settlement.

Before it was dismissed, the 37-parcels proceeding discussed above was consolidated with another pending civil suit in the United States District Court for the Southern District of Mississippi, in which we were made a defendant. The pending proceeding was initiated by real property owners claiming to represent a class of real property owners and seeking compensatory and punitive damages against Mississippi Power Company arising from Mississippi Power Company’s grant of permission to third parties to use its rights-of-way for telecommunications purposes. The plaintiffs also seek an injunction against our use of fiber optic cables in Mississippi Power Company’s rights-of-way. The case is still pending, but has been stayed because of the bankruptcy of another defendant. None of the plaintiffs has an individual claim against us, so we anticipate that we could be materially adversely affected only if a class is certified.

Since 2002, over 220 lawsuits have been filed by a single counsel in the Circuit Court for Harrison County, Mississippi, against Mississippi Power Company, MCI and us. Each plaintiff claims to be the owner of real property over which Mississippi Power Company has an easement and that MCI and/or we have benefited by using the easement to provide telecommunications services. As a result of these allegations, each of the plaintiffs claimed trespass, unjust enrichment, fraud and deceit, and civil conspiracy against each of the defendants. Each of the plaintiffs also sought $5 million in compensatory damages, $50 million in punitive damages, disgorgement of the gross revenues derived from the use by MCI and us of the fiber optic cable over the easements, a percentage of gross profits obtained from the use of the cable, and the plaintiffs’ costs to prosecute the action. In December 2004, a settlement agreement was entered and each of the cases has been or is expected to be dismissed, because the plaintiffs have granted Mississippi Power Company an easement that allows for our use for telecommunications purposes of Mississippi Power Company’s fiber optic cables installed over the plaintiffs’ properties. Proceedings are underway to give effect to the settlement and to obtain dismissal of the few remaining claims by property owners who have not already signed the settlement documents.

In 2002, a lawsuit on behalf of five real property owners was filed against Mississippi Power Company and Southern Company in the Circuit Court of Forrest County, Mississippi, alleging trespass, nuisance, conversion, unjust enrichment, fraud, fraudulent misrepresentation and fraudulent concealment in connection with the use of Mississippi Power Company’s fiber optic cables installed over the plaintiffs’ properties. In May 2004, we were added as a defendant in the lawsuit, upon the court’s order, on the basis that we use the fiber optic cables for the provision of telecommunications services to our customers. The plaintiff is seeking rescission and equitable reformation arising from the alleged unauthorized use of the subject rights-of-way in violation of the terms of the

31

easements held by Mississippi Power Company. The plaintiffs also seek an accounting, unspecified monetary damages and equitable relief. In September 2004, the court granted Mississippi Power Company’s motion for partial summary judgment and issued a final order that the plaintiffs are not entitled to any compensation for trespass damages. In November 2006, the Mississippi Court of Appeals dismissed the appeal for lack of jurisdiction, holding that the trial court’s ruling was not a final order. A hearing on defendants’ motion for summary judgment was held in January 2007 in the trial court.

In September 2002, Mississippi Power Company and we were sued in the Circuit Court of Jasper County, Mississippi, by the owners of 75 parcels of real property located in various Mississippi counties. The plaintiffs allege that Mississippi Power Company and we have violated the property owners’ rights with regard to the use of Mississippi Power Company’s easements across their properties. The allegations are similar to those made in other rights-of-way suits in Mississippi. The plaintiffs allege trespass, unjust enrichment, fraud and deceit, and civil conspiracy, and seek from each plaintiff $5 million in compensatory damages, $50 million in punitive damages, disgorgement of gross revenues, a percentage of the gross revenues derived from use of the rights-of-way, and court costs. Although MCI is not a party to this proceeding, during the pendency of MCI’s bankruptcy proceedings, Mississippi Power Company had removed this action to the United States District Court for the Southern District of Mississippi and requested that the action be transferred to the United States Bankruptcy Court for the Southern District of New York, which administered MCI’s bankruptcy proceedings. There have been no further material developments in this matter.

In July 2002, nine lawsuits on behalf of 101 real property owners were filed against Mississippi Power Company, Southern Company and us in the Chancery Court of Jones County, Mississippi. All nine complaints are identical in seeking relief for trespass, nuisance, conversion, unjust enrichment, fraud, fraudulent misrepresentation and fraudulent concealment. The plaintiffs seek rescission and equitable reformation arising from the alleged unauthorized use of the subject rights of way in violation of the terms of the easements held by Mississippi Power Company. The plaintiffs also seek an accounting, unspecified monetary damages and equitable relief. During the pendency of MCI’s bankruptcy proceedings, Mississippi Power Company sought to change the venue of these proceedings, but the proceedings have been returned to the original venue. There have been no further material developments in this matter.

Gulf Power Company Rights-of-Way. We use the rights-of-way of Gulf Power Company in Florida for a portion of our network. During 2000, Gulf Power Company was sued in the Circuit Court of Gadsden County, Florida, by two real property owners that claim to represent a class of all real property owners over whose property Gulf Power Company has facilities that are used by third parties. The real property owners have alleged that Gulf Power Company does not have the authority to permit us or other carriers to transmit telecommunications services over the rights-of-way. We were made a party to this litigation in August 2001. Additional plaintiffs have been added through various amendments to the Complaint. In November 2005, the trial court entered a declaratory judgment for the plaintiffs. In that decision, the court ruled that the easements do not allow general telecommunications use and that Gulf Power Company did not have the right to apportion the easement for general telecommunications purposes. The trial court has not yet addressed any issues relating to damages. Gulf Power Company and we appealed the declaratory judgment. In October 2006, the Florida First District Court of Appeals dismissed the appeal brought by Gulf Power Company and us on the basis that the trial court’s November 2005 ruling was not a final order and therefore not yet subject to appeal. Gulf Power Company and we have filed motions in the trial court to vacate the prior declaratory judgment and for summary judgment in favor of Gulf Power Company and us. In February 2007, the plaintiffs filed a motion for a permanent injunction which would restrict the Company’s ability to add new customers and services over the disputed route. The trial court has set a hearing in April 2007 on the plaintiffs’ motions for class certification and permanent injunction and defendants’ motion to vacate the declaratory judgment and for summary judgment.

Georgia Power Company Rights-of-Way. We use rights-of-way of Georgia Power Company in Georgia for a portion of our network. In July 2001, a suit was filed in the Superior Court of Decatur County, Georgia, by a group seeking compensatory and punitive damages and claiming to represent a class of real property owners. The

32

plaintiffs have alleged that Georgia Power Company and other entities do not have the right to grant third parties the use of the rights-of-way for the transmission of telecommunications services of such third parties. We were made a party to the suit in January 2002. In January 2005, the court granted the plaintiffs’ motion for partial summary judgment and denied defendants’ motion for partial summary judgment, holding that Georgia Power Company had the right to use the easements for communications directly related to the transmission and distribution of electricity, but that the easements do not afford Georgia Power Company the right to allow any other party, including us, the right to use the rights-of-way for the transmission of telecommunications services. In November 2005, the Georgia Court of Appeals reversed the trial court’s ruling and held that Georgia Power’s easements allow use for fiber optic communication lines and remanded to the trial court the question whether the easements were divisible so as to allow use by persons other than Georgia Power, including us. In May 2006, the Georgia Supreme Court denied the plaintiffs’ request for review of the ruling by the Georgia Court of Appeals. On remand, the trial court held in October 2006 that the easements are divisible and granted summary judgment to the defendants, including us.

In November 2002, a civil action was filed in the Superior Court of Walton County, Georgia, against Georgia Power Company and us. The plaintiff, claiming to be representative of a class of all real property owners over which Georgia Power Company has facilities, alleges that the documents granting Georgia Power Company the rights to cross the plaintiff’s property do not grant the right to Georgia Power Company to allow third parties to use the rights-of-way for the transmission of telecommunications services of such third parties. In September 2006, the plaintiff voluntarily dismissed its complaint without prejudice.

Kansas City Southern Railroad and Illinois Central Railroad Rights-of-Way. In March 2003, a complaint was filed against us in the United States District Court for the Southern District of Mississippi. The plaintiffs, claiming to be representatives of a class of plaintiffs, allege that they are the owners of the real property across which certain rights-of-way of Kansas City Southern Railroad and Illinois Central Railroad are located. Under agreements with Kansas City Southern Railroad and Illinois Central Railroad, we use some fiber optic cable within the rights-of-way of Kansas City Southern Railroad and Illinois Central Railroad across Mississippi. The plaintiffs claim that the documents granting the rights-of-way do not permit the installation and operation of telecommunications facilities of third parties within the rights-of-way. The plaintiffs allege trespass, unjust enrichment and conversion and seek unspecified amounts of compensatory and punitive damages, restitution, disgorgement, attorneys’ fees, an accounting of amounts paid to Kansas City Southern Railroad and Illinois Central Railroad and declaratory relief regarding the parties’ rights. We denied the allegations, but counter-claimed for the certification of a class of counter-defendants. We sought a declaration that we have the right to use the rights-of-way or, alternatively, to condemn such rights. In September 2004, the district court found that neither the class requested by the plaintiffs, nor the class of counter-defendants, should be certified. Our appeal of the district court’s refusal to certify a class of counter-defendants was denied by the United States Court of Appeals for the Fifth Circuit. In February 2005, the district court dismissed the claims of the remaining plaintiffs. In November 2006, the Fifth Circuit affirmed the district court’s dismissal of the claims of the remaining plaintiffs.

A lawsuit was filed against us in Richland Parish, Louisiana, in July 2003 and removed to the United States District Court for the Western District of Louisiana, Monroe Division, in August 2003. The plaintiffs, claiming to be representatives of a class of plaintiffs, allege that they are owners of the real property which underlies or abuts the Kansas City Southern Railroad corridor in Louisiana. Under agreements with Kansas City Southern Railroad and Illinois Central Railroad, we use some fiber optic cable within the rights-of-way of Kansas City Southern Railroad and Illinois Central Railroad in Louisiana. The plaintiffs claim that the documents granting the rights-of-way to Kansas City Southern Railroad and Illinois Central Railroad do not permit the installation or operation of telecommunications facilities of third parties within the rights-of-way. The plaintiffs allege trespass, unjust enrichment, conversion, civil conspiracy, negligence, infringement and misappropriation, and seek the imposition of a constructive trust, an accounting of all compensation paid or received for use of the real property involved in the litigation, restitution, disgorgement, actual, compensatory and consequential damages, and attorneys’ fees. In July 2004, the court found that the class should not be certified. One plaintiff voluntarily dismissed his claim when discovery revealed that he had no rights in the property identified in the complaint. The

33

only remaining named plaintiff asserted a claim based on ownership of less than one mile of property over which we use fiber optic cable within the rights-of-way. This matter was dismissed in March 2006 pursuant to a settlement agreement between the remaining plaintiff and us.

ITC^DeltaCom’s Suit for Rights-of-Way Indemnification. In August 2001, we filed suit in the Superior Court of Troup County, Georgia, against Southern Telecom, Inc., Alabama Power Company, Georgia Power Company, Mississippi Power Company, Gulf Power Company and related entities from which we have obtained by agreement use of rights-of-way for our fiber optic telecommunications networks. We seek a declaratory judgment that the defendants are legally required to use their best efforts to defend us against any claims that we do not have the right to use the rights-of-way granted to these entities and to defend, indemnify and hold us harmless against all such claims. We filed for summary judgment in December 2001, and the defendants subsequently filed a motion for summary judgment. The defendants also have filed a counterclaim requesting, among other relief, that we reimburse them for the cost of perfecting the applicable rights-of-way. In September 2004, the court issued an order denying our motion and the defendants’ motion for summary judgment and staying the proceeding pending a final determination of the property owner proceedings that underlie our claims. We appealed this order to the Georgia Court of Appeals, which denied the appeal on procedural grounds. The proceeding remains stayed pending developments in the various proceedings described above affecting the rights-of-way of Mississippi Power Company, Gulf Power Company and Georgia Power Company used by us.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to the vote of our security holders in the fourth quarter of 2006.

34

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for the Common Stock

The following table sets forth the high and low sale prices of the common stock for each quarter of 2006 and 2005. Our common stock was traded on the Nasdaq National Market from January 1, 2005 through July 26, 2006, when our common stock was delisted from that market. Since that date, our common stock has traded in the over-the-counter market, both through quotations in the National Quotation Bureau “Pink Sheets” and, since October 20, 2006, on the OTC Bulletin Board under the symbol “ITCD.OB.” Sale prices before September 13, 2005, which was the effective date of the one-for-three reverse split of the common stock, have been adjusted to reflect the reverse stock split as if it had become effective as of January 1, 2005.

2005	High		Low
First Quarter	$	5.49	$	1.50
Second Quarter		3.87		1.29
Third Quarter		3.51		1.84
Fourth Quarter		2.16		1.10

2006	High		Low
First Quarter	$	1.50	$	0.99
Second Quarter		1.95		0.87
Third Quarter		1.75		0.70
Fourth Quarter		2.80		1.65

On March 1, 2007, there were approximately 1,180 record holders of the common stock.

Dividend Policy

We have not declared or paid any cash dividends on our common stock and do not anticipate that we will declare or pay cash dividends on the common stock in the foreseeable future. Future declaration and payment of cash dividends, if any, on the common stock, Series A preferred stock or Series B preferred stock will be determined in light of factors deemed relevant by our board of directors, including our earnings, operations, capital requirements and financial condition and restrictions in our financing agreements. Our debt agreements prohibit us from paying cash dividends on our capital stock.

Effective as of the quarterly dividend period ended September 30, 2006, our board of directors suspended indefinitely the quarterly payment of dividends on our Series A preferred stock and Series B preferred stock to comply with provisions of the Delaware General Corporation Law that condition our payment of dividends on compliance with specified financial tests. The dividends that would have been payable for the quarterly dividend periods ended September 30, 2006 and December 31, 2006 would have totaled $404,000 and $412,000, respectively, on the Series A preferred stock and $1.2 million and $1.2 million, respectively, on the Series B preferred stock. For so long as the preferred stock remains outstanding, these unpaid amounts will accrue dividends until paid.

Our board of directors is not required to authorize the payment of dividends on our Series A or Series B preferred stock. The determination to pay cash dividends on the Series A and Series B preferred stock is made at the discretion of the board of directors and is subject to the existence of sufficient legally available funds. Under the Delaware General Corporation Law, we may pay dividends on our capital stock only (1) out of our “surplus” or (2) if we have no “surplus,” from our net profits for the fiscal year in which the dividends are declared or from our net profits for the preceding fiscal year. Our “surplus” is an amount equal to the present fair value of our total assets, minus the present fair value of our total liabilities, minus our capital (which equals the aggregate par value

35

of all of the outstanding shares of our common and preferred stock). We had a negative “surplus” as of September 30, 2006 and December 31, 2006, as that term is defined under Delaware General Corporation Law, and did not generate net profits in fiscal 2006 or for the nine months ended September 30, 2006.

The holders of the Series A and Series B preferred stock are entitled to receive, when, as and if declared by our board of directors, out of funds legally available for this purpose, cumulative dividends payable quarterly at the annual rate of 8% per share on the $100 liquidation preference per share of the preferred stock plus the amount of any accrued and unpaid dividends for past quarterly dividend periods. Dividends may be paid to the holders of the preferred stock by us, at our option, in cash, in shares of such series of the preferred stock, or in a combination of cash and shares of such series of the preferred stock. From our initial issuance of the Series A preferred stock on October 29, 2002 and our initial issuance of the Series B preferred stock on October 6, 2003, we have paid all dividends on our preferred stock through the quarterly dividend period ended June 30, 2006 in the form of payment-in-kind dividends of the same series of preferred stock. Each share of preferred stock issued as a dividend is valued at $100 per share solely for purposes of determining the number of shares of preferred stock to be issued as the dividend.

We generally may not declare or pay dividends on our common stock or redeem, purchase or otherwise acquire any common stock for any consideration unless we have paid all accrued and unpaid dividends with respect to the preferred stock for all past dividend periods and the current dividend period or we have set apart sufficient funds or shares of preferred stock for the payment of such dividends.

As of the date of the filing of this report, accrued and unpaid dividends totaled approximately $1.2 million on the Series A preferred stock and approximately $3.7 million on the Series B preferred stock.

Stock Performance Graph

On October 29, 2002, in connection with the completion of our plan of reorganization under Chapter 11 of the United States bankruptcy code, all shares of our then outstanding common stock were canceled and we issued approximately 14,583,000 shares of our new common stock. Each holder of shares of the formerly outstanding common stock was entitled to receive such holder’s ratable proportion of a total of 118,500 shares of the new common stock pursuant to the plan of reorganization. The graph and table set forth below show the cumulative total stockholder return on our common stock compared to the Standard & Poor’s 500 Stock Index and the Nasdaq Telecommunications Index, which is composed of stocks of publicly traded companies which are principally in the telecommunications business, for the periods between October 30, 2002, which was the initial trading date of the new common stock, and December 29, 2006, which was the last trading day in 2006. The graph assumes $100 was invested at the close of business on October 30, 2002 in (1) the new common stock, (2) the Standard & Poor’s 500 Stock Index and (3) the Nasdaq Telecommunications Index. Total stockholder return is measured by dividing total dividends, assuming dividend reinvestment, plus share price change for a period, by the share price at the beginning of the measurement period.

36

Company Index	October 30, 2002		December 31, 2002		December 31, 2003		December 31, 2004		December 30, 2005		December 29, 2006
ITC^DeltaCom, Inc.	$	100.00	$	77.67	$	202.00	$	57.00	$	14.00	$	28.33
S&P 500 Stock Index	$	100.00	$	98.78	$	124.84	$	136.06	$	140.15	$	159.23
Nasdaq Telecom Index	$	100.00	$	103.01	$	173.82	$	187.72	$	174.18	$	222.54

37

Item 6. Selected Financial Data.

The following table sets forth ITC^DeltaCom’s selected consolidated financial data. The selected operating statement data for the year ended December 31, 2002 and the selected balance sheet data as of the end of such period have been derived from ITC^DeltaCom’s audited consolidated financial statements. The selected operating statement data for the periods from January 1, 2002 to October 29, 2002 and October 30, 2002 to December 31, 2002 and the years ended December 31, 2003, 2004, 2005 and 2006, and the selected balance sheet data at October 29, 2002, December 31, 2002, December 31, 2003, December 31, 2004 December 31, 2005 and December 31, 2006, have been derived from the consolidated financial statements that have been audited by BDO Seidman, LLP, independent registered public accounting firm. The operating statement and balance sheet data at and for the year ended December 31, 2002 have been separated into these two periods as a result of ITC^DeltaCom’s adoption, under AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,” of fresh start reporting on October 30, 2002, following its emergence from Chapter 11 bankruptcy reorganization proceedings on October 29, 2002. The financial results at and for the periods ended October 29, 2002 and December 31, 2002 are not comparable in certain respects to the financial results for prior periods.

You should read the selected financial data below together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements, including the notes thereto, appearing elsewhere in this report.

	Successor															Predecessor
	Year Ended December 31,												Period from October 30, 2002 to December 31, 2002			Period from January 1, 2002 to October 29, 2002
	2006			2005			2004			2003
	(in thousands, except share and per share data)
Operating Statement Data:
Operating revenues:
Integrated communications services	$	381,766		$	414,969		$	467,629		$	320,675		$	41,898		$	200,341
Wholesale services		81,785			85,232			96,449			99,868			18,086			122,100
Equipment sales and related services		24,089			20,200			19,549			41,023			5,585			30,456
Total operating revenues		487,640			520,401			583,627			461,566			65,569			352,897
Cost of services and equipment (exclusive of items shown separately below)		244,278			268,123			290,923			230,844			30,021			164,920
Operating expenses:
Selling, operations and administration expense		182,873			195,496			221,922			173,954			27,108			136,472
Depreciation and amortization		59,832			53,187			87,108			63,393			9,002			105,696
Merger-related expenses		—			135			4,828			2,141			—			—
Asset impairment loss(a)		—			13,373			203,971			—			—			223
Total expenses		486,983			530,314			808,752			470,332			66,131			407,311
Operating income (loss)		657			(9,913	)		(225,125	)		(8,766	)		(562	)		(54,414	)
Interest expense		(57,625	)		(40,508	)		(21,309	)		(15,917	)		(2,350	)		(35,704	)
Debt issuance cost write-off		—			(3,948	)
Interest and other income (expense), net		3,509			3,520			(794	)		344			216			60
Loss before reorganization items and income taxes		(53,459	)		(50,849	)		(247,228	)		(24,339	)		(2,696	)		(90,058	)
Reorganization items(b)		—			—			—			—			—			60,792
Income tax expense (benefit)		—			—			—			—			—			—
Net loss		(53,459	)		(50,849	)		(247,228	)		(24,339	)		(2,696	)		(29,266	)
Preferred stock dividends and accretion(c)		(7,445	)		(6,957	)		(9,345	)		(3,912	)		(514	)		(4,210	)
Net loss applicable to common stockholders	$	(60,904	)	$	(57,806	)	$	(256,573	)	$	(28,251	)	$	(3,210	)	$	(33,476	)
Basic and diluted net loss per common share(b)	$	(3.25	)	$	(3.11	)	$	(14.72	)	$	(1.82	)	$	(0.22	)	$	(1.61	)
Basic and diluted weighted average common shares outstanding(b)		18,751,067			18,598,549			17,426,546			15,517,216			14,916,667			20,788,256

38

	Successor															Predecessor
	Year Ended December 31,												Period from October 30, 2002 to December 31, 2002			Period from January 1, 2002 to October 29, 2002
	2006			2005			2004			2003
	(in thousands, except share and per share data)
Balance Sheet Data (at period end):
Cash and cash equivalents (unrestricted)	$	67,643		$	69,360		$	16,599		$	50,099		$	30,554		$	30,231
Working capital (deficit)		24,009			44,806			(5,155	)		(6,835	)		14,728			(5,860	)
Total assets		435,582			456,758			463,973			745,053			553,520			754,243
Long-term liabilities		338,512			322,272			292,445			301,255			206,993			200,109
Liabilities subject to compromise(b)		—			—			—			—			—			538,147
Convertible redeemable preferred stock		74,170			68,473			61,633			55,007			24,525			63,691
Stockholders’ equity (deficit)		(91,039	)		(31,654	)		3,643			240,713			237,245			(139,209	)
Other Financial Data:
Capital expenditures		46,880			28,325			49,509			45,156			4,916			29,784
Cash flows provided by operating activities		28,676			28,449			28,816			39,832			7,216			12,580
Cash flows used in investing activities		(46,913	)		(6,423	)		(60,856	)		(51,881	)		(4,916	)		(29,780	)
Cash flows (used in) provided by financing activities		16,520			30,735			(1,460	)		31,594			(1,977	)		6,388
EBITDA(d)		61,320			41,789			(139,241	)		54,627			8,440			111,785

(a) In 2005, ITC^DeltaCom recorded asset impairment loss consisting of a write-down of impaired property, plant and equipment of $7.2 million and a write-off of indefinite life intangibles of $6.2 million. In 2004, ITC^DeltaCom recorded asset impairment loss consisting of a write-down of impaired property, plant and equipment of $199.9 million and a write-down of $4.0 million to its amortizable intangible customer base asset. In 2002, ITC^DeltaCom recorded asset impairment loss consisting of a write-down of impaired property, plant and equipment of $223,000. See note 4 to ITC^DeltaCom’s audited consolidated financial statements appearing elsewhere in this report for additional information about some of these write-downs.

(b) On June 25, 2002, ITC^DeltaCom filed a voluntary petition for reorganization under Chapter 11 of the United States bankruptcy code. The plan was confirmed on October 17, 2002 and became effective on October 29, 2002. Accordingly, ITC^DeltaCom reclassified its then-outstanding senior notes and convertible subordinated notes, which were subject to compromise in the reorganization, as “liabilities subject to compromise” before the effective date. Expenses related to the reorganization, such as professional fees and administrative costs, are classified as “reorganization items.” On the reorganization effective date, all shares of old common stock were canceled and new shares of common stock were issued.

(c) Represents the payment of accrued dividends on preferred stock at an annual rate of 8%. All such dividends have been paid in additional shares of preferred stock valued solely for purposes of such dividends at $100 per share.

(d) EBITDA represents net income (loss) before interest, taxes, depreciation and amortization. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—EBITDA Presentation” for our reasons for including EBITDA data in this report and for material limitations with respect to the usefulness of this measure. The following table sets forth, for the periods indicated, a quantitative reconciliation of the differences between EBITDA and net loss, as net loss is calculated in accordance with generally accepted accounting principles:

39

	Successor															Predecessor
	Year Ended December 31,												Period from Oct. 30, 2002 to Dec. 31, 2002			Period from Jan. 1, 2002 to Oct. 29, 2002
	2006			2005			2004			2003
	(in thousands)
Net loss	$	(53,459	)	$	(50,849	)	$	(247,228	)	$	(24,339	)	$	(2,696	)	$	(29,266	)
Add back non-EBITDA items included in net loss:
Depreciation and amortization		59,832			53,187			87,108			63,393			9,002			105,696
Interest expense, net of interest income		54,947			39,451			20,879			15,573			2,134			35,355
EBITDA	$	61,320		$	41,789		$	(139,241	)	$	54,627		$	8,440		$	111,785

In 2002, ITC^DeltaCom recorded a net gain of $60.8 million related to gain from the cancellation of indebtedness and reorganization costs associated with the voluntary petition for reorganization under Chapter 11. In 2003, ITC^DeltaCom recorded merger-related expenses of $2.1 million in connection with the acquisition of BTI. In 2004, ITC^DeltaCom recorded asset impairment loss consisting of a write-down of impaired property, plant and equipment of $199.9 million and a write-down of $4.0 million to its amortizable intangible customer base asset, as well as merger-related expenses of $1.5 million in connection with the acquisition of BTI and $3.3 million in connection with terminated mergers with two companies. In 2005, ITC^DeltaCom recorded asset impairment loss consisting of a write-down of impaired property, plant and equipment of $7.2 million and a write-off of indefinite-life intangibles of $6.2 million. See notes 3 and 4 to ITC^DeltaCom’s audited consolidated financial statements appearing elsewhere in this report for additional information about some of these items.

40

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

General. We are one of the largest facilities-based competitive providers of integrated communications services, primarily to businesses, in our primary eight-state market, which encompasses Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. We deliver a comprehensive suite of high-quality voice and data communications services, including local exchange, long distance, high-speed or broadband communications, and Internet access connectivity, and sell customer premise equipment to our end-user customers. We offer these services primarily over our owned network facilities and also use leased network facilities to extend our market coverage. In addition, we own, operate and manage an extensive fiber optic network with significant transmission capacity that we use for our own voice and data traffic and selectively sell to other communications providers on a wholesale basis.

As of December 31, 2006, we marketed and sold our integrated communications services through 44 branch offices. As of the same date, our fiber optic network of 11,811 route miles extended from New York to Florida and from Georgia to Texas and principally covered portions of our primary eight-state market.

On October 6, 2003, we completed our acquisition of BTI Telecom Corp., a facilities-based integrated communications provider serving markets in the southeastern United States. The inclusion of BTI’s assets and operations in our business since October 6, 2003 has contributed to a significant increase in the size of our business. Before the acquisition, BTI was generating annualized operating revenues for 2003 in excess of $220 million, based on operating revenues of $56 million in the third quarter of 2003. We have integrated the operations of BTI into our existing operations to achieve economies of scale from the consolidation of sales and marketing, customer service, provisioning and installation, and information technology, purchasing, financial and administrative functions.

During 2006, we focused on improving our operating performance and enhancing our liquidity. As part of these ongoing initiatives, we:

• increased the number of our core, facilities-based retail business lines in service (including both UNE-T and UNE lines) by approximately 45,750 net lines, representing 18% growth over 2005, and increased those lines as a percentage of total retail business lines in service from 68% to 75%;

• reduced our cost of services and equipment as a percentage of total operating revenues to 50% from 51.5% by eliminating excess costs from our network;

• added approximately 65 employees to our local retail sales force following the addition of approximately 100 employees to our local retail sales force in 2005;

• reduced our selling, operations and administration expenses by 6.5% from 2005 of which 3.9% of the decline was attributable to executive severance and special consulting fees that were incurred in 2005 that were not incurred in 2006 and 2.6% resulted from improved collections of accounts receivable, reductions in property taxes and reductions in non-sales personnel costs;

• improved our liquidity through the sale to institutional investors of $21 million principal amount of first lien notes with the same terms and the same July 26, 2009 maturity date as the first lien notes we issued in connection with the refinancing of our senior secured indebtedness in July 2005.

Operating Revenues. We currently derive operating revenues from our offering of integrated communications services, wholesale services and equipment sales and related services.

Integrated Communications Services. We deliver integrated voice and data communications services to end users on a retail basis. We refer to these services, which are described in more detail in this report under “Business—Services—Integrated Communications Services,” as our “integrated communications” services. Revenues from these services represented approximately 78% of our total operating revenues for 2006. We derive most of our operating revenues from recurring monthly charges that are generated by these services. Over

41

the past five years, we have generated an increasing percentage of our operating revenues from local services, primarily local services provided under our interconnection agreements with other local telephone companies, and from data and Internet services.

Long distance revenues accounted for approximately 13% of our total annual operating revenues in 2006, which represented a decrease from 15% in 2005 as a result of a decline in total minutes used by our customers and modest long distance rate decreases. We continued to increase the total of our long distance minutes of use bundled within our local service product offering, which contributed to the decline in long distance revenues. We expect that these conditions will continue to have a negative impact on our long distance services and revenues in 2007.

We expect to continue expanding portions of our integrated communications services business. Although we have experienced success in obtaining increased market share in the markets where we provide these services, we generally do not expect that our integrated communications services will command a significant share of the market for communications services in the southeastern United States. We conduct strategic reviews of the profitability of all our service offerings and, as a result of these reviews, have increased our sales efforts in some offerings and decreased our sales efforts in others. In 2007, we will continue to focus on development of our more profitable markets and products.

The customer contracts for our integrated communications services provide for payment in arrears based on minutes of use for switched services and payment in advance for local exchange, data and Internet services, or payment for all services in advance based on a fixed fee agreement. The contracts generally provide that the customer may terminate the affected services without penalty for specified outages in service and for other defined causes. The contracts also typically provide that the customer must use at least a minimum dollar amount of switched long distance services per month for the term of the contract. We also have begun to offer our switched long distance services bundled together with some of our other integrated communications services under agreements providing for a recurring fixed monthly fee and a specified maximum number of long distance minutes of use. During 2006, there was some abatement in the trends of prior years toward declining market prices.

Wholesale Services. We deliver wholesale communications services to other communications businesses. We refer to these services as our “wholesale services.” Our wholesale services include regional communications transmission capacity over our fiber optic network, which we refer to as our “broadband transport” services, local interconnection services to Internet service providers, operator and directory assistance services, and limited amounts of switched termination services for other communications companies. Revenues from these services represented approximately 17% of our total operating revenues for 2006 and are generated from sales to a limited number of other communications companies.

We provide our broadband transport services to other communications companies on a “take or pay” basis, on an individual circuit basis, or on a month-to-month basis after the initial term of the “take or pay” or individual circuit contract has expired. We generally provide our broadband transport services under master lease agreements that have terms ranging from one year to five years. Our broadband transport customers then purchase the amount of capacity they require from time to time under the terms specified in the master agreements.

Broadband transport services also include commission revenues from the marketing, sale and management of capacity on the portions of our network that are owned by utilities but managed and marketed by us. Negligible incremental costs are associated with these commissions, because we use the same marketing and sales force to service the utility-owned portions of the network that we use to service the owned portions of the network. Our commission revenues from these arrangements amounted to approximately $5.7 million for 2004, $3.9 million for 2005 and $3.5 million for 2006. See note 2 to our audited consolidated financial statements appearing elsewhere in this report for additional information regarding these commissions.

42

Broadband transport revenues were generally stable in the first three quarters of 2006. The decrease in these revenues in the fourth quarter of 2006 resulted principally from action by other carriers to transfer traffic from our network to unused portions of their own networks.

We provide local interconnection services throughout our primary eight-state market to Internet service providers that enable the customers of the Internet service providers to connect to their providers by dialing a local number. To acquire these services, our customers interconnect to our network either by colocating their communications equipment within one of our facilities or by purchasing our broadband transport services to connect their remote equipment with our equipment. To provide the local dial tone to their customers, our Internet service provider customers generally purchase primary rate interface, or PRI, circuits from us that are the functional equivalent of approximately 23 local telephone lines. In connection with our provision of the local dial tone, we generate revenues from sales of PRIs to the Internet service providers and from reciprocal compensation we receive from AT&T (following its acquisition of BellSouth) and other carriers that provide the local services to the customers of the Internet service providers. We generated total local interconnection revenues of $7.6 million for 2006, which represented a reduction from revenues of $9.7 million for 2005 because of fewer PRI circuits and lower reciprocal compensation revenues, as dial-up services by Internet service providers continue to be replaced with broadband applications.

We sell nationwide directory assistance services to other communications providers. These communications providers route directory assistance requests of their own customers to one or both of our operator services centers that are located on our regional fiber optic network. The communications providers typically purchase our broadband transport services to interconnect with our operator services centers. We also provide, on a nationwide basis, enhanced assistance services such as movie listings, stock quotes, weather information, horoscopes and yellow pages. Revenues from our operator and directory assistance services increased by 2% in 2006 over 2005. In the fourth quarter of 2006, these revenues declined 25%, or $647,000, from the preceding quarter due to the loss of a significant customer whose contract expired in 2005.

We derived $2.1 million in other wholesale revenues in 2006 from the sale of limited amounts of switched termination services for other communications companies. Because we are investing limited capital in this part of our wholesale business, we expect that our revenues from these services in 2007 will decline from 2006 levels.

Equipment Sales and Related Services. We derive non-recurring revenues from selling, installing and providing maintenance services for customer premise equipment. We refer to these services as our “equipment sales and related services.” Revenues from these services represented approximately 5% of our total operating revenues for 2006 and are primarily generated from sales to our integrated communications services customers. We believe the relationships we have developed with these customers through non-recurring sales and the infrastructure we have developed to support these sales has positioned us to expand our sales of recurring service offerings to customers.

No single customer represented over 10% of our total operating revenues for 2006, 2005 or 2004.

Operating Expenses. Our principal operating expenses consist of cost of services and equipment, selling, operations and administration expense, and depreciation and amortization. Our cost of services as a percentage of revenues decreased in 2006 as a result of our initiatives to groom our network facilities to eliminate excess costs and introduce new service offerings. We were successful in reducing our selling, operations and administration expense in 2006 through continued focus on controlling administrative and maintenance costs. Our depreciation and amortization expense increased in 2006 as a result of our expenditures in 2006 to acquire new customers.

Cost of Services and Equipment. We currently provide our integrated communications services by using our network facilities and by reselling the services of other telephone companies. Cost of services related to our integrated communications services consists primarily of access charges and local facility charges that we are required to pay to other telephone companies when we use a portion of their network or facilities in providing

43

services to our customers, as well as charges that we are required to pay to other telephone companies when they originate, terminate or transport messages sent by our customers. Cost of services and equipment related to our equipment sales include materials and costs of third-party contract personnel and direct labor costs.

The provision of local services over our network generally reduces the amounts we would otherwise be required to pay to other telephone companies to use their networks and facilities in order to provide local services. Beginning in the second quarter of 2005 and continuing through 2006, we undertook a variety of significant cost-saving initiatives, including renegotiation of our contracts with other carriers, implementation of new DS1 and DS0 central office colocations with BellSouth, use of alternative local providers, and least-cost routing of interexchange carrier calls.

We will continue to pursue a number of initiatives in 2007 targeted at reducing our exposure under the FCC’s Triennial Review Remand Order and overall cost of services. We continue to assess the implications for our existing and future cost of services of recent FCC action that significantly limits UNE-P and availability of UNE elements as a provisioning alternative. Our cost of services increased by over $600,000 per month after the March 10, 2006 implementation date of the Triennial Review Remand Order. By December 2006, we had successfully limited the monthly impact of the TRRO on our cost of services to less than $400,000. Because of uncertainties relating to our future customer base, we are unable to estimate with certainty the long-term impact of the TRRO on our cost of services after 2007.

Our cost of services also includes charges for labor and inventory sold related to our sale, installation and repair of telephone systems and related equipment.

Cost of services related to our broadband transport services includes substantially all fixed costs attributable to the leasing of intercity fiber under long-term operating leases and the leasing of intracity capacity to meet customer requirements within each of our markets.

Direct cost of services related to local interconnection services is not significant. The cost of services related to our directory assistance revenues are primarily represented by the cost of the listing and enhanced data, which we purchase from a third party primarily at variable rates. Because our wholesale services generally have significantly lower cost of services than our integrated communications and other services, our consolidated cost of services, as a percentage of our operating revenues, has been adversely affected because the percentage of our operating revenues provided by our wholesale services has declined.

Selling, Operations and Administration Expense. Selling, operations and administration expense consists of expenses of selling and marketing, field personnel engaged in direct network maintenance and monitoring, customer service and corporate administration. Our overall selling, operations and administration expense decreased approximately $26.5 million in 2005, primarily as the result of restructuring efforts we initiated in December 2004. We achieved further reductions in 2006 totaling $12.6 million in our overall selling, operations and administration expense primarily because we incurred no executive severance cost and special consulting fees, which totaled $7.8 million in 2005. In addition, we realized $4.8 million of savings in selling, operations and administration expense from reductions in compensation and benefits cost resulting from the restructuring we initiated in December 2004, improved collections of accounts receivables, and decreased property taxes. These reductions were offset in part by an increase in the cost of professional services. We expect a modest increase in selling, operations and administration expense in 2007 as we support growth in our integrated services revenues and as we invest in the development of customer service systems.

Asset Revaluations and Reorganization. Beginning in December 2004, we considered the following factors as evidencing the necessity of an impairment review: underperformance of our assets relative to expected historical and projected future operating results; significant negative industry trends; a significant decline in our common stock price for a sustained period; and our market capitalization relative to net book value. For purposes

44

of our impairment review, we identified, as two separate asset groups with identifiable cash flows, (1) our “retail group,” which consists of those assets and liabilities associated with servicing our retail customer base, and (2) our “wholesale group,” which consists of those assets and liabilities associated with servicing our wholesale customer base. We determined that the sum of the expected future cash flows was less than the carrying amount of the retail long-lived asset group, including intangibles, and recognized in the fourth quarter of 2004 an impairment loss of $199.9 million to our property, plant and equipment and an impairment loss of $4.0 million to our amortizable intangible customer base asset, equal to the excess of the carrying amount of the assets over their fair value in accordance with Statement of Financial Accounting Standards, or SFAS, No.144. The audit committee of our board of directors concluded on March 25, 2005 that such a charge was required. The asset impairment had no significant impact on our 2004 depreciation and amortization expense and reduced depreciation and amortization expense in 2005 by approximately $34.0 million on an annual basis. The book value of our net intangible assets, long-lived assets and goodwill decreased to $362.9 million at December 31, 2004 from $603.8 million at December 31, 2003.

In evaluating the underperformance of our assets and negative industry trends in our impairment review, we took account of the following factors, among others:

• the effect of intensifying competition on our integrated communications services business, which has contributed to higher customer attrition rates and customer contract renewals on less favorable terms;

• the negative impact of pricing pressure, network overcapacity and service cancellations on our wholesale services business, and the disproportionate effect of declines in this business on our operating results due to the higher gross margins associated with wholesale services; and

• changes in government regulation that have been harmful to our business, including the increase in our cost of services we expected would result from the FCC’s order limiting the number and types of unbundled network elements that incumbent carriers must make available to us.

In October 2005, we reviewed property and equipment for impairment in view of our projected future operating results to evaluate whether changes in circumstances indicated that the carrying amount of our assets might not be recoverable. For our asset groups, we determined that the sum of the expected future cash flows was greater than the carrying amount of the long-lived asset groups, and therefore that the asset groups were not impaired except for certain central office switching assets within our retail group that were identified with a carrying amount greater than their expected future cash flows. Consequently, we recognized an impairment loss of $7.2 million to our property, plant and equipment in the fourth quarter of 2005, which is included in our audited consolidated statements of operations for 2005 appearing elsewhere in this report

We had identified our trade names as indefinite-life non-amortizable intangible assets. In the third quarter of 2005, we discontinued use of our BTI trade name and recognized an impairment loss of $600,000, which was the amount by which the asset’s book value exceeded its fair value. In the fourth quarter of 2005, we determined to discontinue future use of our ITC^DeltaCom trade name as soon as the new trade name could be determined, and recognized an impairment loss of $5.6 million, which was the amount by which the asset’s book value exceeded its fair value. These impairment losses are included in our audited consolidated statements of operations for 2005 appearing elsewhere in this report.

We conducted an annual review of our long-lived assets (property and equipment and finite-lived intangible assets), in conjunction with our current business plans and operating trends in the third quarter of 2006 for possible impairment of those assets. Based upon this review and an evaluation of our current and projected results of operating performance, we concluded that our long-lived assets associated with our two separate asset groups were not impaired as of December 31, 2006. We will continue to assess our assets for impairment as events occur or as industry conditions warrant.

Depreciation and Amortization. Our depreciation and amortization expense increased $23.7 million to $87.1 million in 2004 from $63.4 million primarily as a result of the BTI acquisition. In December 2004, we

45

recognized an impairment loss of $199.9 million to our property, plant and equipment and an impairment loss of $4.0 million to our amortizable intangible customer base asset. The asset impairment had no impact on our 2004 depreciation and amortization expense, but resulted in a decrease of $34.0 million in depreciation and amortization expense in 2005 from 2004. In December 2005, we recognized an impairment loss of $7.2 million to our property, plant and equipment. This last asset impairment had no impact on our 2005 depreciation and amortization expense. For more information about the effects of the foregoing actions on our depreciation and amortization expense, see notes 4, 5 and 6 to our audited consolidated financial statements appearing elsewhere in this report.

EBITDA Presentation. EBITDA represents net income (loss) before interest, taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States, or GAAP. We have included data with respect to EBITDA because our management evaluates and projects the performance of our business using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of our operating performance, particularly as compared to the operating performance of our competitors, because this measure eliminates many differences among companies in financial, capitalization and tax structures, capital investment cycles and ages of related assets, as well as some recurring non-cash and non-operating supplemental information to investors regarding our operating performance, and facilitates comparisons by investors between the operating performance of our company and the operating performance of our competitors. Our management believes that consideration of EBITDA should be supplemental, because EBITDA has limitations as an analytical financial measure. These limitations include the following:

• EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments;

• EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements;

• EBITDA does not reflect the effect of earnings or charges resulting from matters our management considers not to be indicative of our ongoing operations; and

• not all of the companies in our industry may calculate EBITDA in the same manner in which our company calculates EBITDA, which limits its usefulness as a comparative measure.

Our management compensates for these limitations by relying primarily on our GAAP results to evaluate our operating performance and by considering independently the economic effects of the foregoing items that are not reflected in EBITDA. As a result of these limitations, EBITDA should not be considered as an alternative to net income (loss), as calculated in accordance with GAAP, as a measure of operating performance, nor should it be considered as an alternative to cash flows, as calculated in accordance with GAAP, as a measure of liquidity.

46

Information About Our Business

The following table presents information about our operating revenues and about the telephone access lines we installed for and sold to our customers who purchase our integrated communications services and our wholesale services.

	Year Ended December 31,
	2006		2005		2004
	(dollars in thousands)
Integrated communications services revenues	$	381,766	$	414,969	$	467,629
Equipment sales and related services revenues		24,089		20,200		19,549
Wholesale services revenues:
Broadband transport		59,281		59,995		63,472
Local interconnection		7,573		9,720		13,572
Directory assistance and operator services		9,856		9,651		9,557
Other		5,075		5,866		9,848
Total wholesale services revenues		81,785		85,232		96,449
Total operating revenues	$	487,640	$	520,401	$	583,627
Access line information(1):
Integrated communications services lines installed		394,842		367,220		382,718
Wholesale services lines installed(2)		47,702		62,606		61,801
Total lines installed		442,544		429,826		444,519

(1) Reported net of lines disconnected or canceled. Excludes lines installed in connection with sales of our residential GrapeVine product, which we ceased to offer as of November 1, 2005.

(2) Represents primary rate interface circuits provided as part of our local interconnection services for Internet service providers.

Results of Operations

2006 Compared to 2005

Operating Revenues. Total operating revenues decreased $32.8 million, or 6.3%, from $520.4 million for 2005 to $487.6 million for 2006.

Operating revenues from our integrated communications services for 2006 decreased $33.2 million, or 8%, to $381.8 million from $415.0 million for 2005. The decrease in revenues from our integrated communications services resulted from a decrease of $15.2 million related to our decision to discontinue selling certain non-core products and services, a decrease of $16.8 million in revenues from long distance services and a decrease of $6.8 million in enhanced data revenues. These decreases were offset in part by a $3.8 million increase in local service and bundled revenues and a $1.8 million increase in revenues generated by access billings to other carriers as a result of the net increase in the number of our local lines. Our decision to focus on selling products and recurring services with higher gross margins and to eliminate some higher cost products and services caused a decline in the following components of revenue:

• a decrease of $6.7 million in revenues as the result of our strategic decision to discontinue selling UNE-P services to residential customers through our residential GrapeVine product in November 2005; and

• a decrease of $8.5 million in colocation revenues as the result of the sale on September 1, 2005 of our e^deltacom data center in Suwannee, Georgia, whose service offerings historically did not generate positive cash flow.

47

Long distance revenues decreased to approximately 13% of our total operating revenues in 2006 from 15% of our total operating revenues in 2005 as a result of a 12% decrease in total minutes used by our customers combined with modest long distance rate decreases. We continued to increase the total of our long distance minutes of use bundled within our local service product offering, which also contributed to the decline in long distance revenues. We also experienced increased competition from VoIP and wireless competitive offerings. We expect additional declines in our revenues from long distance services in 2007 primarily because we will continue to emphasize other service offerings that generate fixed monthly recurring service charges.

Our local services revenues from recurring monthly charges continued to increase as a percentage of total revenues derived from integrated communications services. Revenues from our bundled service offerings in 2006 increased to 61% of total integrated communications services revenues in 2006 from 55% in 2005. When we sell a bundled product with fixed monthly recurring charges that include long distance minutes and data services together with local services, we attribute all of the revenues from this product to local services. Our local services revenues in 2006 increased as a result of a net increase in billable lines of 7.5% at December 31, 2006 from December 31, 2005 as a result of sales to new customers and improved customer retention. We have continued to experience downward pricing pressure on our local services revenues as we renew contracts with existing customers, although we did not have to extend rate reductions in the second half of 2006 to the same extent as in recent prior periods.

The increase of $1.8 million in revenues generated by access billings to other carriers was primarily attributable to the net increase in our local lines.

Operating revenues from our wholesale services for 2006 decreased $3.4 million, or 4.0%, to $81.8 million from $85.2 million for 2005. The decrease was attributable to a decline in broadband transport services revenues of $715,000, which resulted from action by other carriers to transfer traffic from our network to unused portions of their own networks in the fourth quarter of 2006, and from decreased commission revenues from the marketing, sale and management of capacity on the portions of our network that are owned by utilities but managed and marketed by us. Local interconnection lines installed decreased by 23.8% from 62,606 at December 31, 2005 to 47,702 at December 31, 2006, resulting in a decrease of $2.1 million in local interconnection revenues associated with the dial-up Internet access business. Revenues from our operator and directory assistance services increased by 2% in 2006 over 2005, but declined by 25%, or $647,000, in the fourth quarter of 2006 from the preceding quarter due to the loss of a significant customer whose contract expired in 2005.

Operating revenues from communication equipment sales and related services for 2006 increased $3.9 million, or 19.3%, to $24.1 million from $20.2 million for 2005. The increase was attributable to increased demand by our customers to purchase more of their communications services from their primary service provider and an increase in the number of sales personnel experienced in marketing these services.

Cost of Services and Equipment. Total cost of services and equipment for 2006 totaled $244.3 million, or 50.0% of total operating revenues, which for 2006 represented a decrease of $23.8 million from total cost of services and equipment of $268.1 million, or 51.5% of total operating revenues, for 2005. The decrease was offset in part by cost increases of $5.7 million as a result of the Triennial Review Remand Order and an increase of $2.5 million in costs related to revenues for equipment sales and related services. The decrease in the cost of providing integrated communications services and wholesale services was attributable to our initiatives to reduce the amount we pay other telephone companies to use their networks and facilities and in part to the reduction in services, such as long distance services, purchased by our customers and the elimination of costs associated with discontinued UNE-P services to residential customers and e^deltacom data center revenues. Beginning in the second quarter of 2005 and continuing through 2006, we undertook a variety of significant cost-saving initiatives, including renegotiation of our contracts with other carriers, implementation of new DS1 and DS0 central office colocations with BellSouth, use of alternative local providers, and least-cost routing of interexchange carrier calls.

The cost of services and equipment associated with equipment sales and related services revenues increased from 2005 to 2006 by 3.6% due to an increase in the average amount of individual sales.

48

Selling, Operations and Administration Expense. Total selling, operations and administration expense decreased $12.6 million to $182.9 million, or 37.5% of total operating revenues, for 2006 from $195.5 million, or 37.6% of total operating revenues, for 2005. Total selling, operations and administration expense for 2005 included $4.1 million of executive severance cost, $600,000 of stock-based executive severance cost and $3.1 million of special consulting fees we incurred to facilitate the restructuring of our operations in the first six months of 2005. Excluding such executive severance costs and special consulting fees, selling, operations and administration expense decreased $4.8 million, or 2.6%, in 2006 from 2005. The decrease was primarily attributable to action we took in December 2004 to reduce personnel, which resulted in a $3.3 million reduction in compensation and benefits cost. The effect of this reduction was offset in part by $501,000 of expense we incurred in paying termination benefits for severance, retention and relocation related to our plan initiated in December 2005 to close some financial and network service functions in our former headquarters location in West Point, Georgia, and to relocate those business activities to our other locations in Huntsville and Anniston, Alabama. In 2006, improved collections of accounts receivable and reductions in property taxes contributed $3.6 million and $1.7 million, respectively, to a reduction in selling, operations and administration expense. These reductions were offset in part by an increase in the cost of professional services. While achieving these overall reductions in selling, operations and administration expense, we increased our investment in our sales force by adding approximately 65 employees to our local retail sales force in addition to approximately 100 we added in 2005. In 2006, as in 2005, the costs associated with the expansion of our sales force partially offset the savings we realized from the reduction in force we implemented as part of the December 2004 restructuring.

Depreciation and Amortization. Total depreciation and amortization expense increased $6.6 million to $59.8 million for 2006 from $53.2 million for 2005, as a result of the capital expenditures we made in 2006 primarily to acquire new customers.

Interest Expense. Total interest expense increased $17.1 million to $57.6 million for 2006 from $40.5 million for 2005. The increase was primarily attributable to an increase in the weighted average interest rates that accrued on our outstanding borrowings. The increase was also attributable to higher average balances of outstanding borrowings resulting from our March 2005 restructuring, in which we incurred $20.0 million in additional borrowings, our July 2005 refinancing, in which we incurred $35.0 million in additional borrowings, and the additional first lien borrowings of $21.0 million we incurred in November 2006. At December 31, 2006, our overall weighted average annual interest rate, including debt discount and excluding deferred financing costs, was 15.6% compared to 13.4% at December 31, 2005. Of our interest expense for 2006 and 2005, we paid in-kind interest of $6.6 million in 2006, compared to $2.5 million in 2005. Interest expense resulting from the amortization of debt discount and debt issuance costs increased $2.7 million from $5.2 million in 2005 to $7.9 million in 2006.

Interest Income. Total interest income from the temporary investment of available cash balances increased $1.6 million to $2.7 million for 2006 from $1.1 million for 2005.

EBITDA. EBITDA represents net income (loss) before interest, taxes, depreciation and amortization. The following table presents EBITDA amounts for 2006 and 2005. The table also sets forth for these periods a quantitative reconciliation of the differences between EBITDA and net loss, as net loss is calculated in accordance with GAAP.

	Year Ended December 31,
	2006			2005
	(in thousands)
Net loss	$	(53,459	)	$	(50,849	)
Add back non-EBITDA items included in net loss:
Depreciation and amortization		59,832			53,187
Interest expense, net of interest income		54,947			39,451
EBITDA	$	61,320		$	41,789

49

EBITDA in 2006 included $501,000 in expense of termination benefits for severance, retention and relocation related to our plan initiated in December 2005 to close and relocate some financial and network service functions in our former headquarters location in West Point, Georgia. In 2005, EBITDA included an asset impairment loss of $13.4 million that consisted of a write-down of $7.2 million of impaired property, plant and equipment and a write-down of $6.2 million of non-amortizable trade name intangible assets. EBITDA in 2005 also included a $3.9 million write-off of debt issuance cost, $4.7 million of executive severance cost, and $3.1 million of special consulting fees we incurred to facilitate the restructuring of our operations.

2005 Compared to 2004

Operating Revenues. Total operating revenues decreased $63.2 million, or 10.8%, from $583.6 million for 2004 to $520.4 million for 2005.

Operating revenues from our integrated communications services for 2005 decreased $52.6 million, or 11.2 %, to $415.0 million from $467.6 million for 2004. The decrease in revenues from our integrated communications services resulted from a decrease of $23.1 million in revenues from long distance services, a decrease of $5.2 million in revenues generated by access billings to other carriers, and a decrease of $8.7 million in enhanced data revenues. The revenue decreases resulted in part from our strategy to focus on selling products and recurring services with higher gross margins and to eliminate some higher cost products and services. This strategy contributed to a decline in the following components of revenue:

• a decrease of $8.3 million in revenues as the result of our strategic decision to discontinue selling UNE-P services to residential customers through our residential GrapeVine product;

• a decrease of $5.3 million in revenues as the result of the termination of our satellite capacity services offerings; and

• a decrease of $1.0 million in colocation revenues as the result of the sale on September 1, 2005 of our e^deltacom data center in Suwannee, Georgia, whose service offerings historically did not generate positive cash flow.

Our long distance rates, which at December 31, 2005 were less than 2% lower than at December 31, 2004, stabilized during 2005. Our long distance services, however, were negatively affected in 2005 by continuing competitive pressures to bundle long distance minutes of use within local service product offerings. Our existing base of business long distance minutes is also subject to increasing competition from both VoIP and wireless competitive offerings. From the fourth quarter 2004 through the fourth quarter of 2005, we experienced a loss of 8% in long distance minutes of use. We expect that these negative trends in long distance revenues will persist during 2006, primarily because we will continue to emphasize other service offerings that generate fixed monthly recurring service charges.

Our local services revenues from recurring monthly charges continued to increase as a percentage of total revenues derived from integrated communications services. Revenues from our bundled service offerings in 2005 increased to 55% of total integrated communications services revenues in 2005 from 49% in 2004. When we sell a bundled product with fixed monthly recurring charges that include long distance minutes and data services together with local services, we attribute all of the revenues from this product to local services. Our local services revenues in 2005 were adversely affected by a 4% net decrease in billable lines at December 31, 2005 from December 31, 2004 primarily as a result of our loss of some BTI local services customers who were not subject to term contracts. We expect to continue experiencing downward pricing pressure on our local services revenues, particularly as we seek to renew contracts with existing customers who entered into those contracts in the preceding two or three years.

The decrease of $5.2 million in revenues generated by access billings to other carriers was primarily attributable to an FCC-mandated reduction in rates that became effective on June 21, 2004. Principally as a result

50

of the rate reduction, carrier access revenues in the first six months of 2005 decreased by $3.9 million from the first six months of 2004.

Operating revenues from our wholesale services for 2005 decreased $11.2 million, or 11.6%, to $85.2 million from $96.4 million for 2004. The decrease was attributable to a decline in broadband transport services revenues of $3.5 million, which resulted from downward pricing pressure and the limited capital investment we have allocated to support these services. Although local interconnection lines installed increased by 1% from 61,801 at December 31, 2004 to 62,606 at December 31, 2005, local interconnection revenues decreased $3.9 million as the result of this pricing pressure and intensifying competition in the dial-up Internet access business. We also experienced a loss of $2.2 million in other wholesale revenues from the termination of some services to a customer provided under unfavorable pricing terms. We experienced a 1% growth in our wholesale operator and director assistance revenues in 2005.

Operating revenues from communication equipment sales and related services for 2005 increased $700,000, or 3.3%, to $20.2 million from $19.5 million for 2004. The increase was attributable to demand by our customers to purchase more of their communications services from their primary service provider.

Cost of Services and Equipment. Total cost of services and equipment of $268.1 million, or 51.5% of total operating revenues, for 2005 represented a decrease of $22.8 million from total cost of services and equipment of $290.9 million, or 50.0% of total operating revenues, for 2004. Of the decrease for 2005, the cost of providing integrated communications services declined $20.8 million and the cost of providing wholesale services declined $2.4 million. The decrease was slightly offset by an increase of $400,000 in costs related to revenues for equipment sales and related services. The decrease in the cost of providing integrated communications services and wholesale services was attributable in part to the reduction in services, such as long distance, purchased by customers, as well as the result of our initiatives to reduce the amount we pay other telephone companies to use their networks and facilities. During 2005, we undertook a variety of significant cost-saving initiatives, including renegotiation of our contracts with other carriers, implementation of new DS1 and DS0 BellSouth central office colocations, and use of alternative local providers, least-cost routing of interexchange carrier calls and audits of in-service circuits.

The cost of services and equipment as a percentage of integrated communications services revenues increased approximately 2% from 2004 to 2005 due to a reduction in average revenue per access line. The effect of this reduction was partially offset by our cost-savings initiatives. The cost of services and equipment as a percentage of wholesale services revenues and equipment sales and related services revenues remained constant from 2004 to 2005.

Selling, Operations and Administration Expense. Total selling, operations and administration expense decreased $26.4 million to $195.5 million, or 37.6% of total operating revenues, for 2005 from $221.9 million, or 38.0% of total operating revenues, for 2004. Total selling, operations and administration expense for 2005 included $4.1 million of executive severance cost, $600,000 of stock-based executive severance cost and $3.1 million of special consulting fees we incurred to facilitate the restructuring of our operations in the first six months of 2005. Excluding such executive severance costs and special consulting fees, selling, operations and administration expense decreased $34.2 million in 2005, or 15.5%, from 2004. The decrease was primarily attributable to our action in December 2004 to initiate a reduction in personnel and other selling, operations and administration expense to better align our cost structure with our existing revenue performance. We recorded a restructuring charge of $1.6 million during the fourth quarter of 2004 in connection with this reduction in force. During 2005, as a result of the December 2004 restructuring and our continuing focus on operating efficiencies, we reduced compensation costs by $21.9 million, or $26.0 million excluding executive severance costs, maintenance and facilities costs by $5.9 million and other selling, operations and administration expense, including operating taxes, professional fees and advertising costs, by $5.0 million. While achieving these overall reductions in selling, operations and administration expense, we increased our investment in our sales force by adding approximately 100 employees to our local retail sales force. The costs associated with the expansion of

51

our sales force partially offset the savings we realized from the reduction in force we implemented as part of the December 2004 restructuring.

In December 2005, we implemented a plan to close some financial and network service functions in our former headquarters location in West Point, Georgia, and to relocate those business activities to our other locations in Huntsville and Anniston, Alabama. Approximately 65 employee positions are being relocated under the plan. The plan was adopted for the purpose of reorganizing the affected functions to enhance the focus of our operations. In connection with the plan, we paid and recognized expense of $111,000 of termination benefits for severance, retention and relocation in 2005 and we expect to incur and recognize over the future service period approximately $700,000 of such termination benefits in 2006.

Depreciation and Amortization. Total depreciation and amortization expense decreased $33.9 million to $53.2 million for 2005 from $87.1 million for 2004, primarily as a result of the write-down of our property, plant and equipment and amortizable intangible customer base assets in December 2004.

Asset Impairment Loss. We incurred asset impairment losses totaling $13.4 million during 2005 and $203.9 million during 2004. As described above under “Overview,” the charges for 2005 and for 2004 were primarily attributable to our write-down of impaired property, plant and equipment assets for 2005 and 2004, non-amortizable indefinite-life intangible assets for 2005, and amortizable intangible customer base assets for 2004.

Interest Expense. Total interest expense increased $19.2 million to $40.5 million for 2005 from $21.3 million for 2004. The increase was primarily attributable to higher average balances of outstanding borrowings resulting from our March 2005 restructuring, in which we incurred $20.0 million in additional borrowings, and our July 2005 refinancing, in which we incurred $35.0 million in additional borrowings. The increase was also attributable to an increase in the weighted average interest rates that accrued on our outstanding borrowings. Our weighted average annual interest rate increased by 1.9% to 9.1% as a result of our March 2005 restructuring and by 3.2% to 12.3% as a result of our July 2005 refinancing.

Interest Income. Total interest income from the temporary investment of available cash balances increased $670,000 to $1.1 million for 2005 from $430,000 for 2004.

EBITDA. EBITDA represents net income (loss) before interest, taxes, depreciation and amortization. The following table presents EBITDA amounts for the years ended December 31, 2004 and 2005. The table also sets forth for these periods a quantitative reconciliation of the differences between EBITDA and net loss, as net loss is calculated in accordance with GAAP.

	Year Ended December 31,
	2005			2004
	(in thousands)
Net loss	$	(50,849	)	$	(247,228	)
Add back non-EBITDA items included in net loss:
Depreciation and amortization		53,187			87,108
Interest expense, net of interest income		39,451			20,879
EBITDA	$	41,789		$	(139,241	)

In 2005, EBITDA included an asset impairment loss of $13.4 million that consisted of a write-down of $7.2 million of impaired property, plant and equipment and a write-down of $6.2 million of non-amortizable trade name intangible assets. EBITDA in 2005 also included a $3.9 million write-off of debt issuance cost, $4.7 million of executive severance cost, and $3.1 million of special consulting fees we incurred to facilitate the restructuring of our operations. Our negative EBITDA in 2004 was attributable to our asset impairment loss,

52

which consisted of a write-down of $199.9 million of impaired property, plant and equipment and a write-down of $4.0 million to our amortizable intangible customer base asset. In addition, our EBITDA in 2004 reflected a $1.5 million charge related to a private offering of senior notes that was withdrawn and to $3.3 million of merger-related expenses we incurred in connection with the termination of our proposed mergers with two companies in 2004.

Critical Accounting Policies, Estimates, Risks and Uncertainties

Our audited consolidated financial statements are prepared in accordance with generally accepted accounting principles, which require us to make estimates and assumptions. We believe that, of our significant accounting policies described in note 2 to the audited consolidated financial statements appearing elsewhere in this report, the following policies may involve a higher degree of judgment and complexity.

The policies discussed below are not intended to constitute a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for us to judge their application. There are also areas in which our judgment in selecting any available alternative would not produce a materially different result. See our audited consolidated financial statements and related notes appearing elsewhere in this report, which contain accounting policies and other disclosures required by generally accepted accounting principles.

Revenue Recognition. We generate recurring or multi-year operating revenues, as well as non-recurring operating revenues. We recognize operating revenues as services are rendered to customers in accordance with SEC Staff Accounting Bulletin, or SAB, No. 104, “Revenue Recognition,” which requires that the following four basic criteria must be satisfied before revenues can be recognized:

• there is persuasive evidence that an arrangement exists;

• delivery has occurred or services rendered;

• the fee is fixed and determinable; and

• collectibility is reasonably assured.

We base our determination of the third and fourth criteria above on our judgment regarding the fixed nature of the fees we have charged for the services rendered and products delivered, and the prospects that those fees will be collected. If changes in conditions should cause us to determine that these criteria likely will not be met for future transactions, revenue recognized for any reporting period could be materially adversely affected.

We generate recurring revenues from our integrated communications services and our wholesale services. Revenues from these sources are recognized as services are provided. Advance billings or cash payments received in advance of services performed are recorded as deferred revenue.

We generate non-recurring revenues from our equipment sales and related services. Revenues from these sources are recognized upon installation or as services are performed. Non-recurring revenues such as the sale of telephone systems may be part of multiple element arrangements. We estimate the fair value of the separate elements of a multiple element arrangement and recognize revenues for any separate element that has been delivered only after all of the remaining separate elements of the multiple element arrangement have been delivered.

We recognize some revenues net as an agent versus gross as principal. We apply the guidance provided in Emerging Issues Task Force Issue 99-19, “Reporting Revenue Gross as Principal Versus Net as an Agent,” to classify and record such amounts. We recorded revenues net as an agent of $5.7 million during 2004, $3.9 million during 2005 and $3.5 million during 2006. See note 2 to our audited consolidated financial statements appearing elsewhere in this report for additional information regarding revenues we recognize net as an agent.

53

Allowance for Doubtful Accounts. We record an allowance for doubtful accounts based on specifically identified amounts that we believe will ultimately prove to be uncollectible. We also use estimates based on our aged receivables to determine an additional allowance for bad debts. These estimates are based on our historical collection experience, current trends, credit policy and a percentage of our revenue. We also review current trends in the credit quality of our customer base, as well as changes in the credit policies. Our days sales outstanding improved by 2.5 days from December 31, 2005 to December 31, 2006. The reduction in our allowance for doubtful accounts and in our outstanding accounts receivable as well as our days sales outstanding at December 31, 2006 was primarily attributable to strict enforcement of our credit policy combined with the termination of our product offering to residential customers in November 2005. The following table identifies the amounts we had reserved as of the dates indicated.

	December 31,
	2006		2005		2004
Total reserves	$	4,772,000	$	9,237,000	$	9,331,000

In addition to the reserves shown above, we maintain customer receivable reserves related to exposure for customer credits. These reserves are originally established as reductions to revenues and are accounted for in “Other Accrued Liabilities” in the audited consolidated balance sheets appearing elsewhere in this report. These reserves totaled $1.1 million as of December 31, 2004, $1.4 million as of December 31, 2005 and $1.2 million as of December 31, 2006. We also consider these reserves in our analysis of our required provision for bad debts.

We have attempted to reserve for expected losses based on the foregoing factors and believe our reserves are adequate. It is possible, however, that the accuracy of our estimation process could be materially affected as the composition of our receivables changes over time. We regularly review and refine the estimation process to take account of these changes, but we cannot guarantee that we will be able to estimate accurately credit losses on our receivables.

Cost of Services. Cost of services includes direct expenses associated with providing services to our customers and the cost of equipment sold. These costs include the cost of leasing facilities from incumbent local exchange carriers and other telecommunication providers that provide us with access connections to our customers, to some components of our network facilities, and between our various facilities. In addition, we use other carriers to provide services where we do not have facilities. We use a number of different carriers to terminate our long distance calls outside the southern United States. These costs are expensed as incurred. Some of these expenses are billed in advance and some expenses are billed in arrears. Accordingly, we are required to accrue for expected expenses irrespective of whether these expenses have been billed. We use internal management information to support these required accruals. Experience indicates that the invoices that are received from other telecommunication providers are often subject to significant billing disputes. We typically accrue for all invoiced amounts unless there are contractual, tariff, or operational data that clearly indicate support for the billing dispute. Experience also has shown that these disputes can require a significant amount of time to resolve given the complexities and regulatory issues surrounding the vendor relationships. We maintain reserves for any anticipated exposure associated with these billing disputes. We believe our reserves are adequate. The reserves are reviewed on a monthly basis, but are subject to changes in estimates and management judgment as new information becomes available. In view of the length of time it historically has required to resolve these disputes, disputes may be resolved or require adjustment in future periods and relate to costs invoiced, accrued or paid in prior periods.

Non-Cash Compensation. We adopted SFAS No. 123R, “Share-Based Payment” (“SFAS No. 123R”) effective January 1, 2006. SFAS No. 123R requires that compensation cost relating to share-based payment transactions be recognized in the financial statements based on the fair value of equity instruments issued. The effect of applying SFAS No. 123R on our financial position or results of operations for the year ended December 31, 2006 was insignificant. Although the recognition of the value of the instruments results in

54

compensation in an entity’s financial statements, the expense differs from other compensation in that these charges are typically settled through the issuance of common stock, which would have a dilutive effect upon earnings per share, if and when the instruments are exercised or vest. The determination of the estimated fair value used to record the compensation associated with the equity instruments issued requires management to make a number of assumptions and estimates that can change or fluctuate over time.

Valuation of Long-Lived and Intangible Assets and Goodwill. We assess the impairment of identifiable intangibles, long-lived assets and related goodwill when events or changes in circumstances indicate that we may not be able to recover the carrying value of the identifiable intangibles, long-lived assets or related goodwill. We make our assessments in accordance with SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets.” Factors we consider important and that could trigger an impairment review include the following:

• significant underperformance of our assets relative to expected historical or projected future operating results;

• significant changes in the manner in which we use our assets or in our overall business strategy;

• significant negative industry or economic trends;

• a significant decline in our common stock price for a sustained period; and

• our market capitalization relative to net book value.

When we determine that we may not be able to recover the carrying value of intangibles, long-lived assets or goodwill based upon the existence of one or more of the foregoing indicia of impairment, we measure impairment based on an estimate of fair value. We may base these estimates on the projected discounted cash flow method using a discount rate we determine to be commensurate with the risk inherent in our current business model, or on other methods. Net intangible assets, long-lived assets and goodwill amounted to $362.9 million as of December 31, 2004, $314.3 million as of December 31, 2005 and $297.6 million as of December 31, 2006.

We did not record charges for the impairment of long-lived assets or goodwill in 2006. In 2005, we recognized an impairment loss of $7.2 million to our property, plant and equipment and an impairment loss of $6.2 million to our non-amortizable trade name intangible assets. In 2004, we recognized an impairment loss of $199.9 million to our property, plant and equipment and an impairment loss of $4.0 million to our amortizable intangible customer base asset. See notes 4 and 6 to our audited consolidated financial statements appearing elsewhere in this report for additional information regarding these write-downs.

Concentrations of Credit Risk, Significant Customers and Key Suppliers. Cash and cash equivalents, short-term investments and restricted cash are held with domestic financial institutions primarily with high credit ratings. We have not experienced any losses on our cash or cash equivalents.

Our accounts receivable subject us to credit risk, as collateral is generally not required. We conduct our business with a large base of customers and limit our risk of loss by billing most customers in advance for services and by terminating access on delinquent accounts. The large number of customers mitigates the concentration of credit risk. No customer represented more than 10% of our consolidated operating revenues for any of the three years in the period ended December 31, 2006.

We lease colocation space and loops from the incumbent local exchange carriers that are major competitors. We are dependent upon the availability of this space owned by the ILECs. We are exposed to risk associated with failing to obtain favorable renewal contract terms with these suppliers, which include rates that are subject to industry regulation, and to risk regarding the timeliness of supplier processing of our orders for customers.

We are dependent on a limited number of suppliers for certain equipment used in our network. If these suppliers were unable to meet our needs, management believes that we could obtain this equipment from other

55

suppliers on comparable terms and that our operating results would not be materially adversely affected. If we were required to purchase another manufacturer’s equipment, we would incur significant initial costs to integrate the equipment into our network and to train personnel to use the new equipment, which could have a material adverse effect on our financial condition and results of operations.

Contingencies. We are a party to a variety of legal proceedings, as either plaintiff or defendant, and are engaged in other disputes that arise in the ordinary course of business. We are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses for certain of these matters. The determination of the liabilities to be recognized, if any, for loss contingencies is made after analysis of each individual situation based on the facts and circumstances. However, it is reasonably possible that the liabilities reflected in our consolidated balance sheets for loss contingencies and business disputes could change in the near term due to new facts and circumstances, the effects of which could be material to our consolidated financial position, results of operations or cash flows.

Liquidity and Capital Resources

Prior to 2006 we incurred operating losses, although we generally have experienced positive cash flow from operations. We have an accumulated deficit of $406.7 million as of December 31, 2006, which has accumulated since the consummation of our reorganization on October 29, 2002 under Chapter 11 of the United States Bankruptcy Code. In the second half of 2004, in response to adverse operating trends, we took action to limit capital expenditures, reduce the size of our workforce, and implement other measures to manage cash resources. As a result of these initiatives, and transactions completed in 2005, we achieved significant improvements in our liquidity position as of December 31, 2005, which we have maintained through December 31, 2006.

On March 29, 2005, we completed a restructuring of our existing $259.7 million of secured indebtedness and entered into a new $20 million subordinated secured term loan agreement with the Welsh Carson securityholders, which we drew down in full on the restructuring date. The Welsh Carson securityholders consist of investment funds and other persons affiliated with Welsh, Carson, Anderson & Stowe, a private equity firm, who include members of the stockholders group that owns capital stock representing a majority of our voting power. Our existing lenders required the new loan as a condition of the restructuring. The purpose of the restructuring was to stabilize our liquidity position and obtain a deferral of principal payments on most of our secured indebtedness until June 2006, which was the maturity date of our senior secured credit facility. The completion of the restructuring also enabled us to cure temporarily waived covenant defaults under our credit facilities. In the restructuring, we replaced all $22 million of obligations outstanding under our principal capital leases with loans in the same amount under the senior credit facility. In connection with the subordinated secured loan, we issued to the Welsh Carson securityholders Series C warrants to purchase 6,600,000 shares of common stock at an initial exercise price of $1.80 per share. The Series C warrants have a ten-year term from the issue date.

On July 26, 2005, we completed transactions in which we issued new senior secured indebtedness totaling $259.8 million and warrants and refinanced substantially all of our existing secured indebtedness.

• We issued $209 million principal amount of first lien, senior secured notes due 2009 and used the proceeds of this issuance to repay in full our former $204 million senior secured credit facility, which was terminated, and to pay accrued interest under the facility as well as transaction costs. As a result of the repayment in full of the former credit facility, we expensed $3.9 million of unamortized debt issuance costs, which is reflected as a component of “Other (expense) income” in our audited consolidated statements of operations for 2005 appearing elsewhere in this report.

• We also issued $50.8 million principal amount of third lien, senior secured notes due 2009. Of this amount, we issued $30 million principal amount of third lien notes to new investors for cash and $20.8 million principal amount of third lien notes to the Welsh Carson securityholders, in exchange for $20

56

million principal amount of notes plus capitalized interest evidencing the subordinated secured loan that the Welsh Carson securityholders had extended in connection with the March 2005 restructuring. In connection with the issuance of the third lien notes, we issued 9,000,000 Series D warrants to the third lien note purchasers other than the Welsh Carson securityholders. Each Series D warrant will entitle the holder to purchase shares of a new issue of our 8% Series C convertible redeemable preferred stock or common stock. Each share of Series C preferred stock will be convertible into .4445 of one share of our common stock, subject to antidilution adjustments.

• We also entered into an amendment to our junior, second lien credit facility, which extended the maturity date of the $55.7 million of loans thereunder from June 30, 2009 to August 26, 2009, eliminated all scheduled principal payments prior to maturity, and increased the rate at which interest accrues on such loans.

On November 10, 2006, we placed with institutional investors $21 million principal amount of additional first lien notes with the same payment terms and the same July 26, 2009 maturity date as the first lien notes we issued in connection with the July 2005 refinancing.

On October 31, 2006, we negotiated modifications to an unsecured vendor note in an original principal amount of $7.1 million which we had assumed in connection with our acquisition of BTI. As part of the March 2005 restructuring, we had obtained an extension of the original maturity date of the note from April 30, 2006 to October 31, 2006. The modifications provided for payment of $2.27 million of principal on October 31, 2006, $2.4 million of principal plus interest payments over 36 monthly installments beginning November 1, 2006, and $2.4 million principal on October 1, 2009, with interest payable monthly, and increased the rate at which interest accrues on the outstanding principal balances.

On September 1, 2005, in accordance with our strategy to sell non-core assets on a selected basis, we sold our e^deltacom data center facility located in Suwanee, Georgia and substantially all of the assets related to the e^deltacom business for a sale price of approximately $25.8 million. The e^deltacom business provided managed colocation, hosting, security data storage, monitoring and networking services and hardware solutions. This transaction resulted in net cash proceeds of $25.9 million after working capital adjustments and costs and expenses associated with the sale. We recognized a net gain on sale of the assets of $3.2 million, which is reflected as a component of “Other (expense) income” in our audited consolidated statements of operations for 2005 appearing elsewhere in this report. During 2006, we received proceeds of $1.6 million on sales of surplus property and equipment. We recognized a net gain of $668,000 on the sale of these assets, which is reflected as a component of “Other (expense) income” in the our audited consolidated statements of operations for 2006 appearing elsewhere in this report.

Sources and Uses of Cash. During 2006, we funded our operating and capital requirements and other cash needs through cash from operations, cash on hand and proceeds from sale of $21 million principal amount of first lien, senior secured notes, net of issuance costs. During 2005, we funded our operating and capital requirements and other cash needs through cash from operations, proceeds from the March 2005 restructuring and the July 2005 refinancing and the proceeds from the sale of our e^deltacom data center assets. During 2004, we funded our operating and capital requirements and other cash needs principally through cash from operations, cash on hand and the proceeds from the sale of our Series B preferred stock in November 2004. Cash provided by operating activities was $28.7 million in 2006, $28.4 million in 2005 and $28.9 million in 2004. Changes in working capital were $2.3 million in 2006, $(6.6) million in 2005, and $(26.3) million in 2004.

• The change in working capital in 2006 was primarily attributable to increased accrued interest and unearned revenue, which was partially offset by reductions in our accounts payable and accrued liabilities.

• The change in working capital in 2005 was primarily attributable to reductions in our accounts payable, accrued liabilities and unearned revenue and to increased inventory. We reduced our accounts payable

57

by making payments to network vendors at the end of December 2005, rather than at the beginning of the following month in accordance with our customary practice in other years.

• The change in working capital in 2004 was primarily attributable to a significant reduction in our accounts payable, which was partially offset by increases in our accrued liabilities. The decrease in accounts payable resulted principally from our settlement of line cost disputes with incumbent carriers and additional payments of trade payables. Early in 2004, we initiated an effort to resolve with our vendors a significant amount of aged disputed accounts payable.

Cash used for investing activities was $46.9 million in 2006, $6.4 million in 2005 net of $25.9 million proceeds from the sale of e^deltacom data center assets, and $60.9 million in 2004. We used the cash in these periods primarily to fund capital expenditures. Of cash used for investing activities, we utilized $1.4 million in 2006, $4.9 million in 2005, and $10.8 million in 2004 to fund costs related to our acquisitions or proposed acquisitions of other businesses. We made capital expenditures of $46.9 million in 2006, $28.3 million in 2005, and $49.5 million in 2004.

• Of the $46.9 million of capital expenditures in 2006, $42.4 million related to our integrated communications services business and $4.5 million to our wholesale services business. We applied $35.0 million of the expenditures to expansion of our network and customer base, $9.0 million to network maintenance and $2.9 million to strategic initiatives, which primarily involved investment in assets to facilitate migration of customers to our network to reduce our cost of services.

• Of the $28.3 million of capital expenditures in 2005, $24.8 million related to our integrated communications services business and $3.5 million to our wholesale services business. We applied $16.8 million to expansion of our network and customer base, $4.7 million to network maintenance and $6.1 million to strategic initiatives, which primarily involved investment in assets to facilitate migration of customers to our network to reduce our cost of services.

• Of the $49.5 million of capital expenditures in 2004, $30.5 million related to our integrated communications services business and $12.4 million to the integration of BTI’s operations. During 2004, in accordance with our strategy to minimize the capital we allocate to our wholesale services business, we applied $6.6 million of capital expenditures to this business.

Cash provided (used) by financing activities was $16.5 million in 2006, $30.7 million in 2005, and $(1.5) million in 2004.

• Cash provided by financing activities in 2006 consisted of $19.9 million of proceeds from the issuance of first lien, senior secured notes, net of issuance costs. These proceeds were offset in part by repayments of $3.4 million of long-term debt, capital lease obligations and other indebtedness.

• Cash provided by financing activities in 2005 consisted of $241.8 million of proceeds from the issuance of senior secured notes and stock warrants, net of issuance costs and other long-term debt restructuring costs. These proceeds were offset in part by repayments of $211.0 million of long-term debt, capital lease obligations and other indebtedness.

• Cash provided by financing activities in 2004 consisted primarily of $15 million of proceeds from the sale of our Series B preferred stock, which were offset by repayments of $16.6 million of long-term debt, capital lease obligations and other indebtedness.

Indebtedness. As of December 31, 2006, we had approximately $354.6 million of total long-term indebtedness, net of unamortized debt discount, including current portion, and capital leases. As of the same date, excluding deferred financing costs, this indebtedness had an overall weighted average interest rate of 15.6%, including payment-in-kind interest at a rate of 2.1%.

First Lien, Senior Secured Notes Due July 2009. In connection with our July 2005 refinancing, we issued first lien, senior secured notes due 2009 in the aggregate principal amount of $209 million. We used the proceeds

58

of the first lien notes to repay in full the amount of our former $204 million senior secured credit facility, which was terminated, and to pay accrued interest under the facility as well as transaction costs. The first lien notes accrue interest, payable quarterly, at an annual rate equal to the specified London Interbank Offered Rate, or LIBOR, plus 8%, with the portion of any interest in excess of a 12% annual rate payable in-kind, or PIK, at our option, and accrue PIK interest, payable on a quarterly basis, at an annual rate of 0.5%. No scheduled principal payments will be due on the first lien notes before the maturity date of July 26, 2009. Our obligations under the first lien notes are secured by first priority liens on, and security interests in, substantially all of our assets. We are subject to financial covenants under the first lien note agreement, including a maximum capital expenditures covenant, a senior debt ratio covenant, a total leverage ratio covenant, an interest coverage ratio covenant, a minimum unrestricted cash covenant, and a minimum consolidated EDITDA covenant, as EBITDA is defined for purposes of the agreement. As a result of the repayment in full of our former $204 million senior secured credit facility, we expensed $3.9 million of unamortized debt issuance costs, which is reflected as a component of “Other (expense) income” in our audited consolidated statements of operations for 2005 appearing elsewhere in this report.

On November 10, 2006, we placed with institutional investors $21 million principal amount of additional first lien notes with the same payment terms and the same July 26, 2009 maturity date as the first lien notes we issued in connection with the July 2005 refinancing. We paid the holders of the outstanding first lien notes a fee of $611,000 for consenting to amendments to the first lien note agreement made in connection with the sale of the additional notes. The amendments modified some of the financial and operating covenants in the agreement to reflect changes required by the issuance of the additional first lien notes, concurrent modifications to the unsecured vendor note described below, and operating requirements that include the additional capital expenditures we will make with the new note proceeds. The modifications affected the maximum capital expenditures covenant, the senior debt ratio covenant, the total leverage ratio covenant and the interest coverage ratio covenant. The amendments also expanded the minimum consolidated EBITDA covenant, under which, as modified, we will be required to maintain consolidated EBITDA (as defined for purposes of the agreement), as measured by the cumulative sum of consolidated EBITDA for the preceding 12 months, of at least $60 million at December 31, 2006, $66.7 million at June 30, 2007, $70 million at December 31, 2007 and $77 million at June 30, 2008. The related covenants under our second lien secured credit facility and our third lien, senior secured notes have also been amended to reflect these modifications.

Second Lien Secured Credit Facility Due August 2009. In connection with the July 2005 refinancing, we entered into an amendment to our junior, second lien credit agreement, under which approximately $55.7 million of loans were outstanding at the date of the refinancing. The amendment extended the maturity date of the loans from June 30, 2009 to August 26, 2009, eliminated all scheduled principal payments prior to maturity, and increased the annual rate at which interest accrues. Under the amended agreement, the loans accrue cash interest at an annual rate equal to LIBOR plus 7.75% and accrue PIK interest, payable on a quarterly basis, at an annual rate of 0.75%. The operating and financial covenants of the second lien credit agreement were modified to be substantially consistent with the corresponding covenants under the first lien notes and the third lien, senior secured notes.

Our obligations under the second lien secured credit facility are secured by second priority liens on, and security interests in, substantially all of our assets. Under an intercreditor agreement with the lenders under the first lien notes, the lenders under the second lien secured credit facility are subject to standstill provisions restricting their ability to enforce their remedies upon an event of default by the loan parties or an insolvency of the loan parties until all obligations under the first lien notes have been paid in full. Following payment in full of the first lien notes, the obligations under the second lien secured credit facility will be secured by first priority liens on, and security interests in, the assets that previously had secured obligations under the first lien notes.

Third Lien, Senior Secured Notes Due September 2009. In connection with the July 2005 refinancing, we issued third lien, senior secured notes due September 2009 in the aggregate principal amount of $50.8 million. Of this amount, we issued $30 million principal amount of third lien notes to new investors for cash and $20.8

59

million principal amount of third lien notes to the Welsh Carson securityholders in exchange for $20 million principal amount of notes plus capitalized interest evidencing the subordinated secured loan that the Welsh Carson securityholders extended in connection with the March 2005 restructuring. The third lien notes accrue interest, payable quarterly, at an annual rate of LIBOR plus 7.5%, with the portion of any interest in excess of a 12% annual rate payable in-kind at our option, and accrue additional PIK interest, payable on a quarterly basis, at an annual rate of 4.5%. No scheduled principal payments will be due on the third lien notes before the maturity date of September 26, 2009. The obligations under the third lien notes are secured by third priority liens on, and security interests in, substantially all of our assets. The operating and financial covenants under the third lien notes are substantially consistent with the corresponding covenants under the first lien notes and the second lien credit facility. Under an intercreditor agreement with the holders of the first lien notes and the lenders under the second lien credit agreement, the holders of the third lien notes are subject to standstill provisions restricting their ability to enforce their remedies upon an event of default by the third lien note obligors or an insolvency of the third lien note obligors until all obligations under the first lien notes and the second lien credit agreement have been paid in full.

In connection with the issuance of the third lien notes, we issued 9,000,000 Series D warrants to the third lien note purchasers other than the Welsh Carson securityholders. Each Series D warrant will entitle the holder to purchase one share of a new issue of our Series C preferred stock, which was created on October 24, 2005, and a portion of an additional share equal to the cumulative amount of payment-in-kind dividends that would have accrued with respect to one share from the warrant issue date of July 26, 2005 through the warrant exercise date if such share had been outstanding. Each share of Series C preferred stock will be convertible into .4445 of one share of our common stock, subject to antidilution adjustments. Each Series D warrant also will permit the holder of the warrant to purchase the number of shares of common stock into which the shares of Series C preferred stock otherwise issuable under the warrant would be convertible as of the warrant exercise date. We determined the value associated with the Series D warrants to be $13.0 million as of July 26, 2005, and are amortizing the resulting debt discount to interest cost using the interest method. Interest cost for 2005 included $1.2 million of amortized debt discount. See notes 9 and 10 to the audited consolidated financial statements appearing elsewhere in this report for additional information regarding the Series D warrants and the Series C preferred stock.

Subordinated Secured Loan. In the March 2005 restructuring, we entered into a subordinated secured loan agreement with the Welsh Carson securityholders. On the restructuring date, we drew down the full $20 million of borrowings available under this loan. In connection with the loan, we issued the lenders Series C warrants to purchase 6,600,000 shares of common stock. The resulting $7.6 million debt discount is being amortized to interest cost using the interest method. Interest cost for 2005 included $1.3 million of amortized debt discount. See note 10 to the audited consolidated financial statements appearing elsewhere in this report for additional information regarding the Series C warrants. The subordinated secured loan was repaid as part of the July 2005 refinancing.

See note 7 to the audited consolidated financial statements appearing elsewhere in this report for additional information about the terms of the secured indebtedness that we restructured and refinanced during 2005 and 2006.

Capital Leases. At December 31, 2006, our outstanding obligations under capital leases totaled $76,000. As part of the March 2005 restructuring, we converted into loans under our senior credit agreement the $22 million of obligations outstanding under our principal capital lease facilities at the restructuring date.

Other Long-Term Liabilities. In connection with our acquisition of BTI, we assumed $18.5 million principal amount of unsecured senior notes that accrue interest, payable semi-annually, at an annual rate of 10.5%. The senior notes were originally issued by BTI in September 1997. In 2001, the notes were amended to remove substantially all financial and administrative covenants. The notes are due in full in September 2007.

In connection with our acquisition of BTI, we assumed an unsecured vendor note in an original principal amount of $7.1 million. Before the March 2005 restructuring, the note was payable on demand on or after

60

April 30, 2006. As part of the March 2005 restructuring, we obtained an extension of the maturity date of the note to October 2006. On October 31, 2006, the holder of the note agreed to payment modifications that provided for payment of $2.27 million of principal on October 31, 2006, $2.4 million of principal plus interest payments over 36 monthly installments beginning November 1, 2006, and $2.4 million principal due October 1, 2009, with interest payable monthly. Interest on the note, which had accrued at an annual rate of 8 ³/4%, was modified to accrue at an annual rate of 10% on principal balances outstanding after October 31, 2006.

Cash Requirements. We have various contractual obligations and commercial commitments. We do not have off-balance sheet financing arrangements other than our operating leases.

The following table sets forth, as of December 31, 2006, our contractual obligations and commercial commitments (in thousands):

Contractual Obligations

	Payments Due by Period
	Total		Less than 1 year		2-3 years		4-5 years		More than 5 years
Long-term debt and capital lease obligations	$	368,137	$	19,286	$	348,851	$	—	$	—
Interest on debt, capital leases and other long-term liabilities		136,577		52,078		84,499		—		—
Operating leases		47,262		14,234		16,660		7,745		8,623
Purchase obligations		6,000		6,000		—		—		—
Totals	$	557,976	$	91,598	$	450,010	$	7,745	$	8,623

See note 7 to the audited consolidated financial statements appearing elsewhere in this report for additional information regarding our debt, capital lease obligations and operating leases.

As of December 31, 2006, we had entered into agreements with vendors to purchase approximately $6.0 million of property, plant and equipment and services in 2007 related primarily to the improvement and installation of communications facilities and services.

In February 2007, we entered into an agreement with a leasing company through which we intend to lease equipment totaling up to $7.5 million under terms of the capital lease. Repayment terms under the agreement provide for quarterly payments of principal and interest at an annual rate of approximately 15% over three years beginning in the quarter following funding under the lease.

We expect that we will not experience significant changes over the next year in the aggregate amount of our total capital expenditures, in the amount of capital expenditures that we will apply for network and facilities maintenance, or in the type of capital expenditures that we believe will enable us to acquire additional customers within the markets covered by our existing network to generate increased operating revenues. We currently estimate that our aggregate capital requirements for 2007 will total approximately $40 million to $50 million. The actual amount and timing of our capital requirements may differ materially from this expectation as a result of constraints on our liquidity and regulatory, technological, economic and competitive developments, including market developments and new opportunities.

To enhance our liquidity position, we intend to continue to pursue possible sales of assets that are not integral to our network operations. We cannot provide any assurance as to whether, or as to the terms on which, we would be able to complete any such additional asset sales.

We believe that our cash on hand, which includes the net proceeds of the $21 million principal amount of first lien notes we sold in November 2006, the cash flows we expect to generate from operations under our current business plan and our $7.5 million capital lease borrowings will provide us with sufficient funds to enable

61

us to fund our planned capital expenditures, satisfy our debt service requirements, and meet our other cash needs under our current business plan for at least the next 12 months. Our ability to meet all of our cash needs during the next 12 months and thereafter could be adversely affected by various circumstances, including an increase in customer attrition, employee turnover, service disruptions and associated customer credits, acceleration of critical operating payables, lower than expected collections of accounts receivable, and other circumstances outside of our immediate and direct control. We may determine that it is necessary or appropriate to obtain additional funding through new debt financing or the issuance of equity securities to address such contingencies or changes to our business plan. We cannot provide any assurance as to whether, or as to the terms on which, we would be able to obtain such debt or equity financing.

Based on our current business expectations, we anticipate that we will be required to refinance a substantial portion or all of our outstanding indebtedness under our first lien notes, second lien credit agreement and third lien notes before we are required to make balloon principal payments totaling $344.9 million under these obligations when they mature beginning in July 2009. We will consider opportunities to refinance all or a portion of such indebtedness in the capital markets or in other transactions.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued SFAS No. 153, “Exchanges of Non-Monetary Assets,” December 2004, which was effective for us as of January 1, 2006. Under SFAS No. 153, we will measure assets exchanged at fair value, as long as the transaction has commercial substance and the fair value of the assets exchanged is determinable within reasonable limits. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of SFAS No. 153 did not have a material effect on our consolidated results of operations or financial condition.

The FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, a replacement of APB Opinion No. 20 and SFAS No. 3, June 2005, which was effective for us as of January 1, 2006. SFAS No. 154 applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the instance in which the pronouncement does not include specific transition provisions. Accounting Principles Board, or APB, Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in the statement of operations. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS No. 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS No. 154 redefines restatement as the revision of previously issued financial statements to reflect the correction of an error. SFAS No. 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. The adoption of SFAS No. 154 did not have a material impact on our consolidated results of operations or financial condition.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return that results in a tax benefit. FIN 48 is effective for fiscal years beginning after December 15, 2006 and must be applied to all open tax positions upon initial adoption. In addition, FIN No. 48 provides guidance on de-recognition, income statement classification of interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying the provisions of FIN 48 is required to be

62

reported as an adjustment to tax liabilities and to the opening balance of retained earnings in the year adopted. The adoption of FIN No. 48 is not expected to have a material effect on our consolidated results of operations or financial condition.

In June 2006, the FASB ratified the consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF No. 06-3”). The scope of EITF No. 06-3 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, Universal Service Fund, or USF, contributions and excise taxes. The Task Force concluded that entities should present these taxes in the income statement on either a gross or a net basis, based on their accounting policy, which should be disclosed pursuant to APB Opinion No. 22, “Disclosure of Accounting Policies.” If such taxes are significant and are presented on a gross basis, the amounts of those taxes should be disclosed. The consensus on EITF No. 06-3 will be effective for interim and annual reporting periods beginning after December 15, 2006. We currently record all such taxes billed to our customers, including USF contributions, sales, use and excise taxes, on a net basis in our consolidated statements of operations. The Company will adopt EITF No. 06-3 effective January 1, 2007.

In September 2006, the SEC issued SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements.” SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach, referred to as a “dual approach,” in assessing materiality and provides for a one-time cumulative effect transition adjustment. We adopted SAB No. 108 for the year ended December 31, 2006. The adoption of SAB No. 108 did not have a material effect on our results of operations and financial condition.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for fiscal years beginning after November 15, 2007 and interim periods within that fiscal year. We have not determined the effect that adoption of SFAS No. 157 will have upon our financial statements, which is not reasonably estimable at this time.

In December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”). FSP EITF 00-19-2 addresses an issuer’s accounting for registration payment arrangements. FSP EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS No. 5”). A “registration payment arrangement” is defined as an arrangement that specifies that the issuer will endeavor (1) to file a registration statement for the resale of specified financial instruments and/or for the resale of equity shares that are issuable upon exercise or conversion of specified financial instruments and for that registration statement to be declared effective by the SEC. The arrangement requires the issuer to transfer consideration to the counterparty if the registration statement for the resale of the financial instrument or instruments subject to the arrangement is not declared effective or if effectiveness of the registration statement is not maintained. FSP EITF 00-19-2 specifies that if the transfer of consideration under a registration payment arrangement is probable and can be reasonably estimated at inception, the contingent liability under the registration payment arrangement must be included in the allocation of proceeds from the related financing transaction using the measurement guidance in SFAS No. 5. FSP EITF 00-19-2 also requires certain disclosures about the terms of each registration payment arrangement, even if the likelihood of the issuer having to make any payments under the arrangement is remote. FSP EITF 00-19-2 is effective immediately for registration payment arrangements entered into after December 31, 2006 and for fiscal years beginning after December 31, 2006, and interim periods within those fiscal years, for registration payment arrangements entered into prior to the issuance of FSP EITF 00-19-2. We

63

adopted FSP EITF 00-19-2 for the year ended December 31, 2006. The adoption of FSP EITF 00-19-2 did not have a material effect on our results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to choose, at specified election dates, to elect to measure many financial instruments and certain other items at fair value, including recognized financial assets and financial liabilities except certain items excluded by the statement, and provides that the fair value option may be applied instrument by instrument, is irrevocable and must be applied to an instrument in its entirety. Unrealized gains and losses on items for which the fair value option has been elected must be reported in earnings subsequent to such election. The statement is effective for fiscal years beginning after November 15, 2007. We have not determined the effect that adoption of SFAS No. 159 will have upon our financial statements, which is not reasonably estimable at this time.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to minimal market risks. We maintain investments consisting primarily of short-term, interest-bearing securities. We enter into long-term debt obligations with appropriate pricing and terms. We do not hold or issue derivative, derivative commodity or other financial instruments for trading purposes. We do not have any material foreign currency exposure.

Our major market risk exposure is to changing interest rates on borrowings we use to fund our business, including $344.9 million of borrowings outstanding as of December 31, 2006, under our first lien, senior secured notes, our second lien secured credit facility and our third lien, senior secured notes, all of which accrue interest at floating rates. A change of one percentage point in the interest rate applicable to our $344.9 million of variable-rate debt at December 31, 2006 would result in a fluctuation of approximately $3.4 million in our annual interest expense.

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements and supplementary data listed in Item 15 are filed as part of this report and appear on pages F-2 through F-41.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our management, with the participation of our Chief Executive Officer, who is our principal executive officer, and our Executive Vice President and Chief Financial Officer, who is our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2006. Based upon that evaluation, our Chief Executive Officer and our Executive Vice President and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2006.

During the fourth fiscal quarter of 2006, there have been no changes in our internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

64

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information responsive to this Item 10 is incorporated herein by reference to our definitive proxy statement for our 2007 annual meeting of stockholders.

Item 11. Executive Compensation.

Information responsive to this Item 11 is incorporated herein by reference to our definitive proxy statement for our 2007 annual meeting of stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information responsive to this Item 12 is incorporated herein by reference to our definitive proxy statement for our 2007 annual meeting of stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information responsive to this Item 13 is incorporated herein by reference to our definitive proxy statement for our 2007 annual meeting of stockholders.

Item 14. Principal Accountant Fees and Services.

Information responsive to this Item 14 is incorporated herein by reference to our definitive proxy statement for our 2007 annual meeting of stockholders.

65

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) The following consolidated financial statements of ITC^DeltaCom appear on pages F-2 through F-41 of this report and are incorporated by reference in Part II, Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets:

ITC^DeltaCom—December 31, 2006

ITC^DeltaCom—December 31, 2005

Consolidated Statements of Operations:

ITC^DeltaCom—for the year ended December 31, 2006

ITC^DeltaCom—for the year ended December 31, 2005

ITC^DeltaCom—for the year ended December 31, 2004

Consolidated Statements of Stockholders’ Equity (Deficit):

ITC^DeltaCom—for the year ended December 31, 2006

ITC^DeltaCom—for the year ended December 31, 2005

ITC^DeltaCom—for the year ended December 31, 2004

Consolidated Statements of Cash Flows:

ITC^DeltaCom—for the year ended December 31, 2006

ITC^DeltaCom—for the year ended December 31, 2005

ITC^DeltaCom—for the year ended December 31, 2004

(a)(2) The following financial statement schedule is filed as part of this report and is attached hereto on pages S-1 and S-2:

Report of Independent Registered Public Accounting Firm as to Schedule.

Schedule II—Valuation and Qualification Accounts.

All other schedules for which provision is made in the applicable accounting regulations of the SEC either have been included in the consolidated financial statements of ITC^DeltaCom or the notes thereto, are not required under the related instructions or are inapplicable, and therefore have been omitted.

(a)(3) The following exhibits are either filed with this Form 10-K or are incorporated herein by reference. Our Securities Exchange Act file number is 0-23253.

Exhibit Number	Exhibit Description
2.1	ITC^DeltaCom, Inc. Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, As Further Revised, dated October 15, 2002. Filed as part of Exhibit 1 to Registration Statement on Form 8-A, dated October 29, 2002, of ITC^DeltaCom, Inc. (the “Form 8-A”) and incorporated herein by reference.
3.1	Restated Certificate of Incorporation of ITC^DeltaCom, Inc. (including the Second Amended Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series A Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof, the Amended Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series B

66

Exhibit Number	Exhibit Description
	Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof and the Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series C Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof), as amended by Certificate of Amendment to Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series C Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof. Filed as Exhibit 3.1 to Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (the “2005 Form 10-K”) and incorporated herein by reference.
3.2	Amended and Restated Bylaws of ITC^DeltaCom, Inc. Filed as Exhibit 3.2 to Current Report on Form 8-K of ITC^DeltaCom, Inc., filed on August 1, 2005 (the “August 1, 2005 Form 8-K”), and incorporated herein by reference.
4.1	Warrant Agreement, dated as of October 29, 2002 and amended and restated as of October 6, 2003, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.4 to Current Report of ITC^DeltaCom, Inc., filed on October 21, 2003 (the “October 21, 2003 Form 8-K”), and incorporated herein by reference.
4.2.1	Warrant Agreement, dated as of October 6, 2003, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.3 to the October 21, 2003 Form 8-K and incorporated herein by reference.
4.2.2	Amendment No. 1 to Warrant Agreement, dated as of March 29, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 10.10 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (the “March 31, 2005 Form 10-Q”) and incorporated herein by reference.
4.2.3	Amendment No. 2 to Warrant Agreement, dated as of July 26, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the “September 30, 2005 Form 10-Q”) and incorporated herein by reference.
4.3.1	Warrant Agreement, dated as of March 29, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 10.9 to the March 31, 2005 Form 10-Q and incorporated herein by reference.
4.3.2	Amendment No. 1 to Warrant Agreement, dated as of July 26, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.2 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
4.4.1	Warrant Agreement, dated as of July 26, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.2 to the August 1, 2005 Form 8-K and incorporated herein by reference.
4.4.2	Amendment No. 1 to Warrant Agreement, dated as of December 21, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.4.2 to the 2005 Form 10-K and incorporated herein by reference.
4.5	Specimen representing the Common Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4 to the Form 8-A and incorporated herein by reference.
4.6	Specimen representing the 8% Series A Convertible Redeemable Preferred Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4.2 to the Annual Report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 2002 and incorporated herein by reference.

67

Exhibit Number	Exhibit Description
4.7	Specimen representing the 8% Series B Convertible Redeemable Preferred Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4.7 to Registration Statement on Form S-3 of ITC^DeltaCom, Inc., as amended (File No. 333-101537) (the “2004 Form S-3”), and incorporated herein by reference.
4.8	Specimen representing the 8% Series C Convertible Redeemable Preferred Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4.8 to the 2005 Form 10-K and incorporated herein by reference.
4.9	Form of Series A Common Stock Purchase Warrant. Filed as Exhibit 4.8 to the 2004 Form S-3 and incorporated herein by reference.
4.10	Form of Series B Common Stock Purchase Warrant. Filed as Exhibit 4.9 to the 2004 Form S-3 and incorporated herein by reference.
4.11	Form of Series C Common Stock Purchase Warrant. Filed as Exhibit 4.11 to the 2005 Form 10-K and incorporated herein by reference.
4.12	Form of Series D Warrant. Filed as Exhibit 4.1 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.1.1	Revised and Restated Fiber Optic Facilities and Services Agreement, dated as of June 9, 1995, among Southern Development and Investment Group, Inc., on behalf of itself and as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc., and MPX Systems, Inc., which was assigned in part by MPX Systems, Inc. to Gulf States FiberNet pursuant to an Assignment dated as of July 25, 1995. Filed as Exhibit 10.15 to Registration Statement on Form S-4 of ITC^DeltaCom, Inc., as amended (File No. 333-31361) (the “1997 Form S-4”), and incorporated herein by reference.
10.1.2	Release, Waiver, and Assumption Agreement, dated as of December 31, 1997, between Southern Development Investment Group, Inc., on behalf of itself and as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc., and Interstate FiberNet, Inc. and Gulf States Transmission Systems, Inc. Filed as Exhibit 10.15.1 to Annual Report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 1997 and incorporated herein by reference.
10.1.3	Amendment to the Revised and Restated Fiber Optic Facilities and Services Agreement, dated as of January 1, 1998, by and among Southern Company Energy Solutions, Inc. (f/k/a Southern Development Group, Inc.), on behalf of itself and as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc., and Interstate FiberNet, Inc. Filed as Exhibit 10.15.2 to Quarterly Report on Form 10-Q of ITC^DeltaCom, Inc. for the quarter ended September 30, 1998 and incorporated herein by reference.
10.1.4	First Amendment to Revised and Restated Fiber Optic Facilities and Services Agreement, dated as of July 24, 1995, between Southern Development and Investment Group, Inc., on behalf of itself and as agent for others, and MPX Systems, Inc. Filed as Exhibit 10.16 to the 1997 Form S-4 and incorporated herein by reference.
10.1.5	Partial Assignment and Assumption of Revised and Restated Fiber Optic Facilities and Services Agreement, dated July 25, 1995, between MPX Systems, Inc. and Gulf States FiberNet. Filed as Exhibit 10.17 to the 1997 Form S-4 and incorporated herein by reference.

68

Exhibit Number	Exhibit Description
†10.1.6	Amendment to Revised and Restated Fiber Optic Facilities and Services Agreement, dated July 15, 1997, by and among Southern Development and Investment Group, Inc., on behalf of itself and its agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc. (collectively “SES”), ITC Transmission Systems, Inc. (as managing partner of Interstate FiberNet, Inc.) and Gulf States Transmission Systems, Inc. Filed as Exhibit 10.17.1 to the 1997 Form S-4 and incorporated herein by reference.
10.1.7	Consent for Assignment of Interest, dated February 20, 1997, among SCANA Communications, Inc., Gulf States FiberNet, Gulf States Transmission Systems, Inc. and Southern Development and Investment Groups, Inc. Filed as Exhibit 10.18 to the 1997 Form S-4 and incorporated herein by reference.
10.1.8	Second Partial Assignment and Assumption of Revised and Restated Fiber Optic Facilities and Services Agreement, dated March 27, 1997, between SCANA Communications, Inc. and ITC Holding Company, Inc. Filed as Exhibit 10.19 to the 1997 Form S-4 and incorporated herein by reference.
†10.1.9	Amendment, effective as of August 1, 2000, between Southern Telecom, Inc., on behalf of itself and as agent for the other parties specified therein, and Interstate FiberNet, Inc., to the Revised and Restated Fiber Optics Facilities and Services Agreement made as of June 9, 1995. Filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference.
10.2	Interconnection Agreement, dated February 9, 2001, by and between BellSouth Telecommunications, Inc. and ITC^DeltaCom Communications, Inc. d/b/a/ ITC^DeltaCom (Florida). Filed as Exhibit 10.48 to the Annual Report on Form 10-K of ITC^DeltaCom for the year ended December 31, 2000 (the “2000 Form 10-K”) and incorporated herein by reference.
*10.3	Interconnection Agreement, dated as of November 20, 2006, by and between BellSouth Telecommunications, Inc. and DeltaCom, Inc. (North Carolina).
10.4	Interconnection Agreement, effective as of July 1, 1999, by and between ITC^DeltaCom Communications, Inc. and BellSouth Telecommunications, Inc. (Alabama). Filed as Exhibit 10.50 to the 2000 Form 10-K and incorporated herein by reference.
10.5	Interconnection Agreement, effective as of August 9, 2004, by and between BellSouth Telecommunications, Inc. and ITC^DeltaCom Communications, Inc. d/b/a ITC^DeltaCom d/b/a Grapevine (Georgia). Filed as Exhibit 10.11 to Quarterly Report on Form 10-Q of ITC^DeltaCom, Inc. for the quarter ended September 30, 2004 and incorporated herein by reference.
†10.6.1	IRU Agreement, dated October 31, 1997, between QWEST Communications Corporation and Business Telecom, Inc. Filed as Exhibit 10.9 to Annual Report on Form 10-K of BTI Telecom Corp. for the year ended December 31, 1997 (File No. 0-26771) and incorporated herein by reference.
10.6.2	First Amendment to IRU Agreement, entered into on April 19, 1999, between Qwest Communications Corporation and Business Telecom, Inc. Filed as Exhibit 10.12 to Registration Statement on Form S-1 of BTI Telecom Corp. (File No. 333-83101) and incorporated herein by reference.
†10.6.3	Second Amendment to IRU Agreement, dated as of August 25, 2003, between QWEST Communications Corporation and Business Telecom, Inc. Filed as Exhibit 10.7.3 to the Annual Report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 2003 and incorporated herein by reference.

69

Exhibit Number	Exhibit Description
10.7.1	Indenture, dated as of September 22, 1997, among BTI Telecom Corp., Business Telecom, Inc. and First Trust of New York, National Association, as Trustee, relating to the 10 1/2% Senior Notes due 2007 of BTI Telecom Corp. Filed as Exhibit 4.1 to Registration Statement on Form S-4 (File No. 333-41723) of BTI Telecom Corp. and incorporated herein by reference.
10.7.2	First Supplemental Indenture, dated as of October 26, 2001, between BTI Telecom Corp. and U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association), as Trustee, to the Indenture dated as of September 22, 1997. Filed as Exhibit 99.1 to Current Report on Form 8-K of BTI Telecom Corp. (File No. 0-26771), filed on November 8, 2001, and incorporated herein by reference.
10.8	Asset Purchase Agreement, dated as of August 8, 2005, by and among Quality Investment Properties Atlanta Tech Centre, L.L.C., e^Quality, L.L.C. and Quality Investment Properties—Williams Centre, L.L.C., as Purchasers, and Interstate FiberNet, Inc. and ITC^DeltaCom Communications, Inc., as Sellers. Filed as Exhibit 10.4 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.9.1	Note Purchase Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, the Note Purchasers named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent. Filed as Exhibit 10.1 to the August 1, 2005 Form 8-K and incorporated herein by reference.
10.9.2	Security Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., Interstate FiberNet, Inc., the Subsidiary Guarantors named therein, and TCP Agency Services, LLC, as Collateral Agent. Filed as Exhibit 10.9.2 to the 2005 Form 10-K and incorporated herein by reference.
*10.9.3	Amendment No. 1 to Note Purchase Agreement, dated as of October 27, 2006, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, the New Note Purchasers named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent.
10.10.1	Second Amended and Restated Credit Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., as Parent, Interstate FiberNet, Inc., as Borrower, the Subsidiary Guarantors named therein, the Lenders named therein, and General Electric Capital Corporation, as Administrative Agent and Collateral Agent. Filed as Exhibit 10.1 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.10.2	Second Amended and Restated Security Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., Interstate FiberNet, Inc., the Subsidiary Guarantors named therein, and General Electric Capital Corporation, as Collateral Agent. Filed as Exhibit 10.10.2 to the 2005 Form 10-K and incorporated herein by reference.
10.11.1	Securities Purchase Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, the Purchasers named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent. Filed as Exhibit 10.2 to the August 1, 2005 Form 8-K and incorporated herein by reference.
10.11.2	Amended and Restated Security Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., Interstate FiberNet, Inc., the Subsidiary Guarantors named therein, and TCP Agency Services, LLC, as collateral agent. Filed as Exhibit 10.11.2 to the 2005 Form 10-K and incorporated herein by reference.
*10.11.3	Amendment No. 1 to Securities Purchase Agreement, dated as of October 27, 2006, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent.

70

Exhibit Number	Exhibit Description
10.12	Amended and Restated Governance Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the Securityholders of ITC^DeltaCom, Inc. listed on the signature pages thereof. Filed as Exhibit 10.5 to the August 1, 2005 Form 8-K and incorporated herein by reference.
10.13.1	Registration Rights Agreement, dated as of October 29, 2002 and amended and restated as of October 6, 2003, among ITC^DeltaCom, Inc. and the Holders set forth on the signature pages thereof. Filed as Exhibit 10.3 to the October 21, 2003 Form 8-K and incorporated herein by reference.
10.13.2	Amendment No. 2 to Registration Rights Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the Series A Preferred Stockholders listed on the signature pages thereof. Filed as Exhibit 10.3 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.14.1	Registration Rights Agreement, dated as of October 6, 2003, among ITC^DeltaCom, Inc. and the WCAS Securityholders set forth on the signature pages thereof. Filed as Exhibit 10.2 to the October 21, 2003 Form 8-K and incorporated herein by reference.
10.14.2	Amendment No. 2 to Registration Rights Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the WCAS Securityholders listed on the signature pages thereof. Filed as Exhibit 10.2 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.15	Registration Rights Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the TCP Securityholders listed on the signature pages thereof. Filed as Exhibit 10.6 to the August 1, 2005 Form 8-K and incorporated herein by reference.
*10.16.1	ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan.
10.16.2	Form of ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan Nonqualified Stock Option Agreement. Filed as Exhibit 4.2 to the December 2003 Form S-8 and incorporated herein by reference.
10.16.3	Form of ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan Incentive Stock Option Agreement. Filed as Exhibit 4.3 to the December 2003 Form S-8 and incorporated herein by reference.
10.16.4	Form of ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan Stock Unit Agreement. Filed as Exhibit 4.4 to the December 2003 Form S-8 and incorporated herein by reference.
10.17.1	Employment Agreement, dated as of February 3, 2005, by and between ITC^DeltaCom, Inc. and Randall E. Curran. Filed as Exhibit 10.2 to the March 31, 2005 Form 10-Q and incorporated herein by reference.
10.17.2	Amendment No. 1 to Employment Agreement, dated as of December 20, 2005, by and between ITC^DeltaCom, Inc. and Randall E. Curran. Filed as Exhibit 10.17.2 to the 2005 Form 10-K and incorporated herein by reference.
10.18.1	Employment Agreement, dated as of February 21, 2005, by and between ITC^DeltaCom, Inc. and Richard E. Fish, Jr. Filed as Exhibit 10.13 to the March 31, 2005 From 10-Q and incorporated herein by reference.
10.18.2	Amendment No. 1 to Employment Agreement, dated as of December 20, 2005, by and between ITC^DeltaCom, Inc. and Richard E. Fish, Jr. Filed as Exhibit 10.18.2 to the 2005 Form 10-K and incorporated herein by reference.
10.19.1	Employment Agreement, dated as of February 28, 2005, by and between ITC^DeltaCom, Inc. and James P. O’Brien. Filed as Exhibit 10.14 to the March 31, 2005 Form 10-Q and incorporated herein by reference.

71

Exhibit Number	Exhibit Description
10.19.2	Amendment No. 1 to Employment Agreement, dated as of December 20, 2005, by and between ITC^DeltaCom, Inc. and James P. O’Brien. Filed as Exhibit 10.19.2 to the 2005 Form 10-K and incorporated herein by reference.
10.20	Form of Deferred Compensation Agreement between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.20 to the 2005 Form 10-K and incorporated herein by reference.
10.21.1	ITC^DeltaCom, Inc. Executive Stock Incentive Plan, as amended and restated as of December 20, 2005. Filed as Exhibit 10.21.1 to the 2005 Form 10-K and incorporated herein by reference.
10.21.2	Form of Common Stock Unit Agreement under ITC^DeltaCom, Inc. Executive Stock Incentive Plan between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.21.2 to the 2005 Form 10-K and incorporated herein by reference.
10.21.3	Form of Series A Preferred Stock Unit Agreement under ITC^DeltaCom, Inc. Executive Stock Incentive Plan between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.21.3 to the 2005 Form 10-K and incorporated herein by reference.
10.21.4	Form of Series B Preferred Stock Unit Agreement under ITC^DeltaCom, Inc. Executive Stock Incentive Plan between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.21.4 to the 2005 Form 10-K and incorporated herein by reference.
10.22	Executive Employment and Retention Agreement, dated as of August 13, 2004, between ITC^DeltaCom, Inc. and J. Thomas Mullis. Filed as Exhibit 10.10.1 to Quarterly Report on Form 10-Q of ITC^DeltaCom, Inc. for the quarter ended September 30, 2004 and incorporated herein by reference.
*10.23	Description of Non-Employee Director Compensation.
*10.24	Description of Certain Management Compensatory Plans and Arrangements.
10.25	Form of Indemnity Agreement between ITC^DeltaCom, Inc. and certain of its Directors and Officers. Filed as Exhibit 10.93 to Registration Statement on Form S-1 of ITC^DeltaCom, Inc., as amended (File No. 333-36683), and incorporated herein by reference.
*21	Subsidiaries of ITC^DeltaCom, Inc.
*23	Consent of BDO Seidman, LLP.
*31.1	Certification of Chief Executive Officer of ITC^DeltaCom, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
*31.2	Certification of Executive Vice President and Chief Financial Officer of ITC^DeltaCom, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
*32	Certifications pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. 1350.

* Filed herewith.

† Confidential treatment has been granted for this exhibit. The copy filed as an exhibit omits the information subject to the confidential treatment request.

72

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-3
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

ITC^DeltaCom, Inc.

Huntsville, Alabama

We have audited the accompanying consolidated balance sheets of ITC^DeltaCom, Inc. as of December 31, 2006 and 2005 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ITC^DeltaCom, Inc. at December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO Seidman, LLP

Atlanta, Georgia

March 22, 2007

F-2

ITC^DELTACOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2006			2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	67,643		$	69,360
Restricted cash		1,008			1,108
Accounts receivable, less allowance for doubtful accounts of $4,772 and $9,237 in 2006 and 2005, respectively		58,679			62,356
Inventory		5,340			4,766
Prepaid expenses and other		5,278			4,883
Total current assets		137,948			142,473
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $147,110 and $89,828 in 2006 and 2005, respectively (Note 5)		242,519			254,558
OTHER LONG-TERM ASSETS:
Goodwill (Note 6)		35,109			35,109
Other intangible assets, net of accumulated amortization of $10,585 and $8,046 in 2006 and 2005, respectively (Note 6)		9,887			12,320
Other long-term assets		10,119			12,298
Total other long-term assets		55,115			59,727
Total assets	$	435,582		$	456,758
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable:
Trade	$	31,567		$	34,108
Construction		5,780			6,592
Accrued interest		9,865			2,349
Accrued compensation		4,195			5,565
Unearned revenue (Note 2)		20,622			19,128
Other accrued liabilities (Note 11)		22,624			21,840
Current portion of other long-term liabilities		—			980
Current portion of long-term debt and capital lease obligations (Note 7)		19,286			7,105
Total current liabilities		113,939			97,667
LONG-TERM LIABILITIES:
Other long-term liabilities (Note 11)		3,173			4,675
Long-term debt and capital lease obligations (Note 7)		335,339			317,597
Total long-term liabilities		338,512			322,272
CONVERTIBLE REDEEMABLE PREFERRED STOCK (Note 9):
Par value $0.01; 665,000 shares designated Series A in 2002; 201,882 and 190,286 shares issued and outstanding in 2006 and 2005, respectively, entitled to redemption value of $100 per share, plus accrued and unpaid dividends		18,555			17,115
Par value $0.01; 1,200,000 shares designated Series B in 2003; 607,087 and 572,071 shares issued and outstanding in 2006 and 2005, respectively, entitled to redemption value of $100 per share, plus accrued and unpaid dividends		55,615			51,358
Par value $0.01; 28,000,000 shares designated Series C in 2005; 0 shares issued in 2006 and 2005; entitled to redemption value of $1 per share, plus accrued and unpaid dividends		—			—
Total convertible redeemable preferred stock		74,170			68,473
COMMITMENTS AND CONTINGENCIES (Notes 1, 7 and 12)
STOCKHOLDERS’ (DEFICIT):
Common stock, par value $0.01; 350,000,000 shares authorized; 18,766,942 and 18,745,070 shares issued and outstanding in 2006 and 2005, respectively (Note 10)		187			187
Additional paid-in capital		288,025			286,506
Warrants outstanding (Note 10)		27,492			27,492
Accumulated deficit		(406,743	)		(345,839	)
Total stockholders’ (deficit)		(91,039	)		(31,654	)
Total liabilities and stockholders’ (deficit)	$	435,582		$	456,758

See accompanying notes to consolidated financial statements.

F-3

ITC^DELTACOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

	Year Ended December 31,
	2006			2005			2004
OPERATING REVENUES:
Integrated communications services	$	381,766		$	414,969		$	467,629
Wholesale services		81,785			85,232			96,449
Equipment sales and related services		24,089			20,200			19,549
TOTAL OPERATING REVENUES		487,640			520,401			583,627
COSTS AND EXPENSES:
Cost of services and equipment, excluding depreciation and amortization		244,278			268,123			290,923
Selling, operations and administration		182,873			195,496			221,922
Depreciation and amortization		59,832			53,187			87,108
Merger-related expenses (Note 3)		—			135			4,828
Asset impairment loss (Note 4)		—			13,373			203,971
Total operating expenses		486,983			530,314			808,752
OPERATING INCOME (LOSS)		657			(9,913	)		(225,125	)
OTHER (EXPENSE) INCOME:
Interest expense		(57,625	)		(40,508	)		(21,309	)
Interest income		2,678			1,057			430
Debt issuance cost write-off		—			(3,948	)		—
Other income (expense)		831			2,463			(1,224	)
Total other expense, net		(54,116	)		(40,936	)		(22,103	)
LOSS BEFORE INCOME TAXES		(53,459	)		(50,849	)		(247,228	)
INCOME TAXES (Note 8)		—			—			—
NET LOSS		(53,459	)		(50,849	)		(247,228	)
PREFERRED STOCK DIVIDENDS AND ACCRETION		(7,445	)		(6,957	)		(9,345	)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS	$	(60,904	)	$	(57,806	)	$	(256,573	)
BASIC AND DILUTED NET LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS	$	(3.25	)	$	(3.11	)	$	(14.72	)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Note 10)		18,751,067			18,598,549			17,426,546

See accompanying notes to consolidated financial statements.

F-4

ITC^DELTACOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

	Common Stock				Additional Paid-in Capital			Warrants Outstanding		Deficit			Total Stockholders’ Equity (Deficit)
	Shares		Amount
BALANCE, January 1, 2004	17,282,768		$	173	$	265,108		$	6,892	$	(31,460	)	$	240,713
Common stock options and units exercised	53,072			1		115								116
Deferred compensation						1,771								1,771
Accretion of differences between carrying value and redemption value of Series A and Series B preferred stock (Note 9)											(3,478	)		(3,478	)
Stock dividends declared and accrued on Series A and Series B preferred stock											(5,867	)		(5,867	)
Conversion of Series A preferred stock into common stock	1,027,578			10		17,606								17,616
Unclaimed shares from reorganization	(3,849	)
Net loss											(247,228	)		(247,228	)
BALANCE, December 31, 2004	18,359,569			184		284,600			6,892		(288,033	)		3,643
Common stock units exercised	385,501			3		(3	)							—
Deferred compensation						1,909								1,909
Accretion of differences between carrying value and redemption value of Series A and Series B preferred stock (Note 9)											(1,035	)		(1,035	)
Stock dividends declared and accrued on Series A and Series B preferred stock											(5,922	)		(5,922	)
Issuance of Series C warrants (Note 10)									7,600					7,600
Issuance of Series D warrants (Note 10)									13,000					13,000
Net loss											(50,849	)		(50,849	)
BALANCE, December 31, 2005	18,745,070			187		286,506			27,492		(345,839	)		(31,654	)
Common stock units exercised	21,583													—
Deferred compensation						1,514								1,514
Accretion of differences between carrying value and redemption value of Series A and Series B preferred stock (Note 9)											(1,035	)		(1,035	)
Stock dividends declared and accrued on Series A and Series B preferred stock											(6,410	)		(6,410	)
Conversion of Series A preferred stock into common stock	289					5								5
Net loss											(53,459	)		(53,459	)
BALANCE, December 31, 2006	18,766,942		$	187	$	288,025		$	27,492	$	(406,743	)	$	(91,039	)

See accompanying notes to consolidated financial statements.

F-5

ITC^DELTACOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(53,459	)	$	(50,849	)	$	(247,228	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		59,832			53,187			87,108
Amortization of debt issuance costs and debt discount		7,928			5,195			572
Write off of debt issuance costs		—			3,948			—
Interest paid in kind		6,620			2,516			—
Bad debt expense		3,519			8,530			8,918
Net gain on sale of fixed and intangible assets		(668	)		(1,870	)		—
Net gain on settlement of long-term lease		—			(1,171	)		—
Asset impairment loss		—			13,373			203,971
Stock based compensation		2,568			2,168			1,771
Changes in current operating assets and liabilities (excluding the effects of acquisitions):
Accounts receivable, net		271			759			(7,459	)
Other current assets		(967	)		(1,369	)		3,787
Accounts payable		(2,561	)		(3,634	)		(22,528	)
Accrued interest		7,516			753			78
Unearned revenue		1,493			(1,131	)		(1,272	)
Accrued compensation and other accrued liabilities		(3,416	)		(1,956	)		1,098
Total adjustments		82,135			79,298			276,044
Net cash provided by operating activities		28,676			28,449			28,816
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(46,068	)		(29,427	)		(48,321	)
Change in accounts payable-construction		(812	)		1,102			(1,188	)
Change in restricted cash, net		99			142			790
Proceeds from the sale of e^deltacom data center assets		—			25,859			—
Proceeds from sale of fixed and intangible assets		1,576			1,054			—
Payments for accrued restructuring and merger costs (Notes 3 and 11)		(1,406	)		(4,880	)		(10,781	)
Other		(302	)		(273	)		(1,356	)
Net cash used in investing activities		(46,913	)		(6,423	)		(60,856	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and capital lease obligations		(3,419	)		(211,031	)		(16,576	)
Proceeds from issuance of Series B preferred stock and common stock warrants, net of issuance costs		—			—			15,000
Proceeds from issuance of secured loans and stock warrants, net of issuance costs and other long-term debt restructuring costs		19,939			241,766			—
Proceeds from exercise of common stock options		—			—			116
Net cash (used in) provided by financing activities		16,520			30,735			(1,460	)
CHANGE IN CASH AND CASH EQUIVALENTS		(1,717	)		52,761			(33,500	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		69,360			16,599			50,099
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	67,643		$	69,360		$	16,599
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest	$	35,561		$	32,044		$	21,231
NONCASH TRANSACTIONS:
Preferred stock dividends and accretion	$	7,445		$	6,957		$	9,345
Equipment purchased through capital leases	$	95		$	—		$	—
Stock based compensation	$	2,568		$	2,168		$	1,771

See accompanying notes to consolidated financial statements.

F-6

ITC^DELTACOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Nature of Business and Basis of Presentation

Nature of Business

ITC^DeltaCom, Inc. (“ITC^DeltaCom” and, together with its wholly-owned subsidiaries, the “Company”) provides integrated communications services in the southeastern United States. The Company delivers a comprehensive suite of high-quality voice and data telecommunications services, including local exchange, long distance, high-speed or broadband data communications, and Internet connectivity, and sells customer premise equipment to the Company’s end-user customers. The Company offers these services primarily over its owned network facilities and also uses leased network facilities to extend its market coverage. In addition, the Company owns, operates and manages an extensive fiber optic network with significant transmission capacity that it uses for its own voice and data traffic and selectively sells to other communications providers on a wholesale basis.

Regulation

The Company is subject to certain regulations and requirements of the Federal Communications Commission (the “FCC”) and various state public service commissions.

Liquidity

Prior to 2006 the Company incurred operating losses, although the Company generally has experienced positive cash flow from operations. The Company has an accumulated deficit of $406.7 million as of December 31, 2006, which has accumulated since the consummation of its reorganization on October 29, 2002 under Chapter 11 of the United States Bankruptcy Code. In the second half of the year ended December 31, 2004, in response to adverse operating trends, the Company took action to limit capital expenditures, reduce the size of its workforce, and implement other measures to manage cash resources. As a result of these initiatives, and transactions completed in the year ended December 31, 2005, the Company achieved significant improvements in its liquidity position as of December 31, 2005, which it has maintained through December 31, 2006.

On March 29, 2005, the Company completed a restructuring (the “March 2005 restructuring”) of its existing $259.7 million of secured indebtedness and entered into a new $20 million subordinated secured term loan agreement with the Welsh Carson securityholders, which the Company drew down in full on the restructuring date. The Company’s existing lenders required the new loan as a condition of the restructuring. The purpose of the restructuring was to stabilize the Company’s liquidity position and obtain a deferral of principal payments on most of its secured indebtedness until June 2006. In the restructuring, the Company replaced all $22 million of obligations outstanding under its principal capital leases with loans in the same amount under the senior credit facility. In connection with this loan, the Company issued to the Welsh Carson securityholders warrants (the “Series C warrants”) to purchase 6,600,000 shares of common stock at an initial exercise price of $1.80 per share. The Series C warrants have a ten-year term from the issue date. See Note 7 for terms of the secured indebtedness following the March 2005 restructuring and Note 10 for terms of the Series C warrants.

On July 26, 2005, the Company completed transactions (the “July 2005 refinancing”) in which it issued new senior secured indebtedness totaling $259.8 million and warrants and refinanced substantially all of its existing secured indebtedness.

The Company issued $209 million principal amount of first lien, senior secured notes due 2009 (the “first lien notes”) and used the proceeds of this issuance to repay in full the Company’s former $204 million senior secured credit facility, which was terminated, and to pay accrued interest under the facility as well as transaction costs. As a result of the repayment in full of the former senior credit facility, the Company expensed $3.9 million

F-7

of unamortized debt issuance costs, which is reflected as a component of “Other (expense) income” in the accompanying consolidated statements of operations for the year ended December 31, 2005. See Note 7 for terms of the secured indebtedness following the July 2005 refinancing.

The Company also issued $50.8 million principal amount of third lien, senior secured notes due 2009 (the “third lien notes”). Of this amount, the Company issued $30 million principal amount of third lien notes to new investors for cash and $20.8 million principal amount of third lien notes to the Welsh Carson securityholders in exchange for $20 million principal amount of notes plus capitalized interest evidencing the subordinated secured loan the Welsh Carson securityholders had extended in connection with the March 2005 restructuring. In connection with the issuance of the third lien notes, the Company issued 9,000,000 warrants (the “Series D warrants”) to the third lien note purchasers other than the Welsh Carson securityholders. Each Series D warrant will entitle the holder to purchase shares of a new issue of the Company’s 8% Series C Convertible Redeemable Preferred Stock (the “Series C preferred stock”) or shares of common stock. Each share of Series C preferred stock will be convertible into .4445 of one share of the Company’s common stock (subject to antidilution adjustments). See Notes 9 and 10 for terms of the Series D warrants and the Series C preferred stock.

The Company also entered into an amendment to its junior (second lien) credit agreement that extended the maturity date of the $55.7 million of loans thereunder from June 30, 2009 to August 26, 2009, eliminated all scheduled principal payments prior to maturity, and increased the rate at which interest accrues on such loans.

On October 31, 2006, the Company negotiated modifications to an unsecured vendor note in an original principal amount of $7.1 million which the Company had assumed in connection with its acquisition of BTI in 2003. As part of the March 2005 restructuring, the Company had obtained an extension of the original maturity date of the note from April 30, 2006 to October 31, 2006. The modifications provided for payment of $2.27 million of principal on October 31, 2006, $2.4 million of principal plus interest payments over 36 monthly installments beginning November 1, 2006, and $2.4 million principal on October 1, 2009, with interest payable monthly, and increased the rate at which interest accrues on the note.

On November 10, 2006, the Company placed with institutional investors $21 million principal amount of additional first lien notes with the same payment terms and the same July 26, 2009 maturity date as the first lien notes issued in connection with the July 2005 refinancing.

In accordance with its strategy to sell on a selected basis assets that are not integral to its network operations, on September 1, 2005, the Company sold its e^deltacom data center facility located in Suwanee, Georgia and substantially all of the assets related to the e^deltacom business for a sale price of approximately $25.8 million. The e^deltacom business provided managed colocation, hosting, security data storage, monitoring and networking services and hardware solutions. This transaction resulted in net cash proceeds of $25.9 million after working capital adjustments and costs and expenses associated with the sale. The Company recognized a net gain on sale of the assets of $3.2 million, which is reflected as a component of “Other (expense) income” in the accompanying consolidated statements of operations for the year ended December 31, 2005. During the year ended December 31, 2006 the Company sold surplus property and equipment totaling $1.6 million for which the Company recognized a net gain on the sale of the assets of $668,000, which is reflected as a component of “Other (expense) income” in the accompanying consolidated statements of operations for the year ended December 31, 2006.

Reverse Stock Split

On September 1, 2005, the board of directors of ITC^DeltaCom declared a one-for-three reverse split (the “reverse stock split”) of ITC^DeltaCom’s outstanding shares of common stock to be effective for holders of record at the close of business on September 12, 2005. Upon effectiveness of the reverse stock split on September 13, 2005, each three shares of issued and outstanding common stock was reclassified and combined into one share of common stock (Note 10). The number of shares of common stock outstanding as reflected in

F-8

the accompanying consolidated balance sheets, the consolidated statements of stockholders’ equity (deficit), the basic and diluted weighted average common shares outstanding and basic and diluted net loss per common share as reflected in the accompanying consolidated statements of operations, and the related information in the notes to consolidated financial statements have been retroactively adjusted to reflect the reverse stock split as of and for all other periods presented. The reduction in par value of outstanding common stock as a result of the reverse stock split, which in the aggregate totaled $374,000, has been reclassified to additional paid-in-capital in the accompanying consolidated balance sheets and consolidated statements of stockholders’ equity (deficit) as of the dates of the transactions and balances presented.

Segment Disclosure

The Company operates in one segment.

Basis of Presentation

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. The consolidated financial statements include the accounts of ITC^DeltaCom and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made in the presentation of the financial statements for the years ended December 31, 2005 and 2004, to conform with the presentation of the financial statements for the year ended December 31, 2006.

2.    Summary of Significant Accounting Policies

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most critical estimates and assumptions are made in determining the allowance for doubtful accounts, inventory valuation, recoverability of long-lived assets, useful lives of long-lived assets, accruals for estimated liabilities that are probable and estimatable, expected results of disputed vendor charges for cost of services, restructuring liabilities, valuation allowances associated with deferred tax assets, and anticipated results of litigation and claims. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers all short-term highly liquid investments with an original maturity date of three months or less to be cash equivalents. The Company classifies any cash or investments that collateralize outstanding letters of credit or certain operating or performance obligations of the Company as restricted cash. The classification of restricted cash on the consolidated balance sheet as current or noncurrent is dependent on the duration of the restriction and the purpose for which the restriction exists.

Allowance for Doubtful Accounts

The Company records an allowance for doubtful accounts based on specifically identified amounts that it believes to be uncollectible. The Company also records an additional allowance based on certain percentages of its aged receivables, which are determined based on its experience and assessment of the general financial conditions affecting its customer base. The reduction in the Company’s allowance for doubtful accounts and in its outstanding accounts receivable as well as its days sales outstanding at December 31, 2006 was primarily attributable to strict enforcement of its credit policy combined with the termination of its product offering to residential customers in November 2005. If the Company’s actual collections experience changes, revisions to its allowance may be required. The Company has a large number of customers with individually small amounts due at any given balance sheet date. Any unanticipated change in the creditworthiness of any such customer or other

F-9

matters affecting the collectibility of amounts due from such customers would not have a material effect on the Company’s results of operations in the period in which such changes or events occur. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

Inventory

Inventory consists primarily of customer premise equipment held for resale and is valued at the lower of cost or market, using the first-in, first-out method.

Long-Lived Assets

In accordance with provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company conducts reviews of its long-lived assets (property and equipment and finite-lived intangible assets), in conjunction with its current business plans and operating trends at least annually for possible impairment of those assets, and further conducts such reviews for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the future cash flows expected to be generated by the asset. The Company’s impairment review is based on cash flow analysis at the lowest level for which identifiable cash flows exist. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent that the carrying amount of the asset exceeds the fair value of the asset. Management’s estimate of the future cash flows attributable to its long-lived assets and the fair value of its businesses involve significant uncertainty. Those estimates are based on management’s assumptions of future results, growth trends and industry conditions. Assets to be disposed of are reported at the lower of the asset’s carrying amount or fair value, less the cost to sell.

Substantially all property, plant and equipment was revalued to estimated fair value, which became the Company’s new cost basis, as of October 29, 2002, the effective date of the Company’s plan of reorganization under Chapter 11 of the United States Bankruptcy Code. In addition, depreciable lives of some assets were changed.

Property, Plant and Equipment

Property, plant and equipment are stated at the Company’s cost basis which is for assets acquired prior to October 29, 2002, estimated market value in accordance with “fresh start reporting”, at cost for assets acquired subsequent thereto, and reduced for impairments recognized in prior years. Depreciation begins when property, plant and equipment are placed in service. The cost to maintain, repair and replace minor items of property, plant and equipment is charged to selling, operations and administration expense as the cost is incurred. Depreciation of property, plant and equipment is provided using the straight-line method over the following estimated useful lives:

	Years
Buildings and towers	33 to 40
Fiber optic network	12 to 20
Furniture, fixtures and office equipment	5 to 10
Transmission equipment, electronics and other	2 to 10
Vehicles	3 to 5
Computer hardware and software	3 to 5

The Company capitalizes costs associated with the design, deployment and expansion of its network and operating support systems, including internally and externally developed software. Capitalized external software costs include the actual costs to purchase software from vendors. Capitalized internal software costs include personnel costs directly associated with development, enhancement and implementation of software. Applicable interest charges incurred during the construction of new facilities are capitalized as elements of cost and are

F-10

depreciated over the assets’ estimated useful lives. No interest was capitalized for any of the three years in the period ended December 31, 2006.

Customer Acquisition Costs

The Company capitalizes customer installation and acquisition costs. Customer installation costs represent nonrecurring fees paid to other telecommunications carriers for services performed by the carriers when the Company orders facilities in connection with new customers acquired by the Company. Customer acquisition costs include internal personnel costs directly associated with the provisioning of new customer orders. Customer installation and acquisition costs are amortized on a straight-line basis over the two-year average term of the customer contracts, consistent with the corresponding deferred revenue earned under the contracts.

Intangible Assets

The Company accounts for goodwill and other intangible assets under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 provides that goodwill and other separately recognized intangible assets with indefinite lives are not amortized, but are subject to at least an annual assessment for impairment. See Note 6 for information regarding the Company’s intangible assets.

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for as purchases. The Company evaluates goodwill on an annual basis and whenever events or circumstances indicate that goodwill might be impaired. The Company determines impairment by comparing the net assets of each reporting unit to the fair value of such net assets. The Company has identified, as two reporting units, its retail group, which consists of those assets and liabilities associated with servicing the Company’s retail customer base, and its wholesale group, which consists of those assets and liabilities associated with servicing the Company’s wholesale customer base. If a unit’s net assets exceed its fair value, an implied fair value of goodwill must be determined by assigning the unit’s fair value to each asset and liability of the unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is measured by the difference between the goodwill carrying value and the implied fair value.

The Company evaluates the recoverability of indefinite-lived intangible assets on an annual basis and whenever events or circumstances indicate that these assets might be impaired. The Company determines impairment by comparing an asset’s carrying value to estimates of fair value using the best information available, which requires the use of estimates, judgments and projections. In the event impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset.

Definite-life intangibles include the value associated with customer bases acquired. The Company evaluates the recoverability of definite-life intangible assets when events or circumstances indicate that these assets might be impaired. The Company determines impairment by comparing an asset’s carrying value to estimates of the sum of the future cash flows expected to result from the Company’s asset, undiscounted and without interest charges. If the carrying amount is less than the recoverable amount, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset. Definite-life intangibles are amortized over their useful lives of 5 to 8 years.

Debt Issuance Costs

Other long-term assets primarily consist of debt issuance costs that are amortized using the effective interest rate method over the lives of the related debt.

F-11

Unearned Revenue

Unearned revenue includes the liability for advance billings to customers for use of the Company’s fiber optic network and for recurring monthly charges for local and data services.

Unbilled Revenue

The Company records revenue for long distance services provided, but not yet billed, to customers. Approximately $4.0 million and $5.3 million in unbilled revenue is included in accounts receivable in the accompanying consolidated balance sheets at December 31, 2006 and 2005, respectively.

Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the difference between the financial and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance has been recorded against deferred tax assets, as the Company is unable to conclude under relevant accounting standards that it is more likely than not that deferred tax assets will be realizable.

Revenue Recognition

The Company recognizes operating revenues as services are rendered to customers in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” of the Securities and Exchange Commission. The Company generates recurring revenues from its offering of local exchange services, long distance services, high-speed or broadband data communications services, and Internet services, which include Internet access, and the sale of transmission capacity to other telecommunications carriers. Revenues from these sources, which generally consist of recurring monthly charges for such services, are recognized as services are provided. Advance billings and cash received in advance of services performed are recorded as deferred revenue.

The Company generates nonrecurring revenues from the sale of telephone systems, other equipment, and services. Revenues from these sources are recognized upon installation or as services are performed. Nonrecurring revenues, such as the sale of telephone systems, may be part of multiple element arrangements. The Company estimates the fair value of the separate elements and recognizes revenues for a delivered element only when the remaining elements in the arrangement are delivered. These nonrecurring revenues as a percentage of total revenues were approximately 5% in the year ended December 31, 2006, 4% in the year ended December 31, 2005, and 3% in the year ended December 31, 2004.

In accordance with the guidance provided in Emerging Issues Task Force (“EITF”) Issue 99-19, “Reporting Revenue Gross as Principal Versus Net as an Agent,” the Company recognizes some revenue net as an agent and other revenue gross as a principal. For each revenue source, the Company has analyzed the features of the applicable arrangements and the presence or absence of indicators of net versus gross reporting in those arrangements. The Company has agreements for such arrangements as discussed in the following paragraphs.

On behalf of other telecommunications carriers that are the Company’s customers, the Company procures certain telecommunications services from major interexchange carriers. The Company also administers for these customers the contracts to which these telecommunications services are subject. The Company recognizes revenue equal to the net margin it earns under these arrangements as the third-party carriers provide services. For these services, the Company recorded revenues of $457,000, $682,000, and $2.9 million for the years ended December 31, 2006, 2005 and 2004, respectively.

The Company sells broadband transport capacity on facilities owned by utilities under marketing and management agreements with the utilities to its customers. As compensation for these services, the Company

F-12

receives a percentage of the gross revenue generated by the traffic of these customers on the facilities of the utilities. Revenue equal to this margin is recognized as services are provided. For these services, the Company recorded revenues of $3.5 million, $3.9 million, and $5.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Cost of Services

Cost of services includes direct expenses associated with providing services to the Company’s customers and the cost of equipment sold. These costs include the cost of leasing facilities from ILECs and other telecommunication providers that provide the Company access connections to the Company’s customers, to certain components of the Company’s network facilities, and between the Company’s various facilities. The Company utilizes other carriers to provide services where the Company does not have facilities. The Company utilizes a number of different carriers to terminate its long distance calls outside the southern United States. These costs are expensed as incurred. Certain of these expenses are billed in advance and certain expenses are billed in arrears. Accordingly, the Company is required to accrue for expected expenses irrespective of whether these expenses have been billed. The Company utilizes internal management information to support the required accruals. Experience indicates that the invoices that are received from other telecommunication providers are often subject to significant billing disputes. The Company typically accrues for all invoiced amounts unless there are contractual, tariff, or operational data that clearly indicate support for the billing dispute. Experience also has shown that these disputes can require a significant amount of time to resolve given the complexities and regulatory issues surrounding the vendor relationships. The Company maintains reserves for any anticipated exposure associated with these billing disputes. The Company believes its reserves are adequate. The reserves are reviewed on a monthly basis, but are subject to changes in estimates and management judgment as new information becomes available. Given the length of time the Company has historically required to resolve these disputes, disputes may be resolved or require adjustment in future periods and relate to costs invoiced, accrued or paid in prior periods.

Advertising Costs

The Company charges the costs of advertising to expense as incurred. Advertising expense for 2006, 2005 and 2004 was $1.3 million, $1.6 million and $2.8 million, respectively.

Fair Value of Financial Instruments

The following methods and assumptions were used to determine classification and fair values of financial instruments:

Cash, Cash Equivalents, Accounts Receivable and Accounts Payable

Cash equivalents generally consist of funds invested in highly liquid instruments purchased with an original maturity of three months or less. The securities are stated at cost, which approximates fair value. The carrying value of accounts receivable net of the allowance for doubtful accounts and the carrying value of accounts payable approximated their fair value as of December 31, 2006 and 2005.

Borrowings

The Company’s long-term obligations are not traded in an organized public market. The fair values of its first lien, senior secured notes, its second lien secured credit facility and its third lien, senior secured notes are assumed to approximate their carrying values at December 31, 2006 and 2005 as they are secured by underlying assets. The Company believes the fair values of the 10¹/2% senior unsecured notes due September 2007 and the 10% unsecured note included within Long-Term Debt approximate their carrying values at December 31, 2006 and 2005.

F-13

Earnings (Loss) per Share

The Company computes net loss per share in accordance with the provisions of SFAS No. 128, “Earnings per Share.” Under the provisions of SFAS No. 128, basic and diluted earnings per share (“EPS”) are computed by dividing net income available to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Basic EPS excludes the effect of potentially dilutive securities, while diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised for, converted into or otherwise resulted in the issuance of common stock. Common stock equivalents consist of common stock issuable under the assumed exercise of stock options, restricted stock awards and warrants, computed based on the treasury stock method, and the assumed conversion of the Company’s issued and outstanding preferred stock. Common stock equivalents are not included in diluted EPS calculations to the extent their inclusion would be anti-dilutive.

Stock-Based Compensation

On January 1, 2006, the Company adopted the provisions of SFAS No. 123R requiring the recognition of expense related to the fair value of its stock-based compensation awards. The Company selected the Black-Scholes valuation model as the method for determining the fair value of its equity awards and uses the modified prospective transition method, which requires that compensation cost be recognized in the financial statements for all awards granted after the date of adoption as well as for existing awards for which the requisite service has not been rendered as of the date of adoption. This method requires that prior periods not be restated. The Company now recognizes compensation cost on a straight-line basis over the vesting periods of the awards.

Prior to the adoption of SFAS No. 123R, the Company accounted for awards under its stock incentive plans under the intrinsic value recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as permitted under SFAS No. 123, “Accounting for Stock-Based Compensation.” As required by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” prior to the adoption of SFAS No. 123R, the Company provided pro forma net (loss) and pro forma net (loss) per common share disclosures for stock-based awards, as if the fair-value-based method defined in SFAS No. 123 had been applied (Note 10).

Derivatives

The Company accounts for its derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which was issued in June 1998, and its amendments, SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133,” and SFAS No. 138, “Accounting for Derivative Instruments and Certain Hedging Activities,” issued in June 1999 and June 2000, respectively. As a result, the Company recognized an interest rate swap in the consolidated financial statements at fair value. Changes in the fair value of the interest rate swap are recognized in the accompanying consolidated statements of operations. The net amounts paid or received and net amounts accrued through the end of the accounting period under the Company’s interest rate swap were included in interest expense. This interest rate swap was settled in the year ended December 31, 2004.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued SFAS No. 153, “Exchanges of Non-Monetary Assets,” December 2004, which was effective for the Company as of January 1, 2006. Under SFAS No. 153, the Company will measure assets exchanged at fair value, as long as the transaction has commercial substance and the fair value of the assets exchanged is determinable within reasonable limits. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of SFAS No. 153 did not have a material effect on the Company’s consolidated results of operations or financial condition.

F-14

The FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of APB Opinion No. 20 and SFAS No. 3, June 2005, which was effective for the Company as of January 1, 2006. SFAS No. 154 applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the instance that the pronouncement does not include specific transition provisions. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in the statement of operations. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS No. 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS No. 154 redefines restatement as the revision of previously issued financial statements to reflect the correction of an error. SFAS No. 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. The adoption of SFAS No. 154 did not have a material impact on the Company’s consolidated results of operations or financial condition.

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”). FIN 48 clarifies accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes” by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return that results in a tax benefit. FIN 48 is effective for fiscal years beginning after December 15, 2006 and must be applied to all open tax positions upon initial adoption. Additionally, FIN No. 48 provides guidance on de-recognition, income statement classification of interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The cumulative effect of applying the provisions of FIN 48 is required to be reported as an adjustment to tax liabilities and to the opening balance of retained earnings in the year adopted. The adoption of FIN No. 48 is not expected to have a material effect on the Company’s consolidated results of operations or financial condition.

In June 2006, the FASB ratified the consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF No. 06-3”). The scope of EITF No. 06-3 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, Universal Service Fund (“USF”) contributions and excise taxes. The Task Force concluded that entities should present these taxes in the income statement on either a gross or a net basis, based on their accounting policy, which should be disclosed pursuant to APB Opinion No. 22, “Disclosure of Accounting Policies.” If such taxes are significant and are presented on a gross basis, the amounts of those taxes should be disclosed. The consensus on EITF No. 06-3 will be effective for interim and annual reporting periods beginning after December 15, 2006. The Company currently records all such taxes billed to its customers, including USF contributions, sales, use and excise taxes on a net basis in its consolidated statements of operations. The Company will adopt EITF No. 06-3 effective January 1, 2007.

In September 2006, the Securities and Exchange Commission issued SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements.” SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach, referred to as a “dual approach,” in assessing materiality and provides for a one-time cumulative effect transition adjustment. The Company adopted SAB No. 108 for the year ended December 31, 2006. The adoption of SAB No. 108 did not have a material effect on the Company’s results of operations and financial condition.

F-15

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for fiscal years beginning after November 15, 2007 and interim periods within that fiscal year. The Company has not determined the effect that adoption of SFAS No. 157 will have upon its financial statements, which is not reasonably estimable at this time.

In December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”). FSP EITF 00-19-2 addresses an issuer’s accounting for registration payment arrangements. FSP EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS No. 5”). A “registration payment arrangement” is defined as an arrangement that specifies that the issuer will endeavor to file a registration statement for the resale of specified financial instruments and/or for the resale of equity shares that are issuable upon exercise or conversion of specified financial instruments and for that registration statement to be declared effective by the Securities and Exchange Commission. The arrangement requires the issuer to transfer consideration to the counterparty if the registration statement for the resale of the financial instrument or instruments subject to the arrangement is not declared effective or if effectiveness of the registration statement is not maintained. FSP EITF 00-19-2 specifies that if the transfer of consideration under a registration payment arrangement is probable and can be reasonably estimated at inception, the contingent liability under the registration payment arrangement must be included in the allocation of proceeds from the related financing transaction using the measurement guidance in SFAS No. 5. FSP EITF 00-19-2 also requires certain disclosures about the terms of each registration payment arrangement, even if the likelihood of the issuer having to make any payments under the arrangement is remote. FSP EITF 00-19-2 is effective immediately for registration payment arrangements entered into after December 21, 2006 and for fiscal years beginning after December 31, 2006, and interim periods within those fiscal years, for registration payment arrangements entered into prior to the issuance of FSP EITF 00-19-2. The Company adopted FSP EITF 00-19-2 for the year ended December 31, 2006. The adoption of FSP EITF 00-19-2 did not have a material effect on the Company’s results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to choose, at specified election dates, to elect to measure many financial instruments and certain other items at fair value, including recognized financial assets and financial liabilities except certain items excluded by the statement, and provides that the fair value option may be applied instrument by instrument, is irrevocable and must be applied to an instrument in its entirety. Unrealized gains and losses on items for which the fair value option has been elected must be reported in earnings subsequent to such election. The statement is effective for fiscal years beginning after November 15, 2007. The Company has not determined the effect that adoption of SFAS No. 159 will have upon its financial statements, which is not reasonably estimable at this time.

3.    Mergers and Acquisitions

On September 8, 2004, the Company entered into a merger agreement with Florida Digital Network, Inc. (“FDN”) and certain FDN stockholders pursuant to which the Company agreed to acquire all of the outstanding common stock and preferred stock of FDN in exchange for approximately 10,400,000 shares of the Company’s common stock. Also on September 8, 2004, the Company entered into a merger agreement with NT Corporation (“NTC”) and certain NTC stockholders pursuant to which the Company agreed to acquire all of the outstanding common stock and preferred stock of NTC in exchange for a maximum of 2,950,000 shares of the Company’s

F-16

common stock. Completion of the FDN merger was a condition to the completion of the NTC merger. Effective as of December 16, 2004, the Company and certain of its stockholders and FDN and certain of FDN’s stockholders entered into an agreement pursuant to which the parties mutually terminated the FDN merger agreement. Effective as of February 28, 2005, the Company, NTC and certain of NTC’s stockholders entered into an agreement pursuant to which the parties mutually terminated the NTC merger agreement and pursuant to which the Company agreed to extend to NTC $300,000 of credits for future network access services to be rendered to NTC. In connection with these terminated mergers, the Company incurred expenses totaling $3.3 million (consisting primarily of financial advisory, legal and accounting fees), which are reflected in “Merger-related expenses” in the accompanying consolidated statements of operations.

4.    Asset Impairment

The Company at least annually, or as events or circumstances change that could affect the recoverability of the carrying value of its property, plant and equipment, conducts a comprehensive review of the carrying value of its property and equipment to determine if the carrying amount of the assets are recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to the future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent that the carrying amount of the asset exceeds the fair value of the asset. Historically, for purposes of its impairment review, the Company determined its retail group and its wholesale group as two separate asset groups with identifiable cash flows. Its retail group consists of those assets and liabilities associated with servicing the Company’s retail customer base, and its wholesale group consists of those assets and liabilities associated with servicing the Company’s wholesale customer base.

In October 2005, property, plant and equipment were reviewed for impairment in view of the Company’s projected future operating results to evaluate whether changes in circumstances indicated that the carrying amount of its assets might not be recoverable. For its asset groups, the Company determined that the sum of the expected future cash flows was greater than the carrying amount of the long-lived asset groups, and therefore that the asset groups were not impaired, except for certain central office switching assets within its retail group that were identified with a carrying amount greater than their expected future cash flows. Consequently, the Company recognized an impairment loss to property, plant and equipment of $7.2 million in the three months ended December 31, 2005 included in the accompanying consolidated statements of operations for the year ended December 31, 2005.

In December 2004, the Company considered the following factors as evidencing the necessity of an impairment review: underperformance of the Company’s assets relative to expected historical and projected future operating results; significant negative industry trends; a significant decline in the Company’s common stock price for a sustained period; and the Company’s market capitalization relative to net book value. The Company determined that the sum of the expected future cash flows was less than the carrying amount of the retail long-lived asset group (including intangibles) and recognized in the three months ended December 31, 2004, included in the accompanying consolidated statements of operations for the year ended December 31, 2004, an impairment loss of $199.9 million to its property, plant and equipment and an impairment loss of $4.0 million to its amortizable intangible customer base asset, which was equal to the excess of the carrying amount of the assets over their fair value in accordance with SFAS No. 144. The Company also performed an impairment review of its non-amortizable intangible assets, goodwill and trade name associated with its retail unit. After recognizing the impairment loss to property, plant, equipment and amortizable customer base intangible assets in accordance with SFAS No. 144, the Company determined, in accordance with SFAS No. 142, that the fair value of its retail unit exceeded its carrying value, and therefore goodwill was considered not impaired. For its wholesale asset group, the Company determined that the sum of the expected future cash flows was greater than the carrying amount of the long-lived asset group, and therefore its wholesale group long-lived assets (property, plant and equipment and amortizable intangible customer base assets) were considered not impaired.

F-17

Goodwill and other separately recognized intangible assets with indefinite lives are not amortized and are subject to at least an annual assessment for impairment in accordance with SFAS No. 142. The Company evaluates the recoverability of indefinite-life intangible assets on an annual basis and whenever events or circumstances indicate that these assets might be impaired. The Company determines impairment by comparing an asset’s carrying value to estimates of fair value using the best information available, which requires the use of estimates, judgments and projections. In the event impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset.

The Company had identified its trade names as indefinite-life intangibles. In the three months ended September 30, 2005, the Company discontinued use of its BTI trade name and recognized an impairment loss of $600,000, which was the amount by which the asset’s book value exceeded its fair value. In the three months ended December 31, 2005, the Company determined to discontinue future use of its ITC^DeltaCom trade name as soon as the new trade name could be determined, and recognized an impairment loss of $5.6 million, which was the amount by which the asset’s book value exceeded its fair value.

The Company concluded that its long-lived assets associated with its two separate asset groups were not impaired as of December 31, 2006. Management’s estimate of the future cash flows attributable to its long-lived assets and the fair value of its businesses involve significant uncertainty. Those estimates are based on management’s assumptions of future results, growth trends and industry conditions. Management will continue to assess the Company’s assets for impairment as events occur or as industry conditions warrant.

5.    Property, Plant and Equipment

Balances of major classes of property, plant and equipment and the related accumulated depreciation as of December 31, 2006 and 2005 were as follows (in thousands):

	December 31,
	2006			2005
Land	$	2,505		$	2,536
Buildings and towers		29,694			30,614
Furniture, fixtures and office equipment		24,300			15,451
Vehicles		737			641
Fiber optic network		84,354			83,215
Transmission equipment and electronics		246,760			208,795
		388,350			341,252
Less accumulated depreciation		(147,110	)		(89,828	)
		241,240			251,424
Assets under construction		1,279			3,134
Property, plant and equipment, net	$	242,519		$	254,558

In accordance with SFAS No. 144, in the three months and year ended December 31, 2005, the Company recognized an impairment loss of $7.2 million to property, plant and equipment, and in the three months and year ended December 31, 2004, the Company recognized an impairment loss of $199.9 million to property, plant and equipment (Note 4). The Company did not incur an asset impairment loss for the year ended December 31, 2006. The cost and accumulated depreciation of property, plant and equipment has been reduced for impairments recognized in prior years. Depreciation expense was $57.3 million, $50.6 million, and $83.6 million for the years ended December 31, 2006, 2005 and 2004, respectively.

F-18

6.    Intangible Assets

Intangible assets and the related accumulated amortization as of December 31, 2006 and 2005 were as follows (in thousands):

	December 31,
	2006			2005
Goodwill	$	35,109		$	35,109
Other intangible assets:
Customer base	$	20,316		$	20,316
Trade name		156			50
		20,472			20,366
Less accumulated amortization		(10,585	)		(8,046	)
Intangible assets, net	$	9,887		$	12,320

The book value of goodwill was $35.1 million at December 31, 2006 and December 31, 2005. Goodwill is related to the acquisition of BTI in 2003.

The Company had identified its trade names as indefinite-life intangibles. The book value of this indefinite-life intangible was $6.2 million at December 31, 2004. In accordance with SFAS No. 142, in the year ended December 31, 2005, the Company recognized an impairment loss of $6.2 million to its trade names (Note 4). In accordance with SFAS No. 144, for the three months and the year ended December 31, 2004, the Company recognized an impairment loss of $4.0 million to its retail unit customer base asset (Note 4). Amortization expense was $2.5 million, $2.5 million, and $3.5 million, for the years ended December 31, 2006, 2005 and 2004, respectively. Amortization expense is estimated to be $2.5 million annually for the years ending December 31, 2007 through December 31, 2009 and $2.2 million for the year ending December 31, 2010.

The Company did not incur an asset impairment loss for the year ended December 31, 2006.

F-19

7.    Long-term Obligations and Capital Lease Obligations

Long-Term Debt

Long-term obligations and capital lease obligations at December 31, 2006 and 2005 consisted of the following (in thousands):

	December 31,
	2006			2005
First lien, senior secured notes due July 2009	$	233,999		$	209,535
Second lien secured credit facility due August 2009		56,326			55,900
Third lien, senior secured notes due September 2009 to Welsh Carson securityholders, net of unamortized discount of $4,658		17,661			14,849
Third lien, senior secured notes due September 2009, net of unamortized discount of $8,855		23,353			18,788
10 1/2% senior unsecured notes due September 2007		18,525			18,525
8 3/4% unsecured note due October 2006		—			7,072
10% unsecured notes, $2,400 due in 36 monthly installments beginning November 2006 and $2,400 due October 2009		4,685			—
Capital lease obligations at varying interest rates, maturing through July 2009		76			33
Total		354,625			324,702
Less current maturities		(19,286	)		(7,105	)
Total	$	335,339		$	317,597

Maturities of long-term debt at December 31, 2006 were as follows:

2007	$	19,286
2008		841
2009		334,498
Total	$	354,625

First Lien, Senior Secured Notes Due July 2009

In connection with the July 2005 refinancing, the Company issued first lien, senior secured notes due 2009 in the aggregate principal amount of $209 million. The Company used the proceeds of the first lien notes to repay in full the amount the Company’s former $204 million senior secured credit facility, which was terminated, and to pay accrued interest under the facility as well as transaction costs. Interstate FiberNet, Inc. (“IFN”), which is a wholly-owned subsidiary of ITC^DeltaCom, is the issuer of the first lien notes, which are guaranteed by ITC^DeltaCom and ITC^DeltaCom’s other subsidiaries. The first lien notes accrue interest, payable quarterly, at an annual rate equal to the specified London Interbank Offered Rate (“LIBOR”) plus 8%, with the portion of any interest in excess of a 12% annual rate payable in-kind (“PIK”) at the Company’s option, and accrue PIK interest, payable on a quarterly basis, at an annual rate of 0.5%. No scheduled principal payments will be due on the first lien notes before the maturity date of July 26, 2009. The obligations under the first lien notes are secured by first priority liens on, and security interests in, substantially all of the assets of ITC^DeltaCom and its subsidiaries. The Company is subject to financial covenants under the first lien credit agreement, including a maximum capital expenditures covenant, a senior debt ratio covenant, a total leverage ratio covenant, an interest coverage ratio covenant, a minimum unrestricted cash covenant, and a minimum consolidated EDITDA covenant (as EBITDA is defined for purposes of these obligations). As a result of the repayment in full of the former $204 million senior secured credit facility, the Company expensed $3.9 million of unamortized debt issuance costs, which is reflected as a component of “Other (expense) income” in the accompanying consolidated statements of operations for the year ended December 31, 2005.

F-20

On November 10, 2006, the Company placed with institutional investors $21 million principal amount of additional first lien notes with the same payment terms and the same July 26, 2009 maturity date as the first lien notes we issued in connection with the July 2005 refinancing. The Company paid the holders of the outstanding first lien notes a fee of $611,000 for consenting to amendments to the first lien note agreement made in connection with the sale of the additional notes. The amendments modified some of the financial and operating covenants in the agreement to reflect changes required by the issuance of the additional first lien notes, concurrent modifications to the unsecured vendor note described below, and operating requirements that include the additional capital expenditures the Company will make with the new note proceeds. The modifications affected the maximum capital expenditures covenant, the senior debt ratio covenant, the total leverage ratio covenant and the interest coverage ratio covenant. The amendments also expanded the minimum consolidated EBITDA covenant, under which, as modified, the Company will be required to maintain consolidated EBITDA (as defined for purposes of the agreement), as measured by the cumulative sum of consolidated EBITDA for the preceding 12 months, of at least $60 million at December 31, 2006, $66.7 million at June 30, 2007, $70 million at December 31, 2007 and $77 million at June 30, 2008. The related covenants under our second lien secured credit facility and our third lien, senior secured notes have also been amended to reflect these modifications.

Second Lien Secured Credit Facility Due August 2009

In connection with the July 2005 refinancing, the Company entered into an amendment to its junior (second lien) credit agreement, under which approximately $55.7 million of loans were outstanding at the date of the refinancing. The amendment extended the maturity date of the loans from June 30, 2009 to August 26, 2009, eliminated all scheduled principal payments prior to maturity, and increased the annual rate at which interest accrues. Under the amended agreement, the loans accrue cash interest at an annual rate equal to LIBOR plus 7.75% and accrue PIK interest, payable on a quarterly basis, at an annual rate of 0.75%. The operating and financial covenants of the second lien credit agreement were modified to be substantially consistent with the corresponding covenants under the first lien notes and the third lien, senior secured notes.

Following the 2005 refinancing, the obligations under the second lien secured credit facility are secured by second priority liens on, and security interests in, substantially all of the assets of IFN, which is the borrower under the credit agreement, ITC^DeltaCom and ITC^DeltaCom’s other subsidiaries. Under an intercreditor agreement with the lenders under the first lien notes, the lenders under the second lien secured credit facility are subject to standstill provisions restricting their ability to enforce their remedies upon an event of default by the loan parties or an insolvency of the loan parties until all obligations under the first lien notes have been paid in full. Following payment in full of the first lien notes, the obligations under the second lien secured credit facility will be secured by first priority liens on, and security interests in, the assets that previously had secured obligations under the first lien notes.

Before the March 2005 restructuring, the indebtedness under the second lien secured credit facility was subordinate to the indebtedness under the Company’s former $204 million senior secured credit facility in right of payment and priority of security. No principal payments were permitted to be made under the second lien secured credit facility until all amounts outstanding under the senior secured credit facility were paid in full. Principal amounts outstanding under the facility were payable in quarterly amounts of $3,979,644 from the third quarter of 2006 through the first quarter of 2007, in the amount of $13,979,644 for the second quarter of 2007, in quarterly amounts of $646,331 from the third quarter of 2007 through the first quarter of 2008, and in a final payment of $27,857,725 on the maturity date of June 30, 2008. Borrowings outstanding under the facility generally bore interest at an annual rate that was .25% higher than the annual interest rate under the senior secured credit facility.

In the March 2005 restructuring, the second lien secured credit facility was amended to extend the maturity date by one year from June 30, 2008 to June 30, 2009, to defer the commencement of scheduled amortization payments for four fiscal quarters, and to provide that interest would accrue on outstanding borrowings at a rate of 2.5% in excess of the interest rate payable under the agreement before the restructuring.

F-21

Third Lien, Senior Secured Notes Due September 2009

In connection with the July 2005 refinancing, the Company also issued third lien, senior secured notes due September 2009 in the aggregate principal amount of $50.8 million. Of this amount, the Company issued $30 million principal amount of third lien notes to new investors for cash and $20.8 million principal amount of third lien notes to the Welsh Carson securityholders in exchange for $20 million principal amount of notes plus capitalized interest evidencing the subordinated secured loan that the Welsh Carson securityholders had extended in connection with the March 2005 restructuring. IFN is the issuer of the third lien notes, which are guaranteed by ITC^DeltaCom and ITC^DeltaCom’s other subsidiaries. The third lien notes accrue interest, payable quarterly, at an annual rate of LIBOR plus 7.5%, with the portion of any interest in excess of a 12% annual rate payable in-kind at the Company’s option, and accrue additional PIK interest, payable on a quarterly basis, at an annual rate of 4.5%. No scheduled principal payments will be due on the third lien notes before the maturity date of September 26, 2009. The obligations under the third lien notes are secured by third priority liens on, and security interests in, substantially all of the assets of ITC^DeltaCom and its subsidiaries. The operating and financial covenants under the third lien notes are substantially consistent with the corresponding covenants under the first lien notes and the second lien credit facility. Under an intercreditor agreement with the holders of the first lien notes and the lenders under the second lien credit agreement, the holders of the third lien notes are subject to standstill provisions restricting their ability to enforce their remedies upon an event of default by the third lien note obligors or an insolvency of the third lien note obligors until all obligations under the first lien notes and the second lien credit agreement have been paid in full.

In connection with the issuance of the third lien notes, the Company issued 9,000,000 Series D warrants to the third lien note purchasers other than the Welsh Carson securityholders. Each Series D warrant will entitle the holder to purchase one share of a new issue of the Company’s Series C preferred stock and a portion of an additional share equal to the cumulative amount of payment-in-kind dividends that would have accrued with respect to one share from the warrant issue date of July 26, 2005 through the warrant exercise date if such share had been outstanding. Each share of Series C preferred stock will be convertible into .4445 of one share of the Company’s common stock (subject to antidilution adjustments). Each Series D warrant also will permit the holder of the warrant to purchase the number of shares of common stock into which the shares of Series C preferred stock otherwise issuable under the warrant would be convertible as of the warrant exercise date (Note 10). As described in Note 10, the Company determined the value associated with the Series D warrants to be $13.0 million as of July 26, 2005, and is amortizing the resulting debt discount to interest cost using the interest method. Interest cost for the years ended December 31, 2006 and 2005 included $2.9 million and $1.2 million, respectively, of amortized debt discount.

Subordinated Secured Loan Facility

In the March 2005 restructuring, ITC^DeltaCom and its subsidiaries entered into a subordinated secured loan agreement with the Welsh Carson securityholders. On the restructuring date, the Company drew down the full $20 million of borrowings available under this facility. In connection with this loan, the Company issued the lenders Series C warrants to purchase 6,600,000 shares of common stock (Note 10). The resulting $7.6 million debt discount is being amortized to interest cost using the interest method. Interest cost for the years ended December 31, 2006 and 2005 included $1.7 million and $1.3 million, respectively, of amortized debt discount.

Senior Secured Credit Facility

In the March 2005 restructuring, the Company’s existing senior secured credit facility was amended to increase the principal amount outstanding thereunder to $204.0 million to include $22.0 million of obligations the Company owed under its principal capital lease facilities. The new agreement contained modified principal and interest payment terms applicable to facility indebtedness held by the lenders who elected the restructuring terms (the “electing lender loans”). At the date of the July 2005 refinancing, electing lender loans amounted to $167.6 million of total facility indebtedness of $204.0 million. The Company was not obligated to make any

F-22

principal payments, other than specified prepayments, on the electing lender loans until the facility maturity date of June 30, 2006. Interest accrued on the electing lender loans at a rate of 2.5% in excess of the interest rate payable under the agreement before the restructuring. At the date of the July 2005 refinancing, the interest rate on the electing lender loans was 9.74% per annum. The principal and interest payment terms were not modified with respect to the indebtedness held by the credit facility lenders who did not elect the restructuring terms (the “non-electing lender loans”). At the date of the July 2005 refinancing, non-electing lender loans amounted to $36.4 million of total facility indebtedness of $204.0 million. The interest rate on the non-electing lender loans was 7.24% per annum at the date of the July 2005 refinancing. Based on the amount of the non-electing lender loans, prior to the facility maturity date, the Company was obligated to make quarterly principal payments of up to a maximum of $1.2 million in September 2005, $1.2 million in December 2005 and $1.2 million in March 2006, which would have been funded by drawings on a term loan facility. Borrowings under that facility were to be treated as electing lender loans for purposes of the agreement.

Lease Obligations

The Company has entered into various operating and capital leases for facilities and equipment used in its operations. Aggregate future minimum rental commitments under non-cancelable operating leases with original or remaining periods in excess of one year and maturities of capitalized lease obligations as of December 31, 2006 were as follows (in thousands):

	Operating Leases		Capital Leases
2007	$	14,234	$	85
2008		9,168		—
2009		7,492		—
2010		4,931		—
2011		2,814
Thereafter		8,623		—
	$	47,262		85
Less amounts representing interest				(9	)
Present value of net minimum lease payments				76
Less current portion				(27	)
Obligations under capital leases, net of current portion			$	49

As part of the March 2005 restructuring, the Company converted into loans under its senior secured credit facility the $22.0 million of obligations outstanding under its principal capital lease facilities at the restructuring date.

Rent expense charged to operations for the years ended December 31, 2006, 2005 and 2004 was $19.7 million, $17.9 million, and $20.8 million, respectively.

The Company’s assets under capital lease, vehicles, had a gross book value of $95,000 at December 31, 2006. Accumulated depreciation on these capitalized assets was $12,000 at December 31, 2006.

F-23

Other Long-Term Liabilities

In connection with its acquisition of BTI in 2003, the Company assumed $18.5 million principal amount of unsecured senior notes that accrue interest, payable semi-annually, at an annual rate of 10.5%. The senior notes were originally issued by BTI in September 1997. In 2001, the notes were amended to remove substantially all financial and administrative covenants. The notes are due in full September 2007.

In connection with its acquisition of BTI in 2003, the Company assumed an unsecured vendor note in an original principal amount of $7.1 million. Before the March 2005 restructuring, the note was payable on demand on or after April 30, 2006. As part of the March 2005 restructuring, the Company obtained an extension of the maturity date of the note to October 31, 2006. On October 31, 2006, the holder of the note agreed to payment modifications that provided for payment of $2.27 million of principal on October 31, 2006, $2.4 million of principal plus interest payments over 36 monthly installments beginning November 1, 2006, and $2.4 million principal on October 1, 2009, with interest payable monthly. Interest on the note, which had accrued at an annual rate of 8 ³/4%, was modified to accrue at an annual rate of 10% on principal balances outstanding after October 31, 2006.

In connection with its acquisition of BTI in 2003, the Company assumed certain accrued restructuring fees that are long-term in nature (Note 11).

8.    Income Taxes

Details of the income tax (benefit) expense for the years ended December 31, 2006, 2005 and 2004 are as follows (in thousands):

	Year Ended December 31,
	2006			2005			2004
Current:
Federal	$	—		$	—		$	—
State		—			—			—
Total current		—			—			—
Deferred:
Federal		(9,474	)		(21,561	)		(86,540	)
State		(1,112	)		(2,529	)		(10,181	)
Increase in valuation allowance		10,586			24,090			96,721
Total deferred		—			—			—
Total (benefit) expense	$	—		$	—		$	—

F-24

The tax effects of temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, as of December 31, 2006 and 2005 are as follows (in thousands):

	2006			2005
Deferred tax assets:
Net operating loss carry forwards	$	310,889		$	283,590
Property impairment		80,249			80,249
Accounts receivable reserve		1,165			2,802
Other		10,135			8,110
		402,438			374,751
Deferred tax liabilities:
Property		(97,409	)		(81,429	)
Other		(6,434	)		(5,313	)
		(103,843	)		(86,742	)
Net deferred tax assets		298,595			288,009
Valuation allowance		(298,595	)		(288,009	)
Net deferred tax liabilities	$	—		$	—

At December 31, 2006, the Company had net operating loss carry forwards of approximately $818 million. At December 31, 2005, the Company had net operating loss carry forwards of approximately $746 million, including net operating loss carry forwards of approximately $213 million incurred by BTI prior to the date of its acquisition by the Company. These acquired net operating losses created additional deferred tax assets of $77 million, which are included in the foregoing table. The Company has established a valuation allowance for the net deferred tax assets associated with these net operating losses. The total change in the year ended December 31, 2006 in the valuation allowance was $10.6 million. The Company will reduce the valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will be realized. Provisions of the Internal Revenue Code limit an entity’s ability to utilize net operating loss carry forwards in the case of certain events, including significant changes in ownership interests. During the year ended December 31, 2002, the Company experienced an ownership change as defined in Section 382 of the Internal Revenue Code. The Company’s ability to utilize pre-ownership change losses totaling approximately $152 million and pre-merger losses of BTI totaling approximately $213 million against future taxable income will be limited. The loss carry forwards expire in the years ending December 31, 2019 through December 31, 2026. A reconciliation of the federal statutory income tax rate to the effective income tax rate for the periods presented is as follows:

	Year Ended December 31,
	2006		2005		2004
Federal statutory rate	(34	)%	(34	)%	(34	)%
State income taxes, net of federal benefit	(4	)	(4	)	(4	)
Permanent differences	2		3		1
Increase in valuation allowance	36		35		37
Effective income tax rate	0	%	0	%	0	%

9.    Convertible Redeemable Preferred Stock

On October 29, 2002, in connection with its plan of reorganization under Chapter 11 of the United States Bankruptcy Code, the Company issued 300,000 shares of a new issue of its 8% Series A Convertible Redeemable Preferred Stock (the “Series A preferred stock”) for a total purchase price of $30 million. As of October 29, 2002, the Series A preferred stock was convertible into a total of approximately 1,750,000 shares of the Company’s common stock at a conversion price of $17.15 per share of common stock. On October 29, 2002, the

F-25

Company also issued 1,020,000 warrants, which were exercisable for a total of approximately 340,000 shares of common stock at an exercise price of $15.35 per share of common stock. In December 2004, a Series A preferred stockholder that held approximately 50% of the outstanding shares of Series A preferred stock converted those shares into common stock. As a result, the Company recognized the unamortized discount of $2.2 million associated with those shares as a reduction of income applicable to common stockholders.

On October 6, 2003, in connection with its acquisition of BTI, the Company issued to some of the Welsh Carson securityholders a total of 350,000 shares of the Series B preferred stock for a total purchase price of $35 million. As of October 6, 2003, the Series B preferred stock was convertible into a total of approximately 3,888,889 shares of the Company’s common stock at a conversion price of $9.00 per share of common stock. On November 11, 2004, the Company exercised its right under the BTI merger agreement to require the Welsh Carson securityholders to purchase 150,000 additional shares of the Series B preferred stock for an aggregate purchase price of $15 million. It was a condition to the obligation of the Welsh Carson securityholders to purchase these shares that the Company have unrestricted cash of less than $20 million.

As of October 29, 2005, for the Series A preferred stock, and October 6, 2006, for the Series B preferred stock, ITC^DeltaCom has the right, at its option, to redeem for cash the shares of the applicable series of preferred stock, in whole or in part (with a minimum aggregate redemption price of $5 million for the Series B preferred stock), at any time and from time to time. The redemption price per share of preferred stock in any such optional redemption will be equal to the liquidation preference of $100 per share plus the amount of any accrued and unpaid dividends. The Company has no plans to redeem any of the Series A preferred stock or Series B preferred stock during the year ending December 31, 2007. On October 29, 2012, ITC^DeltaCom will be required to redeem for cash all outstanding shares of the Series A preferred stock and the Series B preferred stock. The redemption price per share of preferred stock in this mandatory redemption will be equal to the liquidation preference of $100 per share plus the amount of any accrued and unpaid dividends.

Dividends accrue on the Series A preferred stock and the Series B preferred stock at an annual rate of 8%. Under its certificate of incorporation, the Company has the option, instead of paying cash dividends on either series of preferred stock, to pay dividends on such series in additional shares of that series. Since its initial issuance of the Series A preferred stock on October 29, 2002 and initial issuance of the Series B preferred stock on October 6, 2003, the Company paid all accrued dividends on the Series A and Series B preferred stock solely in the form of payment-in-kind dividends until June 30, 2006. Solely for purposes of calculating the dividend amount, each share of preferred stock issued as a payment-in-kind dividend is valued at its liquidation preference of $100. In addition, the Company is accreting through the redemption date of each series of preferred stock discount arising when shares of such series are issued.

Effective for the quarterly dividend period ended September 30, 2006, the Company suspended indefinitely the quarterly payment of dividends on its Series A preferred stock and Series B preferred stock to comply with provisions of the Delaware General Corporation Law that condition payment of dividends on compliance with specified financial tests. Under the Delaware General Corporation Law, the Company may pay dividends on its capital stock only (1) out of its “surplus” or (2) if the Company has no “surplus,” from its net profits for the fiscal year in which the dividends are declared or from its net profits for the preceding fiscal year. Its “surplus” is an amount equal to the present fair value of its total assets, minus the present fair value of its total liabilities, minus its capital (which equals the aggregate par value of all of the outstanding shares of its common and preferred stock). The Company had a negative “surplus” as of September 30, 2006, as that term is defined under Delaware General Corporation Law, and did not generate net profits in the year ended December 31, 2006. Accordingly, the Company did not pay dividends on the outstanding shares of the Series A or Series B preferred stock for the quarterly dividend periods ended September 30, 2006 and December 31, 2006. The total cumulative amount of such dividends, which would have been payable on January 1, 2007, would have been $816,000 on the Series A preferred stock and $2.4 million on the Series B preferred stock. For so long as the preferred stock remains outstanding, these unpaid amounts will accrue dividends until paid.

F-26

The Company’s Series C preferred stock was created on October 24, 2005. If and when issued upon the exercise of the Series D warrants (Note 10), the Series C preferred stock will have a liquidation preference of $1.00 per share and will rank pari passu as to liquidation rights with, and will have dividend, redemption and other terms substantially similar to the terms of, the Company’s outstanding Series A preferred stock and Series B preferred stock. The Series C preferred stock will be redeemable at the option of the Company on or after the third anniversary of the date of first issuance, and will be subject to mandatory redemption on October 29, 2012, except that, for so long as the initial holders of the Series C preferred stock are the owners of at least 50% of the outstanding shares at such date, the Company may not redeem any shares without the prior consent of at least 50% of such initial holders unless the Company concurrently redeems a pro rata portion of the Series A preferred stock and the Series B preferred stock.

10.    Other Equity Interests

Common Stock

The Company amended its certificate of incorporation in December 2003 to increase the number of its authorized shares of common stock from 250,000,000 shares to 350,000,000 shares. There were 18,766,942 shares of common stock issued and outstanding at December 31, 2006.

On September 1, 2005, the board of directors of ITC^DeltaCom declared a one-for-three reverse split of ITC^DeltaCom’s outstanding shares of common stock to be effective for holders of record at the close of business on September 12, 2005. Upon effectiveness of the reverse stock split on September 13, 2005, each three shares of issued and outstanding common stock was reclassified and combined into one share of common stock (Note 1). The number of shares of common stock outstanding as reflected in the accompanying consolidated balance sheets, the consolidated statements of stockholders’ equity (deficit), the basic and diluted weighted average common shares outstanding and basic and diluted net loss per common share as reflected in the accompanying consolidated statements of operations, and the related information in the notes to consolidated financial statements have been retroactively adjusted to reflect the reverse stock split as of and for all other periods presented. The reduction in par value of outstanding common stock as a result of the reverse stock split, which in the aggregate totaled $374,000, has been reclassified to additional paid-in-capital in the accompanying consolidated balance sheets and consolidated statements of stockholders’ equity (deficit) as of the dates of the transactions and balances presented.

Warrants

In connection with the subordinated secured loan agreement with the Welsh Carson securityholders entered into in connection with the March 2005 restructuring (Note 7), the Company issued to the lenders Series C warrants to purchase 6,600,000 shares of common stock at an initial exercise price of $1.80 per share. The Series C warrants have a ten-year term from the issue date. The Company used the Black-Scholes pricing model to value the Series C warrants and determined the fair value allocation of the proceeds to the Series C warrants to be $7.6 million. The resulting debt discount is being amortized to future interest cost using the interest method.

In connection with the July 2005 refinancing, the Company issued 9,000,000 Series D warrants to the third lien note purchasers other than the Welsh Carson securityholders (Note 7). Each Series D warrant will entitle the holder to purchase one share of a new issue of the Company’s Series C preferred stock (Note 9) and a portion of an additional share equal to the cumulative amount of payment-in-kind dividends that would have accrued with respect to one share from the warrant issue date of July 26, 2005 through the warrant exercise date if such share had been outstanding. Each share of Series C preferred stock will be convertible into .4445 of one share of the Company’s common stock (subject to antidilution adjustments). Each Series D warrant also will permit the holder of the warrant to purchase the number of shares of common stock into which the shares of Series C preferred stock otherwise issuable under the warrant would be convertible as of the warrant exercise date. The Series D warrants will be first exercisable on June 30, 2007, unless exercisability is triggered earlier upon a change of control of the Company or, subject to specified exceptions, dispositions by the Welsh Carson securityholders of their ITC^DeltaCom securities. The exercise price of the Series D warrants will be between

F-27

$.01 and $.50 and will be fixed as of the initial exercise date based on the Company’s consolidated EBITDA, or net income (net loss) before interest expense, income tax expense, depreciation expense and amortization expense (subject to specified adjustments) for the last twelve months ended March 31, 2007 (or, in the event of early exercisability, for the EBITDA measurement period specified in the agreement). Any warrant not exercised on or before July 1, 2009 will expire on that date. At the first stated exercise date of June 30, 2007 and the expiration date of July 1, 2009, the Series D warrants will be exercisable for approximately 10,500,000 shares and 12,300,000 shares of Series C preferred stock, respectively, which will be convertible into approximately 4,700,000 shares and 5,500,000 shares of common stock, respectively. In determining the value associated with the Series D warrants, the Company assessed the value attributable to (a) the fixed income component of the Series C preferred stock by determining the present value of the future cash-flow stream attributable to the Series C preferred stock and (b) the call option on the Company’s common stock inherent in the conversion right based on a Black-Scholes valuation model, and determined the fair value allocation of the proceeds to the warrants to be $13.0 million. The resulting debt discount is being amortized to future interest cost using the interest method.

Equity Grants

In February 2005, as an inducement material to their entering into employment with the Company, the Company agreed to grant to three newly hired officers a total of 7.25% of each class or series of the Company’s equity securities, calculated on a fully diluted basis, outstanding immediately after completion of the restructuring of the Company’s capital structure. The restructuring was implemented through the March 2005 restructuring and the July 2005 refinancing. The equity securities subject to the grants consisted of units for the Company’s common stock, Series A preferred stock and Series B preferred stock as of March 29, 2005 and, in addition, the Series D warrants as of July 26, 2005. Of each class of securities, 60% of the securities vest ratably over three years on each anniversary of the officer’s initial employment date and 40% of the securities are subject to vesting based on future achievement of performance objectives. Stock-based compensation expense equal to the $4.4 million fair market value of the units for the common stock, Series A preferred stock and Series B preferred stock as of March 29, 2005 is being recognized for 60% of each class of securities over the three-year vesting period beginning in the three months ended March 31, 2005, and for 40% of each class of securities based on the Company’s best estimate of expected performance results adjusted for subsequent changes in results over the term of up to three years under the agreements. The fair market value of the equity securities to be issued as a result of the March 29, 2005 restructuring was determined based on the number of shares of common stock subject to the grants, in the case of the common stock to be issued, and on an as-if-converted into common stock basis based on the conversion price of the preferred stock, in the case of each series of preferred stock to be issued. The fair market value of the common stock was determined based on the trading price of the Company’s common stock as quoted on the Nasdaq National Market on March 29, 2005, which was the date of consummation of the March 2005 restructuring. Stock-based compensation expense equal to the $1.1 million fair market value of the Series D warrants as of July 26, 2005 is being recognized for 60% of the Series D warrants over the three-year vesting period, and for 40% of the Series D warrants based on the Company’s best estimate of expected performance results adjusted for subsequent changes in results over the term of up to three years under the agreements. Based upon its estimate of expected performance results adjusted for actual results in the years ended December 31, 2005 and 2006 and projected future performance results, the Company did not recognize any stock-based compensation expense in the years ended December 31, 2005 and 2006 in connection with the performance-based awards, because achievement of the performance objectives was not considered probable. In determining the value associated with the Series D warrants issued as a result of the July 2005 refinancing, the Company assessed the value attributable to (a) the fixed income component of the Series C preferred stock by determining the present value of the future cash-flow stream attributable to the Series C preferred stock and (b) the call option on the Company’s common stock inherent in the conversion right based on a Black-Scholes valuation model.

ITC^DeltaCom, Inc. Stock Incentive Plans

The Company has two stock-based employee compensation plans, consisting of the ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan (the “Stock Incentive Plan”), which the board of directors adopted

F-28

effective on October 29, 2002, and the ITC^DeltaCom, Inc. Executive Stock Incentive Plan, which the board of directors adopted on May 10, 2005. No additional awards may be made under the Executive Stock Incentive Plan. The compensation committee of the board of directors administers the Stock Incentive Plan and determines the recipients of grants under the plan and the terms of any awards. Awards under the Stock Incentive Plan may be made in the form of stock options, restricted stock, stock units, unrestricted stock, stock appreciation rights, performance awards, annual incentive awards and any combination of the foregoing. The Company may issue up to 3,005,334 shares of common stock, of which no more than 1,216,667 shares may be issued upon the exercise of incentive stock options. In any fiscal year, no participant may be awarded options or restricted stock and stock units for more than 333,334 shares or stock appreciation rights for more than 166,667 shares. At December 31, 2006, 663,398 shares remained available for grant under the Stock Incentive Plan. Option vesting schedules generally range from 25% of the shares subject to the option over a four-year vesting period to one-third of the shares subject to the option over a three-year vesting period.

The option price for any option may not be less than 100% of the fair market value of the stock covered by the option on the date of grant, except that, in the case of an incentive stock option, the option price may not be less than 110% of such fair market value if the optionee is the beneficial owner of 10% or more of the Company’s voting capital stock.

On January 1, 2006, the Company adopted the provisions of SFAS No. 123R requiring the recognition of expense related to the fair value of its stock-based compensation awards. Prior to January 1, 2006, the Company accounted for stock-based compensation under the recognition and measurement provisions of APB 25 and related Interpretations, and provided the required pro-forma disclosures prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosures.” In accordance with APB 25, no compensation cost was required to be recognized for awards that had an exercise price equal to, or greater than, the market value of the underlying common stock on the date of grant.

Restricted Stock Units

Restricted stock units were granted to the recipients at no cost. The fair value of restricted stock units awarded was calculated using the closing value of the common stock on the grant date and is being amortized over the restriction lapse periods of the awards. As of December 31, 2006, the total compensation cost related to nonvested restricted stock units not yet recognized was $2.6 million, and the weighted average period over which this cost will be recognized is 2.3 years. Restrictions on transfer lapse over one to four year periods. The table below summarizes activity in restricted stock units for 2006, 2005 and 2004.

	Shares		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2003	208,734		$	11.89
Restricted stock units granted	50,005		$	20.28
Lapse of restrictions	(55,114	)	$	11.32
Forfeited	(71,586	)	$	13.53
Nonvested as of December 31, 2004	132,039		$	14.42
Restricted stock units granted	347,675		$	1.74
Lapse of restrictions	(30,135	)	$	13.14
Forfeited	(32,649	)	$	12.11
Nonvested as of December 31, 2005	416,930		$	4.35
Restricted stock units granted	772,500		$	2.03
Lapse of restrictions	(126,435	)	$	5.67
Forfeited	(28,114	)	$	1.93
Nonvested as of December 31, 2006	1,034,881		$	2.49

F-29

Stock Options

Valuation Assumptions

The Company selected the Black-Scholes valuation model as the method for determining the fair value of its equity awards and uses the modified prospective transition method, which requires that compensation cost be recognized in the financial statements for all awards granted after the date of adoption as well as for existing awards for which the requisite service has not been rendered as of the date of adoption. This method requires that prior periods not be restated. The Company now recognizes compensation cost on a straight-line basis over the vesting periods of the awards.

The fair value of each option grant was estimated on the date of grant using the following weighted-average assumptions:

Assumptions	2005		2004
Risk-free interest rate	3.85	%	3.36	%
Expected dividend yield	0.00	%	0.00	%
Expected lives	5 years		5 years
Expected volatility	140.00	%	110.00	%

There were no stock option awards granted under the Stock Incentive Plan during the year ended December 31, 2006.

The table below summarizes stock option activity for 2006, 2005 and 2004:

	Shares		Weighted Average Exercise Price Per Option
Outstanding at December 31, 2003	1,026,652		$	14.27
Granted	69,417		$	17.46
Exercised	(14,072	)	$	8.29
Forfeited	(147,605	)	$	14.87
Outstanding at December 31, 2004	934,392		$	14.45
Granted	104,336		$	1.68
Exercised	—			—
Forfeited	(332,070	)	$	14.67
Outstanding at December 31, 2005	706,658		$	12.70
Granted	—
Exercised	—
Forfeited	(49,006	)	$	15.89
Outstanding at December 31, 2006	657,652		$	12.43

The table below sets forth for stock options, the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price and grant date at December 31, 2006:

Range of Exercise Prices	Outstanding as of Dec. 31, 2006	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Exercisable as of Dec. 31, 2006	Weighted Average Exercise Price
$1.68	104,336	8.4	$	1.68	26,082	$	1.68
$5.46-$7.80	168,336	5.9	$	7.66	168,336	$	7.66
$11.10-$13.86	54,960	7.0	$	12.21	54,835	$	12.21
$15.84-$21.27	330,020	6.0	$	18.31	330,020	$	18.31

F-30

The weighted-average fair value of options granted under the Stock Incentive Plan during the years ended December 31, 2005 and 2004 was $1.50 and $12.11, per share, respectively. At December 31, 2006, options to purchase 579,273 shares of the Company’s common stock with a weighted average exercise price of $13.89 per share were exercisable by employees of the Company.

The Company recognized stock-based compensation in the total amount of $2.6 million for the year ended December 31, 2006, including compensation related to existing stock option awards, restricted stock units, and to equity securities granted to three officers in the year ended December 31, 2005. The Company recognized stock-based compensation expense in the amount of $2.2 million and $1.8 million for the years ended December 31, 2005 and 2004, respectively, related to restricted stock units and to equity securities granted to three officers in the year ended December 31, 2005.

Prior to Adoption of SFAS 123R

Prior to January 1, 2006, the Company accounted for awards under the stock incentive plans under the intrinsic value recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as permitted under SFAS No. 123, “Accounting for Stock-Based Compensation.” As required by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” prior to the adoption of SFAS No. 123R, the Company provided pro forma net (loss) and pro forma net (loss) per common share disclosures for stock-based awards, as if the fair-value-based method defined in SFAS No. 123 had been applied.

The following table illustrates the pro forma effect on net loss and net loss per share if the Company had applied the fair value method to account for stock stock-based awards to employees for the years ended December 31, 2005 and 2004:

	2005			2004
Net loss (in thousands)
As reported	$	(57,806	)	$	(256,573	)
Add: total stock based employee compensation expense included in net loss, as reported		2,168			1,771
Less: total stock based employee compensation expense that would have been included in the determination of net loss if the fair value method had been applied to all awards		(3,084	)		(3,220	)
Net loss, pro forma	$	(58,722	)	$	(258,022	)
Basic and diluted net loss per share
As reported	$	(3.11	)	$	(14.72	)
Pro forma	$	(3.16	)	$	(14.81	)

On December 16, 2005, the board of directors of ITC^DeltaCom approved the immediate and full acceleration of the vesting of unvested stock options with exercise prices equal to or greater than $5.00 per share previously granted under the Stock Incentive Plan that were held by employees, other than executive officers. The acceleration was effective as of December 16, 2005. Each of the accelerated options had an exercise price in excess of the then-current market value of the common stock based on the closing price of $1.35 per share reported on the Nasdaq National Market on December 16, 2005. The acceleration applied to option awards granted from the years ended December 31, 2002 through December 31, 2004 with respect to approximately 100,000 shares of common stock.

11.    Restructuring

In December 2003, in connection with its acquisition of BTI, the Company recorded restructuring charges and assumed accrued restructuring liabilities incurred by BTI prior to the acquisition for employee severance and

F-31

related costs and office lease termination costs totaling approximately $18.6 million. In the year ended December 31, 2004, the Company recorded additional restructuring charges of $436,000 which are included in merger-related expenses, and accrued additional lease termination costs of approximately $2.5 million which were included in the adjustment of the original BTI purchase price allocation.

In December 2004, the Company implemented a plan to reduce its workforce by approximately 230 employees, or approximately 11% of the workforce, as a cost-reduction measure, beginning on December 17, 2004, with completion planned by March 31, 2005. The Company recorded a restructuring accrual of approximately $1.6 million for employee severance costs related to this workforce reduction that were included as components of selling, operations and administrative expense.

In December 2005, the Company implemented a plan to close certain financial and network service functions in its former headquarters location in West Point, Georgia and to relocate those business activities to its other locations in Huntsville and Anniston, Alabama. Approximately 65 employee positions were relocated pursuant to the plan. The plan was adopted for the purpose of reorganizing the affected functions to enhance the focus of the Company’s operations. In connection with the plan, the Company paid and recognized as components of selling, operations and administrative expense $501,000 and $111,000 of termination benefits for severance, retention and relocation in the years ended December 31, 2006 and 2005, respectively.

The following table reflects activity associated with accrued restructuring charges from January 1, 2006 through December 31, 2006, which are recorded in accrued liabilities (in thousands):

	Balance at December 31, 2005		Accruals		Payments			Balance at December 31, 2006
Restructuring charges:
Employee severance	$	109	$	501	$	(587	)	$	23
Office space leases		5,733		—		(1,406	)		4,327
Total	$	5,842	$	501	$	(1,993	)	$	4,350

Restructuring charges have been classified as current and long-term. Current restructuring charges are reflected in “Other accrued liabilities” in the table below.

	Balance at December 31, 2005		Balance at December 31, 2006
Other accrued liabilities	$	1,348	$	1,294
Long-term restructuring liabilities		4,494		3,056
Total	$	5,842	$	4,350

12.    Commitments and Contingencies

Purchase Commitments

At December 31, 2006, the Company had entered into agreements with vendors to purchase approximately $6.0 million of equipment and services during the year ending December 31, 2007 related to the improvement and installation of switches, other network equipment and certain services.

Legal Proceedings

In the normal course of business, the Company is subject to various litigation. Management does not believe that there are any legal proceedings pending against the Company, other than those described below, that likely could have a material adverse effect on the financial position, results of operations or liquidity of the Company.

F-32

Regulatory Proceedings. The Company is a party to numerous regulatory proceedings affecting the segments of the communications industry in which it operates, including regulatory proceedings before various state public utility commissions and the FCC, particularly in connection with actions by the regional Bell operating companies. The Company anticipates that these companies will continue to pursue arbitration, litigation, regulations and legislation in states within the Company’s primary eight-state market to reduce regulatory oversight and state regulation over their rates and operations. These companies also are actively pursuing major changes in the federal communications laws through litigation and legislation that would adversely affect competitive carriers, including the Company. If successful, these initiatives could make it more difficult for the Company to compete with these companies and other incumbent carriers. The Company may not succeed in its challenges to these or other similar actions that would prevent or deter it from successfully competing with the incumbent carriers.

Proceedings Affecting Rights-of-Way. To maintain its fiber optic network, the Company has obtained easements, rights-of-way, franchises and licenses from various third parties, including actual and potential competitors, local governments, private real property owners and others. The Company may not be able to continue to use or have access to all of its existing easements, rights-of-way, franchises and licenses or to renew or replace them after they expire. Third parties have initiated legal proceedings in a number of states challenging some of the Company’s significant licenses to use the rights-of-way of others, including its licenses to use the rights-of-way of Mississippi Power Company and Gulf Power Company. Proceedings that remain pending affect approximately 300 route miles of the Company’s network as of December 31, 2006. Similar proceedings involving the rights-of-way of Georgia Power Company, Mississippi Power Company, Kansas City Southern Railroad and Illinois Central Railroad affecting approximately 1,300 route miles of the Company’s network were settled or dismissed during the year ended December 31, 2006 or in prior periods, as discussed below. If some of these or similar future challenges are successful, or if the Company otherwise is unsuccessful in maintaining or renewing its rights to use its network easements, rights-of-way, franchises and licenses, the Company may be compelled to abandon significant portions of its network, which would require it to incur additional expenditures and to pay substantial monetary damages. The results of these challenges, some of which are described below, are uncertain and, individually or in the aggregate, could have a material adverse effect on the Company’s results of operations or financial position.

Mississippi Power Company Rights-of-Way. A portion of the Company’s network runs through fiber optic cables owned by the Mississippi Power Company over its rights-of-way located in Jasper County, Mississippi. A proceeding involving Mississippi Power Company and several real property owners who have granted Mississippi Power Company rights-of-way in Jasper County resulted in a January 1999 order of the Mississippi Supreme Court holding that Mississippi Power Company could not permit third parties to use its rights-of-way at issue for any purpose other than in connection with providing electricity to customers of Mississippi Power Company. The Company became a party to the proceeding after the January 1999 order. The property owners sought compensatory damages equal to the profits or gross revenues received by the Company from its use of Mississippi Power Company’s rights-of-way in Jasper County and punitive damages for the Company’s use of the route. The Circuit Court of the First Judicial District of Jasper County entered an order directing the Company not to use that portion of its fiber optic network located on Mississippi Power Company’s rights-of-way in Jasper County, except in an emergency. In December 2005, a settlement agreement was entered. In January 2006, the order that restricted the Company’s use of the fiber optic network in Jasper County was vacated. As part of the settlement, substantially all of the property owners have dismissed their cases and granted Mississippi Power Company an easement that allows for the Company’s use for telecommunications purposes of Mississippi Power Company’s fiber optic cables installed over the properties.

The Company initiated civil suits in August 2001 and May 2002 in the United States District Court for the Southern District of Mississippi in which it sought a declaratory judgment confirming its continued use of fiber optic cables in Mississippi Power Company’s rights-of-way on 37 parcels of real property and 63 parcels of real property, respectively, or, alternatively, condemnation of the right to use the fiber optic cables upon payment of just compensation to the property owners. As a part of the settlement of the Jasper County proceedings discussed

F-33

above, the Company’s suit for declaratory judgment and all of the remaining counterclaims in the 37-parcels proceeding have been dismissed. In February 2007, the United States District Court for the Southern District of Mississippi entered judgment granting to the Company the right to continued use of fiber optic cables in Mississippi Power Company’s rights-of-way against any remaining property owners named in the 63-parcels proceeding that were intended to be part of the settlement of the Jasper County proceedings, but had not voluntarily signed the easement required as part of that settlement. The 63-parcels proceeding has been dismissed against all other parties.

Some parties to the 37-parcels proceeding who had been dismissed from the proceeding before the Jasper County settlement are not bound by the settlement and have filed new proceedings against Mississippi Power Company and the Company. It is possible that additional parties who are not subject to the settlement also may file new proceedings. In October 2001, a civil action was filed in the Chancery Court of Lamar County, Mississippi, against Mississippi Power Company and the Company by two plaintiffs seeking to quiet and confirm title to real property, for ejectment and for an accounting. The plaintiffs are joint owners of a single parcel of real property located in Lamar County, Mississippi. Both plaintiffs also were defendants in the 37-parcels proceeding. The plaintiffs have not specified the amount of damages they are seeking. Similarly, in November 2004, another former defendant in the 37-parcels proceeding sued the Company and Mississippi Power Company in the Chancery Court of Jones County, Mississippi, to enjoin the Company’s use of fiber optic cables in Mississippi Power Company’s rights-of-way over the plaintiff’s property and to recover all property.

In December 2002, two civil actions were filed against Mississippi Power Company and the Company in the Circuit Court of Smith County, Mississippi, by a single attorney. The plaintiffs are real property owners and allege trespass on the basis that the documents granting Mississippi Power Company the rights to cross the plaintiffs’ property do not grant the right to Mississippi Power Company to allow third parties to use the rights-of-way for the transmission of telecommunications services of such third parties and that such use by third parties is prohibited under state law. One of the proceedings was previously dismissed, and as part of the settlement of the Jasper County proceedings discussed above, the other proceeding was transferred to the Circuit Court of the First Judicial District of Jasper County, Mississippi, and will be dismissed as part of the settlement.

Before it was dismissed, the 37-parcels proceeding was consolidated with another pending civil suit in the United States District Court for the Southern District of Mississippi, in which the Company was made a defendant. The pending proceeding was initiated by real property owners claiming to represent a class of real property owners and seeking compensatory and punitive damages against Mississippi Power Company arising from Mississippi Power Company’s grant of permission to third parties to use its rights-of-way for telecommunications purposes. The plaintiffs also seek an injunction against the Company’s use of fiber optic cables in Mississippi Power Company’s rights-of-way. The case is still pending, but has been stayed because of the bankruptcy of another defendant. None of the plaintiffs has an individual claim against the Company, so the Company anticipates that it could be materially adversely affected only if a class is certified.

Since 2002, over 220 lawsuits have been filed by a single counsel in the Circuit Court for Harrison County, Mississippi, against Mississippi Power Company, MCI and the Company. Each plaintiff claims to be the owner of real property over which Mississippi Power Company has an easement and that MCI and/or the Company have benefited by using the easement to provide telecommunications services. As a result of these allegations, each of the plaintiffs claimed trespass, unjust enrichment, fraud and deceit, and civil conspiracy against each of the defendants. Each of the plaintiffs also sought $5 million in compensatory damages, $50 million in punitive damages, disgorgement of the gross revenues derived from the use by MCI and the Company of the fiber optic cable over the easements, a percentage of gross profits obtained from the use of the cable, and the plaintiffs’ costs to prosecute the action. In December 2004, a settlement agreement was entered and each of the cases has been or is expected to be dismissed, because the plaintiffs have granted Mississippi Power Company an easement that allows for the Company’s use for telecommunications purposes of Mississippi Power Company’s fiber optic cables installed over the plaintiffs’ properties. Proceedings are underway to give effect to the settlement and to obtain dismissal of the few remaining claims by property owners who have not already signed the settlement documents.

F-34

In 2002, a lawsuit on behalf of five real property owners was filed against Mississippi Power Company and Southern Company in the Circuit Court of Forrest County, Mississippi, alleging trespass, nuisance, conversion, unjust enrichment, fraud, fraudulent misrepresentation and fraudulent concealment in connection with the use of Mississippi Power Company’s fiber optic cables installed over the plaintiffs’ properties. In May 2004, the Company was added as a defendant in the lawsuit, upon the court’s order, on the basis that the Company uses the fiber optic cables for the provision of telecommunications services to its customers. The plaintiffs seek rescission and equitable reformation arising from the alleged unauthorized use of the subject rights-of-way in violation of the terms of the easements held by Mississippi Power Company. The plaintiffs also seek an accounting, unspecified monetary damages and equitable relief. In September 2004, the trial court granted Mississippi Power Company’s motion for partial summary judgment and issued an order that the plaintiffs are not entitled to any compensation for trespass damages. In November 2006, the Mississippi Court of Appeals dismissed the appeal for lack of jurisdiction, holding that the trial court’s ruling was not a final order. A hearing on defendants’ motion for summary judgment was held in January 2007 in the trial court.

In September 2002, Mississippi Power Company and the Company were sued in the Circuit Court of Jasper County, Mississippi, by the owners of 75 parcels of real property located in various Mississippi counties. The plaintiffs allege that Mississippi Power Company and the Company have violated the property owners’ rights with regard to the use of Mississippi Power Company’s easements across their properties. The allegations are similar to those made in other rights-of-way suits in Mississippi. The plaintiffs allege trespass, unjust enrichment, fraud and deceit, and civil conspiracy, and seek from each plaintiff $5 million in compensatory damages, $50 million in punitive damages, disgorgement of gross revenues, a percentage of the gross revenues derived from use of the rights-of-way, and court costs. Although MCI is not a party to this proceeding, during the pendency of MCI’s bankruptcy proceedings, Mississippi Power Company had removed this action to the United States District Court for the Southern District of Mississippi and requested that the action be transferred to the United States Bankruptcy Court for the Southern District of New York, which administered MCI’s bankruptcy proceedings. There have been no further material developments in this matter.

In July 2002, nine lawsuits on behalf of 101 real property owners were filed against Mississippi Power Company, Southern Company and the Company in the Chancery Court of Jones County, Mississippi. All nine complaints are identical in seeking relief for trespass, nuisance, conversion, unjust enrichment, fraud, fraudulent misrepresentation and fraudulent concealment. The plaintiffs seek rescission and equitable reformation arising from the alleged unauthorized use of the subject rights of way in violation of the terms of the easements held by Mississippi Power Company. The plaintiffs also seek an accounting, unspecified monetary damages and equitable relief. During the pendency of MCI’s bankruptcy proceedings, Mississippi Power Company sought to change the venue of these proceedings, but the proceedings have been returned to the original venue. There have been no further material developments in this matter.

Gulf Power Company Rights-of-Way. The Company uses the rights-of-way of Gulf Power Company in Florida for a portion of its network. During 2000, Gulf Power Company was sued in the Circuit Court of Gadsden County, Florida, by two real property owners that claim to represent a class of all real property owners over whose property Gulf Power Company has facilities that are used by third parties. The real property owners have alleged that Gulf Power Company does not have the authority to permit the Company or other carriers to transmit telecommunications services over the rights-of-way. The Company was made a party to this litigation in August 2001. Additional plaintiffs have been added through various amendments to the Complaint. In November 2005, the trial court entered a declaratory judgment for the plaintiffs. In that decision, the court ruled that the easements do not allow general telecommunications use and that Gulf Power Company did not have the right to apportion the easement for general telecommunications purposes. The trial court has not yet addressed any issues relating to damages. Gulf Power Company and the Company appealed the declaratory judgment. In October 2006, the Florida First District Court of Appeals dismissed the appeal brought by Gulf Power Company and the Company on the basis that the trial court’s November 2005 ruling was not a final order and therefore not yet subject to appeal. Gulf Power Company and the Company have filed motions in the trial court to vacate the prior declaratory judgment and for summary judgment in favor of Gulf Power Company and the Company. In

F-35

February 2007, the plaintiffs filed a motion for a permanent injunction which would restrict the Company’s ability to add new customers and services over the disputed route. The trial court has set a hearing in April 2007 on the plaintiffs’ motions for class certification and permanent injunction and defendants’ motion to vacate the declaratory judgment and for summary judgment.

Georgia Power Company Rights-of-Way. The Company uses rights-of-way of Georgia Power Company in Georgia for a portion of the Company’s network. In July 2001, a suit was filed in the Superior Court of Decatur County, Georgia, by a group seeking compensatory and punitive damages and claiming to represent a class of landowners. The plaintiffs have alleged that Georgia Power and other entities do not have the right to grant third parties the use of the rights-of-way for the transmission of telecommunications services of such third parties. The Company was made a party to the suit in January 2002. In January 2005, the trial court granted the plaintiffs’ motion for partial summary judgment, holding that Georgia Power had the right to use the easements for communications directly related to the transmission and distribution of electricity, but that the easements do not provide Georgia Power the right to allow any other party, including the Company, the use of the rights-of-way for the transmission of telecommunications services. In November 2005, the Georgia Court of Appeals reversed the trial court’s ruling and held that Georgia Power’s easements allow use for fiber optic communication lines and remanded to the trial court the question whether the easements were divisible so as to allow use by persons other than Georgia Power, including the Company. In May 2006, the Georgia Supreme Court denied the plaintiffs’ request for review of the ruling by the Georgia Court of Appeals. On remand, the trial court held in October 2006 that the easements are divisible and granted summary judgment to the defendants, including the Company.

In November 2002, a civil action was filed in the Superior Court of Walton County, Georgia, against Georgia Power Company and the Company. The plaintiff, claiming to be representative of a class of all real property owners over which Georgia Power Company has facilities, alleges that the documents granting Georgia Power Company the rights to cross the plaintiff’s property do not grant the right to Georgia Power Company to allow third parties to use the rights-of-way for the transmission of telecommunications services of such third parties. In September 2006, the plaintiff voluntarily dismissed its complaint without prejudice.

Kansas City Southern Railroad and Illinois Central Railroad Rights-of-Way. In March 2003, a complaint was filed against the Company in the United States District Court for the Southern District of Mississippi. The plaintiffs, claiming to be representatives of a class of plaintiffs, allege that they are the owners of the real property across which certain rights-of-way of Kansas City Southern Railroad and Illinois Central Railroad are located. Under agreements with Kansas City Southern Railroad and Illinois Central Railroad, the Company uses certain fiber optic cable within the rights-of-way of Kansas City Southern Railroad and Illinois Central Railroad across Mississippi. The plaintiffs claim that the documents granting the rights-of-way do not permit the installation and operation of telecommunications facilities of third parties within the rights-of-way. The plaintiffs allege trespass, unjust enrichment and conversion and seek unspecified amounts of compensatory and punitive damages, restitution, disgorgement, attorneys’ fees, an accounting of amounts paid to Kansas City Southern Railroad and Illinois Central Railroad and declaratory relief regarding the parties’ rights. The Company denied the allegations, but counter-claimed for the certification of a class of counter-defendants. The Company sought a declaration that the Company has the right to use the rights-of-way or, alternatively, to condemn such rights. In September 2004, the district court found that neither the class requested by the plaintiffs, nor the class of counter-defendants, should be certified. The Company’s appeal of the district court’s refusal to certify a class of counter-defendants was denied by the United States Court of Appeals for the Fifth Circuit. In February 2005, the district court dismissed the claims of the remaining plaintiffs. In November 2006, the Fifth Circuit affirmed the district court’s dismissal of the claims of the remaining plaintiffs.

A lawsuit was filed against the Company in Richland Parish, Louisiana, in July 2003 and removed to the United States District Court for the Western District of Louisiana, Monroe Division, in August 2003. The plaintiffs, claiming to be representatives of a class of plaintiffs, allege that they are owners of the real property which underlies or abuts the Kansas City Southern Railroad corridor in Louisiana. Under agreements with

F-36

Kansas City Southern Railroad and Illinois Central Railroad, the Company uses some fiber optic cable within the rights-of-way of Kansas City Southern Railroad and Illinois Central Railroad in Louisiana. The plaintiffs claim that the documents granting the rights-of-way to Kansas City Southern Railroad and Illinois Central Railroad do not permit the installation or operation of telecommunications facilities of third parties within the rights-of-way. The plaintiffs allege trespass, unjust enrichment, conversion, civil conspiracy, negligence, infringement and misappropriation, and seek the imposition of a constructive trust, an accounting of all compensation paid or received for use of the real property involved in the litigation, restitution, disgorgement, actual, compensatory and consequential damages, and attorneys’ fees. In July 2004, the court found that the class should not be certified. One plaintiff voluntarily dismissed his claim when discovery revealed that he had no rights in the property identified in the complaint. The only remaining named plaintiff asserted a claim based on ownership of less than one mile of property over which the Company uses fiber optic cable within the rights-of-way. This matter was dismissed in March 2006 pursuant to a settlement agreement between the remaining plaintiff and the Company.

ITC^DeltaCom’s Suit for Rights-of-Way Indemnification. In August 2001, the Company filed suit in the Superior Court of Troup County, Georgia, against Southern Telecom, Inc., Alabama Power Company, Georgia Power Company, Mississippi Power Company, Gulf Power Company and related entities from which the Company has obtained by agreement use of rights-of-way for our fiber optic telecommunications networks. The Company seeks a declaratory judgment that the defendants are legally required to use their best efforts to defend the Company against any claims that the Company does not have the right to use the rights-of-way granted to these entities and to defend, indemnify and hold the Company harmless against all such claims. The Company filed for summary judgment in December 2001, and the defendants subsequently filed a motion for summary judgment. The defendants also have filed a counterclaim requesting, among other relief, that the Company reimburse them for the cost of perfecting the applicable rights-of-way. In September 2004, the court issued an order denying the Company’s motion and the defendants’ motion for summary judgment and staying the proceeding pending a final determination of the property owner proceedings that form the basis for the Company’s claims. The Company appealed this order to the Georgia Court of Appeals, which denied the appeal on procedural grounds. The proceeding remains stayed pending developments in the various proceedings described above affecting the rights-of-way of Mississippi Power Company, Gulf Power Company and Georgia Power Company used by the Company.

13.    Employee Benefit Plans

Employees of the Company participate in the Company’s 401(k) defined contribution plan. The Company offered matching of employee contributions at a rate of 50% on the first 4% of employee contributions for the years ended December 31, 2006, 2005 and 2004. Total matching contributions made to the Company’s plan and charged to expense by the Company for the years ended December 31, 2006, 2005 and 2004, were $803,000, $915,000 and $1.2 million, respectively. No discretionary contributions were made for the years ended December 31, 2006, 2005 or 2004.

14.    Related Party Transactions

The following is a summary of certain transactions during the years ended December 31, 2006, 2005 and 2004 among the Company and its directors, executive officers, beneficial owners of more than 5% of its common stock or either series of its outstanding preferred stock, and certain entities with which the foregoing persons are affiliated or associated.

Transactions With the Welsh, Carson, Anderson & Stowe Group and the Welsh Carson Securityholders

The members from time to time of the Welsh, Carson, Anderson & Stowe Group have collectively constituted the Company’s largest common stockholder since October 29, 2002 and the largest Series B preferred

F-37

stockholder since October 6, 2003. The current members of the Welsh, Carson, Anderson & Stowe Group are Welsh, Carson, Anderson & Stowe VIII, L.P., WCAS VIII Associates, LLC, WCAS Capital Partners III, L.P., WCAS CP III Associates, L.L.C., Patrick J. Welsh, Russell L. Carson, Bruce K. Anderson, Thomas E. McInerney, Robert A. Minicucci, Anthony J. de Nicola, Paul B. Queally, Jonathan M. Rather, D. Scott Mackesy, John D. Clark, James R. Matthews and Sanjay Swani. Welsh, Carson, Anderson & Stowe is a private equity investment firm. The current members of the Welsh, Carson, Anderson & Stowe Group, together with certain former affiliates and former and current employees of Welsh, Carson, Anderson & Stowe, constitute the Welsh Carson securityholders referred to elsewhere in these notes to consolidated financial statements. Various of the Welsh Carson securityholders and members of the Welsh, Carson, Anderson & Stowe Group have served as directors of the Company since October 6, 2003.

On October 6, 2003, the Company acquired 100% of the outstanding voting stock of BTI. At the time of the acquisition, the Welsh Carson securityholders owned BTI common stock and preferred stock representing approximately 98% of the voting power of the BTI capital stock. See Note 9 for additional information concerning the interests of the Welsh Carson securityholders in the BTI acquisition and related transactions.

On November 12, 2004, the Company completed the issuance and sale to Welsh, Carson, Anderson & Stowe VIII, L.P. and its affiliates and associates who were parties to the BTI merger agreement of a total of 150,000 shares of the Series B preferred stock at a price of $100 per share and for a total cash purchase price of $15 million. The sale represented the remaining cash investment available under the BTI merger agreement.

In connection with the March 2005 restructuring, the Company obtained a $20 million subordinated secured loan from the Welsh Carson securityholders on March 29, 2005. Under that loan, no principal payments could be made until all amounts outstanding under the Company’s senior and junior secured credit facilities were paid in full. The outstanding principal amount under the subordinated loan agreement was payable in a single payment on the maturity date. Interest was payable on the loan at an annual rate of 12% in payment-in-kind interest by an increase in the principal loan amount until repayment of the senior and junior secured credit facilities and, at the Company’s option, in PIK or cash thereafter. The obligations under the subordinated loan agreement were secured by third priority liens on, and security interests in, substantially all of the assets of the Company and all of its subsidiaries. The loan was terminated on July 26, 2005 upon the Company’s issuance to the Welsh Carson securityholders of $20.8 million principal amount of third lien, senior secured notes as part of the July 2005 refinancing.

On March 29, 2005, in connection with the $20 million subordinated secured loan the Company received from the Welsh Carson securityholders, the Company issued to such lenders Series C warrants with a ten-year term to purchase 6,600,000 shares of the Company’s common stock. See Note 10 for terms of the Series C warrants.

In connection with the July 2005 refinancing, the Company issued $20.8 million in principal amount of third lien notes to the Welsh Carson securityholders in exchange for $20 million principal amount of notes plus capitalized interest evidencing the subordinated secured loan the Welsh Carson securityholders had extended in connection with the March 2005 restructuring. For the years ended December 31, 2006 and 2005, the Welsh Carson securityholders, including four of the Company’s directors, received total interest payments, including interest paid in kind, of approximately $3.8 million and $2.2 million, respectively, on their third lien notes. See Note 7 for terms of the third lien notes.

The Company paid the Welsh Carson securityholders a total of $29,000 and $276,000 for the years ended December 31, 2006 and 2005, respectively, for reimbursement of professional services incurred by these securityholders in connection with their extension of the Company’s subordinated secured loan in March 2005 and their purchase of the Company’s third lien notes in July 2005.

F-38

Transactions With Affiliates of TCP

Pursuant to their governance agreement with the Company, which they entered into on July 26, 2005 in connection with their purchase of first lien notes and third lien notes pursuant to the July 2005 refinancing, investment funds (the “TCP Funds”) affiliated with Tennenbaum Capital Partners, LLC have designated two representatives to the Company’s board of directors. For the years ended December 31, 2006 and 2005, the TCP Funds received total interest payments, including interest paid in kind, of $9.1 million and $5.0 million, respectively, on their first lien notes and total interest payments, including interest paid in kind, of $2.8 million and $1.4 million, respectively on their third lien notes. In addition, as holders of the first lien notes, the TCP Funds received $170,000 in 2006 for consenting to amendments to the first lien note agreement made in connection with the sale of $21 million principal amount of additional first lien notes.

Transactions With KNOLOGY, Inc. and Subsidiaries

The Company entered into the transactions with KNOLOGY, Inc. (“KNOLOGY”) and its subsidiaries described below. Two of the Company’s directors in 2004 and for a portion of 2005, Campbell B. Lanier, III and Donald W. Burton, each have reported beneficial ownership of more than 5% of the outstanding common stock of KNOLOGY since at least 2003. Messrs. Lanier and Burton have beneficially owned more than 5% of the outstanding shares of the Company’s Series A preferred stock since the Series A preferred stock was first issued in October 2002. Mr. Lanier has served as Chairman and Mr. Burton as a director of KNOLOGY. In addition, SCANA Corporation, which was a beneficial owner of more than 5% of the Company’s common stock and Series A preferred stock from October 2002 until December 2004, reported that it beneficially owned approximately 26% of KNOLOGY’s outstanding common stock as of April 30, 2003 and approximately 12% of KNOLOGY’s outstanding voting stock and all outstanding shares of KNOLOGY’s non-voting common stock as of March 31, 2004.

The Company has sold capacity on its fiber optic network to KNOLOGY and one of its subsidiaries, Interstate Telephone Company. The Company also has provided long distance and carrier-switched long distance service to KNOLOGY and its subsidiaries, Interstate Telephone Company and Valley Telephone Company. The Company also provides directory assistance and operator services to KNOLOGY and some of its subsidiaries. The Company recorded revenues of approximately $2.8 million for all of these services in the year ended December 31, 2006, and of approximately $1.9 million in each of the years ended December 31, 2005 and 2004. The Company recorded revenues of $164,000 from the sale of equipment to KNOLOGY for the year ended December 31, 2004.

The Company purchased feature group access and other services from KNOLOGY and its subsidiaries totaling approximately $670,000, $616,000 and $689,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

Transactions With Affiliates of J. Smith Lanier, II

J. Smith Lanier, II is the beneficial owner of more than 5% of the Series A preferred stock. Mr. Lanier also is the Chairman and a significant stockholder of J. Smith Lanier & Co., an insurance placement company.

J. Smith Lanier & Co. has provided the Company with insurance brokerage services, including the negotiation and acquisition on behalf of the Company of various insurance policies with third-party insurers. The gross premium for policies obtained by J. Smith Lanier & Co. on behalf of the Company totaled $2.1 million in the year ended December 31, 2006 and $2.7 million in each of the years ended December 31, 2005 and 2004 and included a payment of $125,000 in the year ended December 31, 2006 and $185,000 in each of the years ended December 31, 2005 and 2004 for risk management services provided by J. Smith Lanier & Co. The Company provides retail services, including local and long distance telephone services and data and Internet services, to J. Smith Lanier & Co. Revenues attributable to J. Smith Lanier & Co. for the Company’s provision of these

F-39

services totaled approximately $628,000, $651,000 and $634,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

Transactions With Affiliates of Campbell B. Lanier, III

Prior to January 1, 2007, the Company was the joint owner of an aircraft with KNOLOGY, an entity owned by Campbell B. Lanier, III, an entity affiliated with J. Smith Lanier, II, and others, holding a 1% interest in the aircraft, which the Company used for corporate purposes until February 3, 2005. The Company and the other owners of the aircraft paid third parties for air travel services related to the operation, storage and maintenance of the aircraft. The Company paid its proportionate share of the fees and expenses associated with these air travel services based on its use of the aircraft. ITC Holding Company, LLC, which is a single-member limited liability company managed and wholly owned by Mr. Lanier, provided the Company with the foregoing air travel services in the year ended December 31, 2004 and for the portion of the year ended December 31, 2005 during which the Company used the aircraft. The Company paid ITC Holding Company, LLC a total of approximately $53,000 and $559,000 for these services for the years ended December 31, 2005 and 2004, respectively.

The Company paid a total of approximately $19,000, $17,000 and $38,000 for the years ended December 31, 2006, 2005 and 2004, respectively, to ITC Holding Company, LLC for the use of business conference facilities. The Company recorded revenues of approximately $2,000, $52,000 and $38,000 for the years ended December 31, 2006, 2005 and 2004, respectively, for telecommunications services that it furnished to ITC Holding Company, LLC.

For the years ended December 31, 2005 and 2004, the Company recorded revenues of $306,000 and $298,000, respectively, for telecommunications services that it furnished to ITC Financial Services, LLC. The Company furnished telecommunications services to PRE Solutions, Inc. and recorded revenues of $274,000 for the five months ended May 2006 and $633,000 and $429,000 for the years ended December 31, 2005 and 2004, respectively. Mr. Lanier was an officer and significant stockholder of each of these entities. Mr. Lanier disposed of his interest in PRE Solutions, Inc. in May 2006.

The Company sold its former headquarters building located in West Point, Georgia to ITC Holding Company, LLC in May 2006 for a sales price of $1.5 million and recognized a net gain on sale of the assets of $518,000, which is reflected as a component of “Other (expense) income” in the accompanying consolidated statements of operations for the year ended December 31, 2006.

Transactions With SCANA Corporation and Affiliates

The Company entered into the transactions with SCANA Corporation and its subsidiaries described below. William B. Timmerman, who was a director of the Company in 2003 and 2004 until his resignation on October 25, 2004, served as Chairman, Chief Executive Officer and President of SCANA Corporation in 2004. SCANA Corporation was a beneficial owner of more than 5% of the common stock and Series A preferred stock from October 2002 until December 2004.

The Company provides retail services, including local and long distance telephone services, data services and Internet access, to SCANA Corporation and some of its subsidiaries. The Company billed those entities for such services a total of approximately $944,000 for the year ended December 31, 2004.

The Company leased office space and space for telecommunications switching equipment at various locations in Columbia, South Carolina from a subsidiary of SCANA Corporation. Under the lease agreements, the Company paid approximately $273,000 for the year ended December 31, 2004.

Other Transactions

CT Communications, Inc., which is the beneficial owner of more than 5% of the Series A preferred stock from December 2004, purchases operator services from the Company. The Company billed CT Communications,

F-40

Inc. or its subsidiary $598,000 $689,000 and $810,000 for these services for the years ended December 31, 2006, 2005 and 2004, respectively.

15.    Quarterly Financial Data (Unaudited)

The following table has been prepared from the financial records of the Company, without audit, and reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented (in thousands, except per share amounts). The sum of the per share amounts may not equal the annual amounts because of the changes in the weighted average number of shares outstanding during the year.

2006	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Operating revenues	$	119,938		$	123,811		$	124,118		$	119,773
Operating income (loss)		(1,778	)		1,293			1,937			(795	)
Net loss applicable to common stockholders		(16,674	)		(13,527	)		(13,788	)		(16,915	)
Basic and diluted net loss per common share		(0.89	)		(0.72	)		(0.74	)		(0.90	)
2005	First Quarter			Second Quarter			Third Quarter			Fourth Quarter (1)
Operating revenues	$	137,297		$	134,118		$	128,489		$	120,497
Operating income (loss)		1,658			6,670			996			(19,237	)
Net loss applicable to common stockholders		(5,792	)		(8,114	)		(10,086	)		(33,814	)
Basic and diluted net loss per common share		(0.32	)		(0.44	)		(0.54	)		(1.81	)

(1) In the fourth quarter of 2005, ITC^DeltaCom recorded asset impairment losses consisting of a write-down of impaired property, plant and equipment of $7.2 million and a write-off of $5.6 million of its trade name, an indefinite-life intangible asset.

F-41

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of ITC^DeltaCom, Inc.:

The audits referred to in our report dated March 22, 2007 relating to the consolidated financial statements of ITC^DeltaCom, Inc., which is contained in Item 8 of this Form 10-K, included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits.

In our opinion such financial statement schedule presents fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP

Atlanta, Georgia

March 22, 2007

S-1

ITC^DELTACOM, INC. AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFICATION ACCOUNTS

(In thousands)

Description:	Balance at Beginning of Period	Additions		Deduction		Balance at End of Period
		Charged to Income	Charged to Other Accounts
Provision for uncollectible accounts
Year Ended December 31, 2004	7,070	8,918	—	6,657	(1)	9,331
Year Ended December 31, 2005	9,331	8,530	—	8,624	(1)	9,237
Year Ended December 31, 2006	9,237	3,819	—	8,284	(1)	4,772
Valuation allowance for deferred tax assets
Year Ended December 31, 2004	167,198	96,721	—	—		263,919
Year Ended December 31, 2005	263,919	24,090	—	—		288,009
Year Ended December 31, 2006	288,009	10,586	—	—		298,595

(1) Represents the write-off of accounts considered to be uncollectible, less recovery of amounts previously written off.

S-2

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 29th day of March, 2007.

ITC^DELTACOM, INC.
By:	/s/    RANDALL E. CURRAN
	Randall E. Curran Chief Executive Officer (Duly Authorized Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 29th day of March, 2007.

Signature	Title
/s/    RANDALL E. CURRAN         Randall E. Curran	Chief Executive Officer and Director (Principal Executive Officer)
/s/    RICHARD E. FISH, JR.         Richard E. Fish, Jr.	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/    JOHN ALMEIDA JR.         John Almeida Jr.	Director
/s/    JOHN J. DELUCCA         John J. DeLucca	Director
/s/    PHILIP M. TSENG         Philip M. Tseng	Director
/s/    CLYDE A. HEINTZELMAN         Clyde A. Heintzelman	Director
/s/    MICHAEL E. LEITNER         Michael L. Leitner	Director
/s/    R. GERALD MCCARLEY         R. Gerald McCarley	Director
/s/    SANJAY SWANI         Sanjay Swani	Director
/s/    THOMAS E. MCINERNEY         Thomas E. McInerney	Director

EXHIBIT INDEX

Exhibit Number	Exhibit Description
2.1	ITC^DeltaCom, Inc. Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, As Further Revised, dated October 15, 2002. Filed as part of Exhibit 1 to Registration Statement on Form 8-A, dated October 29, 2002, of ITC^DeltaCom, Inc. (the “Form 8-A”) and incorporated herein by reference.
3.1	Restated Certificate of Incorporation of ITC^DeltaCom, Inc. (including the Second Amended Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series A Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof, the Amended Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series B Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof and the Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series C Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof), as amended by Certificate of Amendment to Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series C Convertible Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof. Filed as Exhibit 3.1 to Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (the “2005 Form 10-K”) and incorporated herein by reference.
3.2	Amended and Restated Bylaws of ITC^DeltaCom, Inc. Filed as Exhibit 3.2 to Current Report on Form 8-K of ITC^DeltaCom, Inc., filed on August 1, 2005 (the “August 1, 2005 Form 8-K”), and incorporated herein by reference.
4.1	Warrant Agreement, dated as of October 29, 2002 and amended and restated as of October 6, 2003, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.4 to Current Report of ITC^DeltaCom, Inc., filed on October 21, 2003 (the “October 21, 2003 Form 8-K”), and incorporated herein by reference.
4.2.1	Warrant Agreement, dated as of October 6, 2003, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.3 to the October 21, 2003 Form 8-K and incorporated herein by reference.
4.2.2	Amendment No. 1 to Warrant Agreement, dated as of March 29, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 10.10 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (the “March 31, 2005 Form 10-Q”) and incorporated herein by reference.
4.2.3	Amendment No. 2 to Warrant Agreement, dated as of July 26, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the “September 30, 2005 Form 10-Q”) and incorporated herein by reference.
4.3.1	Warrant Agreement, dated as of March 29, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 10.9 to the March 31, 2005 Form 10-Q and incorporated herein by reference.
4.3.2	Amendment No. 1 to Warrant Agreement, dated as of July 26, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.2 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
4.4.1	Warrant Agreement, dated as of July 26, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.2 to the August 1, 2005 Form 8-K and incorporated herein by reference.

Exhibit Number	Exhibit Description
4.4.2	Amendment No. 1 to Warrant Agreement, dated as of December 21, 2005, between ITC^DeltaCom, Inc. and Mellon Investor Services LLC, as Warrant Agent. Filed as Exhibit 4.4.2 to the 2005 Form 10-K and incorporated herein by reference.
4.5	Specimen representing the Common Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4 to the Form 8-A and incorporated herein by reference.
4.6	Specimen representing the 8% Series A Convertible Redeemable Preferred Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4.2 to the Annual Report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 2002 and incorporated herein by reference.
4.7	Specimen representing the 8% Series B Convertible Redeemable Preferred Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4.7 to Registration Statement on Form S-3 of ITC^DeltaCom, Inc., as amended (File No. 333-101537) (the “2004 Form S-3”), and incorporated herein by reference.
4.8	Specimen representing the 8% Series C Convertible Redeemable Preferred Stock, par value $0.01 per share, of ITC^DeltaCom, Inc. Filed as Exhibit 4.8 to the 2005 Form 10-K and incorporated herein by reference.
4.9	Form of Series A Common Stock Purchase Warrant. Filed as Exhibit 4.8 to the 2004 Form S-3 and incorporated herein by reference.
4.10	Form of Series B Common Stock Purchase Warrant. Filed as Exhibit 4.9 to the 2004 Form S-3 and incorporated herein by reference.
4.11	Form of Series C Common Stock Purchase Warrant. Filed as Exhibit 4.11 to the 2005 Form 10-K and incorporated herein by reference.
4.12	Form of Series D Warrant. Filed as Exhibit 4.1 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.1.1	Revised and Restated Fiber Optic Facilities and Services Agreement, dated as of June 9, 1995, among Southern Development and Investment Group, Inc., on behalf of itself and as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc., and MPX Systems, Inc., which was assigned in part by MPX Systems, Inc. to Gulf States FiberNet pursuant to an Assignment dated as of July 25, 1995. Filed as Exhibit 10.15 to Registration Statement on Form S-4 of ITC^DeltaCom, Inc., as amended (File No. 333-31361) (the “1997 Form S-4”), and incorporated herein by reference.
10.1.2	Release, Waiver, and Assumption Agreement, dated as of December 31, 1997, between Southern Development Investment Group, Inc., on behalf of itself and as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc., and Interstate FiberNet, Inc. and Gulf States Transmission Systems, Inc. Filed as Exhibit 10.15.1 to Annual Report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 1997 and incorporated herein by reference.
10.1.3	Amendment to the Revised and Restated Fiber Optic Facilities and Services Agreement, dated as of January 1, 1998, by and among Southern Company Energy Solutions, Inc. (f/k/a Southern Development Group, Inc.), on behalf of itself and as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc., and Interstate FiberNet, Inc. Filed as Exhibit 10.15.2 to Quarterly Report on Form 10-Q of ITC^DeltaCom, Inc. for the quarter ended September 30, 1998 and incorporated herein by reference.

Exhibit Number	Exhibit Description
10.1.4	First Amendment to Revised and Restated Fiber Optic Facilities and Services Agreement, dated as of July 24, 1995, between Southern Development and Investment Group, Inc., on behalf of itself and as agent for others, and MPX Systems, Inc. Filed as Exhibit 10.16 to the 1997 Form S-4 and incorporated herein by reference.
10.1.5	Partial Assignment and Assumption of Revised and Restated Fiber Optic Facilities and Services Agreement, dated July 25, 1995, between MPX Systems, Inc. and Gulf States FiberNet. Filed as Exhibit 10.17 to the 1997 Form S-4 and incorporated herein by reference.
†10.1.6	Amendment to Revised and Restated Fiber Optic Facilities and Services Agreement, dated July 15, 1997, by and among Southern Development and Investment Group, Inc., on behalf of itself and its agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Electric Generating Company and Southern Company Services, Inc. (collectively “SES”), ITC Transmission Systems, Inc. (as managing partner of Interstate FiberNet, Inc.) and Gulf States Transmission Systems, Inc. Filed as Exhibit 10.17.1 to the 1997 Form S-4 and incorporated herein by reference.
10.1.7	Consent for Assignment of Interest, dated February 20, 1997, among SCANA Communications, Inc., Gulf States FiberNet, Gulf States Transmission Systems, Inc. and Southern Development and Investment Groups, Inc. Filed as Exhibit 10.18 to the 1997 Form S-4 and incorporated herein by reference.
10.1.8	Second Partial Assignment and Assumption of Revised and Restated Fiber Optic Facilities and Services Agreement, dated March 27, 1997, between SCANA Communications, Inc. and ITC Holding Company, Inc. Filed as Exhibit 10.19 to the 1997 Form S-4 and incorporated herein by reference.
†10.1.9	Amendment, effective as of August 1, 2000, between Southern Telecom, Inc., on behalf of itself and as agent for the other parties specified therein, and Interstate FiberNet, Inc., to the Revised and Restated Fiber Optics Facilities and Services Agreement made as of June 9, 1995. Filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and incorporated herein by reference.
10.2	Interconnection Agreement, dated February 9, 2001, by and between BellSouth Telecommunications, Inc. and ITC^DeltaCom Communications, Inc. d/b/a/ ITC^DeltaCom (Florida). Filed as Exhibit 10.48 to the Annual Report on Form 10-K of ITC^DeltaCom for the year ended December 31, 2000 (the “2000 Form 10-K”) and incorporated herein by reference.
*10.3	Interconnection Agreement, dated as of November 20, 2006, by and between BellSouth Telecommunications, Inc. and DeltaCom, Inc. (North Carolina).
10.4	Interconnection Agreement, effective as of July 1, 1999, by and between ITC^DeltaCom Communications, Inc. and BellSouth Telecommunications, Inc. (Alabama). Filed as Exhibit 10.50 to the 2000 Form 10-K and incorporated herein by reference.
10.5	Interconnection Agreement, effective as of August 9, 2004, by and between BellSouth Telecommunications, Inc. and ITC^DeltaCom Communications, Inc. d/b/a ITC^DeltaCom d/b/a Grapevine (Georgia). Filed as Exhibit 10.11 to Quarterly Report on Form 10-Q of ITC^DeltaCom, Inc. for the quarter ended September 30, 2004 and incorporated herein by reference.
†10.6.1	IRU Agreement, dated October 31, 1997, between QWEST Communications Corporation and Business Telecom, Inc. Filed as Exhibit 10.9 to Annual Report on Form 10-K of BTI Telecom Corp. for the year ended December 31, 1997 (File No. 0-26771) and incorporated herein by reference.

Exhibit Number	Exhibit Description
10.6.2	First Amendment to IRU Agreement, entered into on April 19, 1999, between Qwest Communications Corporation and Business Telecom, Inc. Filed as Exhibit 10.12 to Registration Statement on Form S-1 of BTI Telecom Corp. (File No. 333-83101) and incorporated herein by reference.
†10.6.3	Second Amendment to IRU Agreement, dated as of August 25, 2003, between QWEST Communications Corporation and Business Telecom, Inc. Filed as Exhibit 10.7.3 to the Annual Report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 2003 and incorporated herein by reference.
10.7.1	Indenture, dated as of September 22, 1997, among BTI Telecom Corp., Business Telecom, Inc. and First Trust of New York, National Association, as Trustee, relating to the 101/2% Senior Notes due 2007 of BTI Telecom Corp. Filed as Exhibit 4.1 to Registration Statement on Form S-4 (File No. 333-41723) of BTI Telecom Corp. and incorporated herein by reference.
10.7.2	First Supplemental Indenture, dated as of October 26, 2001, between BTI Telecom Corp. and U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association), as Trustee, to the Indenture dated as of September 22, 1997. Filed as Exhibit 99.1 to Current Report on Form 8-K of BTI Telecom Corp. (File No. 0-26771), filed on November 8, 2001, and incorporated herein by reference.
10.8	Asset Purchase Agreement, dated as of August 8, 2005, by and among Quality Investment Properties Atlanta Tech Centre, L.L.C., e^Quality, L.L.C. and Quality Investment Properties—Williams Centre, L.L.C., as Purchasers, and Interstate FiberNet, Inc. and ITC^DeltaCom Communications, Inc., as Sellers. Filed as Exhibit 10.4 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.9.1	Note Purchase Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, the Note Purchasers named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent. Filed as Exhibit 10.1 to the August 1, 2005 Form 8-K and incorporated herein by reference.
10.9.2	Security Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., Interstate FiberNet, Inc., the Subsidiary Guarantors named therein, and TCP Agency Services, LLC, as Collateral Agent. Filed as Exhibit 10.9.2 to the 2005 Form 10-K and incorporated herein by reference.
*10.9.3	Amendment No. 1 to Note Purchase Agreement, dated as of October 27, 2006, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, the New Note Purchasers named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent.
10.10.1	Second Amended and Restated Credit Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., as Parent, Interstate FiberNet, Inc., as Borrower, the Subsidiary Guarantors named therein, the Lenders named therein, and General Electric Capital Corporation, as Administrative Agent and Collateral Agent. Filed as Exhibit 10.1 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.10.2	Second Amended and Restated Security Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., Interstate FiberNet, Inc., the Subsidiary Guarantors named therein, and General Electric Capital Corporation, as Collateral Agent. Filed as Exhibit 10.10.2 to the 2005 Form 10-K and incorporated herein by reference.
10.11.1	Securities Purchase Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, the Purchasers named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent. Filed as Exhibit 10.2 to the August 1, 2005 Form 8-K and incorporated herein by reference.

Exhibit Number	Exhibit Description
10.11.2	Amended and Restated Security Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., Interstate FiberNet, Inc., the Subsidiary Guarantors named therein, and TCP Agency Services, LLC, as collateral agent. Filed as Exhibit 10.11.2 to the 2005 Form 10-K and incorporated herein by reference.
*10.11.3	Amendment No. 1 to Securities Purchase Agreement, dated as of October 27, 2006, among ITC^DeltaCom, Inc, as Parent, Interstate FiberNet, Inc., as Issuer, the Subsidiary Guarantors named therein, Tennenbaum Capital Partners, LLC, as Agent, and TCP Agency Services, LLC, as Collateral Agent.
10.12	Amended and Restated Governance Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the Securityholders of ITC^DeltaCom, Inc. listed on the signature pages thereof. Filed as Exhibit 10.5 to the August 1, 2005 Form 8-K and incorporated herein by reference.
10.13.1	Registration Rights Agreement, dated as of October 29, 2002 and amended and restated as of October 6, 2003, among ITC^DeltaCom, Inc. and the Holders set forth on the signature pages thereof. Filed as Exhibit 10.3 to the October 21, 2003 Form 8-K and incorporated herein by reference.
10.13.2	Amendment No. 2 to Registration Rights Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the Series A Preferred Stockholders listed on the signature pages thereof. Filed as Exhibit 10.3 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.14.1	Registration Rights Agreement, dated as of October 6, 2003, among ITC^DeltaCom, Inc. and the WCAS Securityholders set forth on the signature pages thereof. Filed as Exhibit 10.2 to the October 21, 2003 Form 8-K and incorporated herein by reference.
10.14.2	Amendment No. 2 to Registration Rights Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the WCAS Securityholders listed on the signature pages thereof. Filed as Exhibit 10.2 to the September 30, 2005 Form 10-Q and incorporated herein by reference.
10.15	Registration Rights Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc. and the TCP Securityholders listed on the signature pages thereof. Filed as Exhibit 10.6 to the August 1, 2005 Form 8-K and incorporated herein by reference.
*10.16.1	ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan.
10.16.2	Form of ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan Nonqualified Stock Option Agreement. Filed as Exhibit 4.2 to the December 2003 Form S-8 and incorporated herein by reference.
10.16.3	Form of ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan Incentive Stock Option Agreement. Filed as Exhibit 4.3 to the December 2003 Form S-8 and incorporated herein by reference.
10.16.4	Form of ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan Stock Unit Agreement. Filed as Exhibit 4.4 to the December 2003 Form S-8 and incorporated herein by reference.
10.17.1	Employment Agreement, dated as of February 3, 2005, by and between ITC^DeltaCom, Inc. and Randall E. Curran. Filed as Exhibit 10.2 to the March 31, 2005 Form 10-Q and incorporated herein by reference.
10.17.2	Amendment No. 1 to Employment Agreement, dated as of December 20, 2005, by and between ITC^DeltaCom, Inc. and Randall E. Curran. Filed as Exhibit 10.17.2 to the 2005 Form 10-K and incorporated herein by reference.
10.18.1	Employment Agreement, dated as of February 21, 2005, by and between ITC^DeltaCom, Inc. and Richard E. Fish, Jr. Filed as Exhibit 10.13 to the March 31, 2005 From 10-Q and incorporated herein by reference.

Exhibit Number	Exhibit Description
10.18.2	Amendment No. 1 to Employment Agreement, dated as of December 20, 2005, by and between ITC^DeltaCom, Inc. and Richard E. Fish, Jr. Filed as Exhibit 10.18.2 to the 2005 Form 10-K and incorporated herein by reference.
10.19.1	Employment Agreement, dated as of February 28, 2005, by and between ITC^DeltaCom, Inc. and James P. O’Brien. Filed as Exhibit 10.14 to the March 31, 2005 Form 10-Q and incorporated herein by reference.
10.19.2	Amendment No. 1 to Employment Agreement, dated as of December 20, 2005, by and between ITC^DeltaCom, Inc. and James P. O’Brien. Filed as Exhibit 10.19.2 to the 2005 Form 10-K and incorporated herein by reference.
10.20	Form of Deferred Compensation Agreement between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.20 to the 2005 Form 10-K and incorporated herein by reference.
10.21.1	ITC^DeltaCom, Inc. Executive Stock Incentive Plan, as amended and restated as of December 20, 2005. Filed as Exhibit 10.21.1 to the 2005 Form 10-K and incorporated herein by reference.
10.21.2	Form of Common Stock Unit Agreement under ITC^DeltaCom, Inc. Executive Stock Incentive Plan between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.21.2 to the 2005 Form 10-K and incorporated herein by reference.
10.21.3	Form of Series A Preferred Stock Unit Agreement under ITC^DeltaCom, Inc. Executive Stock Incentive Plan between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.21.3 to the 2005 Form 10-K and incorporated herein by reference.
10.21.4	Form of Series B Preferred Stock Unit Agreement under ITC^DeltaCom, Inc. Executive Stock Incentive Plan between ITC^DeltaCom, Inc. and each of Randall E. Curran, Richard E. Fish, Jr., and James P. O’Brien. Filed as Exhibit 10.21.4 to the 2005 Form 10-K and incorporated herein by reference.
10.22	Executive Employment and Retention Agreement, dated as of August 13, 2004, between ITC^DeltaCom, Inc. and J. Thomas Mullis. Filed as Exhibit 10.10.1 to Quarterly Report on Form 10-Q of ITC^DeltaCom, Inc. for the quarter ended September 30, 2004 and incorporated herein by reference.
*10.23	Description of Non-Employee Director Compensation.
*10.24	Description of Certain Management Compensatory Plans and Arrangements.
10.25	Form of Indemnity Agreement between ITC^DeltaCom, Inc. and certain of its Directors and Officers. Filed as Exhibit 10.93 to Registration Statement on Form S-1 of ITC^DeltaCom, Inc., as amended (File No. 333-36683), and incorporated herein by reference.
*21	Subsidiaries of ITC^DeltaCom, Inc.
*23	Consent of BDO Seidman, LLP.
*31.1	Certification of Chief Executive Officer of ITC^DeltaCom, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
*31.2	Certification of Executive Vice President and Chief Financial Officer of ITC^DeltaCom, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.
*32	Certifications pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. 1350.

* Filed herewith.

† Confidential treatment has been granted for this exhibit. The copy filed as an exhibit omits the information subject to the confidential treatment request.

EX-10.3

Exhibit 10.3

Interconnection Agreement

Between

BellSouth Telecommunications, Inc.

and

DeltaCom, Inc.

TABLE OF CONTENTS

General Terms and Conditions
	Definitions
1.	CLEC Certification
2.	Term of the Agreement
3.	Nondiscriminatory Access
4.	Court Ordered Requests for Call Detail Records and Other Subscriber Information
5.	Liability and Indemnification
6.	Intellectual Property Rights and Indemnification
7.	Proprietary and Confidential Information
8.	Resolution of Disputes
9.	Taxes
10.	Force Majeure
11.	Adoption of Agreements
12.	Modification of Agreement
13.	Legal Rights
14.	Indivisibility
15.	Severability
16.	Non-Waivers
17.	Governing Law
18.	Assignments and Transfers
19.	Notices
20.	Rule of Construction
21.	Headings of No Force or Effect
22.	Multiple Counterparts
23.	Filing of Agreement
24.	Compliance with Law
25.	Necessary Approvals
26.	Good Faith Performance
27.	Rates
28.	Rate True-Up
29.	Survival
30.	Entire Agreement

TABLE OF CONTENTS (cont’d)

Attachment 1	–	Resale
Attachment 2	–	Network Elements and Other Services
Attachment 3	–	Network Interconnection
Attachment 4	–	Collocation
Attachment 5	–	Access to Numbers and Number Portability
Attachment 6	–	Pre-Ordering, Ordering, Provisioning and Maintenance and Repair
Attachment 7	–	Billing
Attachment 8	–	Rights-of-Way, Conduits and Pole Attachments
Attachment 9	–	Performance Measurements
Attachment 10	–	BellSouth Disaster Recovery Plan
Attachment 11	–	Bona Fide Request and New Business Request Process

General Terms and Conditions

Page 1

AGREEMENT

THIS AGREEMENT is made by and between BellSouth Telecommunications, Inc., (“BellSouth”), a Georgia corporation, and DeltaCom, Inc. (“DeltaCom”), an Alabama corporation, and shall be deemed effective on the Effective Date, as defined herein. This agreement may refer to either BellSouth or DeltaCom or both as a “Party” or “Parties.”

W I T N E SS E T H

WHEREAS, BellSouth is an incumbent local exchange telecommunications company authorized to provide telecommunications services in the states of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee; and

WHEREAS, DeltaCom is a competitive local exchange telecommunications company (“CLEC”) authorized to provide telecommunications services in the state of North Carolina; and

WHEREAS, the Parties wish to interconnect their facilities, purchase unbundled elements and/or resale services, and exchange traffic pursuant to Sections 251 and 252 of the Telecommunications Act of 1996 (“the Act”).

NOW THEREFORE, in consideration of the mutual agreements contained herein, BellSouth and DeltaCom agree as follows:

Definitions

Access Service Request or “ASR” means an industry standard form used by the Parties to add, establish, change or disconnect trunks for the purposes of interconnection.

Act means the Communications Act of 1934, 47 U.S.C. 151 et seq., as amended, including the Telecommunications Act of 1996, and as interpreted from time to time in the duly authorized rules and regulations of the FCC or the Commission/Board.

Advanced Intelligent Network or “AIN” is Telecommunications network architecture in which call processing, call routing and network management are provided by means of centralized databases.

Affiliate is an entity that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, another entity. For purposes of this paragraph, the term “own” or “control” means to own an equity interest (or equivalent thereof) of more than 10 percent.

American National Standards Institute or “ANSI” is a standards setting, non-government organization, which develops and publishes standards for “voluntary” use in the United States.

General Terms and Conditions

Page 2

Automatic Number Identification or “ANI” is a telephone number associated with the access line from which a call originates.

Calling Party Number or “CPN” is a Common Channel Signaling parameter which refers to the number transmitted through the network identifying the calling party.

Carrier Identification Code or “CIC” means a three or four digit number assigned to an IXC that identifies that carrier's traffic.

Centralized Message Distribution System is a national system that Local Exchange Carriers use to exchange Exchange Message Interface (EMI) formatted data among host companies.

Commission is defined as the appropriate regulatory agency in each of BellSouth’s nine-state region, Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee.

Common Channel Signaling or “CCS” means a method of exchanging call set-up and network control data over a digital signaling network fully separate from the Public Switched Network that carriers the actual call.

Competitive Local Exchange Carrier (CLEC) means a telephone company certificated or otherwise legally authorized to provide local exchange service within BellSouth's franchised area.

“Customer Local Area Signaling Services” or “CLASS” is a set of call management service features consisting of number translation such as call forwarding and caller identification, available within a the Local Access and Transport Area (“LATA”).

Digital Service - Level 0 or “DS-0” means the 64 Kbps zero-level signal in the time division multiplex hierarchy.

Digital Service - Level 1 or “DS-1” means the 1.544 Mbps in the time division multiplex hierarchy. In the time-division multiplexing hierarchy of the telephone network, DS1 is the initial level of multiplexing.

Digital Service - Level 3 or “DS-3” means the 44.736 Mbps in the time division multiplex hierarchy. In the time-division multiplexing hierarchy of the telephone network, DS3 is the initial level of multiplexing.

Effective Date is defined as the date that the Agreement is effective for purposes of rates, terms and conditions and shall be ten (10) days after the date of the last signature executing the Agreement. Future amendments including rate changes or new rates will also be effective ten (10) days after the date of the last signature executing the amendment. Future amendments with no rate changes or new rates shall become effective on the date of the last signature executing the Amendment.

General Terms and Conditions

Page 3

The Parties agree, within ten (10) days from execution of the Agreement, any rate errors identified by the Parties that are contained in the rate sheets shall be corrected by an amendment. This amendment will be effective ten (10) days after the date of the last signature executing the amendment.

End User means the ultimate user of the Telecommunications Service.

Exchange Message Interface is the nationally administered standard format for the exchange of data among the Exchange Carriers within the telecommunications industry.

Exchange Access means the offering by a LEC of services or facilities to an IXC for the purpose of the origination or termination of telephone toll services.

FCC means the Federal Communication Commission.

Feature Group A or “FGA” means FGA interexchange access as defined in BellSouth's FCC Tariff No. 1.

Feature Group B or “FGB” means FGB interexchange access as defined in BellSouth's FCC Tariff No. 1.

Feature Group D or “FGD” means FGD interexchange access as defined in

BellSouth's FCC Tariff No. 1.

General Terms and Conditions means this document including all of the terms, provisions and conditions set forth herein.

Interconnection is the linking of the BellSouth and DeltaCom networks for the mutual exchange of traffic as described in Attachment 3 of this Agreement.

Point of Interconnection or “POI” is as described in Attachment 3 of this Agreement.

Interexchange Carrier or “IXC” means a provider of interexchange telecommunications services.

Local Exchange Carrier or “LEC” is as defined in the Act.

Local Exchange Routing Guide or “LERG” means a Telcordia product that is sold to and used by LECs and IXCs to identify NPA-NXX routing and homing information as well as Network Element and equipment designations.

Local Interconnection is defined as 1) the delivery of local traffic to be terminated on each Party’s local network so that end users of either Party have the ability to reach end users of the other Party without the use of any access code or substantial delay in the processing of the call; 2) the LEC unbundled network features, functions, and capabilities set forth in this Agreement; and 3) Service Provider Number Portability sometimes referred to as temporary telephone number portability to be implemented pursuant to the terms of this Agreement.

General Terms and Conditions

Page 4

Local Traffic is as defined in Attachment 3 of this Agreement.

Local Access and Transport Area or “LATA” means one of the contiguous geographic areas established pursuant to the AT&T Consent Decree to define the permitted operating regions of the RBOCs prior to the enactment of the Telecommunications Act of 1996.

Multiple Exchange Carrier Access Billing or (“MECAB”) means the document prepared by the Billing Committee of the Ordering and Billing Forum (“OBF”), which functions under the auspices of the Carrier Liaison Committee of the Alliance for Telecommunications Industry Solutions (“ATIS”) and by Bellcore as Special Report SR-BDS-000983, Containing the recommended guidelines for the billing of Exchange Service access provided by two or more LECs and/or CLECs or by one LEC in two or more states within a single LATA.

Network Element defined to mean a facility or equipment used in the provision of a telecommunications service. Such term may include, but is not limited to, features, functions, and capabilities that are provided by means of such facility or equipment, including but not limited to, subscriber numbers, databases, signaling systems, and information sufficient for billing and collection or used in the transmission, routing, or other provision of a telecommunications service.

Numbering Plan Area or “NPA” is also sometimes referred to as an area code. This is the three-digit indicator, which is defined by the “A”, “B”, and “C” digits of each “digit” telephone number within the North American Numbering Plan (“NANP”). Each NPA contains 800 Possible NXX Codes. At present, there are two general categories of NPA, “Geographic NPAs” and “Non-Geographic NPAS”. A “Geographic NPA” is associated with a defined geographic area, and all telephone numbers bearing such NPA are associated with services provided within that Geographic area. A “Non-Geographic NPA”, also known as a “Service Access Code” (SAC Code) is typically associated with a specialized telecommunications service which may be provided across multiple geographic NPA areas; 500, 800, 9100, 700, and 888 are examples of Non-Geographic NPAS.

NXX”, “NXX Code, “Central Office Code” or “CO Code” is the three-digit switch entity indicator which is defined by the “D”, “E”, and “F” digits of a 10-digit telephone number within the North American Numbering Plan.

Percent Of Interstate Usage of “PIU” is defined as a factor to be applied to terminating access services minutes of use to obtain those minutes that should be rated as interstate access services minutes of use. The numerator includes all interstate “non-intermediary” minutes of use, including interstate minutes of use that are forwarded due to service provider number portability less any interstate minutes of use for Terminating Party Pays services, such as 800 Services. The

General Terms and Conditions

Page 5

denominator includes all “non-intermediary”, local, interstate, intrastate, toll and access minutes of use adjusted for service provider number portability less all minutes attributable to terminating Party pays services

Percent Local Usage or “PLU” is defined as a factor to be applied to intrastate terminating minutes of use. The numerator shall include all “non-intermediary” local minutes of use adjusted for those minutes of use that only apply local due to Service Provider Number Portability. The denominator is the total intrastate minutes of use including local, intrastate toll, and access, adjusted for Service Provider Number Portability less intrastate terminating Party pays minutes of use.

Rate Center identifies the specific geographic point within an Exchange area that is associated with one or more particular NPA-NXX codes which have been assigned to a LEC (or CLEC) for the provision of Telephone Exchange Services. The Rate Center vertical and horizontal coordinates are used in the toll message rating process to measure distances between Rate Centers.

Revenue Accounting Office (“RAO”) Status Company is a local exchange company/alternate local exchange company that has been assigned a unique RAO code. Message data exchanged among RAO status companies is grouped (i.e. packed) according to From/To/Bill RAO combinations.

Telecommunications means the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.

Telecommunications Service means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.

Telecommunications Act of 1996 (“Act”) means Public Law 104-104 of the United States Congress effective February 8, 1996. The Act amended the Communications Act of 1934 (47 U.S.C. Section 1 et. seq.).

Transit Traffic Service is as described in Attachment 3 of this Agreement.

Wire Center denotes a building or space within a building, which serves as an aggregation point on a given carrier's network, where transmission facilities and circuits are connected and/or switched. Wire Center can also denote a building in which one or more central offices, used for the provision of telecommunications services are located.

1. CLEC Certification

1.1 DeltaCom has provided BellSouth in writing the certificate number, company number or docket number, for all states covered by this Agreement. .

General Terms and Conditions

Page 6

1.2 Based upon the certification numbers being provided to BellSouth, BellSouth will file this Agreement with the appropriate commission for approval.

1.3 Except as provided in this Agreement, neither Party shall discontinue or refuse to provide any service provided or required hereunder.

1.4 For products and services purchased pursuant to this Agreement, in the case of a conflict between a provision of this Agreement and a tariff filed by either Party, the conflict shall be resolved in favor of this Agreement.

2. Term of the Agreement

2.1 The term of this Agreement shall be three and one half (3 1/2) years, beginning on the Effective Date and shall apply to the BellSouth territory in the state of North Carolina. Notwithstanding any prior agreement of the Parties, the rates, terms and conditions of this Agreement shall not be applied retroactively prior to the Effective Date.

2.2 The Parties agree that by no earlier than two hundred seventy (270) days and no later than one hundred and eighty (180) days prior to the expiration of this Agreement, they shall commence negotiations for a new agreement to be effective beginning on the expiration date of this Agreement (“Subsequent Agreement”).

2.3 If within one hundred and thirty-five days (135) days of commencing the negotiation referred to in Section 2.2 above, the Parties are unable to negotiate new terms, conditions and prices for a Subsequent Agreement, either Party may petition the Commission to establish appropriate terms, conditions and prices for the Subsequent Agreement pursuant to 47 §U.S.C.252.

2.3.1 Notwithstanding the foregoing and except as set forth in Section 2.4 below, in the event that, as of the date of the expiration of this Agreement and conversion of this Agreement to a month-to-month term, the Parties have not entered into a Subsequent Agreement and no arbitration proceeding has been filed in accordance with Section 252 of the Act, then either Party may terminate this Agreement upon sixty (60) days notice to the other Party. In the event that BellSouth terminates this Agreement as provided above, BellSouth shall continue to offer services to DeltaCom pursuant to BellSouth's then current standard interconnection agreement or DeltaCom may exercise its rights under Section 252(i) of the Act. In the event that BellSouth's standard interconnection agreement becomes effective as between the Parties or DeltaCom adopts another agreement, the Parties may continue to negotiate a Subsequent Agreement, and the terms of such Subsequent Agreement shall be effective as of the effective date stated in the Subsequent Agreement.

2.4 If an arbitration proceeding has been filed in accordance with Section 252 of the Act and if the Commission does not issue its order prior to the expiration of this Agreement, this Agreement shall be deemed extended on a month-to-month basis

General Terms and Conditions

Page 7

until the Subsequent Agreement becomes effective. The terms of such Subsequent Agreement shall be effective as of the effective date stated in such Subsequent Agreement and shall not be applied retroactively to the expiration date of this Agreement unless the Parties agree otherwise. Neither Party shall refuse to provide services to the other Party during the negotiation of the Subsequent Agreement or the transition from this Agreement to the Subsequent Agreement.

3. Ordering Procedures

3.1 Detailed procedures for ordering and provisioning BellSouth services are set forth in BellSouth’s Local Interconnection and Facility Based Ordering Guide, Resale Ordering Guide, and as set forth in the Attachment 6 of this Agreement, as appropriate. To the extent there is a conflict between the BellSouth Local Interconnection and Facility Based, Resale Ordering Guide and any specific provisions of this Agreement, the provisions of this Agreement shall control.

3.2 BellSouth has developed electronic systems for placing most resale and some UNE orders. BellSouth has also developed electronic systems for accessing data needed to place orders including valid address, available services and features, available telephone numbers, due date estimation on pre-order and calculation on firm order, and customer service records where applicable. Charges for OSS shall be as set forth in Attachment 1, Exhibit A and Attachment 2, Exhibit A.

4. Parity

4.1 The services and service provisioning that BellSouth provides DeltaCom for resale will be at least equal in quality to that provided to BellSouth, or any BellSouth subsidiary, affiliate, other carrier or end user. In connection with resale, BellSouth will provide DeltaCom with pre-ordering, ordering, maintenance and trouble reporting, and daily usage data functionality that will enable DeltaCom to provide equivalent levels of customer service to their local exchange customers as BellSouth provides to its own end users.

4.2 BellSouth shall also provide DeltaCom with unbundled network elements, and access to those elements. The quality of an unbundled network element, as well as the quality of the access to such unbundled network element, that BellSouth provides to DeltaCom shall be at least equal in quality to that which BellSouth provides to itself or to any BellSouth subsidiary, affiliate or other carrier. The terms and conditions pursuant to which BellSouth provides access to unbundled network elements, including but not limited to the time within which BellSouth provisions such access to unbundled network elements, shall, at a minimum, be no less favorable to DeltaCom than the terms and conditions under which BellSouth provisions such elements to itself. Consistent with all applicable rules and regulations, BellSouth shall provide DeltaCom with pre-ordering, ordering, provisioning, maintenance and repair, and billing functionality at least equal to that which BellSouth provides for its own retail services.

General Terms and Conditions

Page 8

5. White Pages Listings

5.1 BellSouth shall make available to DeltaCom, for DeltaCom subscribers, nondiscriminary access to its telephone number and address directory listings (“Directory Lists”), under the following terms and conditions. In no event shall DeltaCom subscribers receive Directory Listings that are at less favorable rates, terms or conditions than the rates, terms or conditions that BellSouth provides its subscribers.

5.1.1 Directory Listings. BellSouth has delegated certain authority to its affiliate, BellSouth Advertising & Publishing Corporation (“BAPCO”) and has required BAPCO to carry out certain BellSouth obligations imposed by the Act regarding the publication of directories. DeltaCom and BAPCO have entered into an agreement regarding BAPCO's treatment of DeltaCom's end users' directory listing information in directories published by BAPCO. BellSouth shall maintain the Directory Listings database, which includes DeltaCom's end users' directory information used by BAPCO in publishing directories in accordance with Section 5.2.1 below. Subject to execution of such agreement between DeltaCom and BAPCO, BAPCO shall publish directory listings as follows:

5.1.1.1 White Page Basic Directory Listings. BellSouth shall publish in all BellSouth's white pages Directories at no charge to DeltaCom or any DeltaCom End User other than applicable miscellaneous listing charges as set forth in BellSouth's tariffs, one white pages basic Directory Listing for each DeltaCom End User for all of such End User's phone numbers located in the geographic region covered by any white pages Directory. Notwithstanding the foregoing, BellSouth shall not publish any white pages basic Directory Listing for any DeltaCom End User whose Directory Listing has been identified as non-published. DeltaCom will be required to provide to BellSouth the names, addresses and telephone numbers of all DeltaCom's End Users that wish to be omitted from directories.

5.1.1.2 Enhanced White Pages Listings. Where BellSouth offers to publish, at no charge, in its white pages directory Enhanced White Pages Listing to its retail customer, BellSouth shall publish such listings, at no charge and under the same terms and conditions, for DeltaCom for its End Users. Where BellSouth charges its retail end users for Enhanced White Pages Listings, BellSouth shall publish such listings under the same terms and conditions to DeltaCom for its End Users at the applicable wholesale discount set forth in Attachment 1.

5.1.1.3 Yellow Pages Basic (“Free”) Directory Listings. DeltaCom desires and BellSouth shall facilitate the process by which DeltaCom's business customers receive a free Yellow Pages listing, as offered to BellSouth’s end user customers. DeltaCom acknowledges that its customer listings are commingled in the daily feed with the BellSouth customer listings that BellSouth provides to its Yellow Pages publisher, BAPCO. DeltaCom consents to the release of such information to BAPCO for the aforementioned purpose and acknowledges that BAPCO may solicit DeltaCom's end users to determine whether the end user desires to purchase advertising or other services directly from BAPCO. Neither DeltaCom nor

General Terms and Conditions

Page 9

BellSouth will be responsible for any paid advertising that such end user may elect to purchase. Except as provided herein or with the written consent of DeltaCom, BellSouth shall not sell or otherwise provide the DeltaCom end user listings to any third party. Further, if it has actual knowledge of any use by BAPCO or any other of BellSouth’s affiliates that is inconsistent with the provisions of this section, BellSouth shall notify DeltaCom.

5.1.2 Treatment of Directory Listings. BellSouth shall treat all Directory Listings with the same level of confidentiality that BellSouth accords its own directory listing information, and BellSouth shall limit access to DeltaCom's End User proprietary confidential directory information to those BellSouth employees who are involved in the preparation of listings. Directory Listings of DeltaCom End Users shall be alphabetically commingled with the Directory Listings of all other telecommunications carriers, including BellSouth. All Directory Listings published by BellSouth will be as accurate and complete as BellSouth's own listing or those of its Affiliates.

5.1.3 Reserved Rights. DeltaCom reserves the right to withhold Directory Listing information from BellSouth, if BellSouth charges DeltaCom a rate for inclusion of DeltaCom's unlisted numbers in the BellSouth directory databases exceeding the BellSouth retail tariffed charge for unlisted numbers.

5.2. Directory Listing Database.

5.2.1 Maintenance. BellSouth shall maintain a Directory Listings database that shall include the directory listings of BellSouth, DeltaCom and any other carrier for whom BellSouth has agreed to publish Directory Listings. DeltaCom and BellSouth shall cooperate to ensure that Directory Listing information relating to DeltaCom's End User is delivered to BellSouth and reflected in such database in a timely and accurate manner (and in no event in a manner that is less timely or accurate than the manner in which BellSouth's Directory Listings database is updated for information relating to BellSouth's End User). Data should be generated from the local service order process and other data feeds for facility-based carriers and should be subject to the same rigorous edits that are applied to BellSouth local service orders. BellSouth shall use all commercially reasonable efforts to maintain the Directory Listings database in good order. BellSouth shall advise DeltaCom as soon as possible, but in no event fewer than six (6) months in advance, of any changes in the maintenance of the Directory Listings database or any mechanisms or interfaces, whether industry standard or not, pursuant to which BellSouth will provide Directory Listings to DeltaCom.

5.2.2 Third Party Access to Directory Listings Database. DeltaCom authorizes BellSouth to provide Directory Listings of DeltaCom End Users to third parties on terms and conditions that comport with the Communications Act and the relevant FCC rules and orders on the same terms and conditions applicable to the release of Directory Listings of BellSouth End Users to third parties. This data shall not be used for any other purpose than publishing a directory.

General Terms and Conditions

Page 10

5.2.3 Co-operation. DeltaCom and BellSouth agree to co-operate in good faith to resolve any issue regarding a Directory Listing raised by a DeltaCom End User (e.g., publication of a non-published Directory Listings, etc.). Upon request by either party, DeltaCom and BellSouth will in good faith mutually develop a process for escalating and resolving such issues.

5.3 BellSouth shall provide DeltaCom the directory listings of DeltaCom end users in an electronic format for a reasonable, supported and cost-based rate approved by the Commission.

5.4 DeltaCom has the right to review and edit its end users directory listings by using an electronic version of galley proofs provided by BAPCO at a reasonable, supported, cost-based rate approved by the Commission.

6. Liability and Indemnification

6.1 BellSouth Liability. BellSouth shall take financial responsibility for its own actions in causing, or its lack of action in preventing, unbillable or uncollectible DeltaCom revenues.

6.2 Liability for Acts or Omissions of Third Parties. Neither BellSouth nor DeltaCom shall be liable for any act or omission of another telecommunications company providing a portion of the services provided under this Agreement.

6.3 Limitation of Liability.

6.3.1 With respect to any claim or suit, whether based in contract, tort or any other theory of legal liability, by DeltaCom, any DeltaCom customer or by any other person or entity, for damages associated with any of the services provided by BellSouth pursuant to or in connection with this Agreement, including but not limited to the installation, provision, preemption, termination, maintenance, repair or restoration of service, and subject to the provisions of the remainder of this General Terms and Conditions, BellSouth's liability shall be limited to an amount equal to the proportionate charge for the service provided pursuant to this Agreement for the period during which the service was affected. With respect to any claim or suit, whether based in contract, tort or any other theory of legal liability, by BellSouth, any BellSouth customer or by any other person or entity, for damages associated with any of the services provided by DeltaCom pursuant to or in connection with this Agreement, including but not limited to the installation, provision, preemption, termination, maintenance, repair or restoration of service, and subject to the provisions of the remainder of this General Terms and Conditions, DeltaCom's liability shall be limited to an amount equal to the proportionate charge for the service provided pursuant to this Agreement for the period during which the service was affected. Notwithstanding the foregoing, claims for damages by DeltaCom, any DeltaCom customer or any other person or entity resulting from the gross negligence or willful misconduct of BellSouth and claims for damages by DeltaCom resulting from the failure of BellSouth to honor in one or more material respects any one or more of the material provisions of this Agreement shall not be subject to such

General Terms and Conditions

Page 11

limitation of liability. Likewise, claims for damages by BellSouth, any BellSouth customer or any other person or entity resulting from the gross negligence or willful misconduct of DeltaCom and claims for damages by BellSouth resulting from the failure of DeltaCom to honor in one or more material respects any one or more of the material provisions of this Agreement shall not be subject to such limitation of liability.

6.3.2 Limitations in Tariffs. Subject to the provisions of 6.3.1, a Party may, in its sole discretion, provide in its tariffs and contracts with its Customer and third parties that relate to any service, product or function provided or contemplated under this Agreement, that to the maximum extent permitted by Applicable Law, such Party shall not be liable to Customer or third Party for (i) any Loss relating to or arising out of this Agreement, whether in contract, tort or otherwise, that exceeds the amount such party would have charged that applicable person for the service, product or function that gave rise to such Loss and (ii) Consequential Damages. To the extent that a Party elects not to place in its tariffs or contracts such limitations of liability, and the other Party incurs a Loss as a result thereof, such Party shall indemnify and reimburse the other Party for that portion of the Loss that would have been limited had the first Party included in its tariffs and contracts the limitations of liability that such other Party included in its own tariffs at the time of such Loss.

6.3.3 Neither BellSouth nor DeltaCom shall be liable for damages to the other’s terminal location, POI or other company’s customers’ premises resulting from the furnishing of a service, including, but not limited to, the installation and removal of equipment or associated wiring, except to the extent caused by a company’s negligence or willful misconduct or by a company’s failure to properly ground a local loop after disconnection.

6.3.4 Under no circumstance shall a Party be responsible or liable for indirect, incidental, or consequential damages, including, but not limited to, economic loss or lost business or profits, damages arising from the use or performance of equipment or software, or the loss of use of software or equipment, or accessories attached thereto, delay, error, or loss of data. In connection with this limitation of liability, each Party recognizes that the other Party may, from time to time, provide advice, make recommendations, or supply other analyses related to the Services, or facilities described in this Agreement, and, while each Party shall use diligent efforts in this regard, the Parties acknowledge and agree that this limitation of liability shall apply to provision of such advice, recommendations, and analyses.

6.4 Indemnification for Certain Claims. BellSouth and DeltaCom providing services, their affiliates and their parent company, shall be indemnified, defended and held harmless by each other against any claim, loss or damage arising from the receiving company’s use of the services provided under this Agreement pertaining to (1) claims for libel, slander, invasion of privacy or copyright infringement arising from the content of the receiving company’s own communications, or (2) any claim, loss or damage claimed by the other company’s customer arising from

General Terms and Conditions

Page 12

one company’s use or reliance on the other company’s services, actions, duties, or obligations arising out of this Agreement; provided that in the event of a claim arising under this Section 6.4(2), to the extent any claim, loss or damage is caused by the gross negligence or willful misconduct of the providing party, the receiving Party shall have no obligation to indemnify, defend or hold harmless the providing Party hereunder, subject to the other terms of this Section 6.

6.5 Disclaimer. EXCEPT AS SPECIFICALLY PROVIDED TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER PARTY CONCERNING THE SPECIFIC QUALITY OF ANY SERVICES, OR FACILITIES PROVIDED UNDER THIS AGREEMENT. THE PARTIES DISCLAIM, WITHOUT LIMITATION, ANY WARRANTY OR GUARANTEE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR FROM USAGES OF TRADE.

6.6 DeltaCom and BellSouth will work cooperatively to minimize fraud associated with third-number billed calls, calling card calls, or any other services related to this Agreement. The Parties fraud minimization procedures are to be cost effective and implemented so as not to unduly burden or harm one Party as compared to the other.

6.7 Neither Party accepts responsibility to any person for any unlawful act committed by the other Party, or that other Parties’ End Users, as part of providing service to that other Party.

7. Court Ordered Requests for Call Detail Records and Other Subscriber Information.

7.1 To the extent technically feasible, BellSouth maintains call detail records for DeltaCom end users for limited time periods and can respond to subpoenas and court ordered requests for information. BellSouth shall maintain such information for DeltaCom end users for the same length of time it maintains such information for its own end users.

7.2 DeltaCom agrees that BellSouth will respond to subpoenas and court ordered requests delivered directly to BellSouth for the purpose of providing call detail records when the targeted telephone numbers belong to DeltaCom end users. Billing for such requests will be generated by BellSouth and directed to the law enforcement agency initiating the request.

7.3 DeltaCom agrees that in cases where DeltaCom receives subpoenas or court requests for call detail records for targeted telephone numbers belonging to DeltaCom end users, DeltaCom will advise the law enforcement agency initiating the request to redirect the subpoena or court ordered request to BellSouth. Billing for call detail information will be generated by BellSouth and directed to the law enforcement agency initiating the request.

General Terms and Conditions

Page 13

7.4 In cases where the timing of the response to the law enforcement agency prohibits DeltaCom from having the subpoena or court ordered request redirected to BellSouth by the law enforcement agency, DeltaCom will furnish the official request to BellSouth for providing the call detail information. BellSouth will provide the call detail records to DeltaCom and bill DeltaCom for the information. DeltaCom agrees to reimburse BellSouth for the call detail information provided.

7.5 DeltaCom will provide DeltaCom end user and/or other customer information that is available to DeltaCom in response to subpoenas and court orders for their own customer records. BellSouth will redirect subpoenas and court ordered requests DeltaCom end user and/or other customer information to DeltaCom for the purpose of providing this information to the law enforcement agency.

8. Intellectual Property Rights and Indemnification

8.1 No License. No patent, copyright, trademark or other proprietary right is licensed, granted or otherwise transferred by this Agreement. DeltaCom is strictly prohibited from any use, including but not limited to in sales, in marketing or advertising of telecommunications services, of any BellSouth name, service mark or trademark.

8.2 Ownership of Intellectual Property. Any intellectual property, which originates from or is developed by a Party shall remain in the exclusive ownership of that Party. Except for a limited license to use patents or copyrights to the extent necessary for the Parties to use any facilities or equipment (including software) or to receive any service solely as provided under this Agreement, no license in patent, copyright, trademark or trade secret, or other proprietary or intellectual property right now or hereafter owned, controlled or licensable by a Party, is granted to the other Party or shall be implied or arise by estoppel. It is the responsibility of each Party to ensure at no additional cost to the other Party that it has obtained any necessary licenses in relation to intellectual property of third Parties used in its network that may be required to enable the other Party to use any facilities or equipment (including software), to receive any service, or to perform its respective obligations under this Agreement.

8.3 Indemnification. The Party providing a service pursuant to this Agreement will defend the Party receiving such service or data provided as a result of such service against claims of infringement arising solely from the use by the receiving Party of such service and will indemnify the receiving Party for any damages awarded based solely on such claims in accordance with Section 6 of this Agreement.

Promptly after receipt of notice of any claim or the commencement of any action for which a Party may seek indemnification pursuant to this Section, such Party (the "Indemnified Party") shall promptly give written notice to the other Party (the "Indemnifying Party") of such claim or action, but the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability it may

General Terms and Conditions

Page 14

have to the Indemnified Party except to the extent the Indemnifying Party has actually been prejudiced thereby. The Indemnifying Party shall be obligated to assume the defense of such claim, at its own expense. The Indemnified Party shall cooperate with the Indemnifying Party's reasonable requests for assistance or Information relating to such claim, at the Indemnifying Party's expense. The Indemnified Party shall have the right to participate in the investigation and defense of such claim or action, with separate counsel chosen and paid for by the Indemnified Party.

8.4 Claim of Infringement. In the event that use of any facilities or equipment (including software), becomes, or in reasonable judgment of the Party who owns the affected network is likely to become, the subject of a claim, action, suit, or proceeding based on intellectual property infringement, then said Party shall promptly and at its sole expense, but subject to the limitations of liability set forth below:

8.4.1 modify or replace the applicable facilities or equipment (including software) while maintaining form and function, or

8.4.2 obtain a license sufficient to allow such use to continue.

8.4.3 In the event 8.4.1 or 8.4.2 are commercially unreasonable, then said Party may, terminate, upon reasonable notice under the circumstances, this contract with respect to use of, or services provided through use of, the affected facilities or equipment (including software), but solely to the extent required to avoid the infringement claim.

8.5 Exception to Obligations. Neither Party's obligations under this Section shall apply to the extent the infringement is caused by: (i) modification of the facilities or equipment (including software) by the indemnitee; (ii) use by the indemnitee of the facilities or equipment (including software) in combination with equipment or facilities (including software) not provided or authorized by the indemnitor provided the facilities or equipment (including software) would not be infringing if used alone; (iii) conformance to specifications of the indemnitee which would necessarily result in infringement; or (iv) continued use by the indemnitee of the affected facilities or equipment (including software) after being placed on notice to discontinue use as set forth herein.

8.6 Exclusive Remedy. The foregoing shall constitute the Parties' sole and exclusive remedies and obligations with respect to a third party claim of intellectual property infringement arising out of the conduct of business under this agreement.

9. Treatment of Proprietary and Confidential Information

9.1 All confidential or proprietary information disclosed by either Party during the negotiations and the term of this Agreement shall be protected by the Parties in accordance with the terms of this Section 9. All information which is disclosed by

General Terms and Conditions

Page 15

one Party (“Disclosing Party”) to the other (“Recipient”) in connection with this Agreement, or acquired in the course of performance of this Agreement, shall be deemed confidential and proprietary to the Disclosing Party and subject to this Agreement, such information including but not limited to, network, financial, marketing, and staffing information, proposals, requests for proposals, business plans, strategic information, specifications, costs, procedures, processes, business systems, software programs, orders for services, customer account data, call detail records, usage information in form, and Customer Proprietary Network Information (“CPNI”) as that term is defined by the Act and the rules and regulations of the FCC (collectively, Disclosing Party’s “Confidential Information”).

9.1.1 Recipient shall (i) use Confidential Information only for the purpose of performing under this Agreement, (ii) hold Confidential Information in confidence and disclose it only to employees who have a need to know it in order to perform under this Agreement, and (iii) safeguard Confidential Information from unauthorized use or disclosure using no less than the degree of care with which Recipient safeguards its own Confidential Information. If Recipient wishes to disclose the Disclosing Party’s Confidential Information to a third party agent or consultant in order to perform Recipient’s obligations hereunder, such third party shall have executed a written agreement comparable in scope to the terms of this Section 9.

9.1.1.1 Notwithstanding the provisions of subsection 9.1.1, under no circumstances will BellSouth disclose DeltaCom’s Confidential Information to, or permit access to DeltaCom’s Confidential Information by, the retail operations or any employee thereof, or the retail customer representatives of, BellSouth or any BellSouth Affiliate, or any independent contractors to any of the foregoing, and BellSouth and any BellSouth Affiliate shall take all reasonable actions to protect DeltaCom’s Confidential Information. In the event that the retail operations, any employees thereof, or retail customer representatives of BellSouth or any BellSouth Affiliate, or any independent contractors to any of the foregoing, possess or have knowledge of any DeltaCom Confidential Information, DeltaCom bears the burden of showing that the actions taken by BellSouth to protect the Confidential Information were not reasonable.

9.1.2 Recipient shall have no obligation to safeguard Confidential Information (i) which was in the Recipient’s possession free of restriction prior to its receipt from Disclosing Party, (ii) which becomes publicly known or available through no breach of this Agreement by Recipient, (iii) which is lawfully acquired by Recipient free of restrictions on its disclosure, (iv) which is independently developed by personnel of Recipient to whom the Disclosing Party’s Confidential Information had not been previously disclosed, or (v) which Disclosing Party in writing authorizes Recipient to disclose without restriction. Recipient may disclose Confidential Information if required by law, a court, or governmental agency, provided that Disclosing Party has been notified of the requirement promptly after Recipient becomes aware of the requirement, and provided that Recipient undertakes all lawful measures to avoid disclosing such information

General Terms and Conditions

Page 16

until Disclosing Party has had reasonable time to obtain a protective order. Recipient agrees to comply with any protective order that covers the Confidential Information to be disclosed.

9.1.3 Each Party agrees that Disclosing Party would be irreparably injured by a breach of this Section 9 by Recipient or its representatives and that Disclosing Party shall be entitled to seek equitable relief, including injunctive relief and specific performance, in the event of any breach of this Section 9. Such remedies shall not be exclusive, but shall be in addition to all other remedies available at law or in equity.

9.2 CPNI related to DeltaCom’s customers obtained by virtue of Local Interconnection or any other Service provided under this Agreement shall be DeltaCom’s Confidential Information and may not be used by BellSouth for any purpose except performance of its obligations under this Agreement, and in connection with such performance, shall be disclosed only to employees with a need to know, unless the DeltaCom customer expressly directs DeltaCom to disclose such information to BellSouth pursuant to the requirements of Section 222(c)(2) of the Act. In the event such authorization is obtained, BellSouth may use or disclose only such information as DeltaCom provides pursuant to such authorization and may not use information that BellSouth has otherwise obtained, directly or indirectly, in connection with its performance under this Agreement. CPNI related to BellSouth’s customers obtained by virtue of Local Interconnection or any other Service provided under this Agreement shall be BellSouth’s Confidential Information and may not be used by DeltaCom for any purpose except performance of its obligations under this Agreement, and in connection with such performance shall be disclosed only to employees with a need to know, unless the BellSouth customer expressly directs BellSouth to disclose such information to DeltaCom pursuant to the requirements of Section 222(c)(2) of the Act. In the event such authorization is obtained, DeltaCom may use or disclose only such information as BellSouth provides pursuant to such authorization and may not use information that DeltaCom has otherwise obtained, directly or indirectly, in connection with its performance under this Agreement.

9.2.1 Except as otherwise expressly provided in this Section 9, nothing herein shall be construed as limiting the rights of either Party with respect to its customer information under any applicable law, including without limitation Section 222 of the Act.

9.3 Publicity

9.3.1 Unless otherwise mutually agreed upon, neither Party shall publish or use the other Party’s logo, trademark, service mark, name, language, pictures, or symbols or words from which the other Party’s name may reasonably be inferred or implied in any product, service, advertisement, promotion, or in connection with any sales or marketing activity or any other publicity matter.

General Terms and Conditions

Page 17

9.3.2 Neither Party shall produce, publish or distribute any press release or other publicity referring to the other Party or its Affiliates, or announcing the execution or discussing the terms of this Agreement without prior notice to the other Party. In no event shall either Party mischaracterize the contents of this Agreement in any public statement or in any representation to a governmental entity or member thereof.

9.4 The Parties’ rights and obligations under this Section 9 shall survive and continue in effect until four (4) years after the expiration or termination date of this Agreement with regard to all Confidential Information exchanged during the term of this Agreement. Thereafter, the parties’ rights and obligations hereunder survive and continue in effect with respect to any Information that is a trade secret under applicable law.

10. Assignments

Any assignment by either Party to any non-affiliated entity of any right, obligation or duty, or of any other interest hereunder, in whole or in part, without the prior written consent of the other Party shall be void. A Party may assign this Agreement or any right, obligation, duty or other interest hereunder to an Affiliate company of the Party without the consent of the other Party. All obligations and duties of any Party under this Agreement shall be binding on all successors in interest and assigns of such Party. No assignment of delegation hereof shall relieve the assignor of its obligations under this Agreement in the event that the assignee fails to perform such obligations.

11. Dispute Resolution

Except as otherwise stated in this Agreement, the Parties agree that if any dispute arises as to the interpretation of any provision of this Agreement or as to the proper implementation of this Agreement, either Party may petition the Commission for a resolution of the dispute; provided, however, that to the extent any issue disputed hereunder involves issues beyond the scope of authority or jurisdiction of the Commission, the Parties may seek initial resolution of such dispute in another appropriate forum. However, each Party reserves any rights it may have to seek judicial review of any ruling made by the Commission concerning this Agreement. Each Party shall bear its own costs when seeking Commission or judicial review of any ruling concerning this Agreement.

12. Limitation of Use

The Parties agree that this Agreement shall not be offered by either Party in another jurisdiction as evidence of any concession or as a waiver of any position taken by the other Party in that jurisdiction or for any other purpose.

General Terms and Conditions

Page 18

13. Taxes

13.1 Any Federal, state or local excise, license, sales, use or other taxes or tax-like charges (excluding any taxes levied on income) resulting from the performance of this Agreement shall be borne by the Party upon which the obligation for payment is imposed under applicable law, even if the obligation to collect and remit such taxes is placed upon the other party. To the extent permitted by applicable law, any such taxes shall be shown as separate items on applicable billing documents between the Parties. The Party obligated to collect and remit taxes shall do so unless the other Party provides such Party with the required evidence of exemption. The Party obligated to pay any such taxes may contest the same and shall be entitled to the benefit of any refund or recovery. The Party obligated to collect and remit taxes shall cooperate fully in any such contest by the other Party by providing, records, testimony, and such additional information or assistance as may reasonably be necessary to pursue the contest.

13.1.1 If the purchasing Party determines that in its opinion any such taxes or fees are not payable, the providing Party shall not bill such taxes or fees to the purchasing Party if the purchasing Party provides written certification, reasonably satisfactory to the providing Party, stating that it is exempt or otherwise not subject to the tax or fee, setting forth the basis therefore, and satisfying any other requirements under applicable law. If any authority seeks to collect any such tax or fee that the purchasing Party has determined and certified not to be payable, or any such tax or fee that was not billed by the providing Party, the purchasing Party may contest the same in good faith, at its own expense. In any such contest, the purchasing Party shall promptly furnish the providing Party with copies of all filings in any proceeding, protest, or legal challenge, all rulings issued in connection therewith, and all correspondence between the purchasing Party and the taxing authority.

13.1.2 In the event that all or any portion of an amount sought to be collected must be paid in order to contest the imposition of any such tax or fee, or to avoid the existence of a lien on the assets of the providing Party during the pendency of such contest, the purchasing Party shall be responsible for such payment and shall be entitled to the benefit of any refund or recovery.

13.1.3 If it is ultimately determined that any additional amount of such a tax or fee is due to the imposing authority, the purchasing Party shall pay such additional amount, including any interest and penalties thereon.

13.1.4 Notwithstanding any provision to the contrary, the purchasing Party shall protect, indemnify and hold harmless (and defend at the purchasing Party’s expense) the providing Party from and against any such tax or fee, interest or penalties thereon, or other charges or payable expenses (including reasonable attorney fees) with respect thereto, which are incurred by the providing Party in connection with any claim for or contest of any such tax or fee.

13.1.5 Each Party shall notify the other Party in writing of any assessment, proposed assessment or other claim for any additional amount of such a tax or fee by a taxing authority; such notice to be provided, if possible, at least ten (10) days prior to the date by which a response, protest or other appeal must be filed, but in no event later than thirty (30) days after receipt of such assessment, proposed assessment or claim.

General Terms and Conditions

Page 19

13.2 Mutual Cooperation. In any contest of a tax or fee by one Party, the other Party shall cooperate fully by providing records, testimony and such additional information or assistance as may reasonably be necessary to pursue the contest. Further, the other Party shall be reimbursed for any reasonable and necessary out-of-pocket copying and travel expenses incurred in assisting in such contest.

14. Force Majeure

In the event performance of this Agreement, or any obligation hereunder, is either directly or indirectly prevented, restricted, or interfered with by reason of fire, flood, earthquake or like acts of God, wars, revolution, civil commotion, explosion, acts of public enemy, embargo, acts of the government in its sovereign capacity, labor difficulties, including without limitation, strikes, slowdowns, picketing, or boycotts, unavailability of equipment from vendor, changes requested by Customer, or any other circumstances beyond the reasonable control and without the fault or negligence of the Party affected, the Party affected, upon giving prompt notice to the other Party, shall be excused from such performance on a day-to-day basis to the extent of such prevention, restriction, or interference (and the other Party shall likewise be excused from performance of its obligations on a day-to-day basis until the delay, restriction or interference has ceased); provided however, that the Party so affected shall use best efforts to avoid or remove such causes of non-performance and both Parties shall proceed whenever such causes are removed or cease.

15. Modification of Agreement

15.1 Pursuant to 47 U.S.C. § 252(i) and 47 C.F.R. § 51.809, BellSouth shall make available to DeltaCom any entire interconnection agreement filed and approved pursuant to 47 U.S.C. § 252. The adopted agreement shall apply to the same states as the agreement that was adopted, and the term of the adopted agreement shall expire on the same date as set forth in the agreement that was adopted.

15.2 No modification, amendment, supplement to, or waiver of the Agreement or any of its provisions shall be effective and binding upon the Parties unless it is made in writing and duly signed by the Parties.

15.2.1 Except as otherwise set forth in Attachment 3, Section 2 concerning the Jurisdictional Factor Guide, the Parties acknowledge that certain provisions of this Agreement incorporate by reference various BellSouth document and industry publications (collectively referred to herein as the "Provisions"), and that such Provisions may change from time to time. The Parties agree that: 1) If the change or alteration was made as a result of the Change Control Process (CCP), a revision to ANSI or Telcordia guidelines or OBF guidelines or if DeltaCom agrees in writing to such change or alteration, any such change or alteration shall become effective with respect to DeltaCom pursuant to the terms of the notice to DeltaCom via the applicable Internet website posting; 2) Any other changes that (a) alters, amends or conflicts with any term of this Agreement, (b) changes any

General Terms and Conditions

Page 20

charge or rate, or the application of any charge or rate, specified in this Agreement, will be implemented through amendment of this Agreement; and 3) all other changes that would require DeltaCom to incur more than minimal expense will not become effective as to DeltaCom provided DeltaCom has submitted to BellSouth notice within thirty (30) days of receipt/posting of BellSouth’s notice of such change. For purposes of item (3) above, costs associated with disseminating notice of the change or providing training regarding the change to employees shall not be deemed "more than minimal." In the event the Parties disagree as to whether any alteration or amendment described in this Section is effective as to DeltaCom pursuant to the requirements of this Section, either Party may file a complaint with the Commission pursuant to the dispute resolution provisions of this Agreement, and until a Commission issues its order regarding the dispute, the change shall not take effect.

15.3 Execution of this Agreement by either Party does not confirm or infer that the executing Party agrees with any decision(s) issued pursuant to the Telecommunications Act of 1996 and the consequences of those decisions on specific language in this Agreement. Neither Party waives its rights to appeal or otherwise challenge any such decision(s) and each Party reserves all of its rights to pursue any and all legal and/or equitable remedies, including appeals of any such decision(s).

15.4 In the event that any effective legislative, regulatory, judicial or other legal action materially affects any material terms of this Agreement, or the ability of DeltaCom or BellSouth to perform any material terms of this Agreement, DeltaCom or BellSouth may, on thirty (30) days’ written notice require that such terms be renegotiated, and the Parties shall renegotiate in good faith such mutually acceptable new terms as may be required. In the event that such new terms are not renegotiated within ninety (90) days after such notice, the Dispute shall be referred to the Dispute Resolution procedure set forth in Section 11.

15.5 If any provision of this Agreement, or the application of such provision to either Party or circumstance, shall be held invalid, the remainder of the Agreement, or the application of any such provision to the Parties or circumstances other than those to which it is held invalid, shall not be effective thereby, provided that the Parties shall attempt to reformulate such invalid provision to give effect to such portions thereof as may be valid without defeating the intent of such provision.

15.6 If DeltaCom changes its name or makes changes to its structure or identity due to a merger, acquisition, transfer or any other reason, it is the responsibility of DeltaCom to notify BellSouth of said change and request that an amendment to this Agreement, if necessary, be executed to reflect said change.

General Terms and Conditions

Page 21

16. Indivisibility

The Parties intend that this Agreement be indivisible and nonseverable, and each of the Parties acknowledges that it has assented to all of the covenants and promises in this Agreement as a single whole and that all of such covenants and promises, taken as a whole, constitute the essence of the contract. Without limiting the generality of the foregoing, each of the Parties acknowledges that any provision by BellSouth of space for collocation was related to the provision of interconnection and unbundled network elements under this Agreement as set forth in Attachment 4 and is governed by the other applicable attachments to this Agreement. The Parties further acknowledge that this Agreement is intended to constitute a single transaction, and that the obligations of the Parties under this Agreement are interdependent.

17. Waivers

A failure or delay of either Party to enforce any of the provisions hereof, to exercise any option which is herein provided, or to require performance of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or options, and each Party, notwithstanding such failure, shall have the right thereafter to insist upon the specific performance of any and all of the provisions of this Agreement.

18. Governing Law

This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Georgia, without regard to its conflict of laws principles.

19. Arm’s Length Negotiations

This Agreement was executed after arm’s length negotiations between the undersigned Parties and reflects the conclusion of the undersigned that this Agreement is in the best interests of all Parties.

20. Notices

20.1 Every notice, consent, approval, or other communications required or contemplated by this Agreement shall be in writing and shall be delivered in person or given by postage prepaid mail and electronic mail to the electronic mail address bellow, if address to:

BellSouth Telecommunications, Inc.

BellSouth Local Contract Manager

600 North 19^th Street

Birmingham, Alabama 35203

and

General Terms and Conditions

Page 22

General Attorney - COU

Suite 4300

675 W. Peachtree St.

Atlanta, GA 30375

DeltaCom, Inc.

Regulatory Department

7037 Old Madison Pike

Huntsville, AL 35806

Ph (256)-382-3843

Fax (256)-382-3936

or at such other address as the intended recipient previously shall have designated by written notice to the other Party.

20.2 Where specifically required, notices shall be by certified or registered mail. Unless otherwise provided in this Agreement, notice by mail shall be effective on the date it is officially recorded as delivered by return receipt or equivalent, and in the absence of such record of delivery, it shall be presumed to have been delivered the fifth day, or next business day after the fifth day, after it was deposited in the mails.

20.3 Notwithstanding the foregoing, BellSouth may provide DeltaCom notice via Internet posting of price changes and changes to the terms and conditions of services available for resale per Commission Orders. In North Carolina, BellSouth will provide forty-five (45) days notice of any discontinuation of service or rate increases on a resold service. Where there is a generic Commission order to provide advance notice, BellSouth will comply. BellSouth will post changes to business processes and policies, notices of new service offerings, and changes to service offerings not requiring an amendment to this Agreement, notices required to be posted to BellSouth’s website, and any other information of general applicability to CLECs.

21. Discontinuance of Service

Each Party reserves the right to suspend or terminate service in the event of prohibited, unlawful or improper use of facilities or service pursuant to regulatory or legal authorities, for which it is purchasing services or in the event of nonpayment of undisputed billing for services in accordance with Attachment 7 of this Agreement.

22. Rule of Construction

No rule of construction requiring interpretation against the drafting Party hereof shall apply in the interpretation of this Agreement.

General Terms and Conditions

Page 23

23. Headings of No Force or Effect

The headings of Articles and Sections of this Agreement are for convenience of reference only, and shall in no way define, modify or restrict the meaning or interpretation of the terms or provisions of this Agreement.

24. Multiple Counterparts

This Agreement may be executed multiple counterparts, each of which shall be deemed an original, but all of which shall together constitute but one and the same document.

25. Filing of Agreement

Upon execution of this Agreement it shall be filed with the appropriate state regulatory agency pursuant to the requirements of Section 252 of the Act, and the Parties shall share equally any filing fees therefore. If the regulatory agency imposes any filing or public interest notice fees regarding the filing or approval of the Agreement, the Parties shall be responsible for publishing the required notice and the publication and/or notice costs shall be shared equally by the Parties.

26. Compliance with Applicable Law

Each Party shall comply at its own expense with applicable law.

27. Necessary Approvals

Each Party shall be responsible for obtaining and keeping in effect all approvals from, and rights granted by, governmental authorities, building and property owners, other carriers, and any other persons that may be required in connection with the performance of its obligations under this Agreement. Each Party shall reasonably cooperate with the other Party in obtaining and maintaining any required approvals and rights for which such Party is responsible.

28. Good Faith Performance

Each Party shall act in good faith in its performance under this Agreement and, in each case in which a Party’s consent or agreement is required or requested hereunder, such Party shall not unreasonably withhold or delay such consent or agreement.

General Terms and Conditions

Page 24

29. Nonexclusive Dealings

This Agreement does not prevent either Party from providing or purchasing services to or from any other person.

30. Survival

The Parties’ obligations under this Agreement which by their nature are intended to continue beyond the termination or expiration of this Agreement shall survive the termination or expiration of this Agreement.

31. Establishment of Service

Each Party shall be liable for any applicable charge as set forth in each Parties’ respective Access Tariff for the unauthorized change in local service to that Party pursuant to applicable State Commission or FCC slamming liability rules.

31.1 This Agreement includes Attachments with provisions for the following:

Resale

Network Elements and Other Services

Network Interconnection

Collocation

Access to Numbers and Number Portability

Pre-Ordering, Ordering, Provisioning, Maintenance and Repair

Billing

Rights-of-Way, Conduits and Pole Attachments

Performance Measurements

BellSouth Disaster Recovery Plan

Bona Fide Request/New Business Request Process

31.2 This Agreement and its Attachments, incorporated herein by this reference, sets forth the entire understanding and supersedes prior agreements between the Parties relating to the subject matter contained herein and merges all prior discussions between them, and neither Party shall be bound by any definition, condition, provision, representation, warranty, covenant or promise other than as expressly stated in this Agreement or as is contemporaneously or subsequently set forth in writing and executed by a duly authorized officer or representative of the Party to be bound thereby. Except as otherwise provided in Attachment 4, any orders placed under prior agreements between the Parties shall be governed by the terms of this Agreement and the Parties agree that any and all amounts and obligations owed for services provisioned or orders placed under prior agreements between the Parties, related to the subject matter hereof, shall be due and owing under this Agreement and be governed by the terms and conditions of this Agreement as if such services or orders were provisioned or placed under this Agreement.

General Terms and Conditions

Signature Page

IN WITNESS WHEREOF, the Parties have executed this Agreement the day and year written below.

BellSouth Telecommunications, Inc.		DeltaCom, Inc.
By:	/s/ Kristen E. Shore	By:	/s/ Jerry Watts
Name:	Kristen E. Shore	Name:	Jerry Watts
Title:	Director	Title:	Vice President
Date:	11/20/06	Date:	11/20/06

Attachment 1

Resale

Attachment 1

Page 2

Table of Contents

1.	Discount Rates	3
2.	Definition of Terms	3
3.	General Provisions	4
4.	Restrictions on Provision of Service	6
5.	BellSouth’s Provision of Services to DeltaCom	7
6.	Operations Support Systems Functions	9
7.	Maintenance of Services	9
8.	Establishment of Service	10
9.	Standards of Performance	11
10.	Payment And Billing Arrangements	11
11.	Discontinuance of Service	12
12.	Modification of Agreement	12
13.	Line Information Database (LIDB)	12
14.	Optional Daily Usage File (ODUF)	13
Operational Support Systems (OSS) Rates		Exhibit A
Resale Restrictions		Exhibit B
Line Information Database (LIDB) Storage Agreement		Exhibit C
Optional Daily Usage File (ODUF)		Exhibit D
Resale Discounts and Rates		Exhibit E

Attachment 1

Page 3

RESALE

1. Discount Rates

DeltaCom may purchase all retail Telecommunications Services provided by BellSouth. The price or wholesale discount for these Telecommunications Services shall be the retail rates reduced by the wholesale discount rate established by the appropriate state public utility commission. The wholesale discount shall be as set forth in Exhibit E, attached hereto and incorporated herein by this reference.

2. Definition of Terms

2.1 CUSTOMER OF RECORD means the entity responsible for placing application for service; requesting additions, rearrangements, maintenance or discontinuance of service; payment in full of charges incurred such as non-recurring, monthly recurring, toll, directory assistance, etc.

2.2 DEPOSIT means assurance provided by a customer in the form of cash, surety bond or bank letter of credit to be held by BellSouth.

2.3 END USER means the ultimate user of the telecommunications services.

2.4 END USER CUSTOMER LOCATION means the physical location of the premises where an end user makes use of the telecommunications services.

2.5 NEW SERVICES means functions, features or capabilities that are not currently offered by BellSouth. This includes packaging of existing services or combining a new function, feature or capability with an existing service.

2.6 COMPETITIVE LOCAL EXCHANGE COMPANY (CLEC) means a telephone company certificated by the public service commissions of BellSouth’s franchised area to provide local exchange service within BellSouth’s franchised area.

2.7 RESALE means an activity wherein a certificated CLEC, such as DeltaCom subscribes to the telecommunications services of BellSouth and then reoffers those telecommunications services to the public (with or without “adding value”).

2.8 RESALE SERVICE AREA means the area, as defined in a public service commission approved certificate of operation, within which an CLEC, such as DeltaCom, may offer resold local exchange telecommunications service.

Attachment 1

Page 4

3. General Provisions

3.1 DeltaCom may resell the tariffed local exchange and toll telecommunications services of BellSouth contained in the General Subscriber Service Tariff and Private Line Service Tariff subject to the terms, and conditions specifically set forth herein. Notwithstanding the foregoing, the exclusions and limitations on services available for resale will be as set forth in Exhibit B, attached hereto and incorporated herein by this reference.

3.2 BellSouth shall make available telecommunications services for resale at the rates set forth in Exhibit E to this Agreement and subject to the exclusions and limitations set forth in Exhibit B to this Agreement. Neither Party waives its right to appeal or otherwise challenge any decision regarding resale that resulted in the discount rates contained in Exhibit E or the exclusions and limitations contained in Exhibit B. Both Parties reserve the right to pursue any and all legal and/or equitable remedies, including appeals of any decisions. If such appeals or challenges result in changes in the discount rates or exclusions and limitations, the parties agree that appropriate modifications to this Agreement will be made promptly to make its terms consistent with the outcome of the appeal.

3.3 DeltaCom may purchase resale services from BellSouth for its own use in operating its business. The resale discount will apply to those services under the following conditions:

3.3.1 DeltaCom must resell services to other end users.

3.3.2 DeltaCom must order services through the LCSC and/or Complex Resale Support Group (CRSG).

3.3.3 DeltaCom cannot be a competitive local exchange telecommunications company for the single purpose of selling to themselves.

3.4 The provision of services by BellSouth to DeltaCom does not constitute a joint undertaking for the furnishing of any service.

3.5 DeltaCom will be the customer of record for all services purchased from BellSouth. Except as specified herein, BellSouth will take orders from, bill and expect payment from DeltaCom for all services.

3.6 DeltaCom will be BellSouth’s single point of contact for all services purchased pursuant to this Agreement. BellSouth shall have no contact with the end user except to the extent provided for herein.

3.7 BellSouth will continue to bill the end user for any services that the end user specifies it wishes to receive directly from BellSouth. The Parties shall not restrict the customer’s choice of using other telecommunications carriers and their services.

Attachment 1

Page 5

3.8 BellSouth maintains the right to serve directly any end user within the service area of DeltaCom. BellSouth will continue to directly market its own telecommunications products and services and in doing so may establish independent relationships with end users of DeltaCom.

3.9 Neither Party shall interfere with the right of any person or entity to obtain service directly from the other Party. Neither Party, its employees, nor its subcontractors shall make disparaging comments regarding the other Party or its services to end-users.

3.10 Where BellSouth provides resold services to DeltaCom, BellSouth will provide DeltaCom with on line access to intermediate telephone numbers as defined by applicable FCC rules and regulations on a first come first served basis. DeltaCom acknowledges that such access to numbers shall be in accordance with the appropriate FCC rules and regulations. DeltaCom acknowledges that there may be instances where there is a shortage of telephone numbers in a particular Common Language Location Identifier Code (CLLIC); and in such instances, DeltaCom shall return unused intermediate telephone numbers to BellSouth upon BellSouth’s request. BellSouth shall make all such requests on a nondiscriminatory basis.

3.11 BellSouth will allow DeltaCom to designate up to 100 intermediate telephone numbers per CLLIC, for DeltaCom’s sole use. Assignment, reservation and use of telephone numbers shall be governed by applicable FCC rules and regulations. DeltaCom acknowledges that there may be instances where there is a shortage of telephone numbers in a particular CLLIC and BellSouth has the right to limit access to blocks of intermediate telephone numbers. These instances include: 1) where jeopardy status has been declared by the North American Numbering Plan (NANP) for a particular Numbering Plan Area (NPA); or 2) where a rate center has less than six months supply of numbering resources. DeltaCom may resell BellSouth services only within the specific resale service area as defined in its certificate(s) of authority as a local telecommunications carrier.

3.12 911- BellSouth shall provide to DeltaCom 911 and E911 emergency call routing services at parity with BellSouth.

3.13 Customer Service Functions-Except as otherwise provided in this Agreement, DeltaCom shall be the single point of contact for all DeltaCom end users.

3.14 BellSouth shall refer all questions regarding DeltaCom service or product directly to DeltaCom. BellSouth shall use its best efforts to ensure that all BellSouth representatives who receive inquiries regarding DeltaCom services do not in any way disparage or discriminate against DeltaCom or its products or services.

Attachment 1

Page 6

3.15 The same quality standards that BellSouth requires of its employees when contacting BellSouth end users (e.g. honesty, respect, and courtesy) shall apply when its employees are in contact with DeltaCom end users.

3.16 Service Ordering and Operational Support Systems (OSS)

3.16.1 DeltaCom must order services through resale interfaces, i.e., the Local Carrier Service Center (LCSC) and/or appropriate Complex Resale Support Group (CRSG). BellSouth has developed and made available interactive interfaces by which DeltaCom may submit LSRs electronically as set forth in Attachment 6 of this Agreement. Service orders will be in a standard format designated by BellSouth. BellSouth OSS interfaces shall provide DeltaCom with the same process and system capabilities for residential and business services. BellSouth shall not require DeltaCom to develop distinct processes or OSS interfaces by class of service. BellSouth may only charge manual non-recurring ordering charges if it does not provide an electronic ordering process for its retail representatives. LSRs submitted by means of one of these interactive interfaces will incur an OSS electronic charge as set forth in Exhibit E to this Agreement. An individual LSR will be identified for billing purposes by its Purchase Order Number (PON). LSRs submitted by means other than one of these interactive interfaces (Mail, fax, courier, etc.) will incur a manual order charge as set forth in Exhibit E to this Agreement. Supplements or clarifications to a previously billed LSR will not incur another OSS charge. In the event that BellSouth’s OSS interfaces experience unscheduled downtime requiring DeltaCom to submit an LSR manually, DeltaCom will incur the mechanized OSS charge in lieu of the manual OSS charge provided that DeltaCom follows the procedures outlined in BellSouth’s Business Rules for Local Ordering that address system outages and associated OSS charges.

3.16.2 Denial/Restoral OSS Charge. In the event DeltaCom provides a list of customers to be denied and restored, rather than an LSR, each location on the list will require a separate PON and therefore will be billed as one LSR per location.

3.16.3 Cancellation OSS Charge. DeltaCom will incur an OSS charge for an accepted LSR that is later canceled.

4. Restrictions on Provision of Service

4.1 Service is furnished subject to the condition that it will not be used for any unlawful purpose.

4.2 Service will be discontinued if any law enforcement agency advises that the service being used is in violation of the law.

Attachment 1

Page 7

4.3 BellSouth can refuse service when it has grounds to believe that service will be used in violation of the law.

4.4 The characteristics and methods of operation of any circuits, facilities or equipment provided by any person or entity other than BellSouth shall not:

4.5.1 Interfere with or impair service over any facilities of BellSouth, its affiliates, or its connecting and concurring carriers involved in its service;

4.5.2 Cause damage to BellSouth’s plant;

4.5.3 Impair the privacy of any communications; or

4.5.4 Create hazards to any employees or the public.

4.6 Current telephone numbers may normally be retained by the end user. DeltaCom has no property right to the telephone number or any other call number designation associated with services furnished by BellSouth, and no right to the continuance of service through any particular central office. BellSouth reserves the right to change such numbers, or the central office designation associated with such numbers, or both, whenever BellSouth deems it necessary to do so in the conduct of its business any such changes will be implemented in a nondiscriminatory manner.

4.7 No patent, copyright, trademark or other proprietary right is licensed, granted or otherwise transferred by this Agreement. DeltaCom is strictly prohibited from any use, including but not limited to sales, marketing or advertising, of any BellSouth name or trademark.

5. BellSouth’s Provision of Services to DeltaCom

5.1 DeltaCom agrees that its resale of BellSouth services shall be as follows:

5.1.1 The resale of telecommunications services shall be limited to users and uses conforming to the class of service restrictions.

5.1.2 Hotel and Hospital PBX service are the only telecommunications services available for resale to Hotel/Motel and Hospital end users, respectively. Similarly, Access Line Service for Customer Provided Coin Telephones is the only local service available for resale to Independent Payphone Provider (IPP) customers. Shared Tenant Service customers can only be sold those telecommunications services available in BellSouth Shared Tenant Service Tariff.

5.1.3 DeltaCom is prohibited from furnishing both flat and measured rate service on the same business premises to the same subscribers (end users) as stated in A2 of BellSouth’s Tariff except for backup service as indicated in the applicable state tariff Section A3.

Attachment 1

Page 8

5.2 BellSouth reserves the right to periodically audit services purchased by DeltaCom to establish authenticity of use. Such audit shall not occur more than once in a calendar year. DeltaCom shall make any and all records and data available to BellSouth or BellSouth’s auditors on a reasonable basis. BellSouth shall bear the cost of said audit.

5.3 Resold services can only be used in the same manner as specified in BellSouth’s Tariff. Resold services are subject to the same terms and conditions as are specified for such services when furnished to an individual end user of BellSouth in the appropriate section of BellSouth’s Tariffs. Specific tariff features, e.g. a usage allowance per month, shall not be aggregated across multiple resold services. Resold services cannot be used to aggregate traffic from more than one end user customer except as specified in BellSouth’s Tariff referring to Shared Tenant Service.

5.4 BellSouth may provide any service or facility for which a charge is not established herein, as long as it is offered on the same terms to DeltaCom.

5.5 White page directory listings will be provided in accordance with Section 5 of the General Terms and Conditions and with the regulations set forth in Section A6 of the General Subscriber Service Tariff.

5.6 Where available to BellSouth’s end users, BellSouth shall provide the following telecommunications services at a discount to allow for voice mail services:

- Simplified Message Desk Interface – Enhanced (“SMDI-E”)

- Simplified Message Desk Interface (“SMDI”) Message Waiting Indicator (“MWI”) stutter dialtone and message waiting light feature capabilities.

- Call Forward on Busy/Don’t Answer (“CF-B/DA”)

- Call Forward on Busy (“CF/B”)

- Call Forward Don’t Answer (“CF/DA”)

Further, BellSouth messaging services set forth in BellSouth’s Messaging Service Information Package shall be made available for resale without the wholesale discount.

Attachment 1

Page 9

5.7 BellSouth’s Inside Wire Maintenance Service Plan may be made available for resale at rates, terms and conditions as set forth by BellSouth and without the wholesale discount.

5.8 BellSouth will provide customer record information to DeltaCom provided DeltaCom has either executed a blanket agency agreement or has the appropriate Letter(s) of Authorization. BellSouth shall provide customer record information via an electronic interface and in accordance with the provisions of Attachment 6.

5.9 Telephone numbers transmitted via any resold service feature are intended solely for the use of the end user of the feature. Resale of this information is prohibited.

6. Operations Support Systems Functions

6.1 BellSouth shall provide DeltaCom advance notice of changes to the prices, terms, and conditions for Resale in accordance with the provisions of Section 20.3 of the General Terms and Conditions. BellSouth provides electronic access to customer record information. Access is provided through the Local Exchange Navigation System (LENS), and the Telecommunications Access Gateway (TAG). Customer Record Information includes but is not limited to, customer specific information in CRIS and RSAG. DeltaCom agrees not to view, copy or otherwise obtain access to the customer record information of any customer without that customer’s permission and only in accordance with applicable federal and state regulations.

6.2 As provided in Section 3 of the General Terms and Conditions and Attachment 6, BellSouth shall provide DeltaCom, at its request, non-discriminatory access to BellSouth’s OSS functions for pre-ordering, ordering, provisioning, maintenance and repair, and billing. Such OSS functions shall be equal in quality and provisioned with the same timeliness as provided by BellSouth to itself or to any Subsidiary, Affiliate or any other Telecommunications Carrier to which BellSouth provides the OSS functions.

6.3 Charges for use of OSS shall be as set forth in Exhibit E of this Attachment.

7. Maintenance of Services

7.1 DeltaCom will adopt and adhere to the standards contained in the applicable BellSouth Work Center Interface Agreement regarding maintenance and installation of service.

7.2 Services resold under BellSouth’s Tariffs and facilities and equipment provided by BellSouth shall be maintained by BellSouth

Attachment 1

Page 10

7.3 DeltaCom or its end users may not rearrange, move, disconnect, remove or attempt to repair any facilities owned by BellSouth, other than by connection or disconnection to any interface means used, except with the written consent of BellSouth.

7.4 DeltaCom accepts responsibility to notify BellSouth of situations that arise that may result in a service problem.

7.5 DeltaCom will be BellSouth’s single point of contact for all repair calls on behalf of DeltaCom’s end users. The parties agree to promptly provide one another with toll-free contact numbers for such purposes.

7.6 DeltaCom will contact the appropriate repair centers in accordance with reasonable procedures established by BellSouth

7.7 For all repair requests, DeltaCom accepts responsibility for adhering to BellSouth’s reasonable prescreening guidelines prior to referring the trouble to BellSouth.

7.8 BellSouth will bill DeltaCom for handling troubles that are found not to be in BellSouth’s network pursuant to its standard time and material charges. The standard time and material charges will be no more than what BellSouth charges to its retail customers for the same services.

7.9 BellSouth reserves the right to contact DeltaCom’s customers, if deemed necessary, for maintenance purposes.

7.10 Facilities and/or equipment utilized by BellSouth to provide service to DeltaCom remain the property of BellSouth.

8. Establishment of Service

8.1 If DeltaCom has not already done so, after receiving certification as a local exchange company from the appropriate regulatory agency, DeltaCom will provide the appropriate Company service center the necessary documentation to enable BellSouth to establish a master account for DeltaCom. Such documentation shall include the Application for Master Account, proof of authority to provide telecommunications services, an Operating Company Number (“OCN”) assigned by the National Exchange Carriers Association (“NECA”) and a tax exemption certificate, if applicable.

8.2 Service orders will be in a standard format designated by BellSouth.

Attachment 1

Page 11

8.3 BellSouth will not require end user confirmation prior to establishing service for DeltaCom’s end user customer. DeltaCom must, however, be able to demonstrate end user authorization upon request.

8.4 DeltaCom will be the single point of contact with BellSouth for all subsequent ordering activity resulting in additions or changes to resold services except that BellSouth will accept a request directly from the end user for conversion of the end user’s service from DeltaCom to BellSouth or will accept a request from another CLEC for conversion of the end user’s service from DeltaCom to the other LEC. BellSouth will promptly notify DeltaCom that such a request has been processed.

8.5 BellSouth shall take orders for resale from DeltaCom provided the deposit requirements of Section 1.10 of Attachment 7 to this Agreement are met.

8.6 The Parties will adopt and adhere to the BellSouth guidelines associated with each method of providing customer record information.

9. Standards of Performance

9.1 BellSouth shall provide Resale Services to DeltaCom (i) in accordance with Attachment 10 hereto and (ii) as required by the FCC or the applicable State Commission.

10. Payment And Billing Arrangements

10.1 If DeltaCom has not already done so, prior to submitting orders to BellSouth for local service, a master account must be established for DeltaCom. DeltaCom is required to provide the following before a master account is established: proof of PSC/PUC certification, the Application for Master Account, an Operating Company Number (“OCN”) assigned by the National Exchange Carriers Association (“NECA”) and a tax exemption certificate, if applicable.

10.2 BellSouth shall bill DeltaCom on a current basis all applicable charges and credits.

10.3 Payment of all charges will be the responsibility of DeltaCom. DeltaCom shall make payment to BellSouth for all services billed. BellSouth is not responsible for payments not received by DeltaCom from DeltaCom’s customer. BellSouth will not become involved in billing disputes that may arise between DeltaCom and its customer. Payments made to BellSouth, as payment on account will be credited to an accounts receivable master account and not to an end user’s account.

10.4 BellSouth will render bills each month on established bill days for each of DeltaCom’s accounts.

Attachment 1

Page 12

11. Discontinuance of Service

11.1 The procedures for discontinuing service to an end user are as follows:

11.1.1. Where possible, BellSouth will deny service to DeltaCom’s end user on behalf of, and at the request of, DeltaCom. Upon restoration of the end user’s service, restoral charges will apply and will be the responsibility of DeltaCom. If within fifteen days after an end user’s service has been denied no contact has been made in reference to restoring service, the end user’s service will be disconnected.

11.1.2. At the request of DeltaCom, BellSouth will disconnect a DeltaCom end user customer.

11.1.3. All requests by DeltaCom for denial or disconnection of an end user for nonpayment must be in writing or via the electronic interface established pursuant to Attachment 6 to the Agreement.

11.1.4 DeltaCom will be made solely responsible for notifying the end user of the proposed disconnection of the service.

11.1.5 BellSouth will continue to process calls made to the Annoyance Call Center and will advise DeltaCom when it is determined that annoyance calls are originated from one of their end user’s locations. BellSouth shall be indemnified, defended and held harmless by DeltaCom and/or the end user against any claim, loss or damage arising from providing this information to DeltaCom. It is the responsibility of DeltaCom to take the corrective action necessary with its customers who make annoying calls. Failure to do so will result in BellSouth’s disconnecting the end user’s service.

12. Modification of Agreement

Provisions for modifying the terms, rates and conditions of this Attachment are contained in Section 15 of the General Terms and Conditions to this Agreement.

13. Line Information Database (LIDB)

13.1 BellSouth will store in its Line Information Database (LIDB) records relating to service only in the BellSouth region. The LIDB Storage Agreement is included in this Attachment as Exhibit C.

13.2 BellSouth will provide LIDB Storage upon written request to DeltaCom’s Local Contract Manager stating a requested activation date.

Attachment 1

Page 13

14. Optional Daily Usage File (ODUF)

14.1 The Optional Daily Usage File (ODUF) Agreement with terms and conditions is included in this Attachment as Exhibit D. Rates for ODUF are as set forth in Exhibit E of this Attachment.

14.2. BellSouth will provide ODUF service upon written request to its Local Contract Manager stating a requested activation date.

Attachment 1

Page 14

EXHIBIT A

Page 1

OPERATIONAL SUPPORT SYSTEMS (OSS) RATES

BellSouth has developed and made available the following mechanized systems by which DeltaCom may submit LSRs electronically.

LENS	Local Exchange Navigation System
EDI	Electronic Data Interchange
TAG	Telecommunications Access Gateway

Rates for OSS are as set forth in Exhibit E of this Attachment.

Exhibit B

Attachment 1

Page 15

Type of Service		NC
		Resale	Discount
1	Grandfathered Services (Note 1)	Yes	Yes
2	Contract Service Arrangements	Yes	Yes
3	Promotions - > 90 Days (Note 2)	Yes	Yes
4	Promotions - < 90 Days (Note 2)	Yes	No
5	Lifeline/Link Up Services	Yes	Yes
6	911/E911 Services	Yes	Yes
7	N11 Services	Yes	Yes
8	AdWatchSM Svc	Yes	Yes
9	MemoryCall® Service	Yes	No
10	Mobile Services	Yes	No
11	Federal Subscriber Line Charges	Yes	No
12	Non-Recurring Charges	Yes	Yes
13	End User Line Charge – Number Portability	Yes	No
14	Public Telephone Access Service (PTAS)	Yes	Yes

Applicable Notes:

1. Grandfathered services can be resold only to existing subscribers of the grandfathered service.

Note 2: Where available for resale, promotions will be made available only to End Users who would have qualified for the promotion had it been provided by BellSouth directly for the term specified in the applicable tariff.

Attachment 1

Page 16

Exhibit C

LINE INFORMATION DATA BASE (LIDB)

RESALE STORAGE AGREEMENT

I. Definitions (from Addendum)

A. Billing number—a number used by BellSouth for the purpose of identifying an account liable for charges. This number may be a line or a special billing number.

B. Line number—a ten-digit number assigned by BellSouth that identifies a telephone line associated with a resold local exchange service.

C. Special billing number—a ten-digit number that identifies a billing account established by BellSouth in connection with a resold local exchange service.

D. Calling Card number—a billing number plus PIN number assigned by BellSouth.

E. PIN number—a four-digit security code assigned by BellSouth that is added to a billing number to compose a fourteen-digit calling card number.

F. Toll billing exception indicator—associated with a billing number to indicate that it is considered invalid for billing of collect calls or third number calls or both, by DeltaCom.

G. Billed Number Screening—refers to the query service used to determine whether a toll billing exception indicator is present for a particular billing number.

H. Calling Card Validation—refers to the query service used to determine whether a particular calling card number exists as stated or otherwise provided by a caller.

I. Billing number information—information about billing number or Calling Card number as assigned by BellSouth and toll billing exception indicator provided to BellSouth by DeltaCom.

J. GetData—refers to the query service used to determine, at a minimum, the Account Owner and/or Regional Accounting Office for a line number. This query service may be modified to provide additional information in the future.

K. Originating Line Number Screening (“OLNS”)—refers to the query service used to determine the billing, screening and call handling indicators, station type and Account Owner provided to BellSouth by DeltaCom for originating line numbers.

L. Account Owner—name of the local exchange telecommunications company that is providing dialtone on a subscriber line.

Attachment 1

Page 17

Exhibit C

II. General

A. This Agreement sets forth the terms and conditions pursuant to which BellSouth agrees to store in its LIDB certain information at the request of DeltaCom and pursuant to which BellSouth, its LIDB customers and DeltaCom shall have access to such information. In addition, this Agreement sets forth the terms and conditions for DeltaCom’s provision of billing number information to BellSouth for inclusion in BellSouth’s LIDB. DeltaCom understands that BellSouth provides access to information in its LIDB to various telecommunications service providers pursuant to applicable tariffs and agrees that information stored at the request of DeltaCom pursuant to this Agreement, shall be available to those telecommunications service providers. The terms and conditions contained herein shall hereby be made a part of this Resale Agreement upon notice to DeltaCom’s account team and/or Local Contract Manager activate this LIDB Storage Agreement. The General Terms and Conditions of the Resale Agreement shall govern this LIDB Storage Agreement.

B. BellSouth will provide responses to on-line, call-by-call queries to billing number information for the following purposes:

1. Billed Number Screening

BellSouth is authorized to use the billing number information to determine whether DeltaCom has identified the billing number as one that should not be billed for collect or third number calls.

2. Calling Card Validation

BellSouth is authorized to validate a 14-digit Calling Card number where the first 10 digits are a line number or special billing number assigned by BellSouth, and where the last four digits (PIN) are a security code assigned by BellSouth.

3. OLNS

BellSouth is authorized to provide originating line screening information for billing services restrictions, station type, call handling indicators, presubscribed interLATA and local carrier and account owner on the lines of DeltaCom from which a call originates.

4. GetData

BellSouth is authorized to provide, at a minimum, the account owner and/or Regional Accounting Office information on the lines of DeltaCom indicating the local service provider and where billing records are to be sent for settlement purposes. This query service may be modified to provide additional information in the future.

Attachment 1

Page 18

Exhibit C

5. Fraud Control

BellSouth will provide seven days per week, 24-hours per day, fraud monitoring on Calling Cards, bill-to-third and collect calls made to numbers in BellSouth’s LIDB, provided that such information is included in the LIDB query. BellSouth will establish fraud alert thresholds and will notify DeltaCom of fraud alerts so that DeltaCom may take action it deems appropriate.

III. Responsibilities of the Parties

A. BellSouth will administer all data stored in the LIDB, including the data provided by DeltaCom pursuant to this Agreement, in the same manner as BellSouth’s data for BellSouth’s End User customers. BellSouth shall not be responsible to DeltaCom for any lost revenue which may result from BellSouth’s administration of the LIDB pursuant to its established practices and procedures as they exist and as they may be changed by BellSouth in its sole discretion from time to time.

B. Billing and Collection Customers

BellSouth currently has in effect numerous billing and collection agreements with various interexchange carriers and billing clearing houses and as such these billing and collection customers (“B&C Customers”) query BellSouth’s LIDB to determine whether to accept various billing options from End Users. Until such time as BellSouth implements in its LIDB and its supporting systems the means to differentiate DeltaCom’s data from BellSouth’s data, the following shall apply:

(1) BellSouth will identify DeltaCom end user originated long distance charges and will return those charges to the interexchange carrier as not covered by the existing B&C agreement. DeltaCom is responsible for entering into the appropriate agreement with interexchange carriers for handling of long distance charges by their end users.

(2) BellSouth shall have no obligation to become involved in any disputes between DeltaCom and B&C Customers. BellSouth will not issue adjustments for charges billed on behalf of any B&C Customer to DeltaCom. It shall be the responsibility of DeltaCom and the B&C Customers to negotiate and arrange for any appropriate adjustments.

Attachment 1

Page 19

Exhibit C

IV. Fees for Service and Taxes

A. DeltaCom will not be charged a fee for storage services provided by BellSouth to DeltaCom, as described in this LIDB Resale Storage Agreement.

B. Sales, use and all other taxes (excluding taxes on BellSouth’s income) determined by BellSouth or any taxing authority to be due to any federal, state or local taxing jurisdiction with respect to the provision of the service set forth herein will be paid by DeltaCom General Terms and Conditions of this Agreement.

Attachment 1

Page 20

Exhibit C

Optional Daily Usage File

1. Upon written request from DeltaCom, BellSouth will provide the Optional Daily Usage File (ODUF) service to DeltaCom pursuant to the terms and conditions set forth in this section.

2. DeltaCom shall furnish all relevant information required by BellSouth for the provision of the ODUF.

3. The ODUF feed will contain billable messages that were carried over the BellSouth Network and processed in the BellSouth Billing System, but billed to a DeltaCom customer.

4. Charges for ODUF will appear on DeltaCom’s monthly bills. The charges are as set forth in Exhibit E to this Attachment.

5. The ODUF feed will contain both rated and unrated messages. All messages will be in the standard Alliance for Telecommunications Industry Solutions (ATIS) EMI record format.

6. Messages that error in DeltaCom’s billing system will be the responsibility of DeltaCom. If, however, DeltaCom should encounter significant volumes of errored messages that prevent processing by DeltaCom within its systems, BellSouth will work with DeltaCom to determine the source of the errors and the appropriate resolution.

6. The following specifications shall apply to the ODUF feed.

6.1 USAGE to be Transmitted

6.1.1 The following messages recorded by BellSouth will be transmitted to DeltaCom:

— Message recording for per use/per activation type services (examples: Three Way Calling, Verify, Interrupt, Call Return, etc.)

— Measured billable Local

— Directory Assistance messages

— IntraLATA Toll

— WATS and 800 Service

— N11

Attachment 1

Page 21

Exhibit D

— Information Service Provider Messages

— Operator Services Messages

— Credit/Cancel Records

— Usage for Voice Mail Message Service

6.1.2 Rated Incollects (originated in BellSouth and from other companies) can also be on ODUF. Rated Incollects will be intermingled with BellSouth recorded rated and unrated usage. Rated Incollects will not be packed separately.

6.1.3 BellSouth will perform duplicate record checks on records processed to ODUF. Any duplicate messages detected will be deleted and not sent to DeltaCom.

6.1.4 In the event that DeltaCom detects a duplicate on ODUF they receive from BellSouth, DeltaCom will drop the duplicate message and will not return the duplicate to BellSouth).

6.2 Physical File Characteristics

6.2.1 The ODUF will be distributed to DeltaCom via an agreed medium with CONNECT: Direct being the preferred transport method. The ODUF will be a variable block format (2472) with an LRECL of 2472. The data on the ODUF feed will be in a non-compacted EMI format (175 byte format plus modules). It will be created on a daily basis (Monday through Friday except holidays). Details such as dataset name and delivery schedule will be addressed during negotiations of the distribution medium. There will be a maximum of one dataset per workday per OCN.

6.2.2 Data circuits (private line or dial-up) will be required between BellSouth and DeltaCom for the purpose of data transmission. Where a dedicated line is required, DeltaCom will be responsible for ordering the circuit, overseeing its installation and coordinating the installation with BellSouth. DeltaCom will also be responsible for any charges associated with this line. Equipment required on the BellSouth end to attach the line to the mainframe computer and to transmit successfully ongoing will be negotiated on a case-by-case basis. Where a dial-up facility is required, dial circuits will be installed in the BellSouth data center by BellSouth and the associated charges assessed to DeltaCom. Additionally, all message toll charges associated with the use of the dial circuit by DeltaCom will be the responsibility of DeltaCom. Associated equipment on the BellSouth end, including a modem, will be negotiated on a case-by-case basis between the Parties. All equipment, including modems and software, that is required on DeltaCom end for the purpose of data transmission will be the responsibility of DeltaCom.

Attachment 1

Page 22

Exhibit D

6.3 Packing Specifications

6.3.1 A pack will contain a minimum of one message record or a maximum of 99,999 message records plus a pack header record and a pack trailer record. One transmission can contain a maximum of 99 packs and a minimum of one pack.

6.3.2 The OCN, From RAO, and Invoice Number will control the invoice sequencing. The From RAO will be used to identify to DeltaCom which BellSouth RAO is sending the message. BellSouth and DeltaCom will use the invoice sequencing to control data exchange. BellSouth will be notified of sequence failures identified by DeltaCom and resend the data as appropriate.

The data will be packed using ATIS EMI records.

6.4 Pack Rejection

6.4.1 DeltaCom will notify BellSouth within one business day of rejected packs (via the mutually agreed medium). Packs could be rejected because of pack sequencing discrepancies or a critical edit failure on the Pack Header or Pack Trailer records (i.e. out-of-balance condition on grand totals, invalid data populated). Standard ATIS EMI Error Codes will be used. DeltaCom will not be required to return the actual rejected data to BellSouth. Rejected packs will be corrected and retransmitted to DeltaCom by BellSouth.

6.5 Control Data

DeltaCom will send one confirmation record per pack that is received from BellSouth. This confirmation record will indicate DeltaCom received the pack and the acceptance or rejection of the pack. Pack Status Code(s) will be populated using standard ATIS EMI error codes for packs that were rejected by DeltaCom for reasons stated in the above section.

6.6 Testing

6.6.1 Upon request from DeltaCom, BellSouth shall send test files to DeltaCom for the ODUF. The Parties agree to review and discuss the file’s content and/or format. For testing of usage results, BellSouth shall request that DeltaCom set up a production (LIVE) file. The live test may consist of DeltaCom’s employees making test calls for the types of services DeltaCom requests on the ODUF. These test calls are logged by DeltaCom, and the logs are provided to BellSouth. These logs will be used to verify the files. Testing will be completed within 30 calendar days from the date on which the initial test file was sent.

RESALE DISCOUNTS & RATES - North Carolina

Att: 1 Exh: E

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic- 1st

Incremental Charge - Manual Svc Order vs. Electronic- Add'l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add'l

First

Add'l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

RESALE APPLICABLE DISCOUNTS

Residence %

21.50

Business %

17.60

CSAs %

17.60

OPERATIONS SUPPORT SYSTEMS (OSS) - "REGIONAL RATES"

NOTE: (1) CLEC should contact its contract negotiator if it prefers the "state specific" OSS charges as ordered by the State Commissions. The OSS charges currently contained in this rate exhibit are the BellSouth "regional" service ordering charges. CLEC may elect either the state specific Commission ordered rates for the service ordering charges, or CLEC may elect the regional service ordering charge, however, CLEC can not obtain a mixture of the two regardless if CLEC has a interconnection contract established in each of the 9 states.

OSS - Electronic Service Order Charge, Per Local Service Request (LSR) - Resale Only

SOMEC

3.50

0.00

3.50

0.00

OSS - Manual Service Order Charge, Per Local Service Request (LSR) - Resale Only

SOMAN

19.99

0.00

19.99

0.00

ODUF/EODUF SERVICES

OPTIONAL DAILY USAGE FILE (ODUF)

ODUF: Recording, per message

0.0000174

ODUF: Message Processing, per message

0.001647

ODUF: Message Processing, per Magnetic Tape provisioned

35.91

ODUF: Data Transmission (CONNECT:DIRECT), per message

0.00011029

ENHANCED OPTIONAL DAILY USAGE FILE (EODUF)

EODUF: Message Processing, per message

0.131005

SELECTIVE CALL ROUTING USING LINE CLASS CODES (SCR-LCC)

Selective Routing Per Unique Line Class Code Per Request Per Switch

188.59

DIRECTORY ASSISTANCE CUSTOM BRANDING ANNOUNCEMENT via OLNS SOFTWARE

Recording of DA Custom Branded Announcement

3,000.00

3,000.00

Loading of DA Custom Branded Anouncement per Switch per OCN

1,170.00

1,170.00

DIRECTORY ASSISTANCE UNBRANDING via OLNS SOFTWARE

Loading of DA per OCN (1 OCN per Order)

420.00

420.00

Loading of DA per Switch per OCN

16.00

16.00

OPERATOR ASSISTANCE CUSTOM BRANDING ANNOUNCEMENT via OLNS SOFTWARE

Recording of Custom Branded OA Announcement

7,000.00

7,000.00

Loading of Custom Branded OA Announcement per shelf/NAV per OCN

500.00

500.00

Loading of OA Custom Branded Announcement per Switch per OCN

1,170.00

1,170.00

OPERATOR ASSISTANCE UNBRANDING via OLNS SOFTWARE

Loading of OA per OCN (Regional)

1,200.00

1,200.00

Page 1 of 1

Attachment 2

Exhibit 1-Form

Page 1

Attachment 2

Attachment 2

Exhibit 1-Form

Page 2

TABLE OF CONTENTS

1	Introduction	3
2	Loops	8
3	Line Splitting	32
4	Unbundled Network Element Combinations	34
5	Dedicated Transport and Dark Fiber Transport	39
6	Call Related Databases and Signaling	50
7	Automatic Location Identification/Data Management System	50
Rates		Exhibit A
Rates		Exhibit B
BellSouth/DeltaCom Points of Interconnection		Exhibit C

Attachment 2

Exhibit 1-Form

Page 3

ACCESS TO NETWORK ELEMENTS AND OTHER SERVICES

1 Introduction

1.1 This Attachment sets forth rates, terms and conditions for unbundled network elements (hereinafter referred to as Network Elements or UNEs) and combinations of Network Elements (Combinations) that BellSouth offers to DeltaCom for DeltaCom’s provision of Telecommunications Services in accordance with its obligations under Section 251(c)(3) of the Act. Additionally, this Attachment sets forth the rates, terms and conditions for other facilities and services BellSouth makes available to DeltaCom (Other Services). Additionally, the provision of a particular Network Element or Other Service may require DeltaCom to purchase other Network Elements or services. In the event of a conflict between this Attachment and any other section or provision of this Agreement, the provisions of this Attachment shall control.

1.2 The rates for each Network Element, Combinations and Other Services are set forth in Exhibits A and B. If no rate is identified in this Agreement, the rate will be as set forth in the applicable BellSouth tariff or as negotiated by the Parties upon request by either Party. If DeltaCom purchases service(s) from a tariff, all terms and conditions and rates as set forth in such tariff shall apply. A one-month minimum billing period shall apply to all Network Elements, Combinations and Other Services.

1.3 DeltaCom may purchase and use Network Elements and Other Services from BellSouth in accordance with 47 C.F.R § 51.309.

1.4 The Parties shall comply with the requirements as set forth in the technical references within this Attachment 2.

1.5 DeltaCom shall not obtain a Network Element for the exclusive provision of mobile wireless services or interexchange services.

1.6 Conversion of Wholesale Services to Network Elements or Network Elements to Wholesale Services. Upon request, BellSouth shall convert a wholesale service, or group of wholesale services, to the equivalent Network Element or Combination that is available to DeltaCom pursuant to this Agreement or convert a Network Element or Combination that is available to DeltaCom under this Agreement to an equivalent wholesale service or group of wholesale services offered by BellSouth (collectively “Conversion”). BellSouth shall charge the applicable nonrecurring switch-as-is rates for Conversions to specific Network Elements or Combinations found in Exhibit A. BellSouth shall also charge the same nonrecurring switch-as-is rates when converting from Network Elements or Combinations. Any rate change resulting from the Conversion will be effective as of the next billing cycle following BellSouth’s receipt of a complete and accurate

Attachment 2

Exhibit 1-Form

Page 4

Conversion request from DeltaCom. A Conversion shall be considered termination for purposes of any volume and/or term commitments and/or grandfathered status between DeltaCom and BellSouth. Any change from a wholesale service/group of wholesale services to a Network Element/Combination, or from a Network Element/Combination to a wholesale service/group of wholesale services, that requires a physical rearrangement will not be considered to be a Conversion for purposes of this Agreement. BellSouth will not require physical rearrangements if the Conversion can be completed through record changes only. Orders for Conversions will be handled in accordance with the guidelines set forth in the Ordering Guidelines and Processes and CLEC Information Packages as referenced in Sections 1.14.1 and 1.14.2 below.

1.7 The rates, terms and conditions for conversions shall be retroactive back to the effective date of the FCC’s Triennial Review Order (TRO). To the extent, DeltaCom had a Conversion request pending as of October 2, 2003 shall be processed under the conditions that existed prior to the TRO.

1.8 Effective March 11, 2006, and except to the extent expressly provided otherwise in this Attachment, DeltaCom may not maintain unbundled network elements or combinations of unbundled network elements, that are no longer offered pursuant to this Agreement (collectively “Arrangements”). In the event BellSouth determines that DeltaCom has in place any Arrangements after the Effective Date of this Agreement, BellSouth will provide DeltaCom with thirty (30) days written notice to disconnect or convert such Arrangements. If DeltaCom fails to submit orders to disconnect or convert such Arrangements within such thirty (30) day period, BellSouth will transition such circuits to the equivalent tariffed BellSouth service(s). Those circuits identified and transitioned by BellSouth pursuant to this Section 1.8 shall be subject to applicable switch-as-is charges.

1.9 BellSouth’s Master List of Unimpaired Wire Centers as Approved by State Commissions in its Region (Master List of Unimpaired Wire Centers) located on the BellSouth Interconnection Web site designates those wire centers that, in accordance with state Commission orders, met the FCC’s established criteria for unimpairment, as of March 11, 2005, where certain high capacity (DS1 and above) Loops and high capacity Dedicated Transport are no longer available as Network Elements. The Master List of Unimpaired Wire Centers shall be subject to modification and/or the addition of wire centers without amendment to this Agreement upon subsequent orders from state Commissions in the respective generic dockets establishing the wire centers that as of March 11, 2005, were unimpaired. Notification of such modification and/or addition of wire centers shall be via BellSouth’s Interconnection Web site. Upon the Effective Date of this Agreement, DeltaCom will not place any new orders for high capacity Dedicated Transport or high capacity Loops, as applicable, in those

 ³/8Attachment 2

Exhibit 1-Form

Page 5

wire centers listed on the Master List of Unimpaired Wire Centers. To the extent DeltaCom placed orders after March 10, 2005 for high capacity Loops or high capacity Dedicated Transport in wire centers designated on the Master List of Unimpaired Wire Centers as amended as specified above, within thirty (30) days after the Effective Date of this Agreement, or in the case of additions to the Master List of Unimpaired Wire Centers within thirty (30) days after the notice of such addition, DeltaCom shall submit an LSR(s) or spreadsheet(s) identifying those non-compliant circuits to be transitioned or disconnected. DeltaCom shall disconnect or convert such circuits to the equivalent tariffed service. BellSouth shall bill DeltaCom the difference between the rates for such circuits pursuant to this Agreement and the applicable nonrecurring and recurring charges for the equivalent tariffed service from the date of installation to the date the circuit is transitioned or disconnected. BellSouth shall designate its wire center list in accordance with the North Carolina Utilities Commission decision in Issue 5 in Docket No. P-55, Sub 1549.

1.9.1 Prior to submitting an order pursuant to this Agreement for high capacity Dedicated Transport or high capacity Loops, DeltaCom shall undertake a reasonably diligent inquiry to determine whether DeltaCom is entitled to unbundled access to such Network Elements in accordance with the terms of this Agreement. By submitting any such order, DeltaCom self-certifies that to the best of DeltaCom’s knowledge, the high capacity Dedicated Transport or high capacity Loop requested is available as a Network Element pursuant to this Agreement. Upon receiving such order, except in wire centers set forth on the Master List of Unimpaired Wire Centers, BellSouth shall process the request in reliance upon DeltaCom’s self-certification. To the extent BellSouth believes that such request does not comply with the terms of this Agreement, BellSouth shall seek dispute resolution in accordance with the General Terms and Conditions of this Agreement. In the event such dispute is resolved in BellSouth’s favor, BellSouth shall bill DeltaCom the difference between the rates for such circuits pursuant to this Agreement and the applicable nonrecurring and recurring charges for the equivalent tariffed service from the date of installation to the date the circuit is transitioned to the equivalent tariffed service. Within thirty (30) days following a decision finding in BellSouth’s favor, DeltaCom shall submit an LSR(s) or spreadsheet(s) identifying those non-compliant circuits to be transitioned to tariffed services or disconnected.

1.9.2 In the event that (1) BellSouth designated a wire center as unimpaired as set forth on the Master List of Unimpaired Wire Centers on the BellSouth Interconnection Web site, (2) as a result of such designation, DeltaCom converted high capacity Dedicated Transport or high capacity Loops to other services or ordered new services as services other than high capacity Dedicated

Attachment 2

Exhibit 1-Form

Page 6

Transport or high capacity Loop Network Elements subsequent to March 10, 2005, (3) DeltaCom otherwise would have been entitled to high capacity Dedicated Transport or high capacity Loops in such wire center at the time such alternative services were provisioned, and (4) BellSouth acknowledges, or a state or federal regulatory body with authority determines, that, at the time BellSouth designated such wire center as unimpaired, such wire center did not meet the FCC’s unimpairment criteria, then upon request of DeltaCom consistent with the applicable ordering processes as reflected in the Guides located on BellSouth’s Interconnection Web site no later than sixty (60) days after BellSouth acknowledges or the state or federal regulatory body issues an order making such a finding, BellSouth shall transition to high capacity Dedicated Transport or high capacity Loops, as appropriate, any alternative services in such wire center that were established after such wire center was designated as unimpaired. In such instances, BellSouth shall refund to DeltaCom the difference between the rate paid by DeltaCom for such services and the applicable rates set forth herein for high capacity Dedicated Transport or high capacity Loops, including but not limited to any charges associated with the Conversion (as defined in Section 1.6 above ) from high capacity Dedicated Transport or high capacity Loops to other wholesale services, if applicable, for the period from the later of March 11, 2005, or the date the circuit became a wholesale service to the date the circuit is transitioned to high capacity Dedicated Transport or high capacity Loop as described in this Section.

1.10 DeltaCom may utilize Network Elements and Other Services to provide services in accordance with this Agreement, as long as such services are consistent with industry standards and applicable BellSouth Technical References.

1.11 BellSouth will perform Routine Network Modifications (RNM) in accordance with FCC 47 C.F.R. § 51.319 (a)(7) and (e)(4) for Loops and Dedicated Transport provided under this Attachment. If BellSouth performs such RNM during normal operations and has recovered the costs for performing such modifications through the rates set forth in Exhibit A Attachment 2 of the Agreement, then BellSouth will perform such RNM at no additional charge. RNM shall be performed within the intervals established for the Network Element and subject to the performance measurements and associated remedies set forth in Attachment 9 of this Agreement. If BellSouth has not recovered the costs of such RNM in the rates set forth in Exhibit A to Attachment 2 of the Agreement, then such request will be handled as a project on an individual case basis. BellSouth will provide a price quote for the request and, upon receipt of payment from DeltaCom, BellSouth shall perform the RNM. In the event DeltaCom considers BellSouth’s price quote to be excessive, DeltaCom may seek review from the Commission.

Attachment 2

Exhibit 1-Form

Page 7

1.12 Commingling of Services

1.12.1 Commingling means the connecting, attaching, or otherwise linking of a Network Element, or a Combination, to one or more Telecommunications Services or facilities that DeltaCom has obtained at wholesale from BellSouth, or the combining of a Network Element or Combination with one or more such wholesale Telecommunications Services or facilities consistent with the NCUC’s Order dated March 1, 2006 in Docket No. P-55, Sub 1549. DeltaCom must comply with all rates, terms or conditions applicable to such wholesale Telecommunications Services or facilities.

1.12.2 Subject to the limitations set forth elsewhere in this Attachment, BellSouth shall not deny access to a Network Element or a Combination on the grounds that one or more of the elements: (1) is connected to, attached to, linked to, or combined with a wholesale facility or service obtained from BellSouth; or (2) shares part of BellSouth’s network with access services or inputs for mobile wireless services and/or interexchange services.

1.12.3 Unless otherwise agreed to by the Parties, the Network Element portion of a commingled circuit will be billed at the rates set forth in Exhibit A which are based on TELRIC and the remainder of the circuit or service will be billed in accordance with BellSouth’s tariffed rates or rates set forth in a separate agreement between the Parties, for other services offered at wholesale.

1.12.4 When multiplexing equipment is attached to a commingled circuit, the multiplexing equipment will be billed from the same agreement or tariff as the higher bandwidth circuit. Central Office Channel Interfaces (COCI) will be billed from the same agreement or tariff as the lower bandwidth circuit.

1.13 Terms and conditions for Service Date Advancement Charges, will apply in accordance with Attachment 6 and are incorporated herein by this reference. The charges shall be as set forth in Exhibit A to Attachment 2 of the Agreement.

1.14 Ordering Guidelines and Processes

1.14.1 For information regarding Ordering Guidelines and Processes for various Network Elements, Combinations and Other Services, DeltaCom should refer to the “Guides” section of the BellSouth Interconnection Web site.

1.14.2 Additional information may also be found in the individual CLEC Information Packages located at the “CLEC UNE Products” on BellSouth’s Interconnection Web site at: www.interconnection.bellsouth.com/guides/html/unes.html.

1.14.3 The provisioning of Network Elements, Combinations and Other Services to DeltaCom’s Collocation Space will require cross-connections within the central office to connect the Network Element, Combinations or Other Services to the demarcation point associated with DeltaCom’s Collocation Space. These cross-

Attachment 2

Exhibit 1-Form

Page 8

connects are separate components that are not considered a part of the Network Element, Combinations or Other Services and, thus, have a separate charge pursuant to this Agreement.

1.14.4 Testing/Trouble Reporting.

1.14.4.1 DeltaCom will be responsible for testing and isolating troubles on Network Elements. DeltaCom must test and isolate trouble to the BellSouth network before reporting the trouble to the UNE Customer Wholesale Interconnection Network Services (CWINS) Center. Upon request from BellSouth at the time of the trouble report, DeltaCom will be required to provide the results of the DeltaCom test which indicate a problem on the BellSouth network.

1.14.4.2 Once DeltaCom has isolated a trouble to the BellSouth network, and has issued a trouble report to BellSouth, BellSouth will take the actions necessary to repair the Network Element when trouble is found. BellSouth will repair its network facilities to its wholesale customers in the same time frames that BellSouth repairs similar services to its retail End Users.

1.14.4.3 DeltaCom reports a trouble on a BellSouth Network Element and no trouble is found in BellSouth’s network, BellSouth will charge DeltaCom a Maintenance of Service Charge for any dispatching and testing (both inside and outside the CO) required by BellSouth in order to confirm the Network Element’s working status. BellSouth will assess the applicable Maintenance of Service rates from BellSouth’s FCC No.1 Tariff, Section 13.3.1.

1.14.4.4 In the event BellSouth must dispatch to the End User’s location more than once due to incorrect or incomplete information provided by DeltaCom (e.g., incomplete address, incorrect contact name/number, etc.), BellSouth will bill DeltaCom for each additional dispatch required to repair the Network Element due to the incorrect/incomplete information provided. BellSouth will assess the applicable Maintenance of Service rates from BellSouth’s FCC No.1 Tariff, Section 13.3.1.

2 Loops

2.1 General. The local loop Network Element is defined as a transmission facility that BellSouth provides pursuant to this Attachment between a distribution frame (or its equivalent) in BellSouth’s central office and the loop demarcation point at an End User premises (Loop). Facilities that do not terminate at a demarcation point at an End User premises, including, by way of example, but not limited to, facilities that terminate to another carrier’s switch or premises, a cell site, Mobile Switching Center or base station, do not constitute local Loops under Section 251, except to the extent that DeltaCom may require Loops to such locations for the purpose of providing telecommunications services to its

Attachment 2

Exhibit 1-Form

Page 9

personnel at those locations. The Loop Network Element includes all features, functions, and capabilities of the transmission facilities, including the network interface device, and attached electronics (except those used for the provision of advanced services, such as Digital Subscriber Line Access Multiplexers (DSLAMs)), optronics and intermediate devices (including repeaters and load coils) used to establish the transmission path to the End User’s premises, including inside wire owned or controlled by BellSouth. DeltaCom shall purchase the entire bandwidth of the Loop and, except as required herein or as otherwise agreed to by the Parties, BellSouth shall not subdivide the frequency of the Loop.

2.1.1 The Loop does not include any packet switched features, functions or capabilities.

2.1.2 Fiber to the Home (FTTH) loops are local loops consisting entirely of fiber optic cable, whether dark or lit, serving an End User’s premises or, in the case of predominantly residential multiple dwelling units (MDUs), a fiber optic cable, whether dark or lit, that extends to the MDU minimum point of entry (MPOE). Fiber to the Curb (FTTC) loops are local loops consisting of fiber optic cable connecting to a copper distribution plant that is not more than five hundred (500) feet from the End User’s premises or, in the case of predominantly residential MDUs, not more than five hundred (500) feet from the MDU’s MPOE. The fiber optic cable in a FTTC loop must connect to a copper distribution plant at a serving area interface from which every other copper distribution subloop also is not more than five hundred (500) feet from the respective End User’s premises. BellSouth shall offer DeltaCom unbundled access to FTTH/FTTC loops serving enterprise customers and predominantly business MDUs.

2.1.2.1 In new build (Greenfield) areas, where BellSouth has only deployed FTTH/FTTC facilities, BellSouth is under no obligation to provide such FTTH and FTTC Loops. FTTH facilities include fiber loops deployed to the MPOE of a MDU that is predominantly residential regardless of the ownership of the inside wiring from the MPOE to each End User in the MDU.

2.1.2.2 In FTTH/FTTC overbuild situations where BellSouth also has copper Loops, BellSouth will make those Loops available to DeltaCom on an unbundled basis pursuant to the requirements of 47 C.F.R. § 51.319(a)(3)(iii). BellSouth’s retirements of copper loops or copper subloops must comply with the requirements of 47 C.F.R. § 51.319(a)(3)(iv).

2.1.2.3 Notwithstanding the above, nothing in this Section shall limit BellSouth’s obligations to offer DeltaCom an unbundled DS1 Loop (or loop/transport combination) in any wire center where BellSouth is required to provide unbundled access to DS1 loops and loop/transport combinations.

2.1.2.4 Furthermore, in FTTH/FTTC overbuild areas where BellSouth has not yet retired copper facilities, BellSouth is not obligated to ensure that such copper Loops in

Attachment 2

Exhibit 1-Form

Page 10

that area are capable of transmitting signals prior to receiving a request for access to such Loops by DeltaCom. If a request is received by BellSouth for a copper Loop, and the copper facilities have not yet been retired, BellSouth will restore the copper Loop to serviceable condition if technically feasible. In these instances of Loop orders in an FTTH/FTTC overbuild area, BellSouth’s standard Loop provisioning interval will not apply, and the order will be handled on a project basis by which the Parties will negotiate the applicable provisioning interval

2.1.3 A hybrid Loop is a local Loop, composed of both fiber optic cable, usually in the feeder plant, and copper twisted wire or cable, usually in the distribution plant. BellSouth shall provide unbundled access to hybrid loops pursuant to the requirements of 47 C.F.R. 51.319(a)(2).

2.1.4 Transition for DS1 and DS3 Loops

2.1.4.1 For purposes of this Section 2, the Transition Period for the Embedded Base of DS1 and DS3 Loops and for the Excess DS1 and DS3 Loops (defined in 2.1.4.3) is the twelve (12) month period beginning March 11, 2005 and ending March 10, 2006.

2.1.4.2 For purposes of this Section 2, Embedded Base means DS1 and DS3 Loops that were in service for DeltaCom as of March 10, 2005 in those wire centers that, as of such date, met the criteria set forth in Sections 2.1.4.6.2 or 2.1.4.6.3 below. Subsequent disconnects or loss of End Users shall be removed from the Embedded Base.

2.1.4.3 Excess DS1 and DS3 Loops are those DeltaCom DS1 and DS3 Loops in service as of March 10, 2005, in excess of the caps set forth in Sections 2.3.6.2 and 2.3.12 below, respectively. Subsequent disconnects or loss of End Users shall be removed from Excess DS1 and DS3 Loops.

2.1.4.4 BellSouth shall not provide more than ten (10) unbundled DS1 Loops to DeltaCom at any single building in which DS1 Loops are available as unbundled loops. DeltaCom may obtain a maximum of a single Unbundled DS3 loop to any single building in which DS3 Loops are available as Unbundled Loops.

2.1.4.5 For purposes of this Section 2, a Business Line is defined in 47 C.F.R. § 51.5.

2.1.4.6 Notwithstanding anything to the contrary in this Agreement, and except as set forth in Section 2.1.4.12 below, BellSouth shall make available DS1 and DS3 Loops as described in this Section 2.1.4 only for DeltaCom’s Embedded Base during the Transition Period:

2.1.4.6.1 For purposes of this Section 2, a fiber-based collocator is defined in 47 C.F.R. § 5.1.5.

Attachment 2

Exhibit 1-Form

Page 11

2.1.4.6.2 DS1 Loops at any location within the service area of a wire center containing 60,000 or more Business Lines and four (4) or more fiber-based collocators.

2.1.4.6.3 DS3 Loops at any location within the service area of a wire center containing 38,000 or more Business Lines and four (4) or more fiber-based collocators.

2.1.4.7 The Master List of Unimpaired Wire Centers as described in Section 1.9 sets forth the list of wire centers meeting the criteria set forth in Sections 2.1.4.6.2 and 2.1.4.6.3 above as of March 11, 2005.

2.1.4.8 Transition Period Pricing. From March 11, 2005, through the completion of the Transition Period, BellSouth shall charge a rate for DeltaCom’s Embedded Base and DeltaCom’s Excess DS1 and DS3 Loops equal to the higher of:

2.1.4.8.1 115% of the rate paid for that element on June 15, 2004; or

2.1.4.8.2 115% of a new rate the Commission establishes, if any, between June 16, 2004 and March 11, 2005.

2.1.4.8.3 These rates shall be as set forth in Exhibit B to Attachment 2 of the Agreement and this Section 2.1.4.8.

2.1.4.9 The Transition Period shall apply only to (1) DeltaCom’s Embedded Base and (2) DeltaCom’s Excess DS1 and DS3 Loops. DeltaCom shall not add new DS1 or DS3 loops as described in this Section 2.1.4 pursuant to this Agreement, except pursuant to the self-certification process as set forth in Section 1.9 of this Attachment and as set forth in Section 2.1.4.13 below.

2.1.4.10 Once a wire center meets or exceeds both of the thresholds set forth in Section 2.1.4.6.2 above, no future DS1 Loop unbundling will be required in that wire center.

2.1.4.11 Once a wire center meets or exceeds both of the thresholds set forth in Section 2.1.4.6.3 above, no future DS3 Loop unbundling will be required in that wire center.

2.1.4.12 No later than December 9, 2005 DeltaCom shall submit spreadsheet(s) identifying all of the Embedded Base of circuits and Excess DS1 and DS3 Loops to be either disconnected or converted to other BellSouth services pursuant to Section 1.6 above. The Parties shall negotiate a project schedule for the Conversion of the Embedded Base and Excess DS1 and DS3 Loops. For circuits for which DeltaCom requests Conversion to tariffed wholesale services, BellSouth will not complete the Conversion until March 11, 2006, or later, and BellSouth will continue to bill DeltaCom at the transitional rates set forth in 2.1.4.8 until the circuit is converted to the tariffed wholesale service, which will occur on March 11, 2006, or later.

Attachment 2

Exhibit 1-Form

Page 12

2.1.4.12.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 2.1.4.12 above for all of its Embedded Base and Excess DS1 and DS3 Loops on or before March 10, 2006 or by some other mutually agreed upon date, BellSouth will identify DeltaCom’s remaining Embedded Base and Excess DS1 and DS3 Loops, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s) effective March 11, 2006. Those circuits identified and transitioned by BellSouth pursuant to this Section 2.1.4.12 shall be subject to the applicable switch-as-is charges as set forth in this Agreement and, only where physical rearrangements are necessary, the full nonrecurring charges for installation of such BellSouth services as set forth in BellSouth’s tariffs shall apply to such circuits.

2.1.4.12.2 For Embedded Base circuits and Excess DS1 and DS3 Loops converted pursuant to Section 2.1.4.12 above or transitioned pursuant to Section 2.1.4.12.1 above, the applicable recurring tariff charge shall apply to each circuit as of March 11, 2006.

2.1.4.12.3 To the extent that DeltaCom no longer desires to provide a particular service, it must notify BellSouth of its intent to discontinue and the parties must coordinate the disconnect to take place prior the conclusion of the applicable transition period. DeltaCom must also adhere to Commission Rule R17-2(q) regarding the discontinuance of service to customers.

2.1.4.13 Modifications and Updates to the Wire Center List and Subsequent Transition Periods

2.1.4.13.1 In the event BellSouth identifies additional wire centers that meet the criteria set forth in Section 2.1.4.6 above, but that were not included in the Initial Wire Center List, BellSouth shall include such additional wire centers in a carrier notification letter (CNL). Each such list of additional wire centers shall be considered a “Subsequent Wire Center List”.

2.1.4.13.2 DeltaCom shall have thirty (30) business days to dispute the additional wire centers listed on BellSouth’s CNL as set forth in the General Terms and Conditions. Absent such dispute, effective thirty (30) business days after the date of a BellSouth CNL providing a Subsequent Wire Center List, BellSouth shall not be required to unbundle DS1 and/or DS3 Loops, as applicable, in such additional wire center(s).

2.1.4.13.3 For purposes of Section 2.1.4.12 above, BellSouth shall make available DS1 and DS3 Loops that were in service for DeltaCom in a wire center on the Subsequent Wire Center List as of the thirtieth (30^th) business day after the date of BellSouth’s CNL identifying the Subsequent Wire Center List (Subsequent Embedded Base) until one-hundred and fifty (150) days after the thirtieth (30th) business day from the date of BellSouth’s CNL identifying the Subsequent Wire Center List (Subsequent Transition Period).

Attachment 2

Exhibit 1-Form

Page 13

2.1.4.13.4 Subsequent disconnects or loss of End Users shall be removed from the Subsequent Embedded Base.

2.1.4.13.5 The rates set forth in Exhibit B shall apply to the Subsequent Embedded Base during the Subsequent Transition Period.

2.1.4.13.6 No later than forty (40) days from BellSouth’s CNL identifying the Subsequent Wire Center List, DeltaCom shall submit a spreadsheet(s) identifying the Subsequent Embedded Base of circuits to be disconnected or converted to other BellSouth services. The Parties shall negotiate a project schedule for the Conversion of the Subsequent Embedded Base.

2.1.4.13.6.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 2.1.4.13.6 above for all of its Subsequent Embedded Base within forty (40) days after the date of BellSouth’s CNL identifying the Subsequent Wire Center List, BellSouth will identify DeltaCom’s remaining Subsequent Embedded Base, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s). Those circuits identified and transitioned by BellSouth pursuant to this Section 2.1.4.13 shall be subject to the applicable switch-as-is charges as set forth in this Agreement and, only where physical rearrangements are necessary, the full nonrecurring charges for installation of such BellSouth services as set forth in BellSouth’s tariffs shall apply to such circuits.

2.1.4.13.6.2 For Subsequent Embedded Base circuits converted pursuant to Section 2.1.4.13.6 above or transitioned pursuant to Section 2.1.4.13.6.1 above, the applicable recurring tariff charges shall apply as of the earlier of the date each circuit is converted or transitioned, as applicable, or the first day after the end of the Subsequent Transition Period.

2.1.5 Where facilities are available, BellSouth will install Loops in compliance with BellSouth’s Products and Services Interval Guide available at BellSouth’s Web site. For orders of fifteen (15) or more Loops, the installation and any applicable Order Coordination as described below will be handled on a project basis, and the intervals will be set by the BellSouth project manager for that order. When Loops require a Service Inquiry (SI) prior to issuing the order to determine if facilities are available, the interval for the SI process is separate from the installation interval.

2.1.6 The Loop shall be provided to DeltaCom in accordance with BellSouth’s TR 73600 Unbundled Local Loop Technical Specification and applicable industry standard technical references.

Attachment 2

Exhibit 1-Form

Page 14

2.1.7 BellSouth will only provision, maintain and repair the Loops to the standards that are consistent with the type of Loop ordered.

2.1.8 When a BellSouth technician is required to be dispatched to provision the Loop, BellSouth will tag the Loop with the Circuit ID number and the name of the ordering CLEC. When a dispatch is not required to provision the Loop, BellSouth will tag the Loop on the next required visit to the End User’s location. If DeltaCom wants to ensure the Loop is tagged during the provisioning process for Loops that may not require a dispatch (e.g., UVL-SL1, UVL-SL2, and UCL-ND), DeltaCom may order Loop Tagging. Rates for Loop Tagging are as set forth in Exhibit A.

2.1.8.1 For voice grade Loop orders (or orders for Loops intended to provide voice grade services), DeltaCom shall have dial-tone available for that Loop forty-eight (48) hours prior to the Loop order completion due date.

2.1.9 Order Coordination (OC) and Order Coordination-Time Specific (OC-TS)

2.1.9.1 OC allows BellSouth and DeltaCom to coordinate the installation of the SL2 Loops, Unbundled Digital Loops (UDL) and other Loops where OC may be purchased as an option, to DeltaCom’s facilities to limit End User service outage. OC is available when the Loop is provisioned over an existing circuit that is currently providing service to the End User. OC for physical conversions will be scheduled at BellSouth’s discretion during normal working hours on the committed due date. OC shall be provided in accordance with the chart set forth below.

2.1.9.2 OC-TS allows DeltaCom to order a specific time for OC to take place. BellSouth will make commercially reasonable efforts to accommodate DeltaCom’s specific conversion time request. However, BellSouth reserves the right to negotiate with DeltaCom a conversion time based on load and appointment control when necessary. This OC-TS is a chargeable option for all Loops except Unbundled Copper Loops (UCL) and is billed in addition to the OC charge. DeltaCom may specify a time between 9:00 a.m. and 4:00 p.m. (location time) Monday through Friday (excluding holidays). If DeltaCom specifies a time outside this window, or selects a time or quantity of Loops that requires BellSouth technicians to work outside normal work hours, overtime charges will apply in addition to the OC and OC-TS charges. Overtime charges will be applied based on the amount of overtime worked and in accordance with the rates established in BellSouth’s intrastate Access Services Tariff, Section E13.2, for each state. The OC-TS charges for an order due on the same day at the same location will be applied on a per LSR basis.

Attachment 2

Exhibit 1-Form

Page 15

2.1.10

	Order Coordination (OC)	Order Coordination – Time Specific (OC-TS)	Test Points	DLR	Charge for Dispatch and Testing if No Trouble Found
SL-1 (Non-Designed)	Chargeable Option	Chargeable Option	Not available	Chargeable Option – ordered as Engineering Information Document	Charged for Dispatch inside and outside Central Office
UCL-ND (Non-Designed)	Chargeable Option	Not Available	Not Available	Chargeable Option – ordered as Engineering Information Document	Charged for Dispatch inside and outside Central Office
Unbundled Voice Loops—SL-2 (including 2- and 4-wire UVL) (Designed)	Included	Chargeable Option	Included	Included	Charged for Dispatch outside Central Office
Unbundled Digital Loop (Designed)	Included	Chargeable Option	Included (where appropriate)	Included	Charged for Dispatch outside Central Office
Unbundled Copper Loop (Designed)	Chargeable in accordance with Section 2	Not available	Included	Included	Charged for Dispatch outside Central Office
For UVL-SL1 and UCLs, DeltaCom must order and will be billed for both OC and OC-TS if requesting OC-TS.

2.1.11 CLEC to CLEC Conversions for Unbundled Loops

2.1.11.1 The CLEC to CLEC conversion process for Loops may be used by DeltaCom when converting an existing Loop from another CLEC for the same End User. The Loop type being converted must be included in DeltaCom’s Agreement before requesting a conversion.

2.1.11.2 To utilize the CLEC to CLEC conversion process, the Loop being converted must be the same Loop type with no requested changes to the Loop, must serve the same End User location from the same serving wire center, and must not require an outside dispatch to provision.

Attachment 2

Exhibit 1-Form

Page 16

2.1.11.3 The Loops converted to DeltaCom pursuant to the CLEC to CLEC conversion process shall be provisioned in the same manner and with the same functionality and options as described in this Agreement for the specific Loop type.

2.1.12 Bulk Migration

2.1.12.1 BellSouth will make available to DeltaCom a Bulk Migration process pursuant to which DeltaCom may request to migrate port/loop combinations, provisioned pursuant to a separate agreement between the parties, to Loops (UNE-L). The Bulk Migration process may be used if such loop/port combinations are (1) associated with two (2) or more Existing Account Telephone Numbers (EATNs); and (2) located in the same Central Office. The terms and conditions for use of the Bulk Migration process are described in the BellSouth CLEC Information Package. The CLEC Information Package is located on BellSouth’s Interconnection Web site at: www.interconnection.bellsouth.com/guides/html/unes.html. The rates for the Bulk Migration process shall be the nonrecurring rates as set forth in Exhibit A. Additionally, OSS charges will also apply. Except as otherwise set forth herein, Loops connected to Integrated Digital Loop Carrier (IDLC) systems will be migrated pursuant to Section 2.6 below.

2.1.12.2 Should DeltaCom request migration for two (2) or more EATNs containing fifteen (15) or more circuits, DeltaCom must use the Bulk Migration process referenced in 2.1.11.1 above.

2.2 Unbundled Voice Loops (UVLs)

2.2.1 BellSouth shall make available the following UVLs:

2.2.1.1 2-wire Analog Voice Grade Loop – SL1 (Non-Designed);

2.2.1.2 2-wire Analog Voice Grade Loop – SL2 (Designed); or

2.2.1.3 4-wire Analog Voice Grade Loop (Designed)

2.2.2 UVL may be provisioned using any type of facility that will support voice grade services. This may include loaded copper, non-loaded copper, digital loop carrier systems, fiber/copper combination (hybrid loop) or a combination of any of these facilities. BellSouth, in the normal course of maintaining, repairing, and configuring its network, may also change the facilities that are used to provide any given voice grade circuit. This change may occur at any time. In these situations, BellSouth will only ensure that the newly provided facility will support voice

Attachment 2

Exhibit 1-Form

Page 17

grade services. BellSouth will not guarantee that DeltaCom will be able to continue to provide any advanced services over the new facility. BellSouth will offer UVL in two (2) different service levels—Service Level One (SL1) and Service Level Two (SL2).

2.2.3 Unbundled Voice Loop—SL1 (UVL-SL1). Loops are 2-wire loop start circuits, will be non-designed, and will not have remote access test points. OC will be offered as a chargeable option on SL1 Loops when reuse of existing facilities has been requested by DeltaCom, however, OC is always required on UCLs that involve the reuse of facilities that are currently providing service. DeltaCom may also order OC-TS when a specified conversion time is requested. OC-TS is a chargeable option for any coordinated order and is billed in addition to the OC charge. An Engineering Information (EI) document can be ordered as a chargeable option. The EI document provides Loop Make-Up information that is similar to the information normally provided in a Design Layout Record (DLR). Upon issuance of a non-coordinated order in the service order system, SL1 Loops will be activated on the due date in the same manner and time frames that BellSouth normally activates POTS-type Loops for its End Users.

2.2.4 For an additional charge BellSouth will make available Loop Testing so that DeltaCom may request further testing on new UVL-SL1 Loops. Rates for Loop Testing are as set forth in Exhibit A.

2.2.5 Unbundled Voice Loop – SL2 (UVL-SL2). Loops may be 2-wire or 4-wire circuits, shall have remote access test points, and will be designed with a DLR provided to DeltaCom. SL2 circuits can be provisioned with loop start, ground start or reverse battery signaling. OC is provided as a standard feature on SL2 Loops. The OC feature will allow DeltaCom to coordinate the installation of the Loop with the disconnect of an existing customer’s service and/or number portability service. In these cases, BellSouth will perform the order conversion with standard order coordination at its discretion during normal work hours.

2.3 Unbundled Digital Loops

2.3.1 BellSouth will offer UDLs. UDLs are service specific, will be designed, will be provisioned with test points (where appropriate), and will come standard with OC and a DLR. The various UDLs are intended to support a specific digital transmission scheme or service.

2.3.2 BellSouth shall make available the following UDLs, subject to restrictions set forth herein:

2.3.2.1 2-wire Unbundled ISDN Digital Loop;

2.3.2.2 2-wire Unbundled ADSL Compatible Loop;

Attachment 2

Exhibit 1-Form

Page 18

2.3.2.3 2-wire Unbundled HDSL Compatible Loop; This is a designed Loop that meets Carrier Serving Area (CSA) specifications, may be up to 12,000 feet long and may have up to 2,500 feet of bridged tap (inclusive of Loop length). It may be a 2-wire or 4-wire circuit and will come standard with a test point, OC, and a DLR.

2.3.2.4 4-wire Unbundled HDSL Compatible Loop;

2.3.2.5 4-wire Unbundled DS1 Digital Loop; This is a designed 4-wire Loop that is provisioned according to industry standards for DS1 or Primary Rate ISDN services and will come standard with a test point, OC, and a DLR. A DS1 Loop may be provisioned over a variety of loop transmission technologies including copper, HDSL-based technology or fiber optic transport systems. It will include a 4-wire DS1 Network Interface at the End User’s location.

2.3.2.5.1 This is a designed 4-wire Loop that is provisioned according to industry standards for DS1 or Primary Rate ISDN services and will come standard with a test point, OC, and a DLR. A DS1 Loop may be provisioned over a variety of loop transmission technologies including copper, HDSL-based technology or fiber optic transport systems. It will include a 4-wire DS1 Network Interface at the End User’s location.

2.3.2.5.2 DS3 Loop. DS3 Loop is a two-point digital transmission path which provides for simultaneous two-way transmission of serial, bipolar, return-to-zero isochronous digital electrical signals at a transmission rate of forty-four point seven thirty-six (44.736) megabits per second (Mbps) that is dedicated to the use of the ordering CLEC in its provisioning of local exchange and associated exchange access services. It may provide transport for twenty-eight (28) DS1 channels, each of which provides the digital equivalent of twenty-four (24) analog voice grade channels. The interface to unbundled dedicated DS3 transport is a metallic-based electrical interface.

2.3.2.6 4-wire Unbundled Digital Loop/DS0 – 64 kbps, 56 kbps and below;

2.3.2.7 DS3 Loop; or

2.3.2.8 STS-1 Loop.

2.3.3 2-wire Unbundled ISDN Digital Loops. These will be provisioned according to industry standards for 2-Wire Basic Rate ISDN services and will come standard with a test point, OC, and a DLR. DeltaCom will be responsible for providing BellSouth with a Service Profile Identifier (SPID) associated with a particular ISDN-capable Loop and End User. With the SPID, BellSouth will be able to adequately test the circuit and ensure that it properly supports ISDN service.

Attachment 2

Exhibit 1-Form

Page 19

2.3.4 2-wire ADSL-Compatible Loop. This is a designed Loop that is provisioned according to Revised Resistance Design (RRD) criteria and may be up to 18,000 feet long and may have up to 6,000 feet of bridged tap (inclusive of Loop length). The Loop is a 2-wire circuit and will come standard with a test point, OC, and a DLR.

2.3.5 2-wire or 4-wire HDSL-Compatible Loop. This is a designed Loop that meets Carrier Serving Area (CSA) specifications, may be up to 12,000 feet long and may have up to 2,500 feet of bridged tap (inclusive of Loop length). It may be a 2-wire or 4-wire circuit and will come standard with a test point, OC, and a DLR.

2.3.6 4-wire Unbundled DS1 Digital Loop.

2.3.6.1 This is a designed 4-wire Loop that is provisioned according to industry standards for DS1 or Primary Rate ISDN services and will come standard with a test point, OC, and a DLR. A DS1 Loop may be provisioned over a variety of loop transmission technologies including copper, HDSL-based technology or fiber optic transport systems. It will include a 4-wire DS1 Network Interface at the End User’s location.

2.3.6.2 BellSouth shall not provide more than ten (10) unbundled DS1 Loops to DeltaCom at any single building in which DS1 Loops are available as unbundled Loops.

2.3.7 4-wire Unbundled Digital/DS0 Loop. These are designed 4-wire Loops that may be configured as sixty-four (64)kbps, fifty-six (56)kbps, nineteen (19)kbps, and other sub-rate speeds associated with digital data services and will come standard with a test point, OC, and a DLR.

2.3.8 DS3 Loop. DS3 Loop is a two-point digital transmission path which provides for simultaneous two-way transmission of serial, bipolar, return-to-zero isochronous digital electrical signals at a transmission rate of forty-four point seven thirty-six (44.736) megabits per second (Mbps) that is dedicated to the use of the ordering CLEC. It may provide transport for twenty-eight (28) DS1 channels, each of which provides the digital equivalent of twenty-four (24) analog voice grade channels. The interface to unbundled dedicated DS3 transport is a metallic-based electrical interface.

2.3.9 STS-1 Loop. STS-1 Loop is a high-capacity digital transmission path with SONET VT1.5 mapping that is dedicated for the use of the ordering customer. It is a two (2)-point digital transmission path which provides for simultaneous two (2)-way transmission of serial bipolar return-to-zero synchronous digital electrical signals at a transmission rate of fifty-one point eighty-four (51.84) Mbps. It may provide transport for twenty-eight (28) DS1 channels, each of which provides the digital equivalent of twenty-four (24) analog voice grade channels. The interface to unbundled dedicated STS-1 transport is a metallic-based electrical interface.

Attachment 2

Exhibit 1-Form

Page 20

2.3.10 Both DS3 Loop and STS-1 Loop require a SI in order to ascertain availability.

2.3.11 DS3 services come with a test point and a DLR. Mileage is airline miles, rounded up and a minimum of one (1) mile applies. BellSouth’s TR 73501 LightGate® Service Interface and Performance Specifications, Issue D, June 1995 applies to DS3 services.

2.3.12 DeltaCom may obtain a maximum of a single Unbundled DS3 Loop to any single building in which DS3 Loops are available as Unbundled Loops.

2.4 Unbundled Copper Loops (UCL)

2.4.1 BellSouth shall make available UCLs. The UCL is a copper twisted pair Loop that is unencumbered by any intervening equipment (e.g., filters, load coils, range extenders, digital loop carrier, or repeaters) and is not intended to support any particular telecommunications service. The UCL will be offered in two (2) types - Designed and Non-Designed.

2.4.2 Unbundled Copper Loop – Designed (UCL-D)

2.4.2.1 The UCL-D will be provisioned as a dry copper twisted pair (2-wire or 4-wire) Loop that is unencumbered by any intervening equipment (e.g., filters, load coils, range extenders, digital loop carrier, or repeaters).

2.4.2.2 A UCL-D will be eighteen thousand (18,000) feet or less in length and is provisioned according to Resistance Design parameters, may have up to six thousand (6,000) feet of bridged tap and will have up to thirteen hundred (1300) Ohms of resistance.

2.4.2.3 The UCL-D is a designed circuit, is provisioned with a test point, and comes standard with a DLR. OC is a chargeable option for a UCL-D; however, OC is always required on UCLs where a reuse of existing facilities has been requested by DeltaCom.

2.4.2.4 These Loops are not intended to support any particular services and may be utilized by DeltaCom to provide a wide-range of telecommunications services as long as those services do not adversely affect BellSouth’s network. This facility will include a Network Interface Device (NID) at the customer’s location for the purpose of connecting the Loop to the customer’s inside wire.

Attachment 2

Exhibit 1-Form

Page 21

2.4.3 Unbundled Copper Loop – Non-Designed (UCL-ND)

2.4.3.1 The UCL–ND is provisioned as a dedicated 2-wire metallic transmission facility from BellSouth’s Main Distribution Frame (MDF) to a customer’s premises (including the NID). The UCL-ND will be a “dry copper” facility in that it will not have any intervening equipment such as load coils, repeaters, or digital access main lines (DAMLs), and may have up to six thousand (6,000) feet of bridged tap between the End User’s premises and the serving wire center. The UCL-ND typically will be thirteen hundred (1300) Ohms resistance and in most cases will not exceed eighteen thousand (18,000) feet in length, although the UCL-ND will not have a specific length limitation. For Loops less than eighteen thousand (18,000) feet and with less than thirteen hundred (1300) Ohms resistance, the Loop will provide a voice grade transmission channel suitable for loop start signaling and the transport of analog voice grade signals. The UCL-ND will not be designed and will not be provisioned with either a DLR or a test point.

2.4.3.2 The UCL-ND facilities may be mechanically assigned using BellSouth’s assignment systems. Therefore, the Loop Makeup (LMU) process is not required to order and provision the UCL-ND. However, DeltaCom can request LMU for which additional charges would apply.

2.4.3.3 For an additional charge, BellSouth also will make available Loop Testing so that DeltaCom may request further testing on the UCL-ND. Rates for Loop Testing are as set forth in Exhibit A.

2.4.3.4 UCL-ND Loops are not intended to support any particular service and may be utilized by DeltaCom to provide a wide-range of telecommunications services as long as those services do not adversely affect BellSouth’s network. The UCL-ND will include a NID at the customer’s location for the purpose of connecting the Loop to the customer’s inside wire.

2.4.3.5 OC will be provided as a chargeable option and may be utilized when the UCL-ND provisioning is associated with the reuse of BellSouth facilities. OC-TS does not apply to this product.

2.4.3.6 DeltaCom may use BellSouth’s Unbundled Loop Modification (ULM) offering to remove excessive bridged taps and/or load coils from any copper Loop within the BellSouth network. Therefore, some Loops that would not qualify as UCL-ND could be transformed into Loops that do qualify, using the ULM process.

2.5 Unbundled Loop Modifications (Line Conditioning)

2.5.1 BellSouth shall perform line conditioning in accordance with FCC 47 C.F.R. §51.319 (a)(1)(iii). Line Conditioning is as defined in FCC 47 C.F.R. § 51.319 (a)(1)(iii)(A). Insofar as it is technically feasible, BellSouth shall test and report troubles for all the features, functions, and capabilities of conditioned copper lines, and may not restrict its testing to voice transmission only.

Attachment 2

Exhibit 1-Form

Page 22

2.5.2 The line conditioning activity of load coil removal on copper loops should not be limited to copper loops with only a length of 18,000 feet or less.

2.5.3 For any copper loop being ordered by DeltaCom which has over six thousand (6,000) feet of combined bridged tap will be modified, upon request from DeltaCom, so that the loop will have a maximum of six thousand (6,000) feet of bridged tap. This modification will be performed at no additional charge to DeltaCom. Loop conditioning orders that require the removal of bridged tap that serves no network design purpose on a copper Loop that will result in a combined total of bridged tap between two thousand five hundred (2,500) and six thousand (6,000) feet will be performed at the rates set forth in Exhibit A.

2.5.4 DeltaCom may request removal of any unnecessary and non-excessive bridged tap (bridged tap between zero (0) and two thousand five hundred (2,500) feet which serves no network design purpose), at rates pursuant to BellSouth’s SC Process as mutually agreed to by the Parties.

2.5.5 Rates for ULM are as set forth in Exhibit A.

2.5.6 BellSouth will not modify a Loop in such a way that it no longer meets the technical parameters of the original Loop type (e.g., voice grade, ADSL, etc.) being ordered.

2.5.7 If DeltaCom requests ULM on a reserved facility for a new Loop order, BellSouth may perform a pair change and provision a different Loop facility in lieu of the reserved facility with ULM if feasible. The Loop provisioned will meet or exceed specifications of the requested Loop facility as modified. DeltaCom will not be charged for ULM if a different Loop is provisioned. For Loops that require a DLR or its equivalent, BellSouth will provide LMU detail of the Loop provisioned.

2.5.8 DeltaCom shall request Loop make up information pursuant to this Attachment prior to submitting a service inquiry and/or a LSR for the Loop type that DeltaCom desires BellSouth to condition.

2.5.9 When requesting ULM for a Loop that BellSouth has previously provisioned for DeltaCom, DeltaCom will submit a SI to BellSouth. If a spare Loop facility that meets the Loop modification specifications requested by DeltaCom is available at the location for which the ULM was requested, DeltaCom will have the option to change the Loop facility to the qualifying spare facility rather than to provide ULM. In the event that BellSouth changes the Loop facility in lieu of providing ULM, DeltaCom will not be charged for ULM but will only be charged the service order charges for submitting an order.

Attachment 2

Exhibit 1-Form

Page 23

2.6 Loop Provisioning Involving IDLC

2.6.1 Where DeltaCom has requested an Unbundled Loop and BellSouth uses IDLC systems to provide the local service to the End User and BellSouth has a suitable alternate facility available, BellSouth will make such alternative facilities available to DeltaCom. If a suitable alternative facility is not available, then to the extent it is technically feasible, BellSouth will implement one of the following alternative arrangements for DeltaCom (e.g., hairpinning):

1. Roll the circuit(s) from the IDLC to any spare copper that exists to the customer premises.

2. Roll the circuit(s) from the IDLC to an existing DLC that is not integrated.

3. If capacity exists, provide “side-door” porting through the switch.

4. If capacity exists, provide “Digital Access Cross-Connect System (DACS)-door” porting (if the IDLC routes through a DACS prior to integration into the switch).

2.6.2 Arrangements 3 and 4 above require the use of a designed circuit. Therefore, non-designed Loops such as the SL1 voice grade and UCL-ND may not be ordered in these cases.

2.6.3 If no alternate facility is available, and upon request from DeltaCom, and if agreed to by both Parties, BellSouth may utilize its SC process to determine the additional costs required to provision facilities. DeltaCom will then have the option of paying the one-time SC rates to place the Loop.

2.7 Network Interface Device

2.7.1 The NID is defined as any means of interconnection of the End User’s customer premises wiring to BellSouth’s distribution plant, such as a cross-connect device used for that purpose. The NID is a single line termination device or that portion of a multiple line termination device required to terminate a single line or circuit at the premises. The NID features two (2) independent chambers or divisions that separate the service provider’s network from the End User’s premises wiring. Each chamber or division contains the appropriate connection points or posts to which the service provider and the End User each make their connections. The NID provides a protective ground connection and is capable of terminating cables such as twisted pair cable.

2.7.2 BellSouth shall permit DeltaCom to connect DeltaCom’s Loop facilities to the End User’s customer premises wiring through the BellSouth NID or at any other technically feasible point.

2.7.3 Access to NID

2.7.3.1 DeltaCom may access the End User’s premises wiring by any of the following means and DeltaCom shall not disturb the existing form of electrical protection and shall maintain the physical integrity of the NID:

Attachment 2

Exhibit 1-Form

Page 24

2.7.3.1.1 BellSouth shall allow DeltaCom to connect its Loops directly to BellSouth’s multi-line residential NID enclosures that have additional space and are not used by BellSouth or any other telecommunications carriers to provide service to the premises;

2.7.3.1.2 Where an adequate length of the End User’s customer premises wiring is present and environmental conditions permit, either Party may remove the End User premises wiring from the other Party’s NID and connect such wiring to that Party’s own NID;

2.7.3.1.3 Either Party may enter the subscriber access chamber or dual chamber NID enclosures for the purpose of extending a cross-connect or spliced jumper wire from the customer premises wiring through a suitable “punch-out” hole of such NID enclosures; or

2.7.3.1.4 DeltaCom may request BellSouth to make other rearrangements to the End User premises wiring terminations or terminal enclosure on a time and materials cost basis.

2.7.3.2 In no case shall either Party remove or disconnect the other Party’s loop facilities from either Party’s NIDs, enclosures, or protectors unless the applicable Commission has expressly permitted the same and the disconnecting Party provides prior notice to the other Party. In such cases, it shall be the responsibility of the Party disconnecting loop facilities to leave undisturbed the existing form of electrical protection and to maintain the physical integrity of the NID. It will be DeltaCom’s responsibility to ensure there is no safety hazard, and DeltaCom will hold BellSouth harmless for any liability associated with the removal of the BellSouth Loop from the BellSouth NID. Furthermore, it shall be the responsibility of the disconnecting Party, once the other Party’s loop has been disconnected from the NID, to reconnect the disconnected loop to a nationally recognized testing laboratory listed station protector, which has been grounded as per Article 800 of the National Electrical Code. If no spare station protector exists in the NID, the disconnected loop must be appropriately cleared, capped and stored.

2.7.3.3 DeltaCom shall not remove or disconnect ground wires from BellSouth’s NIDs, enclosures, or protectors.

2.7.3.4 DeltaCom shall not remove or disconnect NID modules, protectors, or terminals from BellSouth’s NID enclosures.

2.7.3.5 Due to the wide variety of NID enclosures and outside plant environments, BellSouth will work with DeltaCom to develop specific procedures to establish the most effective means of implementing this section if the procedures set forth herein do not apply to the NID in question.

Attachment 2

Exhibit 1-Form

Page 25

2.7.4 Technical Requirements

2.7.4.1 The NID shall provide an accessible point of interconnection and shall maintain a connection to ground.

2.7.4.2 If an existing NID is accessed, it shall be capable of transferring electrical analog or digital signals between the End User’s customer premises and the distribution media and/or cross-connect to DeltaCom’s NID.

2.7.4.3 Existing BellSouth NIDs will be operational and provided in “as is” condition. DeltaCom may request BellSouth to do additional work to the NID on a time and material basis. When DeltaCom deploys its own local loops in a multiple-line termination device, DeltaCom shall specify the quantity of NID connections that it requires within such device.

2.8 Subloop Elements.

2.8.1 Where facilities permit, BellSouth shall offer access to its Unbundled Subloop (USL) elements as specified herein.

2.8.2 Unbundled Subloop Distribution (USLD)

2.8.2.1 The USLD facility is a dedicated transmission facility that BellSouth provides from an End User’s point of demarcation to a BellSouth cross-connect device. The BellSouth cross-connect device may be located within a remote terminal (RT) or a stand-alone cross-box in the field or in the equipment room of a building. The USLD media is a copper twisted pair that can be provisioned as a 2-wire or 4-wire facility. BellSouth will make available the following subloop distribution offerings where facilities exist:

USLD – Voice Grade (USLD-VG)

Unbundled Copper Subloop (UCSL)

USLD – Intrabuilding Network Cable (USLD-INC (aka riser cable))

2.8.2.2 USLD-VG is a copper subloop facility from the cross-box in the field up to and including the point of demarcation at the End User’s premises and may have load coils.

2.8.2.3 UCSL is a copper facility eighteen thousand (18,000) feet or less in length provided from the cross-box in the field up to and including the End User’s point of demarcation. If available, this facility will not have any intervening equipment such as load coils between the End User and the cross-box.

2.8.2.3.1 If DeltaCom requests a UCSL and it is not available, DeltaCom may request the copper Subloop facility be modified pursuant to the ULM process to remove load coils and/or excessive bridged taps. If load coils and/or excessive bridged taps are removed, the facility will be classified as a UCSL.

Attachment 2

Exhibit 1-Form

Page 26

2.8.2.4 USLD-INC is the distribution facility owned or controlled by BellSouth inside a building or between buildings on the same property that is not separated by a public street or road. USLD-INC includes the facility from the cross-connect device in the building equipment room up to and including the point of demarcation at the End User’s premises.

2.8.2.4.1 Upon request for USLD-INC from DeltaCom, BellSouth will install a cross-connect panel in the building equipment room for the purpose of accessing USLD-INC pairs from a building equipment room. The cross-connect panel will function as a single point of interconnection (SPOI) for USLD-INC and will be accessible by multiple carriers as space permits. BellSouth will place cross-connect blocks in twenty five (25) pair increments for DeltaCom’s use on this cross-connect panel. DeltaCom will be responsible for connecting its facilities to the twenty five (25) pair cross-connect block(s).

2.8.2.5 For access to Voice Grade USLD and UCSL, DeltaCom shall install a cable to the BellSouth cross-box pursuant to the terms and conditions for physical collocation for remote sites set forth in Attachment 4. This cable would be connected by a BellSouth technician within the BellSouth cross-box during the set-up process. DeltaCom’s cable pairs can then be connected to BellSouth’s USL within the BellSouth cross-box by the BellSouth technician.

2.8.2.6 Through the SI process, BellSouth will determine whether access to USLs at the location requested by DeltaCom is technically feasible and whether sufficient capacity exists in the cross-box. If existing capacity is sufficient to meet DeltaCom’s request, then BellSouth will perform the site set-up as described in the CLEC Information Package, located at BellSouth’s Interconnection Web site: www.interconnection.bellsouth.com/products/html/unes.html.

2.8.2.7 The site set-up must be completed before DeltaCom can order Subloop pairs. For the site set-up in a BellSouth cross-connect box in the field, BellSouth will perform the necessary work to splice DeltaCom’s cable into the cross-connect box. For the site set-up inside a building equipment room, BellSouth will perform the necessary work to install the cross-connect panel and the connecting block(s) that will be used to provide access to the requested USLs.

2.8.2.8 Once the site set-up is complete, DeltaCom will request Subloop pairs through submission of a LSR form to the LCSC. OC is required with USL pair provisioning when DeltaCom requests reuse of an existing facility, and the OC charge shall be billed in addition to the USL pair rate. For expedite requests by DeltaCom for Subloop pairs, expedite charges will apply for intervals less than five (5) days.

Attachment 2

Exhibit 1-Form

Page 27

2.8.2.9 USLs will be provided in accordance with BellSouth’s TR 73600 Unbundled Local Loop Technical Specifications.

2.8.3 Unbundled Network Terminating Wire (UNTW)

2.8.3.1 UNTW is unshielded twisted copper wiring that is used to extend circuits from an intra-building network cable terminal or from a building entrance terminal to an individual End User’s point of demarcation. It is the final portion of the Loop that in multi-subscriber configurations represents the point at which the network branches out to serve individual subscribers.

2.8.3.2 This element will be provided in MDUs and/or Multi-Tenants Units (MTUs) where either Party owns wiring all the way to the End User’s premises. Neither Party will provide this element in locations where the property owner provides its own wiring to the End User’s premises, where a third party owns the wiring to the End User’s premises.

2.8.3.3 Requirements

2.8.3.3.1 On a multi-unit premises, upon request of the other Party (Requesting Party), the Party owning the network terminating wire (Provisioning Party) will provide access to UNTW pairs on an Access Terminal that is suitable for use by multiple carriers at each Garden Terminal or Wiring Closet.

2.8.3.3.2 The Provisioning Party shall not be required to install new or additional NTW beyond existing NTW to provision the services of the Requesting Party.

2.8.3.3.3 In existing MDUs and/or MTUs in which BellSouth does not own or control wiring (INC/NTW) to the End Users premises, and DeltaCom does own or control such wiring, DeltaCom will install UNTW Access Terminals for BellSouth under the same terms and conditions as BellSouth provides UNTW Access Terminals to DeltaCom.

2.8.3.3.4 In situations in which BellSouth activates a UNTW pair, BellSouth will compensate DeltaCom for each pair activated commensurate to the price specified in DeltaCom’s Agreement.

2.8.3.3.5 Upon receipt of the UNTW SI requesting access to the Provisioning Party’s UNTW pairs at a multi-unit premises, representatives of both Parties will participate in a meeting at the site of the requested access. The purpose of the site visit will include discussion of the procedures for installation and location of the Access Terminals. By request of the Requesting Party, an Access Terminal will be installed either adjacent to each of the Provisioning Party’s Garden Terminal or inside each Wiring Closet. The Requesting Party will deliver and connect its central office facilities to the UNTW pairs within the Access Terminal. The

Attachment 2

Exhibit 1-Form

Page 28

Requesting Party may access any available pair on an Access Terminal. A pair is available when a pair is not being utilized to provide service or where the End User has requested a change in its local service provider to the Requesting Party. Prior to connecting the Requesting Party’s service on a pair previously used by the Provisioning Party, the Requesting Party is responsible for ensuring the End User is no longer using the Provisioning Party’s service or another CLEC’s service before accessing UNTW pairs.

2.8.3.3.6 Access Terminal installation intervals will be established on an individual case basis.

2.8.3.3.7 The Requesting Party is responsible for obtaining the property owner’s permission for the Provisioning Party to install an Access Terminal(s) on behalf of the Requesting Party. The submission of the SI by the Requesting Party will serve as certification by the Requesting Party that such permission has been obtained. If the property owner objects to Access Terminal installations that are in progress or within thirty (30) days after completion and demands removal of Access Terminals, the Requesting Party will be responsible for costs associated with removing Access Terminals and restoring the property to its original state prior to Access Terminals being installed.

2.8.3.3.8 The Requesting Party shall indemnify and hold harmless the Provisioning Party against any claims of any kind that may arise out of the Requesting Party’s failure to obtain the property owner’s permission. The Requesting Party will be billed for nonrecurring and recurring charges for accessing UNTW pairs at the time the Requesting Party activates the pair(s). The Requesting Party will notify the Provisioning Party within five (5) business days of activating UNTW pairs using the LSR form.

2.8.3.3.9 If a trouble exists on a UNTW pair, the Requesting Party may use an alternate spare pair that serves that End User if a spare pair is available. In such cases, the Requesting Party will re-terminate its existing jumper from the defective pair to the spare pair. Alternatively, the Requesting Party will isolate and report troubles in the manner specified by the Provisioning Party. The Requesting Party must tag the UNTW pair that requires repair. If the Provisioning Party dispatches a technician on a reported trouble call and no UNTW trouble is found, the Provisioning Party will charge Requesting Party for time spent on the dispatch and testing the UNTW pair(s).

2.8.3.3.10 If the Requesting Party initiates the Access Terminal installation and the Requesting Party has not activated at least ten percent (10%) of the capacity of the Access Terminal installed pursuant to the Requesting Party’s request for an Access Terminal within six (6) months of installation of the Access Terminal, the Provisioning Party will bill the Requesting Party a nonrecurring charge equal to the actual cost of provisioning the Access Terminal.

Attachment 2

Exhibit 1-Form

Page 29

2.8.3.3.11 If the Provisioning Party determines that the Requesting Party is using the UNTW pairs without reporting the activation of the pairs, the Requesting Party will be billed for the use of that pair back to the date the End User began receiving service from the Requesting Party at that location. Upon request, the Requesting Party will provide copies of its billing record to substantiate such date. If the Requesting Party fails to provide such records, then the Provisioning Party will bill the Requesting Party back to the date of the Access Terminal installation.

2.8.4 Dark Fiber Loop

2.8.4.1 Dark Fiber Loop is an unused optical transmission facility, without attached signal regeneration, multiplexing, aggregation or other electronics, from the demarcation point at an End User’s premises to the End User’s serving wire center. Dark Fiber Loops may be strands of optical fiber existing in aerial or underground structure. BellSouth will not provide line terminating elements, regeneration or other electronics necessary for DeltaCom to utilize Dark Fiber Loops.

2.8.4.2 Transition for Dark Fiber Loop

2.8.4.2.1 For purposes of this Section 2.8.4, the Transition Period for Dark Fiber Loops is the eighteen (18) month period beginning March 11, 2005 and ending September 10, 2006.

2.8.4.2.2 For purposes of this Section 2.8.4, Embedded Base means Dark Fiber Loops that were in service for DeltaCom as of March 10, 2005. Subsequent disconnects or loss of End Users shall be removed from the Embedded Base.

2.8.4.3 During the Transition Period only, BellSouth shall make available for the Embedded Base Dark Fiber Loops for DeltaCom at the terms and conditions set forth in this Attachment.

2.8.4.4 Transition Period Pricing. From March 11, 2005, through the completion of the Transition Period, BellSouth shall charge a rate for DeltaCom’s Embedded Base of Dark Fiber Loops equal to the higher of:

2.8.4.4.1 115% of the rate paid for that element on June 15, 2004; or

2.8.4.4.2 115% of a new rate the Commission establishes, if any, between June 16, 2004 and March 11, 2005

2.8.4.4.3 These rates shall be as set forth in Exhibit A to Attachment 2 of the Agreement and this Section 2.8.4.4.

2.8.4.5 The Transition Period shall apply only to DeltaCom’s Embedded Base and DeltaCom shall not add new Dark Fiber Loops pursuant to this Agreement.

Attachment 2

Exhibit 1-Form

Page 30

2.8.4.6 Effective September 11, 2006, Dark Fiber Loops will no longer be made available pursuant to this Agreement.

2.8.4.7 No later than June 10, 2006 DeltaCom shall submit spreadsheet(s) identifying all of the Embedded Base of circuits to be either disconnected or converted to other BellSouth services as Conversions pursuant to Section 1.6 above. The Parties shall negotiate a project schedule for the Conversion of the Embedded Base.

2.8.4.7.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 2.8.4.7 above for all of its Embedded Base prior to June 10, 2006 or by some other mutually agreed upon date, BellSouth will identify DeltaCom’s remaining Embedded Base, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s) effective September 10, 2006. Those circuits identified and transitioned by BellSouth pursuant to this Section 2.8.4.7.1 shall be subject to the applicable switch-as-is charges as set forth in this Agreement and, only where physical rearrangements are required, the full nonrecurring charges for installation of such BellSouth services as set forth in BellSouth’s tariffs to such circuits.

2.8.4.7.2 For Embedded Base circuits converted pursuant to Section 2.8.4.7 above or transitioned pursuant to Section 2.8.4.7.1 above, the applicable recurring tariff charge shall apply to each circuit as of September 11, 2006.

2.8.4.7.3 To the extent that DeltaCom no longer desires to provide a particular service, it must notify BellSouth of its intent to discontinue and the parties must coordinate the disconnect to take place prior the conclusion of the applicable transition period. DeltaCom must also adhere to Commission Rule R17-2(q) regarding the discontinuance of service to customers.

2.9 Loop Makeup

2.9.1 Description of Service

2.9.1.1 BellSouth shall make available to DeltaCom LMU information with respect to Loops that are required to be unbundled under this Agreement so that DeltaCom can make an independent judgment about whether the Loop is capable of supporting the advanced services equipment DeltaCom intends to install and the services DeltaCom wishes to provide. LMU is a preordering transaction, distinct from DeltaCom ordering any other service(s). Loop Makeup Service Inquiries (LMUSI) and mechanized LMU queries for preordering LMU are likewise unique from other preordering functions with associated SIs as described in this Agreement.

2.9.1.2 BellSouth will provide DeltaCom LMU information consisting of the composition of the Loop material (copper/fiber); the existence, location and type of equipment on the Loop, including but not limited to digital loop carrier or other remote concentration devices, feeder/distribution interfaces, bridged taps, load coils, pair-gain devices; the Loop length; the wire gauge and electrical parameters.

Attachment 2

Exhibit 1-Form

Page 31

2.9.1.3 BellSouth’s LMU information is provided to DeltaCom as it exists either in BellSouth’s databases or in its hard copy facility records. BellSouth does not guarantee accuracy or reliability of the LMU information provided.

2.9.1.4 BellSouth’s provisioning of LMU information to the requesting CLEC for facilities is contingent upon either BellSouth or the requesting CLEC controlling the Loop(s) that serve the service location for which LMU information has been requested by the CLEC. The requesting CLEC is not authorized to receive LMU information on a facility used or controlled by another CLEC unless BellSouth receives a LOA from the voice CLEC (owner) or its authorized agent on the LMUSI submitted by the requesting CLEC.

2.9.1.5 DeltaCom may choose to use equipment that it deems will enable it to provide a certain type and level of service over a particular BellSouth Loop as long as that equipment does not disrupt other services on the BellSouth network. The determination shall be made solely by DeltaCom and BellSouth shall not be liable in any way for the performance of the advanced data services provisioned over said Loop. The specific Loop type (e.g., ADSL, HDSL, or otherwise) ordered on the LSR must match the LMU of the Loop reserved taking into consideration any requisite line conditioning. The LMU data is provided for informational purposes only and does not guarantee DeltaCom’s ability to provide advanced data services over the ordered Loop type. Furthermore, the LMU information for Loops other than copper-only Loops (e.g., ADSL, UCL-ND, etc.) that support xDSL services, is subject to change at any time due to modifications and/or upgrades to BellSouth’s network. Except as set forth in Section 2.9.1.6 below, copper-only Loops will not be subject to change due to modification and/or upgrades to BellSouth’s network and will remain on copper facilities until the Loop is disconnected by DeltaCom or the End User, or until BellSouth retires the copper facilities via the FCC’s and any applicable Commission’s requirements. DeltaCom is fully responsible for any of its service configurations that may differ from BellSouth’s technical standard for the Loop type ordered.

2.9.1.6 If BellSouth retires its copper facilities using 47 C.F.R § 51.325(a) requirements; or is required by a governmental agency or regulatory body to move or replace copper facilities as a maintenance procedure, BellSouth will notify DeltaCom, according to the applicable network disclosure requirements. It will be DeltaCom’s responsibility to move any service it may provide over such facilities to alternative facilities. If DeltaCom fails to move the service to alternative facilities by the date in the network disclosure notice, BellSouth may terminate the service to complete the network change.

Attachment 2

Exhibit 1-Form

Page 32

2.9.2 Submitting LMUSI

2.9.2.1 DeltaCom may obtain LMU information and reserve facilities by submitting a mechanized LMU query or a manual LMUSI according to the terms and conditions as described in the LMU CLEC Information Package, incorporated herein by reference as it may be amended from time to time. The CLEC Information Package is located at the “CLEC UNE Product” on the BellSouth Interconnection Web site: www.interconnection.bellsouth.com/guides/html/unes.html. After obtaining the Loop information from the mechanized LMU process, if DeltaCom needs further Loop information in order to determine Loop service capability, DeltaCom may initiate a separate Manual SI for a separate nonrecurring charge as set forth in Exhibit A.

2.9.2.2 All LSRs issued for reserved facilities shall reference the facility reservation number as provided by BellSouth. DeltaCom will not be billed any additional LMU charges for the Loop ordered on such LSR. If, however, DeltaCom does not reserve facilities upon an initial LMUSI, DeltaCom’s placement of an order for an advanced data service type facility will incur the appropriate billing charges to include SI and reservation per Exhibit A.

2.9.2.3 Where DeltaCom has reserved multiple Loop facilities on a single reservation, DeltaCom may not specify which facility shall be provisioned when submitting the LSR. For those occasions, BellSouth will assign to DeltaCom, subject to availability, a facility that meets the BellSouth technical standards of the BellSouth type Loop as ordered by DeltaCom.

2.9.2.4 Charges for preordering manual LMUSI or mechanized LMU are separate from any charges associated with ordering other services from BellSouth.

3 Line Splitting

3.1 Line splitting shall mean that a provider of data services (a Data LEC) and a provider of voice services (a Voice CLEC) to deliver voice and data service to End Users over the same Loop. The Voice CLEC and Data LEC may be the same or different carriers.

3.2 Line Splitting – UNE-L. In the event DeltaCom provides its own switching or obtains switching from a third party, DeltaCom may engage in line splitting arrangements with another CLEC using a splitter, provided by DeltaCom, in a Collocation Space at the central office where the loop terminates into a distribution frame or its equivalent.

3.3 Line Splitting – Loop and Port

3.3.1 To the extent DeltaCom is using a commingled arrangement that consists of an unbundled Loop purchased pursuant to this Agreement and

Attachment 2

Exhibit 1-Form

Page 33

local switching provided by BellSouth pursuant to Section 271 outside of this Agreement, BellSouth will allow DeltaCom to utilize Line Splitting. BellSouth shall charge the rates previously approved by the North Carolina Utilities Commission as set forth in Exhibit A of Attachment 2 in the Agreement.

3.3.2 DeltaCom shall provide BellSouth with a signed LOA between it and the third party CLEC (Data LEC or Voice CLEC) with which it desires to provision Line Splitting services, where DeltaCom will not provide voice and data services.

3.3.3 The Data LEC, Voice CLEC, a third party or BellSouth may provide the splitter, if line splitting is provided with a commingled loop and port. BellSouth will not provide the splitter for line splitting with a UNE-L. However, BellSouth is not obligated to provide CLPs with access to BellSouth-owned splitters. When DeltaCom or its authorized agent owns the splitter, Line Splitting requires the following: a non-designed analog Loop from the serving wire center to the NID at the End User’s location; a collocation cross-connection connecting the Loop to the collocation space; a second collocation cross-connection from the collocation space connected to a voice port; the high frequency spectrum line activation, and a splitter. When BellSouth owns the splitter, Line Splitting requires the following; a non-designed analog Loop from the serving wire center to the NID at the End User’s location with CFA and splitter port assignments, and a collocation cross-connection from the collocation space connected to a voice port.

3.3.4 An unloaded 2-wire copper Loop must serve the End User. The meet point for the Voice CLEC and the Data LEC is the point of termination on the MDF for the Data LEC’s cable and pairs.

3.3.5 The foregoing procedures are applicable to migration from a UNE-P arrangement to Line Splitting Service, including a Line splitting service that includes a commingled arrangement of Loop and unbundled local switching pursuant to Section 271.

3.4 Provisioning Line Splitting and Splitter Space – UNE-L

3.4.1 The Voice CLEC provides the splitter when providing Line Splitting with UNE-L. When DeltaCom owns the splitter, Line Splitting requires the following: a loop from NID at the End User’s location to the serving wire center and terminating into a distribution frame or its equivalent.

3.5 CLEC Provided Splitter – Line Splitting

3.5.1 To order High Frequency Spectrum on a particular Loop, DeltaCom must have a DSLAM collocated in the central office that serves the End User of such Loop.

Attachment 2

Exhibit 1-Form

Page 34

3.5.2 DeltaCom may purchase, install and maintain central office POTS splitters in its collocation arrangements. DeltaCom may use such splitters for access to its customers and to provide digital line subscriber services to its customers using the High Frequency Spectrum. Existing Collocation rules and procedures and the terms and conditions relating to Collocation set forth in Attachment 4-Central Office shall apply.

3.5.3 Any splitters installed by DeltaCom in its collocation arrangement shall comply with ANSI T1.413, Annex E, or any future ANSI splitter Standards. DeltaCom may install any splitters that BellSouth deploys or permits to be deployed for itself or any BellSouth affiliate.

3.6 Maintenance – Line Splitting

3.6.1 BellSouth will be responsible for repairing voice troubles and the troubles with the physical loop between the NID at the End User’s premises and the termination point.

3.6.2 BellSouth must make all necessary network modifications, including providing nondiscriminatory access to operations support systems necessary for pre-ordering, ordering, provisioning, maintenance and repair, and billing for loops used in line splitting arrangements.

3.6.3 Indemnity

3.6.3.1 DeltaCom shall indemnify, defend and hold harmless BellSouth from and against any claims, losses, damages and costs which arise out of actions related to the other service provider, except to the extent caused by BellSouth’s gross negligence or willful misconduct.

4 Unbundled Network Element Combinations

4.1 For purposes of this Section, references to “Currently Combined” Network Elements shall mean that the particular Network Elements requested by DeltaCom are in fact already combined by BellSouth in the BellSouth network. References to “Ordinarily Combined” Network Elements shall mean that the particular Network Elements requested by DeltaCom are not already combined by BellSouth in the location requested by DeltaCom but are elements that are typically combined in BellSouth’s network. References to “Not Typically Combined” Network Elements shall mean that the particular Network Elements requested by DeltaCom are not elements that BellSouth combines for its use in its network.

4.1.1 Except as otherwise set forth in this Agreement, upon request, BellSouth shall perform the functions necessary to combine Network Elements that BellSouth is required to provide under this Agreement in any manner, even if those elements

Attachment 2

Exhibit 1-Form

Page 35

are not ordinarily combined in BellSouth’s network, provided that such Combination is technically feasible and will not undermine the ability of other carriers to obtain access to Network Elements or to interconnect with BellSouth’s network.

4.1.2 To the extent DeltaCom requests a Combination for which BellSouth does not have methods and procedures in place to provide such Combination, rates and/or methods or procedures for such Combination will be developed pursuant to the BFR process.

4.2 Rates

4.2.1 The rates for the Currently Combined Network Elements specifically set forth in Exhibit A shall be the rates associated with such Combinations. Where a Currently Combined Combination is not specifically set forth in Exhibit A, the rate for such Currently Combined Combination shall be the sum of the recurring rates for those individual Network Elements as set forth in Exhibit A and/or Exhibit B in addition to the applicable nonrecurring switch-as-is charge set forth in Exhibit A.

4.2.2 The rates for the Ordinarily Combined Network Elements specifically set forth in Exhibit A shall be the nonrecurring and recurring charges for those Combinations. Where an Ordinarily Combined Combination is not specifically set forth in Exhibit A, the rate for such Ordinarily Combined Combination shall be the sum of the recurring rates for those individual Network Elements as set forth in Exhibit A and/or Exhibit B and nonrecurring rates for those individual Network Elements as set forth in Exhibit A.

4.2.3 The rates for Not Typically Combined Combinations shall be developed pursuant to the BFR process upon request of DeltaCom.

4.3 Enhanced Extended Links (EELs)

4.3.1 EELs are combinations of Loops and Dedicated Transport as defined in this Attachment, together with any facilities, equipment, or functions necessary to combine those Network Elements. BellSouth shall provide DeltaCom with EELs where the underlying Network Element are available and are required to be provided pursuant to this Agreement and in all instances where the requesting carrier meets the eligibility requirements, if applicable.

4.3.2 High-capacity EELs are (1) combinations of Loop and Dedicated Transport, (2) Dedicated Transport commingled with a wholesale loop, or (3) a loop commingled with wholesale transport at the DS1 and/or DS3 level as described in 47 C.F.R. § 51.318(b).

Attachment 2

Exhibit 1-Form

Page 36

4.3.3 By placing an order for a high-capacity EEL, DeltaCom thereby certifies that the service eligibility criteria set forth herein are met for access to a converted high-capacity EEL, a new high-capacity EEL, or part of a high-capacity commingled EEL as a UNE. BellSouth shall have the right to audit DeltaCom’s high-capacity EELs as specified below.

4.4 EELs Audit Provisions

4.4.1 BellSouth may, on an annual basis, audit DeltaCom’s records in order to verify compliance with the high capacity EEL eligibility criteria. To invoke its limited right to audit, BellSouth will send a Notice of Audit to DeltaCom stating its cause for concern that DeltaCom is not complying with the service eligibility requirements as set forth above and a concise statement of the reasons therefore. Such Notice of Audit will be delivered to DeltaCom no less than forty-five (45) calendar days prior to the date upon which BellSouth seeks to commence an audit. BellSouth is not required to provide documentation, as distinct from a statement of concern, to support its basis for an audit, or seek the concurrence of the requesting carrier before selecting the location of the audit.

4.4.2 The audit shall be conducted by a third party independent auditor, retained and paid for by BellSouth. BellSouth may select the independent auditor without the prior approval of DeltaCom or the Commission. Challenges to the independence of the auditor may be filed with the Commission only after the audit has been concluded. The audit must be performed in accordance with the standards established by the American Institute for Certified Public Accountants (AICPA) which will require the auditor to issue an opinion regarding DeltaCom’s compliance with the high capacity EEL eligibility criteria. AICPA standards and other AICPA requirements will be used to determine the independence of an auditor. Because The concept of materiality governs this audit; the independent auditor’s report will conclude whether DeltaCom complied in all material respects with the applicable service eligibility criteria. Consistent with standard auditing practices, such audits require compliance testing designed by the independent auditor.

4.4.3 To the extent the independent auditor’s report concludes that DeltaCom failed to comply with the service eligibility criteria, DeltaCom must true-up any difference in payments, convert all noncompliant circuits to the appropriate service, and make the correct payments on a going-forward basis.

4.4.4 To the extent the independent auditor’s report concludes that DeltaCom failed to comply in all material respects with the service eligibility criteria, DeltaCom shall reimburse BellSouth for the cost of the independent auditor. To the extent the independent auditor’s report concludes that DeltaCom did comply in all material

Attachment 2

Exhibit 1-Form

Page 37

respects with the service eligibility criteria, BellSouth will reimburse DeltaCom for its reasonable and demonstrable costs associated with the audit. DeltaCom will maintain appropriate documentation to support its certifications.

4.4.5 Service Eligibility Criteria

4.4.5.1 High capacity EELs must comply with the following service eligibility requirements. DeltaCom must certify for each high-capacity EEL that all of the following service eligibility criteria are met:

4.4.5.1.1 DeltaCom has received state certification to provide local voice service in the area being served;

4.4.5.2 For each combined circuit, including each DS1 circuit, each DS1 EEL, and each DS1-equivalent circuit on a DS3 EEL:

4.4.5.2.1 1) Each circuit to be provided to each End User will be assigned a local number prior to the provision of service over that circuit;

4.4.5.2.2 2) Each DS1-equivalent circuit on a DS3 EEL must have its own local number assignment so that each DS3 must have at least twenty-eight (28) local voice numbers assigned to it;

4.4.5.2.3 3) Each circuit to be provided to each End User will have 911 or E911 capability prior to provision of service over that circuit;

4.4.5.2.4 4) Each circuit to be provided to each End User will terminate in a collocation arrangement that meets the requirements of 47 C.F.R. § 51.318(c);

4.4.5.2.5 5) Each circuit to be provided to each End User will be served by an interconnection trunk over which DeltaCom will transmit the calling party’s number in connection with calls exchanged over the trunk;

4.4.5.2.6 6) For each twenty-four (24) DS1 EELs or other facilities having equivalent capacity, DeltaCom will have at least one (1) active DS1 local service interconnection trunk over which DeltaCom will transmit the calling party’s number in connection with calls exchanged over the trunk; and

4.4.5.2.7 7) Each circuit to be provided to each End User will be served by a switch capable of switching local voice traffic.

4.4.5.3 Notwithstanding the foregoing, if as of the Effective Date of this Agreement, DeltaCom has in place high-capacity EELs that do not comply with the Service Eligibility Criteria set forth herein, and that will not be rearranged pursuant to Section 4.5.5 below, DeltaCom shall identify such EELs and submit orders to

Attachment 2

Exhibit 1-Form

Page 38

either disconnect such EELs or convert such EELs within sixty (60) days of the Effective Date. If as of the Effective Date DeltaCom has in place high-capacity EELs that do not comply with the Service Eligibility Criteria but that will be rearranged pursuant to Section 4.5.5 below, DeltaCom shall have 60 days from the placement of such rearrangement orders to rearrange such non-compliant EELs, so long as the orders are placed within 30 days of the date BellSouth makes available to DeltaCom the process and procedures to place such rearrangement orders. To the extent any non-compliant EELs remain in place after the time periods set forth in this Section, BellSouth shall have the right to take such action as set forth in Section 4.3.4.3 above.

4.4.5.4 In the event DeltaCom converts special access services to UNEs, DeltaCom shall be subject to the termination liability provisions in the applicable special access tariffs, if any.

4.5.5 EEL to DS1 Loop Rearrangements

4.5.5.1 DeltaCom may submit orders to disconnect an EEL circuit, including the Dedicated Transport portion of the EEL, and reconnect the Loop in a collocation space in the End User Serving Wire Center (“EEL to DS1 Rearrangement”). The non-recurring charge (NRC) for each EEL to DS1 Loop Rearrangement shall be $128 per DS1 Loop per LSR for the initial EEL to DS1 Rearrangement, and $77 per DS1 Loop per LSR for each additional EEL to DS1 Rearrangement. OSS charges, and EEL Disconnect non-recurring charges, as set forth in Exhibit A hereto, and Cross Connect non-recurring charges, as set forth in Attachment 4 to this Agreement, are applicable in addition to the EEL to DS1 Rearrangement non-recurring charges set forth herein.

4.5.5.2 BellSouth shall make available processes and procedures to implement EEL to DS1 Rearrangements by the later of the Effective Date or November 15, 2005. BellSouth will use best efforts to complete such orders within a thirty (30) day interval, depending upon workload and receipt of correct ordering information from DeltaCom via spreadsheets. BellSouth shall provide project management support for EEL to DS1 Rearrangements.

4.5.6 Commingled EELs

4.5.6.1 Notwithstanding anything in this Agreement to the contrary, DeltaCom may, at its option, purchase high-capacity commingled EELs terminating to the 25 identified BellSouth/DeltaCom points of interconnection on DeltaCom’s network, as forth in Exhibit C to this Attachment (“Existing POIs”). The final portion of the EEL circuit that terminates in the Existing POI must be a BellSouth special access circuit and cannot be purchased as Dedicated Transport pursuant to this Agreement.

Attachment 2

Exhibit 1-Form

Page 39

4.5.6.2 BellSouth is not required to locate switching equipment at the Existing POIs, and to the extent that BellSouth does not locate switching equipment at an Existing POI, BellSouth shall not provide Dedicated Transport as a Network Element to such existing POI. No other carrier shall have access to the Existing POIs to obtain Network Elements or commingled EELs.

4.5.6.3 BellSouth may place equipment at the Existing POIs, or may maintain at such Existing POIs equipment previously placed consistent with Attachment 3 of this Agreement. BellSouth shall not be responsible to DeltaCom for any collocation or other charges for any such equipment placed at the Existing POIs.

5 Dedicated Transport and Dark Fiber Transport

5.1 Dedicated Transport. Dedicated Transport is defined as BellSouth’s transmission facilities between wire centers or switches owned by BellSouth, or between wire centers or switches owned by BellSouth and switches owned by DeltaCom, including but not limited to DS1, DS3 and OCn level services, as well as dark fiber, dedicated to DeltaCom. BellSouth shall not be required to provide access to OCn level Dedicated Transport under any circumstances pursuant to this Agreement. In addition, except as set forth in Section 5.2 below, BellSouth shall not be required to provide to DeltaCom unbundled access to interoffice transmission facilities that do not connect a pair of wire centers or switches owned by BellSouth (“Entrance Facilities”).

5.2 Transition for DS1 and DS3 Dedicated Transport Including DS1 and DS3 Entrance Facilities

5.2.1 For purposes of this Section 5.2, the Transition Period for the Embedded Base of DS1 and DS3 Dedicated Transport, Embedded Base Entrance Facilities and for Excess DS1 and DS3 Dedicated Transport, is the twelve (12) month period beginning March 11, 2005 and ending March 10, 2006.

5.2.2 For purposes of this Section 5.2, Embedded Base means DS1 and DS3 Dedicated Transport that were in service for DeltaCom as of March 10, 2005 in those wire centers that, as of such date, met the criteria set forth in Sections 5.2.6.1 or 5.2.6.2 below. Subsequent disconnects or loss of End Users shall be removed from the Embedded Base.

5.2.3 For purposes of this Section 5, Embedded Base Entrance Facilities means Entrance Facilities that were in service for DeltaCom as of March 10, 2005. Subsequent disconnects or loss of customers shall be removed from the Embedded Base.

Attachment 2

Exhibit 1-Form

Page 40

5.2.3.1 DeltaCom may obtain a maximum of ten (10) unbundled DS1 dedicated transport circuits on each route where DS1 dedicated transport is available on an unbundled basis or may obtain a maximum of twelve (12) unbundled DS3 dedicated transport circuits on each route where DS3 dedicated transport is available on an unbundled basis.

5.2.4 For purposes of this Section 5, Excess DS1 and DS3 Dedicated Transport means those DeltaCom DS1 and DS3 Dedicated Transport facilities in service as of March 10, 2005, in excess of the caps set forth in Section 5.6 below. Subsequent disconnects and loss of End Users shall be removed from Excess DS1 and DS3 Loops.

5.2.5 For purposes of this Section 5.2, a Business Line is as defined in 47 C.F.R. § 51.5.

5.2.6 For purposes of this Section 5.2, a fiber-based collocator is defined in 47 C.F.R. § 51.5.

5.2.7 A Building is defined as a permanent physical structure including, but not limited to, a structure in which people reside, or conduct business or work on a daily basis and through which there is one centralized point of entry in the structure through which all telecommunications services must transit. As an example only, a high rise office building with a general telecommunications equipment room through which all telecommunications services to that building’s tenants must pass would be a single “building for purposes of this Attachment 2. Two or more physical areas served by a individual points of entry through which telecommunications services must transit will be considered separate buildings. For instance, a strip mall with individual businesses obtaining telecommunications services from different access points on the building(s) will be considered individual buildings, even though they might share common walls.

5.2.8 A route is defined as a transmission path between one of BellSouth’s wire centers or switches and another of BellSouth’s wire centers or switches. A route between two (2) points may pass through one or more intermediate wire centers or switches. Transmission paths between identical end points are the same “route”, irrespective of whether they pass through the same intermediate wire centers or switches, if any. For the purposes of determining routes wire centers include non-BellSouth locations where BellSouth has reverse collocated switches with line side functionality that terminate Loops.

5.2.9 Notwithstanding anything to the contrary in this Agreement, BellSouth shall make available Dedicated Transport as described in this Section 5.2 only for DeltaCom’s Embedded Base during the Transition Period:

5.2.9.1 DS1 Dedicated Transport where both wire centers at the end points of the route contain 38,000 or more Business Lines or four (4) or more fiber-based collocators.

Attachment 2

Exhibit 1-Form

Page 41

5.2.9.2 DS3 Dedicated Transport where both wire centers at the end points of the route contain 24,000 or more Business Lines or three (3) or more fiber-based collocators.

5.2.9.3 This section left blank intentially by the Parties.

5.2.9.4 Notwithstanding anything to the contrary in this Agreement, BellSouth shall make available Entrance Facilities only for DeltaCom’s Embedded Base Entrance Facilities and only during the Transition Period.

5.2.9.5 Transition Period Pricing. From March 11, 2005, through the completion of the Transition Period, BellSouth shall charge a rate for DeltaCom’s Embedded Base of DS1 and DS3 Dedicated Transport and for DeltaCom’s Excess DS1 and DS3 Dedicated Transport, as described in this Section 5.2, equal to the higher of:

5.2.9.5.1 115% of the rate paid for that element on June 15, 2004; or

5.2.9.5.2 115% of a new rate the Commission establishes, if any, between June 16, 2004 and March 11, 2005.

5.2.9.5.3 These rates shall be as set forth in Exhibit A to Attachment 2 of the Agreement and this Section 5.2.9.

5.2.9.5.4 From March 11, 2005, through the completion of the Transition Period, BellSouth shall charge a rate for DeltaCom’s Embedded Base Entrance Facilities as set forth in Exhibit A to Attachment 2 of the Agreement and this Section 5.2.9.

5.2.9.6 The Transition Period shall apply only to (1) DeltaCom’s Embedded Base and Embedded Base Entrance Facilities; and (2) DeltaCom’s Excess DS1 and DS3 Dedicated Transport. DeltaCom shall not add new Entrance Facilities pursuant to this Agreement. Further, DeltaCom shall not add new DS1 or DS3 Dedicated Transport as described in this Section 5.2 pursuant to this Agreement, except pursuant to the self-certification process as set forth in Section 1.9 above and as set forth in Section 5.2.9.9 below.

5.2.9.7 Once a wire center exceeds either of the thresholds set forth in Section 5.2.6.1 above, no future DS1 Dedicated Transport unbundling will be required in that wire center.

5.2.9.8 Once a wire center exceeds either of the thresholds set forth in Section 5.2.6.2 above, no future DS3 Dedicated Transport will be required in that wire center.

5.2.9.9 No later than December 9, 2005 DeltaCom shall submit spreadsheet(s) identifying all of the Embedded Base of circuits, Embedded Base Entrance Facilities, and

Attachment 2

Exhibit 1-Form

Page 42

Excess DS1 and DS3 Dedicated Transport to be either disconnected or converted pursuant to Section 1.6 above. The Parties shall negotiate a project schedule for the Conversion of the Embedded Base, Embedded Base Entrance Facilities and Excess DS1 and DS3 Dedicated Transport. For circuits for which DeltaCom requests Conversion to tariffed wholesale services, BellSouth will not complete the Conversion until March 11, 2006, or later, and BellSouth will continue to bill DeltaCom at the transitional rates set forth in Section 5.2.6.5 until the circuit is converted to the tariffed wholesale service, which will occur on March 11, 2006, or later.

5.2.9.9.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 5.2.6.9 above for all of its Embedded Base, Embedded Base Entrance Facilities and Excess DS1 and DS3 Dedicated Transport by February 10, 2006, BellSouth will identify DeltaCom’s remaining Embedded Base, Embedded Base Entrance Facilities and Excess DS1 and DS3 Dedicated Transport, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s). Those circuits identified and transitioned by BellSouth pursuant to this Section 5.2.6.9.1 shall be subject to all applicable disconnect charges as set forth in this Agreement and the full nonrecurring charges for installation of the equivalent tariffed BellSouth service as set forth in BellSouth’s tariffs.

5.2.9.9.2 For Embedded Base circuits, Embedded Base Entrance Facilities and Excess DS1 and DS3 Dedicated Transport converted pursuant to Section 5.2.6.9 above or transitioned pursuant to Section 5.2.6.9.1 above, the applicable recurring tariff charge shall apply to each circuit as of March 11, 2006.

5.2.9.9.3 To the extent that DeltaCom no longer desires to provide a particular service, it must notify BellSouth of its intent to discontinue and the parties must coordinate the disconnect to take place prior the conclusion of the applicable transition period. DeltaCom must also adhere to Commission Rule R17-2(q) regarding the discontinuance of service to customers.

5.2.9.10 Modifications and Updates to the Wire Center List and Subsequent Transition Periods for DS1 and/or DS3 Transport

5.2.9.10.1 In the event BellSouth identifies additional wire centers that meet the criteria set forth in Sections 5.2.6.1 or 5.2.6.2 above, but that were not included in the Initial Wire Center List, BellSouth shall include such additional wire centers in carrier notification letter (CNL). Each such list of additional wire centers shall be considered a Subsequent Wire Center List.

5.2.9.10.2 DeltaCom shall have thirty (30) business days to dispute the additional wire centers listed on BellSouth’s CNL as set forth in the General Terms and Conditions. Absent such dispute, effective thirty (30) business days after the date of a BellSouth CNL providing a Subsequent Wire Center List, BellSouth shall not be required to provide DS1 and DS3 Dedicated Transport, as applicable, in such additional wire center(s).

Attachment 2

Exhibit 1-Form

Page 43

5.2.9.10.3 For purposes of Section 5.2.6.10 above, BellSouth shall make available DS1 and DS3 Dedicated Transport that was in service for DeltaCom in a wire center on the Subsequent Wire Center List as of the thirtieth (30^th) business day after the date of BellSouth’s CNL identifying the Subsequent Wire Center List (Subsequent Embedded Base) until one-hundred and fifty (150) days after the thirtieth (30th) business day from the date of BellSouth’s CNL identifying the Subsequent Wire Center List (Subsequent Transition Period).

5.2.9.10.4 Subsequent disconnects or loss of End Users shall be removed from the Subsequent Embedded Base.

5.2.9.10.5 The rates set forth in Exhibit B shall apply to the Subsequent Embedded Base during the Subsequent Transition Period.

5.2.9.10.6 No later than forty (40) days from BellSouth’s CNL identifying the Subsequent Wire Center List DeltaCom shall submit a spreadsheet(s) identifying the Subsequent Embedded Base of circuits to be disconnected or converted to other BellSouth services. The Parties shall negotiate a project schedule for the Conversion of the Subsequent Embedded Base.

5.2.9.10.6.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 5.2.6.10.6 above for all of its Subsequent Embedded Base within forty (40) days after the date of BellSouth’s CNL identifying the Subsequent Wire Center List, BellSouth will identify DeltaCom’s remaining Subsequent Embedded Base, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s). Those circuits identified and transitioned by BellSouth pursuant to this Section 5.2.9.10.6.1 shall be subject to the applicable switch-as-is charges as set forth in this Agreement and, only where physical rearrangements are necessary, the full nonrecurring charges for installation of such BellSouth services as set forth in BellSouth’s tariffs shall apply to such circuits.

5.2.9.10.7 For Subsequent Embedded Base circuits converted pursuant to Section 5.2.6.10.6 above or transitioned pursuant to Section 5.2.6.10.6.1 above, the applicable recurring tariff charges shall apply as of the earlier of the date each circuit is converted or transitioned, as applicable, or the first day after the end of the Subsequent Transition Period.

5.3 BellSouth shall:

5.3.1 Provide DeltaCom exclusive use of Dedicated Transport to a particular customer or carrier;

Attachment 2

Exhibit 1-Form

Page 44

5.3.2 Provide all technically feasible features, functions, and capabilities of Dedicated Transport as outlined within the technical requirements of this section;

5.3.3 Permit, to the extent technically feasible, DeltaCom to connect Dedicated Transport to equipment designated by DeltaCom, including but not limited to, DeltaCom’s collocated facilities; and

5.3.4 Permit, to the extent technically feasible, DeltaCom to obtain the functionality provided by BellSouth’s digital cross-connect systems.

5.4 BellSouth shall offer Dedicated Transport:

5.4.1 As capacity on a shared facility; and

5.4.2 As a circuit (i.e., DS0, DS1, DS3, STS-1) dedicated to DeltaCom.

5.5 Dedicated Transport may be provided over facilities such as optical fiber, copper twisted pair, and coaxial cable, and shall include transmission equipment such as line terminating equipment, amplifiers, and regenerators.

5.6 DeltaCom may obtain a maximum of (10) unbundled DS1 Dedicated Transport circuits, or their equivalent, on each route where DS3 Dedicated Transport is not available as a Network Element. DeltaCom may obtain a maximum of twelve (12) unbundled DS3 Dedicated Transport circuits, or their equivalent, on each route where DS3 Dedicated Transport is available as a Network Element. A route is defined as a transmission path between one (1) of BellSouth’s wire centers or switches and another of BellSouth’s wire centers or switches. A route between two (2) points may pass through one (1) or more intermediate wire centers or switches. Transmission paths between identical end points are the same “route”, irrespective of whether they pass through the same intermediate wire centers or switches, if any.

5.7 Technical Requirements

5.7.1 BellSouth shall offer DS0 equivalent interface transmission rates for DS0 or voice grade Dedicated Transport. For DS1 or DS3 circuits, Dedicated Transport shall at a minimum meet the performance, availability, jitter, and delay requirements specified for Customer Interface to Central Office (CI to CO) connections in the applicable industry standards.

5.7.2 BellSouth shall offer the following interface transmission rates for Dedicated Transport:

5.7.2.1 DS0 Equivalent;

5.7.2.2 DS1;

Attachment 2

Exhibit 1-Form

Page 45

5.7.2.3 DS3;

5.7.2.4 STS-1; and

5.7.2.5 SDH (Synchronous Digital Hierarchy) Standard interface rates are in accordance with International Telecommunications Union (ITU) Recommendation G.707 and Plesiochronous Digital Hierarchy (PDH) rates per ITU Recommendation G.704.

5.7.3 BellSouth shall design Dedicated Transport according to its network infrastructure. DeltaCom shall specify the termination points for Dedicated Transport.

5.7.4 At a minimum, Dedicated Transport shall meet each of the requirements set forth in the applicable industry technical references and BellSouth Technical References;

5.7.4.1 Telcordia TR-TSY-000191 Alarm Indication Signals Requirements and Objectives, Issue 1, May 1986.

5.7.4.2 BellSouth’s TR 73501 LightGate® Service Interface and Performance Specifications, Issue D, June 1995.

5.7.4.3 BellSouth’s TR 73525 MegaLink® Service, MegaLink Channel Service and MegaLink Plus Service Interface and Performance Specifications, Issue C, May 1996.

5.8 Unbundled Channelization (Multiplexing)

5.8.1 To the extent DeltaCom is purchasing DS1 or DS3 or STS-1 Dedicated Transport pursuant to this Agreement, Unbundled Channelization (UC) provides the optional multiplexing capability that will allow a DS1 (1.544 Mbps) or DS3 (44.736 Mbps) or STS-1 (51.84 Mbps) Network Elements to be multiplexed or channelized at a BellSouth central office. Channelization can be accomplished through the use of a multiplexer or a digital cross-connect system at the discretion of BellSouth. Once UC has been installed, DeltaCom may request channel activation on a channelized facility and BellSouth shall connect the requested facilities via COCIs. The COCI must be compatible with the lower capacity facility and ordered with the lower capacity facility. This service is available as defined in NECA 4.

5.8.2 BellSouth shall make available the following channelization systems and interfaces:

5.8.2.1 DS1 Channelization System: channelizes a DS1 signal into a maximum of twenty-four (24) DS0s. The following COCI are available: Voice Grade, Digital Data and ISDN.

Attachment 2

Exhibit 1-Form

Page 46

5.8.2.2 DS3 Channelization System: channelizes a DS3 signal into a maximum of twenty-eight (28) DS1s. A DS1 COCI is available with this system.

5.8.2.3 STS-1 Channelization System: channelizes a STS-1 signal into a maximum of twenty-eight (28) DS1s. A DS1 COCI is available with this system.

5.8.3 Technical Requirements. In order to assure proper operation with BellSouth provided central office multiplexing functionality, DeltaCom’s channelization equipment must adhere strictly to form and protocol standards. DeltaCom must also adhere to such applicable industry standards for the multiplex channel bank, for voice frequency encoding, for various signaling schemes, and for sub rate digital access.

5.9 Dark Fiber Transport. Dark Fiber Transport is defined as Dedicated Transport that consists of unactivated optical interoffice transmission facilities without attached signal regeneration, multiplexing, aggregation or other electronics. Except as set forth in Section 5.9.1 below, BellSouth shall not be required to provide access to Dark Fiber Transport Entrance Facilities pursuant to this Agreement.

5.9.1 Transition for Dark Fiber Transport and Dark Fiber Transport Entrance Facilities

5.9.1.1 For purposes of this Section 5.9, the Transition Period for the Embedded Base of Dark Fiber Transport is the eighteen (18) month period beginning March 11, 2005 and ending September 10, 2006.

5.9.1.2 For purposes of this Section 5.9, Embedded Base means Dark Fiber Transport that was in service for DeltaCom as of March 10, 2005 in those wire centers that, as of such date, met the criteria set forth in 5.9.1.4.1 below. Subsequent disconnects or loss of End Users shall be removed from the Embedded Base.

5.9.1.3 For purposes of this Section 5.9, a Business Line is as defined in 47 C.F.R. § 51.5.

5.9.1.4 Notwithstanding anything to the contrary in this Agreement, BellSouth shall make available Dark Fiber Transport as described in this Section 5.9 only for DeltaCom’s Embedded Base during the Transition Period:

5.9.1.4.1 Dark Fiber Transport where both wire centers at the end points of the route contain twenty-four thousand (24,000) or more Business Lines or three (3) or more fiber-based collocators.

5.9.1.5 This section left blank intentially by the Parties.

Attachment 2

Exhibit 1-Form

Page 47

5.9.1.6 Transition Period Pricing. From March 11, 2005, through the completion of the Transition Period, BellSouth shall charge a rate for DeltaCom’s Embedded Base and Excess of Dark Fiber Transport and Embedded Base Dark Fiber Transport Entrance Facilities shall be equal to the higher of:

5.9.1.6.1 115% of the rate paid for that element on June 15, 2004; or

5.9.1.6.2 115% of a new rate the Commission establishes, if any, between June 16, 2004 and March 11, 2005.

5.9.1.6.3 These rates shall be as set forth in Exhibit B Attachment 2 of the Agreement and this Section 5.9.1.

5.9.1.7 The Transition Period shall apply only to DeltaCom’s Embedded Base of Dark Fiber Transport and Dark Fiber Entrance Facilities. DeltaCom shall not add new Dark Fiber Transport as described in this Section 5.9 except pursuant to the self-certification process as set forth in Section 1.9 above and as set forth in Section 5.9.1.10 below. Further, DeltaCom shall not add new Dark Fiber Entrance Facilities pursuant to this Agreement.

5.9.1.8 Once a wire center exceeds either of the thresholds set forth in this Section 5.9.1.4 above, no future Dark Fiber Transport unbundling will be required in that wire center.

5.9.1.9 No later than June 10, 2006 DeltaCom shall submit spreadsheet(s) identifying all of the Embedded Base of Dark Fiber Transport and Dark Fiber Entrance Facilities to be either disconnected or converted to other BellSouth services as Conversions pursuant to Section 1.6 above. The Parties shall negotiate a project schedule for the Conversion of the Embedded Base.

5.9.1.9.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 5.9.1.9 above for all of its Embedded Base prior to June 10, 2006 or by some other mutually agreed upon date, BellSouth will identify DeltaCom’s remaining Embedded Base, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s). Those circuits identified and transitioned by BellSouth pursuant to this Section 5.9.1.9.1 shall be subject to the applicable switch-as-is charges as set forth in this Agreement and, only where physical rearrangements are necessary, the full nonrecurring charges for installation of such BellSouth services as set forth in BellSouth’s tariffs shall apply to such circuits.

5.9.1.9.2 For Embedded Base circuits converted pursuant to Section 5.9.1.9 above or transitioned pursuant to Section 5.9.1.9.1 above, the applicable recurring tariff charge shall apply to each circuit as of September 11, 2006.

Attachment 2

Exhibit 1-Form

Page 48

5.9.1.9.3 To the extent that DeltaCom no longer desires to provide a particular service, it must notify BellSouth of its intent to discontinue and the parties must coordinate the disconnect to take place prior the conclusion of the applicable transition period. DeltaCom must also adhere to Commission Rule R17-2(q) regarding the discontinuance of service to customers.

5.9.1.10 This section left blank intentially by the Parties.

5.9.1.11 Modifications and Updates to the Wire Center List and Subsequent Transition Periods for Dark Fiber Transport

5.9.1.11.1 In the event BellSouth identifies additional wire centers that meet the criteria set forth in Section 5.9.1.4.1 above, but that were not included in the Initial Wire Center List, BellSouth shall include such additional wire centers in a CNL. Each such list of additional wire centers shall be considered a “Subsequent Wire Center List”.

5.9.1.11.2 DeltaCom shall have thirty (30) business days to dispute the additional wrie centers listed on BellSouth’s CNL as set forth in the General Terms and Conditions. Absent such dispute, effective thirty (30) business days after the date of a BellSouth CNL providing a Subsequent Wire Center List, BellSouth shall not be required to provide unbundled access to Dark Fiber Transport, as applicable, in such additional wire center(s), except pursuant to the self-certification process as set forth in Section 1.9 above.

5.9.1.11.3 For purposes of Section 5.9.1.10, BellSouth shall make available Dark Fiber Transport that were in service for DeltaCom in a wire center on the Subsequent Wire Center List as of the thirtieth (30^th) business day after the date of BellSouth’s CNL identifying the Subsequent Wire Center List (Subsequent Embedded Base) until one-hundred and fifty (150) days after the thitieth (30th) business day from the date of BellSouth’s CNL identifying the Subsequent Wire Center List (Subsequent Transition Period).

5.9.1.11.4 Subsequent disconnects or loss of End Users shall be removed from the Subsequent Embedded Base.

5.9.1.11.5 The rates set forth in Exhibit B shall apply to the Subsequent Embedded Base during the Subsequent Transition Period.

5.9.1.11.6 No later than forty (40) days from BellSouth’s CNL identifying the Subsequent Wire Center List DeltaCom shall submit a spreadsheet(s) identifying the Subsequent Embedded Base of circuits to be disconnected or converted to other BellSouth services. The Parties shall negotiate a project schedule for the Conversion of the Subsequent Embedded Base.

Attachment 2

Exhibit 1-Form

Page 49

5.9.1.11.6.1 If DeltaCom fails to submit the spreadsheet(s) specified in Section 5.9.1.10.6 above for all of its Subsequent Embedded Base within forty (40) days after the date of BellSouth’s CNL identifying the Subsequent Wire Center List, BellSouth will identify DeltaCom’s remaining Subsequent Embedded Base, if any, and will transition such circuits to the equivalent tariffed BellSouth service(s). Those circuits identified and transitioned by BellSouth pursuant to this Section 5.9.1.11.6.1 shall be subject to the applicable switch-as-is charges as set forth in this Agreement and, only where physical rearrangements are necessary, the full nonrecurring charges for installation of such BellSouth services as set forth in BellSouth’s tariffs shall apply to such circuits.

5.9.1.11.6.2 For Subsequent Embedded Base circuits converted pursuant to Section 5.9.1.10.6 above or transitioned pursuant to Section 5.9.1.10.6.1 above, the applicable recurring tariff charges shall apply as of the earlier of the date each circuit is converted or transitioned, as applicable, or the first day after the end of the Subsequent Transition Period.

5.9.1.12 This section left blank intentially by the Parties.

5.10 Rearrangements

5.10.1 A request to move a working DeltaCom CFA to another DeltaCom CFA, where both CFAs terminate in the same BellSouth Central Office (Change in CFA), shall not constitute the establishment of new service. The applicable rates set forth in Exhibit A.

5.10.2 Requests to re-terminate one end of a facility that is not a Change in CFA constitute the establishment of new service and require disconnection of existing service and the applicable rates set forth in Exhibit A shall apply.

5.10.3 Upon request of DeltaCom, BellSouth shall project manage the Change in CFA or re-termination of a facility as described in Sections 5.10.1 and 5.10.2 above and DeltaCom may request OC-TS for such orders.

5.10.4 BellSouth shall accept a LOA between DeltaCom and another carrier that will allow DeltaCom to connect a facility, or Combination that includes Dedicated Transport to the other carrier’s collocation space or to another carrier’s CFA associated with higher bandwidth transport.

5.10.5 To the extent DeltaCom elects to rearrange a BellSouth multiplexer purchased pursuant to this Agreement to a BellSouth special access multiplexer terminating to an DeltaCom collocation space, BellSouth will charge the applicable DS3

Attachment 2

Exhibit 1-Form

Page 50

multiplexing and circuit charges (e.g., the multiplexer installation charge and DS3 cross connect charge) as set forth in the BellSouth FCC tariff. For circuits purchased pursuant to this Agreement that may be attached to the multiplexer being rearranged, charges shall be assessed pursuant to this Agreement where no physical rearrangement of such circuits is required. Where a physical rearrangement of such circuits is required, charges shall be pursuant to BellSouth’s FCC tariff, Section 23.5.2.17, Reconfiguration Charges – Nonrecurring.

6 Call Related Databases and Signaling

6.1 Call Related Databases are the databases other than OSS, that are used in signaling networks, for billing and collection, or the transmission, routing or other provision of a Telecommunications Service. Such databases include, but are not limited to Switched Access 8XX Toll Free Dialing Ten Digit Screening Service, LIDB, Signaling, Signaling Link Transport, STP, SS7 AIN Access, Service Control Point(SCP\Databases, Local Number Portability (LNP) Databases and Calling Name (CNAM) Database.

6.2 Except for 911 and E911, BellSouth is not required to provide unbundled access to call related databases pursuant to section 251.

7 Automatic Location Identification/Data Management System

7.1 911 and E911 Databases

7.1.1 BellSouth shall provide DeltaCom with nondiscriminatory access to 911 and E911 databases on an unbundled basis, in accordance with 47 C.F.R. § 51.319 (f).

7.1.2 The ALI/DMS database contains End User information (including name, address, telephone information, and sometimes special information from the local service provider or End User) used to determine to which PSAP to route the call. The ALI/DMS database is used to provide enhanced routing flexibility for E911. DeltaCom will be required to provide the BellSouth 911 database vendor daily service order updates to E911 database in accordance with Section 7.2.1 below.

7.2 Technical Requirements

7.2.1 BellSouth’s 911 database vendor shall provide DeltaCom the capability of providing updates to the ALI/DMS database through a specified electronic interface. DeltaCom shall contact BellSouth’s 911 database vendor directly to request interface. DeltaCom shall provide updates directly to BellSouth’s 911 database vendor on a daily basis. Updates shall be the responsibility of DeltaCom and BellSouth shall not be liable for the transactions between DeltaCom and BellSouth’s 911 database vendor.

Attachment 2

Exhibit 1-Form

Page 51

7.2.2 It is DeltaCom’s responsibility to retrieve and confirm statistical data and to correct errors obtained from BellSouth’s 911 database vendor on a daily basis. All errors will be assigned a unique error code and the description of the error and the corrective action is described in the CLEC Users Guide for Facility Based Providers that is found on the BellSouth Interconnection Web site.

7.2.3 DeltaCom shall conform to the BellSouth standards as described in the CLEC Users Guide to E911 for Facilities Based Providers that is located on the BellSouth’s Interconnection Web site: www.interconnection.bellsouth.com/guides.

7.2.4 Stranded Unlocks are defined as End User records in BellSouth’s ALI/DMS database that have not been migrated for over ninety (90) days to DeltaCom, as a new provider of local service to the End User. Stranded Unlocks are those End User records that have been “unlocked” by the previous local exchange carrier that provided service to the End User and are open for DeltaCom to assume responsibility for such records.

7.2.5 Based upon End User record ownership information available in the NPAC database, BellSouth shall provide a Stranded Unlock annual report to DeltaCom that reflects all Stranded Unlocks that remain in the ALI/DMS database for over ninety (90) days. DeltaCom shall review the Stranded Unlock report, identify its End User records and request to either delete such records or migrate the records to DeltaCom within two (2) months following the date of the Stranded Unlock report provided by BellSouth. DeltaCom shall reimburse BellSouth for any charges BellSouth’s database vendor imposes on BellSouth for the deletion of DeltaCom’s records.

7.3 911 PBX Locate Service®. 911 PBX Locate Service is comprised of a database capability and a separate transport component.

7.3.1 Description of Product. The transport component provides a dedicated trunk path from a Private Branch Exchange (PBX) switch to the appropriate BellSouth 911 tandem.

7.3.1.1 The database capability allows DeltaCom to offer an E911 service to its PBX End Users that identifies to the PSAP the physical location of the DeltaCom PBX 911 End User station telephone number for the 911 call that is placed by the End User.

7.3.2 DeltaCom may order either the database capability or the transport component as desired or DeltaCom may order both components of the service.

7.3.3 911 PBX Locate Database Capability. DeltaCom’s End User or DeltaCom’s End User’s database management agent (DMA) must provide the End User PBX station telephone numbers and corresponding address and location data to BellSouth’s 911 database vendor. The data will be loaded and maintained in BellSouth’s ALI database.

Attachment 2

Exhibit 1-Form

Page 52

7.3.4 Ordering, provisioning, testing and maintenance shall be provided by DeltaCom pursuant to the 911 PBX Locate Marketing Service Description (MSD) that is located on the BellSouth Interconnection Web site.

7.3.5 DeltaCom’s End User, or DeltaCom’s End User DMA must provide ongoing updates to BellSouth’s 911 database vendor within a commercially reasonable timeframe of all PBX station telephone number adds, moves and deletions. It will be the responsibility of DeltaCom to ensure that the End User or DMA maintain the data pertaining to each End User’s extension managed by the 911 PBX Locate Service product. DeltaCom should not submit telephone number updates for specific PBX station telephone numbers that are submitted by DeltaCom’s End User, or DeltaCom’s End User DMA under the terms of 911 PBX Locate product.

7.3.5.1 DeltaCom must provision all PBX station numbers in the same LATA as the E911 tandem.

7.3.6 DeltaCom agrees to release, indemnify, defend and hold harmless BellSouth from any and all loss, claims, demands, suits, or other action, or any liability whatsoever, whether suffered, made, instituted or asserted by DeltaCom’s End User or by any other party or person, for any personal injury to or death of any person or persons, or for any loss, damage or destruction of any property, whether owned by DeltaCom or others, or for any infringement or invasion of the right of privacy of any person or persons, caused or claimed to have been caused, directly or indirectly, by the installation, operation, failure to operate, maintenance, removal, presence, condition, location or use of PBX Locate Service features or by any services which are or may be furnished by BellSouth in connection therewith, including but not limited to the identification of the telephone number, address or name associated with the telephone used by the party or parties accessing 911 services using 911 PBX Locate Service hereunder, except to the extent caused by BellSouth’s gross negligence or wilful misconduct. DeltaCom is responsible for assuring that its authorized End Users comply with the provisions of these terms and that unauthorized persons do not gain access to or use the 911 PBX Locate Service through user names, passwords, or other identifiers assigned to DeltaCom’s End User or DMA pursuant to these terms. Specifically, DeltaCom’s End User or DMA must keep and protect from use by any unauthorized individual identifiers, passwords, and any other security token(s) and devices that are provided for access to this product.

7.3.7 DeltaCom may only use BellSouth PBX Locate Service solely for the purpose of validating and correcting 911 related data for DeltaCom’s End Users’ telephone numbers for which it has direct management authority.

Attachment 2

Exhibit 1-Form

Page 53

7.3.8 911 PBX Locate Transport Component. The 911 PBX Locate Service transport component requires DeltaCom to order a CAMA type dedicated trunk from DeltaCom’s End User premise to the appropriate BellSouth 911 tandem pursuant to the following provisions.

7.3.8.1 Except as otherwise set forth below, a minimum of two (2) End User specific, dedicated 911 trunks are required between the DeltaCom’s End User premise and the BellSouth 911 tandem as described in BellSouth’s TR 73576 and in accordance with the 911 PBX Locate Marketing Service Description located on the BellSouth Interconnection Web site. DeltaCom is responsible for connectivity between the End User’s PBX and DeltaCom’s switch or POP location. DeltaCom will then order 911 trunks from their switch or POP location to the BellSouth 911 tandem. The dedicated trunks shall be, at a minimum, DS0 level trunks configured as part of a digital interface (delivered over a DeltaCom purchased DS1 facility that hands off at a DS1 or higher level digital or optical interface). DeltaCom is responsible for ensuring that the PBX switch is capable of sending the calling station’s Direct Inward Dial (DID) telephone number to the BellSouth 911 tandem in a specified Multi-frequency (MF) Address Signaling Protocol. If the PBX switch supports Primary Rate ISDN (PRI) and the calling stations are DID numbers, then the 911call can be transmitted using PRI, and there will be no requirement for the PBX Locate Transport component.

7.3.9 Ordering and Provisioning. DeltaCom will submit an Access Service Request (ASR) to BellSouth to order a minimum of two (2) End User specific 911 trunks from its switch or POP location to the BellSouth 911 tandem.

7.3.9.1 Testing and maintenance shall be provided by DeltaCom pursuant to the 911 PBX Locate Marketing Service description that is located on the BellSouth Interconnection Web site.

7.3.10 Rates. Rates for the 911 PBX Locate Service database component are set forth in Exhibit A. Trunks and facilities for 911 PBX Locate transport component may be ordered by DeltaCom pursuant to the terms and conditions set forth in Attachment 3.

Attachment 2

Exhibit 1-Form

Page 54

Exhibit C

Exhibit C	BellSouth/DeltaCom Points of interconnection
IP CLLI	Address	City	State
CHRLNCRU4MD	401 South College St	Charlotte	NC	422
GNBONCPH9MD	301 South Elm St	Greensboro	NC	424
RLGINCMNAMD	213 N Harrington	Raleigh	NC	426
GNVLSCMCCMD	325 West McBee Av	Greenville	SC	430
FLRNSCTSHMD	224 West Cheves St	Florence	SC	432
CLMASCEANMD	1426 Main Street	Columbia	SC	434
CHTNSCPSXYX	One Charlotte Street	Charleston	SC	436
ATLNGAPKXCX	55 Park Place NE,Suite 360	Atlanta	GA	438
MACNGA013MD	160 State Street	Macon	GA	446
AGSTGADL5MD	301 B 15th Street	Augusta	GA	442
ALBYGADZ1MD	2151 Gillionville Rd	Albany	GA	444
JCVLFLJBH06	421 West Church St	Jacksonville	FL	452
ORLFFL42AMD	8248 Parkline Blvd,Suite 220	Orlando	FL	458
WPBIFLJA1MD	1475 Centrepark Blvd,STE300	W. Palm Beach	FL	460
NSVMTN30AMD	101 Raines Ave	Nashville	TN	470
CHTHTNDNH00	1329 Slayton St	Chattanooga	TN	472
ANTNAL07AMD	410 West 10th St	Anniston	AL	476
BRHMALWDBMD	900 Appalachee St	Birmingham	AL	476
HNVIAL03ZMD	8600 South MemorialPkwy	Huntsville	AL	477
MTGMALLTAMD	10 Tallapoosa St	Montgomery	AL	478
MOBLALNHAMD	25 Battleship Pkwy	Mobile	AL	480
JCSNMSITBMD	308 East Pearl St	Jackson	MS	482
GLPTMS55JMD	2221 17th St	Gulfport	MS	484
SHPTLA12XVX	724 McNeil, 2nd Floor STE 200	Shreveport	LA	486
NWORLA90AMD	12928 Chef Menteur Hwy	New Orleans	LA	490

UNBUNDLED NETWORK ELEMENTS - North Carolina

Att: 2 Exh: A

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add'l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add'l

First

Add'l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

The "Zone" shown in the sections for stand-alone loops or loops as part of a combination refers to Geographically Deaveraged UNE Zones. To view Geographically Deaveraged UNE Zone Designations by Central Office, refer to internet Website: http://www.interconnection.bellsouth.com/become_a_clec/html/interconnection.htm

OPERATIONS SUPPORT SYSTEMS (OSS)—"REGIONAL RATES"

NOTE: (1) CLEC should contact its contract negotiator if it prefers the "state specific" OSS charges as ordered by the State Commissions. The OSS charges currently contained in this rate exhibit are the BellSouth "regional" service ordering charges. CLEC may elect either the state specific Commission ordered rates for the service ordering charges, or CLEC may elect the regional service ordering charge, however, CLEC can not obtain a mixture of the two regardless if CLEC has a interconnection contract established in each of the 9 states.

NOTE: (2) Any element that can be ordered electronically will be billed according to the SOMEC rate listed in this category. Please refer to BellSouth's Local Ordering Handbook (LOH) to determine if a product can be ordered electronically. For those elements that cannot be ordered electronically at present per the LOH, the listed SOMEC rate in this category reflects the charge that would be billed to a CLEC once electronic ordering capabilities come on-line for that element. Otherwise, the manual ordering charge, SOMAN, will be applied to a CLECs bill when it submits an LSR to BellSouth.

OSS - Electronic Service Order Charge, Per Local Service Request (LSR) - UNE Only

SOMEC

3.50

0.00

3.50

0.00

OSS - Manual Service Order Charge, Per Local Service Request (LSR) - UNE Only

SOMAN

15.20

0.00

15.20

0.00

UNE SERVICE DATE ADVANCEMENT CHARGE

NOTE: The Expedite charge will be maintained commensurate with BellSouth's FCC No.1 Tariff, Section 5 as applicable.

UNE Expedite Charge per Circuit or Line Assignable USOC, per Day

UAL, UEANL, UCL, UEF, UDF, UEQ, UDL, UENTW, UDN, UEA, UHL, ULC, USL, U1T12, U1T48, U1TD1, U1TD3, U1TDX, U1TO3, U1TS1, U1TVX, UC1BC, UC1BL, UC1CC, UC1CL, UC1DC, UC1DL, UC1EC, UC1EL, UC1FC, UC1FL, UC1GC, UC1GL, UC1HC, UC1HL, UDL12, UDL48, UDLO3, UDLSX, UE3, ULD12, ULD48, ULDD1, ULDD3, ULDDX, ULDO3, ULDS1, ULDVX, UNC1X, UNC3X, UNCDX, UNCNX, UNCSX, UNCVX, UNLD1, UNLD3, UXTD1, UXTD3, UXTS1, U1TUC, U1TUD, U1TUB, U1TUA,NTCVG, NTCUD, NTCD1

SDASP

200.00

ORDER MODIFICATION CHARGE

Order Modification Charge (OMC)

26.21

0.00

0.00

0.00

Order Modification Additional Dispatch Charge (OMCAD)

0.00

0.00

0.00

0.00

UNBUNDLED EXCHANGE ACCESS LOOP

2-WIRE ANALOG VOICE GRADE LOOP

2-Wire Analog Voice Grade Loop -Service Level 1-Zone 1

1

UEANL

UEAL2

10.82

36.54

16.87

2-Wire Analog Voice Grade Loop - Service Level 1- Zone 2

2

UEANL

UEAL2

16.21

36.54

16.87

2-Wire Analog Voice Grade Loop - Service Level 1- Zone 3

3

UEANL

UEAL2

24.08

36.54

16.87

2-Wire Analog Voice Grade Loop - Service Level 1- Zone 1

1

UEANL

UEASL

10.82

36.54

16.87

2-Wire Analog Voice Grade Loop - Service Level 1- Zone 2

2

UEANL

UEASL

16.21

36.54

16.87

2-Wire Analog Voice Grade Loop - Service Level 1- Zone 3

3

UEANL

UEASL

24.08

36.54

16.87

Tag Loop at End User Premise

UEANL

URETL

8.93

0.88

Loop Testing - Basic 1st Half Hour

UEANL

URET1

33.17

0.00

Loop Testing - Basic Additional Half Hour

UEANL

URETA

19.28

19.28

Manual Order Coordination for UVL-SL1s (per loop)

UEANL

UEAMC

7.92

7.92

Order Coordination for Specified Conversion Time for UVL-SL1 (per LSR)

UEANL

OCOSL

17.56

Page 1 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		Unbundled Non-Design Voice Loop, billing for BST providing make-up (Engineering Information - E.I.)			UEANL	UEANM		13.04	13.04
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UEANL	UREWO		15.74	8.92
		Bulk Migration, per 2 Wire Voice Loop-SL1			UEANL	UREPN		28.44	11.23
		Bulk Migration Order Coordination, per 2 Wire Voice Loop-SL1			UEANL	UREPM		7.92	7.92
	2-WIRE Unbundled COPPER LOOP
		2-Wire Unbundled Copper Loop - Non-Designed Zone 1		1	UEQ	UEQ2X	10.93	35.27	15.60
		2 Wire Unbundled Copper Loop - Non-Designed - Zone 2		2	UEQ	UEQ2X	12.75	35.27	15.60
		2 Wire Unbundled Copper Loop - Non-Designed - Zone 3		3	UEQ	UEQ2X	13.92	35.27	15.60
		Tag Loop at End User Premise			UEQ	URETL		8.93	0.88
		Loop Testing - Basic 1st Half Hour			UEQ	URET1		33.17	0.00
		Loop Testing - Basic Additional Half Hour			UEQ	URETA		19.28	19.28
		Manual Order Coordination 2 Wire Unbundled Copper Loop - Non-Designed (per loop)			UEQ	USBMC		7.92	7.92
		Unbundled Copper Loop - Non-Design, billing for BST providing make-up (Engineering Information - E.I.)			UEQ	UEQMU		13.04	13.04
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UEQ	UREWO		14.23	7.41
		Bulk Migration, per 2 Wire UCL-ND			UEQ	UREPN		27.30	10.08
		Bulk Migration Order Coordination, per 2 Wire UCL-ND			UEQ	UREPM		7.92	7.92
UNBUNDLED EXCHANGE ACCESS LOOP
	2-WIRE ANALOG VOICE GRADE LOOP
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Loop or Ground Start Signaling - Zone 1		1	UEA	UEAL2	11.96	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Loop or Ground Start Signaling - Zone 2		2	UEA	UEAL2	17.36	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Loop or Ground Start Signaling - Zone 3		3	UEA	UEAL2	25.23	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Reverse Battery Signaling - Zone 1		1	UEA	UEAR2	11.96	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Reverse Battery Signaling - Zone 2		2	UEA	UEAR2	17.36	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Reverse Battery Signaling - Zone 3		3	UEA	UEAR2	25.23	102.10	65.72
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS0)			UEA	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS0)			UEA	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UEA	UREWO		87.49	36.26
		Loop Tagging - Service Level 2 (SL2)			UEA	URETL		11.20	1.10
		Bulk Migration, per 2 Wire Voice Loop-SL2			UEA	UREPN		88.24	50.31
		Bulk Migration Order Coordination, per 2 Wire Voice Loop-SL2			UEA	UREPM		0.00	0.00
	4-WIRE ANALOG VOICE GRADE LOOP
		4-Wire Analog Voice Grade Loop - Zone 1		1	UEA	UEAL4	19.52	127.40	91.02
		4-Wire Analog Voice Grade Loop - Zone 2		2	UEA	UEAL4	24.74	127.40	91.02
		4-Wire Analog Voice Grade Loop - Zone 3		3	UEA	UEAL4	46.11	127.40	91.02
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS0)			UEA	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS0)			UEA	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UEA	UREWO		87.49	36.26
	2-WIRE ISDN DIGITAL GRADE LOOP
		2-Wire ISDN Digital Grade Loop - Zone 1		1	UDN	U1L2X	19.78	113.34	76.96
		2-Wire ISDN Digital Grade Loop - Zone 2		2	UDN	U1L2X	26.16	113.34	76.96
		2-Wire ISDN Digital Grade Loop - Zone 3		3	UDN	U1L2X	35.37	113.34	76.96
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UDN	UREWO		91.39	44.04
	2-WIRE ASYMMETRICAL DIGITAL SUBSCRIBER LINE (ADSL) COMPATIBLE LOOP
		2 Wire Unbundled ADSL Loop including manual service inquiry & facility reservation - Zone 1		1	UAL	UAL2X	10.14	117.08	68.36
		2 Wire Unbundled ADSL Loop including manual service inquiry & facility reservation - Zone 2		2	UAL	UAL2X	11.59	117.08	68.36

Page 2 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
								Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
							Rec	First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		2 Wire Unbundled ADSL Loop including manual service inquiry & facility reservation - Zone 3		3	UAL	UAL2X	12.28	117.08	68.36
		2 Wire Unbundled ADSL Loop without manual service inquiry & facility reservaton - Zone 1		1	UAL	UAL2W	10.14	92.83	56.02
		2 Wire Unbundled ADSL Loop without manual service inquiry & facility reservaton - Zone 2		2	UAL	UAL2W	11.59	92.83	56.02
		2 Wire Unbundled ADSL Loop without manual service inquiry & facility reservaton - Zone 3		3	UAL	UAL2W	12.28	92.83	56.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UAL	UREWO		78.06	32.38
	2-WIRE HIGH BIT RATE DIGITAL SUBSCRIBER LINE (HDSL) COMPATIBLE LOOP
		2 Wire Unbundled HDSL Loop including manual service inquiry & facility reservation - Zone 1		1	UHL	UHL2X	7.95	125.50	76.77
		2 Wire Unbundled HDSL Loop including manual service inquiry & facility reservation - Zone 2		2	UHL	UHL2X	9.15	125.50	76.77
		2 Wire Unbundled HDSL Loop including manual service inquiry & facility reservation - Zone 3		3	UHL	UHL2X	9.53	125.50	76.77
		2 Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 1		1	UHL	UHL2W	7.95	101.24	64.43
		2 Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 2		2	UHL	UHL2W	9.15	101.24	64.43
		2 Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 3		3	UHL	UHL2W	9.53	101.24	64.43
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UHL	UREWO		78.00	32.38
	4-WIRE HIGH BIT RATE DIGITAL SUBSCRIBER LINE (HDSL) COMPATIBLE LOOP
		4 Wire Unbundled HDSL Loop including manual service inquiry and facility reservation - Zone 1		1	UHL	UHL4X	11.01	153.26	104.54
		4-Wire Unbundled HDSL Loop including manual service inquiry and facility reservation - Zone 2		2	UHL	UHL4X	12.20	153.26	104.54
		4-Wire Unbundled HDSL Loop including manual service inquiry and facility reservation - Zone 3		3	UHL	UHL4X	13.49	153.26	104.54
		4-Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 1		1	UHL	UHL4W	11.01	129.00	92.20
		4-Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 2		2	UHL	UHL4W	12.20	129.00	92.20
		4-Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 3		3	UHL	UHL4W	13.49	129.00	92.20
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UHL	UREWO		78.00	32.38
	4-WIRE DS1 DIGITAL LOOP
		4-Wire DS1 Digital Loop - Zone 1		1	USL	USLXX	63.62	245.16	152.98
		4-Wire DS1 Digital Loop - Zone 2		2	USL	USLXX	104.40	245.16	152.98
		4-Wire DS1 Digital Loop - Zone 3		3	USL	USLXX	210.22	245.16	152.98
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS1)			USL	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS1)			USL	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			USL	UREWO		100.82	42.93
	4-WIRE 19.2, 56 OR 64 KBPS DIGITAL GRADE LOOP
		4 Wire Unbundled Digital Loop 2.4 Kbps - Zone 1		1	UDL	UDL2X	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 2.4 Kbps - Zone 2		2	UDL	UDL2X	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 2.4 Kbps - Zone3		3	UDL	UDL2X	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 4.8 Kbps -Zone 1		1	UDL	UDL4X	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 4.8 Kbps - Zone 2		2	UDL	UDL4X	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 4.8 Kbps - Zone 3		3	UDL	UDL4X	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 9.6 Kbps - Zone 1		1	UDL	UDL9X	21.98	121.86	85.48
		5 Wire Unbundled Digital Loop 9.6 Kbps - Zone 2		2	UDL	UDL9X	27.58	121.86	85.48
		6 Wire Unbundled Digital Loop 9.6 Kbps - Zone 3		3	UDL	UDL9X	43.08	121.86	85.48
		4 Wire Unbundled Digital 19.2 Kbps - Zone 1		1	UDL	UDL19	21.98	121.86	85.48
		4 Wire Unbundled Digital 19.2 Kbps - Zone 2		2	UDL	UDL19	27.58	121.86	85.48
		4 Wire Unbundled Digital 19.2 Kbps - Zone 3		3	UDL	UDL19	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 56 Kbps - Zone 1		1	UDL	UDL56	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 56 Kbps - Zone 2		2	UDL	UDL56	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 56 Kbps - Zone 3		3	UDL	UDL56	43.08	121.86	85.48

Page 3 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		4 Wire Unbundled Digital Loop 64 Kbps - Zone 1		1	UDL	UDL64	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 64 Kbps - Zone 2		2	UDL	UDL64	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 64 Kbps - Zone 3		3	UDL	UDL64	43.08	121.86	85.48
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS0)			UDL	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS0)			UDL	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UDL	UREWO		101.86	49.62
	2-WIRE Unbundled COPPER LOOP
		2-Wire Unbundled Copper Loop-Designed including manual service inquiry & facility reservation - Zone 1		1	UCL	UCLPB	10.14	116.18	67.46
		2-Wire Unbundled Copper Loop-Designed including manual service inquiry & facility reservation - Zone 2		2	UCL	UCLPB	11.59	116.18	67.46
		2 Wire Unbundled Copper Loop-Designed including manual service inquiry & facility reservation - Zone 3		3	UCL	UCLPB	12.28	116.18	67.46
		2-Wire Unbundled Copper Loop-Designed without manual service inquiry and facility reservation - Zone 1		1	UCL	UCLPW	10.14	91.92	55.12
		2-Wire Unbundled Copper Loop-Designed without manual service inquiry and facility reservation - Zone 2		2	UCL	UCLPW	11.59	91.92	55.12
		2-Wire Unbundled Copper Loop-Designed without manual service inquiry and facility reservation - Zone 3		3	UCL	UCLPW	12.28	91.92	55.12
		Order Coordination for Unbundled Copper Loops (per loop)			UCL	UCLMC		7.92	7.92
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UCL	UREWO		89.06	34.45
	4-WIRE COPPER LOOP
		4-Wire Copper Loop including manual service inquiry and facility reservation - Zone 1		1	UCL	UCL4S	13.10	139.69	90.96
		4-Wire Copper Loop including manual service inquiry and facility reservation - Zone 2		2	UCL	UCL4S	15.17	139.69	90.96
		4-Wire Copper Loop including manual service inquiry and facility reservation - Zone 3		3	UCL	UCL4S	17.03	139.69	90.96
		4-Wire Copper Loop without manual service inquiry and facility reservation - Zone 1		1	UCL	UCL4W	13.10	115.43	78.63
		4-Wire Copper Loop without manual service inquiry and facility reservation - Zone 2		2	UCL	UCL4W	15.17	115.43	78.63
		4-Wire Copper Loop without manual service inquiry and facility reservation - Zone 3		3	UCL	UCL4W	17.03	115.43	78.63
		Order Coordination for Unbundled Copper Loops (per loop)			UCL	UCLMC		7.92	7.92
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			UCL	UREWO		89.06	34.45
		Order Coordination for Specified Conversion Time (per LSR)			UEA, UDN, UAL, UHL, UDL, USL	OCOSL		17.56
	Rearrangements
		EEL to UNE-L Retermination, per 2 Wire Unbundled Voice Loop-SL2			UEA	UREEL		87.49	36.26
		EEL to UNE-L Retermination, per 4 Wire Unbundled Voice Loop			UEA	UREEL		87.49	36.26
		EEL to UNE-L Retermination, per 2 Wire ISDN Loop			UDN	UREEL		91.39	44.04
		EEL to UNE-L Retermination, per 4 Wire Unbundled Digital Loop			UDL	UREEL		101.86	49.62
		EEL to UNE-L Retermination, per 4 Wire Unbundled DS1 Loop			USL	UREEL		100.82	42.93
UNE LOOP COMMINGLING
	2-WIRE ANALOG VOICE GRADE LOOP - COMMINGLING
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Loop or Ground Start Signaling - Zone 1		1	NTCVG	UEAL2	11.96	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Loop or Ground Start Signaling - Zone 2		2	NTCVG	UEAL2	17.36	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Loop or Ground Start Signaling - Zone 3		3	NTCVG	UEAL2	25.23	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Reverse Battery Signaling - Zone 1		1	NTCVG	UEAR2	11.96	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Reverse Battery Signaling - Zone 2		2	NTCVG	UEAR2	17.36	102.10	65.72
		2-Wire Analog Voice Grade Loop - Service Level 2 w/Reverse Battery Signaling - Zone 3		3	NTCVG	UEAR2	25.23	102.10	65.72

Page 4 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS0)			NTCVG	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS0)			NTCVG	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			NTCVG	UREWO		87.49	36.26
		Loop Tagging - Service Level 2 (SL2)			NTCVG	URETL		11.20	1.10
	4-WIRE ANALOG VOICE GRADE LOOP -COMMINGLING
		4-Wire Analog Voice Grade Loop - Zone 1		1	NTCVG	UEAL4	19.52	127.40	91.02
		4-Wire Analog Voice Grade Loop - Zone 2		2	NTCVG	UEAL4	24.74	127.40	91.02
		4-Wire Analog Voice Grade Loop - Zone 3		3	NTCVG	UEAL4	46.11	127.40	91.02
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS0)			NTCVG	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS0)			NTCVG	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			NTCVG	UREWO		87.49	36.26
	4-WIRE DS1 DIGITAL LOOP
		4-Wire DS1 Digital Loop - Zone 1		1	NTCD1	USLXX	63.62	245.16	152.98
		4-Wire DS1 Digital Loop - Zone 2		2	NTCD1	USLXX	104.40	245.16	152.98
		4-Wire DS1 Digital Loop - Zone 3		3	NTCD1	USLXX	210.22	245.16	152.98
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS1)			NTCD1	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS1)			NTCD1	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			NTCD1	UREWO		100.82	42.93
	4-WIRE 19.2, 56 OR 64 KBPS DIGITAL GRADE LOOP
		4 Wire Unbundled Digital Loop 2.4 Kbps - Zone 1		1	NTCUD	UDL2X	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 2.4 Kbps - Zone 2		2	NTCUD	UDL2X	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 2.4 Kbps - Zone3		3	NTCUD	UDL2X	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 4.8 Kbps -Zone 1		1	NTCUD	UDL4X	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 4.8 Kbps - Zone 2		2	NTCUD	UDL4X	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 4.8 Kbps - Zone 3		3	NTCUD	UDL4X	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 9.6 Kbps - Zone 1		1	NTCUD	UDL9X	21.98	121.86	85.48
		5 Wire Unbundled Digital Loop 9.6 Kbps - Zone 2		2	NTCUD	UDL9X	27.58	121.86	85.48
		6 Wire Unbundled Digital Loop 9.6 Kbps - Zone 3		3	NTCUD	UDL9X	43.08	121.86	85.48
		4 Wire Unbundled Digital 19.2 Kbps - Zone 1		1	NTCUD	UDL19	21.98	121.86	85.48
		4 Wire Unbundled Digital 19.2 Kbps - Zone 2		2	NTCUD	UDL19	27.58	121.86	85.48
		4 Wire Unbundled Digital 19.2 Kbps - Zone 3		3	NTCUD	UDL19	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 56 Kbps - Zone 1		1	NTCUD	UDL56	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 56 Kbps - Zone 2		2	NTCUD	UDL56	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 56 Kbps - Zone 3		3	NTCUD	UDL56	43.08	121.86	85.48
		4 Wire Unbundled Digital Loop 64 Kbps - Zone 1		1	NTCUD	UDL64	21.98	121.86	85.48
		4 Wire Unbundled Digital Loop 64 Kbps - Zone 2		2	NTCUD	UDL64	27.58	121.86	85.48
		4 Wire Unbundled Digital Loop 64 Kbps - Zone 3		3	NTCUD	UDL64	43.08	121.86	85.48
		Switch-As-Is Conversion rate per UNE Loop, Single LSR, (per DS0)			NTCUD	URESL		25.03	3.53
		Switch-As-Is Conversion rate per UNE Loop, Spreadsheet, (per DS0)			NTCUD	URESP		26.52	5.02
		Unbundled Loop Service Rearrangement, change in loop facility, per circuit			NTCUD	UREWO		101.86	49.62
		Order Coordination for Specified Conversion Time (per LSR)			NTCVG, NTCUD, NTCD1	OCOSL		17.56
MAINTENANCE OF SERVICE

Page 5 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina

Att: 2 Exh: A

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add'l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add'l

First

Add'l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

Maintenance of Service Charge, Basic Time, per half hour

UDC, UEA, UDL, UDN, USL, UAL, UHL, UCL, NTCVG, NTCUD, NTCD1, U1TD1, U1TD3, U1TDX, U1TS1, U1TVX, UDF, UDFCX, UDLSX, UE3, ULDD1, ULDD3, ULDDX, ULDS1, ULDVX, UNC1X, UNC3X, UNCDX, UNCSX, UNCVX, ULS

MVVBT

80.00

55.00

Maintenance of Service Charge, Overtime, per half hour

UDC, UEA, UDL, UDN, USL, UAL, UHL, UCL, NTCVG, NTCUD, NTCD1, U1TD1, U1TD3, U1TDX, U1TS1, U1TVX, UDF, UDFCX, UDLSX, UE3, ULDD1, ULDD3, ULDDX, ULDS1, ULDVX, UNC1X, UNC3X, UNCDX, UNCSX, UNCVX, ULS

MVVOT

90.00

65.00

Maintenance of Service Charge, Premium, per half hour

UDC, UEA, UDL, UDN, USL, UAL, UHL, UCL, NTCVG, NTCUD, NTCD1, U1TD1, U1TD3, U1TDX, U1TS1, U1TVX, UDF, UDFCX, UDLSX, UE3, ULDD1, ULDD3, ULDDX, ULDS1, ULDVX, UNC1X, UNC3X, UNCDX, UNCSX, UNCVX, ULS

MVVPT

100.00

75.00

LOOP MODIFICATION

Unbundled Loop Modification, Removal of Load Coils - 2 Wire pair less than or equal to 18k ft, per Unbundled Loop

UAL, UHL, UCL, UEQ, ULS, UEA, UEANL, UEPSR, UEPSB

ULM2L

0.00

0.00

Unbundled Loop Modification, Removal of Load Coils - 2 wire greater than 18k ft

UCL, ULS, UEQ

ULM2G

0.00

0.00

Unbundled Loop Modification Removal of Load Coils - 4 Wire less than or equal to 18K ft, per Unbundled Loop

UHL, UCL, UEA

ULM4L

0.00

0.00

Unbundled Loop Modification Removal of Load Coils - 4 Wire pair greater than 18k ft

UCL

ULM4G

0.00

0.00

Unbundled Loop Modification Removal of Bridged Tap Removal, per unbundled loop

UAL, UHL, UCL, UEQ, ULS, UEA, UEANL, UEPSR, UEPSB

ULMBT

12.15

12.15

SUB-LOOPS

Sub-Loop Distribution

Sub-Loop - Per Cross Box Location - CLEC Feeder Facility Set-Up

UEANL, UEF

USBSA

144.09

Sub-Loop - Per Cross Box Location - Per 25 Pair Panel Set-Up

UEANL, UEF

USBSB

10.99

10.99

Sub-Loop - Per Building Equipment Room - CLEC Feeder Facility Set-Up

UEANL

USBSC

86.16

Sub-Loop - Per Building Equipment Room - Per 25 Pair Panel Set-Up

UEANL

USBSD

27.13

27.13

Page 6 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic- 1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		Sub-Loop Distribution Per 2-Wire Analog Voice Grade Loop - Zone 1		1	UEANL	USBN2	6.70	63.89	30.06
		Sub-Loop Distribution Per 2-Wire Analog Voice Grade Loop - Zone 2		2	UEANL	USBN2	9.93	63.89	30.06
		Sub-Loop Distribution Per 2-Wire Analog Voice Grade Loop - Zone 3		3	UEANL	USBN2	12.79	63.89	30.06
		Order Coordination for Unbundled Sub-Loops, per sub-loop pair			UEANL	USBMC		7.92	7.92
		Sub-Loop Distribution Per 4-Wire Analog Voice Grade Loop - Zone 1		1	UEANL	USBN4	10.81	76.75	42.92
		Sub-Loop Distribution Per 4-Wire Analog Voice Grade Loop - Zone 2		2	UEANL	USBN4	14.16	76.75	42.92
		Sub-Loop Distribution Per 4-Wire Analog Voice Grade Loop - Zone 3		3	UEANL	USBN4	24.67	76.75	42.92
		Order Coordination for Unbundled Sub-Loops, per sub-loop pair			UEANL	USBMC		7.92	7.92
		Sub-Loop 2-Wire Intrabuilding Network Cable (INC)			UEANL	USBR2	2.34	51.48	17.65
		Order Coordination for Unbundled Sub-Loops, per sub-loop pair			UEANL	USBMC		7.92	7.92
		Sub-Loop 4-Wire Intrabuilding Network Cable (INC)			UEANL	USBR4	4.18	57.54	23.71
		Order Coordination for Unbundled Sub-Loops, per sub-loop pair			UEANL	USBMC		7.92	7.92
	Service Order charges will apply only once per sub-loop
		Loop Testing - Basic 1st Half Hour			UEANL	URET1		33.17	0.00
		Loop Testing - Basic Additional Half Hour			UEANL	URETA		19.28	19.28
		2 Wire Copper Unbundled Sub-Loop Distribution - Zone 1		1	UEF	UCS2X	5.43	63.89	30.06
		2 Wire Copper Unbundled Sub-Loop Distribution - Zone 2		2	UEF	UCS2X	8.04	63.89	30.06
		2 Wire Copper Unbundled Sub-Loop Distribution - Zone 3		3	UEF	UCS2X	9.79	63.89	30.06
		Order Coordination for Unbundled Sub-Loops, per sub-loop pair			UEF	USBMC		7.92	7.92
		4 Wire Copper Unbundled Sub-Loop Distribution - Zone 1		1	UEF	UCS4X	6.34	76.75	42.92
		4 Wire Copper Unbundled Sub-Loop Distribution - Zone 2		2	UEF	UCS4X	9.62	76.75	42.92
		4 Wire Copper Unbundled Sub-Loop Distribution - Zone 3		3	UEF	UCS4X	13.04	76.75	42.92
		Order Coordination for Unbundled Sub-Loops, per sub-loop pair			UEF	USBMC		7.92	7.92
		Loop Tagging Service Level 1, Unbundled Copper Loop, Non-Designed and Distribution Subloops			UEF, UEANL	URETL		8.93	0.88
		Loop Testing - Basic 1st Half Hour			UEF	URET1		33.17	0.00
		Loop Testing - Basic Additional Half Hour			UEF	URETA		19.28	19.28
	Unbundled Sub-Loop Modification
		Unbundled Sub-Loop Modification - 2-W Copper Dist Load Coil/Equip Removal per 2-W PR			UEF	ULM2X		0.00	0.00
		Unbundled Sub-loop Modification - 4-W Copper Dist Load Coil/Equip Removal per 4-W PR			UEF	ULM4X		0.00	0.00
		Unbundled Loop Modification, Removal of Bridge Tap, per unbundled loop			UEF	ULMBT		224.55	4.29
	Unbundled Network Terminating Wire (UNTW)
		Unbundled Network Terminating Wire (UNTW) per Pair			UENTW	UENPP	0.5097	14.72	14.72
	Network Interface Device (NID)
		Network Interface Device (NID) - 1-2 lines			UENTW	UND12		86.37	56.69
		Network Interface Device (NID) - 1-6 lines			UENTW	UND16		127.93	98.21
		Network Interface Device Cross Connect - 2 W			UENTW	UNDC2		5.73	5.73
		Network Interface Device Cross Connect - 4W			UENTW	UNDC4		5.73	5.73
UNE OTHER, PROVISIONING ONLY - NO RATE
		Unbundled Contact Name, Provisioning Only - no rate			UAL, UCL, UDC, UDL, UDN, UEA, UHL, UEANL, UEF, UEQ, UENTW, NTCVG, NTCUD, NTCD1, USL	UNECN	0.00	0.00
		Unbundled DS1 Loop - Superframe Format Option - no rate			USL, NTCD1	CCOSF		0.00
		Unbundled DS1 Loop - Expanded Superframe Format option - no rate			USL, NTCD1	CCOEF		0.00
		NID - Dispatch and Service Order for NID installation			UENTW	UNDBX	0.00	0.00

page 7 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		UNTW Circuit Establishment, Provisioning Only - No Rate			UENTW	UENCE	0.00	0.00
LOOP MAKE-UP
		Loop Makeup - Preordering Without Reservation, per working or spare facility queried (Manual).			UMK	UMKLW		23.29	23.29
		Loop Makeup - Preordering With Reservation, per spare facility queried (Manual).			UMK	UMKLP		24.70	24.70
		Loop Makeup - With or Without Reservation, per working or spare facility queried (Mechanized)			UMK	UMKMQ		0.19	0.19
LINE SPLITTING
	END USER ORDERING-CENTRAL OFFICE BASED
		Line Splitting - per line activation DLEC owned splitter			UEPSR UEPSB	UREOS	0.61	15.53	7.79
		Line Splitting - per line activation BST owned - physical			UEPSR UEPSB	UREBP	0.6409	17.97	10.29
		Line Splitting - per line activation BST owned - virtual			UEPSR UEPSB	UREBV	0.6325	17.87	10.29
	END USER ORDERING - REMOTE SITE LINE SPLITTING
	UNBUNDLED EXCHANGE ACCESS LOOP
	2-WIRE ANALOG VOICE GRADE LOOP
		2 Wire Analog Voice Grade Loop-Service Level 1-Line Splitting- Zone 1		1	UEPSR UEPSB	UEALS	10.82	36.54	16.87	0.00	0.00
		2 Wire Analog Voice Grade Loop-Service Level 1-Line Splitting- Zone 1		1	UEPSR UEPSB	UEABS	10.82	36.54	16.87	0.00	0.00
		2 Wire Analog Voice Grade Loop- Service Level 1-Line Splitting-Zone 2		2	UEPSR UEPSB	UEALS	16.21	36.54	16.87	0.00	0.00
		2 Wire Analog Voice Grade Loop- Service Level 1-Line Splitting-Zone 2		2	UEPSR UEPSB	UEABS	16.21	36.54	16.87	0.00	0.00
		2 Wire Analog Voice Grade Loop-Service Level 1-Line Splitting-Zone 3		3	UEPSR UEPSB	UEALS	24.08	36.54	16.87	0.00	0.00
		2 Wire Analog Voice Grade Loop-Service Level 1-Line Splitting-Zone 3		3	UEPSR UEPSB	UEABS	24.08	36.54	16.87	0.00	0.00
	PHYSICAL COLLOCATION
		Physical Collocation-2 Wire Cross Connects (Loop) for Line Splitting			UEPSR UEPSB	PE1LS	0.0309	19.77	14.95	0.00	0.00
	VIRTUAL COLLOCATION
		Virtual Collocation-2 Wire Cross Connects (Loop) for Line Splitting			UEPSR UEPSB	VE1LS	0.0287	33.96	32.08	0.00	0.00
UNBUNDLED DEDICATED TRANSPORT
	INTEROFFICE CHANNEL - DEDICATED TRANSPORT
		Interoffice Channel - 2-Wire Voice Grade - per mile			U1TVX	1L5XX	0.0095
		Interoffice Channel - 2-Wire Voice Grade - Facility Termination			U1TVX	U1TV2	12.12	39.36	26.62
		Interoffice Channel - 2-Wire Voice Grade Rev Bat. - per mile			U1TVX	1L5XX	0.0095
		Interoffice Channel - 2-Wire VG Rev Bat. - Facility Termination			U1TVX	U1TR2	12.12	39.36	26.62
		Interoffice Channel - 4-Wire Voice Grade - per mile			U1TVX	1L5XX	0.0095
		Interoffice Channel - 4- Wire Voice Grade - Facility Termination			U1TVX	U1TV4	10.19	39.36	26.62
		Interoffice Channel - 56 kbps - per mile			U1TDX	1L5XX	0.0095
		Interoffice Channel - 56 kbps - Facility Termination			U1TDX	U1TD5	7.47	39.37	26.62
		Interoffice Channel - 64 kbps - per mile			U1TDX	1L5XX	0.0095
		Interoffice Channel - 64 kbps - Facility Termination			U1TDX	U1TD6	7.47	39.37	26.62
		Interoffice Channel - DS1 - per mile			U1TD1	1L5XX	0.1938
		Interoffice Channel - DS1 - Facility Termination			U1TD1	U1TF1	31.06	86.69	79.44
		Interoffice Channel - DS3 - per mile			U1TD3	1L5XX	4.44
		Interoffice Channel - DS3 - Facility Termination			U1TD3	U1TF3	329.91	270.69	158.05
		Interoffice Channel - STS-1 - per mile			U1TS1	1L5XX	4.44
		Interoffice Channel - STS-1 - Facility Termination			U1TS1	U1TFS	339.20	270.69	158.05
HIGH CAPACITY UNBUNDLED LOCAL LOOP
	DS-3/STS-1 UNBUNDLED LOCAL LOOP - Stand Alone
		DS3 Unbundled Local Loop - per mile			UE3	1L5ND	12.95
		DS3 Unbundled Local Loop - Facility Termination			UE3	UE3PX	229.90	438.46	256.30
		STS-1Unbundled Local Loop - per mile			UDLSX	1L5ND	12.95
		STS-1 Unbundled Local Loop - Facility Termination			UDLSX	UDLS1	257.82	438.46	256.30
	UNBUNDLED DARK FIBER
		Dark Fiber - Interoffice Transport, Per Four Fiber Strands, Per Route Mile Or Fraction Thereof			UDF, UDFCX	1L5DF	24.77
		Dark Fiber - Interoffice Transport, Per Four Fiber Strands, Per Route Mile Or Fraction Thereof			UDF, UDFCX	UDF14		620.60	133.88
ENHANCED EXTENDED LINK (EELs)

Page 8 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
	Network Elements Used in Combinations
		2-Wire VG Loop (SL2) in Combination - Zone 1		1	UNCVX	UEAL2	11.96	385.26	72.08
		2-Wire VG Loop (SL2) in Combination - Zone 2		2	UNCVX	UEAL2	17.36	385.26	72.08
		2-Wire VG Loop (SL2) in Combination - Zone 3		3	UNCVX	UEAL2	25.23	385.26	72.08
		4-Wire Analog Voice Grade Loop in Combination - Zone 1		1	UNCVX	UEAL4	19.52	385.26	72.08
		4-Wire Analog Voice Grade Loop in Combination - Zone 2		2	UNCVX	UEAL4	24.74	385.26	72.08
		4-Wire Analog Voice Grade Loop in Combination - Zone 3		3	UNCVX	UEAL4	46.11	385.26	72.08
		2-Wire ISDN Loop in Combination - Zone 1		1	UNCNX	U1L2X	19.78	385.26	72.08
		2-Wire ISDN Loop in Combination - Zone 2		2	UNCNX	U1L2X	26.16	385.26	72.08
		2-Wire ISDN Loop in Combination - Zone 3		3	UNCNX	U1L2X	35.37	385.26	72.08
		4-Wire 56Kbps Digital Grade Loop in Combination - Zone 1		1	UNCDX	UDL56	21.98	385.26	72.08
		4-Wire 56Kbps Digital Grade Loop in Combination - Zone 2		2	UNCDX	UDL56	27.58	385.26	72.08
		4-Wire 56Kbps Digital Grade Loop in Combination - Zone 3		3	UNCDX	UDL56	43.08	385.26	72.08
		4-Wire 64Kbps Digital Grade Loop in Combination - Zone 1		1	UNCDX	UDL64	21.98	385.26	72.08
		4-Wire 64Kbps Digital Grade Loop in Combination - Zone 2		2	UNCDX	UDL64	27.58	385.26	72.08
		4-Wire 64Kbps Digital Grade Loop in Combination - Zone 3		3	UNCDX	UDL64	43.08	385.26	72.08
		4-Wire DS1 Digital Loop in Combination - Zone 1		1	UNC1X	USLXX	63.62	412.03	139.55
		4-Wire DS1 Digital Loop in Combination - Zone 2		2	UNC1X	USLXX	104.40	412.03	139.55
		4-Wire DS1 Digital Loop in Combination - Zone 3		3	UNC1X	USLXX	210.22	412.03	139.55
		DS3 Local Loop in combination - per mile			UNC3X	1L5ND	12.95
		DS3 Local Loop in combination - Facility Termination			UNC3X	UE3PX	229.90	3,073.55	1,245.84
		STS-1 Local Loop in combination - per mile			UNCSX	1L5ND	12.95
		STS-1 Local Loop in combination - Facility Termination			UNCSX	UDLS1	257.82	3,073.55	1,245.84
		Interoffice Channel in combination - 2-wire VG - per mile			UNCVX	1L5XX	0.0095
		Interoffice Channel in combination - 2-wire VG - Facility Termination			UNCVX	U1TV2	12.12	131.81	78.34
		Interoffice Channel in combination - 4-wire VG - per mile			UNCVX	1L5XX	0.0095
		Interoffice Channel in combination - 4-wire VG - Facility Termination			UNCVX	U1TV4	10.19	131.81	78.34
		Interoffice Channel in combination - 4-wire 56 kbps - per mile			UNCDX	1L5XX	0.0095
		Interoffice Channel in combination - 4-wire 56 kbps - Facility Termination			UNCDX	U1TD5	7.47	131.81	78.34
		Interoffice Channel in combination - 4-wire 64 kbps - per mile			UNCDX	1L5XX	0.0095
		Interoffice Channel in combination - 4-wire 64 kbps - Facility Termination			UNCDX	U1TD6	7.47	131.81	78.34
		Interoffice Channel in combination - DS1 - per mile			UNC1X	1L5XX	0.1938
		Interoffice Channel in combination - DS1 Facility Termination			UNC1X	U1TF1	31.06	234.02	162.52
		Interoffice Channel in combination - DS3 - per mile			UNC3X	1L5XX	4.44
		Interoffice Channel in combination - DS3 - Facility Termination			UNC3X	U1TF3	329.91	802.81	146.02
		Interoffice Channel in combination - STS-1 - per mile			UNCSX	1L5XX	4.44
		Interoffice Channel in combination - STS-1 Facility Termination			UNCSX	U1TFS	339.20	802.81	146.02
ADDITIONAL NETWORK ELEMENTS
	Optional Features & Functions:
		Clear Channel Capability Extended Frame Option - per DS1	I		U1TD1, ULDD1,UNC1X	CCOEF		0.00
		Clear Channel Capability Super FrameOption - per DS1	I		U1TD1, ULDD1,UNC1X	CCOSF		0.00
		Clear Channel Capability (SF/ESF) Option - Subsequent Activity - per DS1	I		ULDD1, U1TD1, UNC1X, USL	NRCCC		184.76	23.80
		C-bit Parity Option - Subsequent Activity - per DS3	I		U1TD3, ULDD3, UE3, UNC3X	NRCC3		218.92	7.66
		DS1/DS0 Channel System			UNC1X	MQ1	70.84	170.57
		DS3/DS1Channel System			UNC3X, UNCSX	MQ3	84.32	0.00
		Voice Grade COCI in combination			UNCVX	1D1VG	0.4329	54.14	17.51
		Voice Grade COCI - for 2W-SL2 & 4W Voice Grade Local Loop			UEA	1D1VG	0.4329	6.39	4.58
		Voice Grade COCI - for connection to a channelized DS1 Local Channel in the same SWC as collocation			U1TUC	1D1VG	0.4329	6.39	4.58
		OCU-DP COCI (2.4-64kbs) in combination			UNCDX	1D1DD	0.9199	54.14	17.51
		OCU-DP COCI (2.4-64kbs) - for Unbundled Digital Loop			UDL	1D1DD	0.9199	6.39	4.58
		OCU-DP COCI (2.4-64kbs) - for connection to a channelized DS1 Local Channel in the same SWC as collocation			U1TUD	1D1DD	0.9199	6.39	4.58
		2-wire ISDN COCI (BRITE) in combination			UNCNX	UC1CA	1.53	54.14	17.51
		2-wire ISDN COCI (BRITE) - for a Local Loop			UDN	UC1CA	1.53	6.39	4.58
		2-wire ISDN COCI (BRITE) - for connection to a channelized DS1 Local Channel in the same SWC as collocation			U1TUB	UC1CA	1.53	6.39	4.58

111

UNBUNDLED NETWORK ELEMENTS - North Carolina														Att: 2 Exh: A
CATEGORY		RATE ELEMENTS	Interim	Zone	BCS	USOC	RATES($)					Svc Order Submitted Elec per LSR	Svc Order Submitted Manually per LSR	Incremental Charge - Manual Svc Order vs. Electronic-1st	Incremental Charge - Manual Svc Order vs. Electronic- Add'l	Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st	Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l
							Rec	Nonrecurring		Nonrecurring Disconnect		OSS Rates($)
								First	Add'l	First	Add'l	SOMEC	SOMAN	SOMAN	SOMAN	SOMAN	SOMAN
		DS1 COCI in combination			UNC1X	UC1D1	8.43	54.14	17.51
		DS1 COCI - for Stand Alone Local Channel			ULDD1	UC1D1	8.43	6.39	4.58
		DS1 COCI - for Stand Alone Interoffice Channel			U1TD1	UC1D1	8.43	6.39	4.58
		DS1 COCI - for DS1 Local Loop			USL	UC1D1	8.43	6.39	4.58
		DS1 COCI - for connection to a channelized DS1 Local Channel in the same SWC as collocation			U1TUA	UC1D1	8.43	6.39	4.58
		Wholesale - UNE, Switch-As-Is Conversion Charge			UNCVX, UNCDX, UNC1X, UNC3X, UNCSX, UDFCX, XDH1X, HFQC6, XDD2X, XDV6X, XDDFX, XDD4X, HFRST, UNCNX	UNCCC		5.43	5.43
		Unbundled Misc Rate Element, SNE SAI, Single Network Element - Switch As Is Non-recurring Charge, per circuit (LSR)			U1TVX, U1TDX, U1TD1, U1TD3, U1TS1, UDF, UE3	URESL		36.90	16.15
		Unbundled Misc Rate Element, SNE SAI, Single Network Element - Switch As Is Non-recurring Charge, incremental charge per circuit on a spreadsheet			U1TVX, U1TDX, U1TD1, U1TD3, U1TS1, UDF, UE3	URESP		1.49	1.49
	Access to DCS - Customer Reconfiguration (FlexServ)
		Customer Reconfiguration Establishment						1.43	1.43
		DS1 DCS Termination with DS0 Switching					21.64	24.81	19.09
		DS1 DCS Termination with DS1 Switching					7.32	17.93	12.22
		DS3 DCS Termination with DS1 Switching					136.07	24.81	19.09
	Node (SynchroNet)
		Node per month			UNCDX	UNCNT	16.00
	Service Rearrangements
		NRC - Change in Facility Assignment per circuit Service Rearrangement	I		U1TVX, U1TDX, U1TUC, U1TUD, U1TUB, ULDVX, ULDDX, UNCVX, UNCDX, UNC1X	URETD		100.82	42.93
		NRC - Change in Facility Assignment per circuit Project Management (added to CFA per circuit if project managed)	I		U1TVX, U1TDX, U1TUC, U1TUD, U1TUB, ULDVX, ULDDX, UNCVX, UNCDX, UNC1X	URETB		3.18	3.18
		NRC - Order Coordination Specific Time - Dedicated Transport	I		UNC1X, UNC3X	OCOSR		18.89	18.89
COMMINGLING
		Commingling Authorization			UNCVX, UNCDX, UNC1X, UNC3X, UNCSX, U1TD1, U1TD3, U1TS1, UE3, UDLSX, U1TVX, U1TDX, U1TUB, ULDVX, ULDD1, ULDD3, ULDS1	CMGAU	0.00	0.00	0.00
	Commingled (UNE part of single bandwidth circuit)
		Commingled VG COCI			XDV2X	1D1VG	0.4329	54.14	17.51
		Commingled Digital COCI			XDV6X	1D1DD	0.9199	54.14	17.51
		Commingled ISDN COCI			XDD4X	UC1CA	1.53	54.14	17.51
		Commingled 2-wire VG Interoffice Channel Facility Termination			XDV2X	U1TV2	12.12	131.81	78.34
		Commingled 4-wire VG Interoffice Channel Facility Termination			XDV6X	U1TV4	10.19	131.81	78.34
		Commingled 56kbps Interoffice Channel Facility Termination			XDD4X	U1TD5	7.47	131.81	78.34
		Commingled 64kbps Interoffice Channel Facility Termination			XDD4X	U1TD6	7.47	131.81	78.34
		Commingled VG/DS0 Interoffice Channel per mile			XDV2X, XDV6X, XDD4X	1L5XX	0.0095
		Commingled 2-wire Local Loop Zone 1		1	XDV2X	UEAL2	11.96	385.26	72.08
		Commingled 2-wire Local Loop Zone 2		2	XDV2X	UEAL2	17.36	385.26	72.08
		Commingled 2-wire Local Loop Zone 3		3	XDV2X	UEAL2	25.23	385.26	72.08
		Commingled 4-wire Local Loop Zone 1		1	XDV6X	UEAL4	19.52	385.26	72.08
		Commingled 4-wire Local Loop Zone 2		2	XDV6X	UEAL4	24.74	385.26	72.08
		Commingled 4-wire Local Loop Zone 3		3	XDV6X	UEAL4	46.11	385.26	72.08
		Commingled 56kbps Local Loop Zone 1		1	XDD4X	UDL56	21.98	385.26	72.08
		Commingled 56kbps Local Loop Zone 2		2	XDD4X	UDL56	27.58	385.26	72.08

Page 10 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina

Att: 2 Exh: A

CATEGORY

RATE ELEMENTS

Interim

Zone

BC

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add'l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add'l

First

Add'l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

Commingled 56kbps Local Loop Zone 3

3

XDD4X

UDL56

43.08

385.26

72.08

Commingled 64kbps Local Loop Zone 1

1

XDD4X

UDL64

21.98

385.26

72.08

Commingled 64kbps Local Loop Zone 2

2

XDD4X

UDL64

27.58

385.26

72.08

Commingled 64kbps Local Loop Zone 3

3

XDD4X

UDL64

43.08

385.26

72.08

Commingled ISDN Local Loop Zone 1

1

XDD4X

U1L2X

19.78

385.26

72.08

Commingled ISDN Local Loop Zone 2

2

XDD4X

U1L2X

26.16

385.26

72.08

Commingled ISDN Local Loop Zone 3

3

XDD4X

U1L2X

35.37

385.26

72.08

Commingled DS1 COCI

XDH1X

UC1D1

8.43

54.14

17.51

Commingled DS1 Interoffice Channel Facility Termination

XDH1X

U1TF1

31.06

234.02

162.52

Commingled DS1 Interoffice Channel per mile

XDH1X

1L5XX

0.1938

Commingled DS1/DS0 Channel System

XDH1X

MQ1

70.84

170.57

Commingled DS1 Local Loop Zone 1

1

XDH1X

USLXX

63.62

412.03

139.55

Commingled DS1 Local Loop Zone 2

2

XDH1X

USLXX

104.40

412.03

139.55

Commingled DS1 Local Loop Zone 3

3

XDH1X

USLXX

210.22

412.03

139.55

Commingled DS3 Local Loop Facility Termination

HFQC6

UE3PX

229.90

3,073.55

1,245.84

Commingled DS3/STS-1 Local Loop per mile

HFQC6, HFRST

1L5ND

12.95

Commingled STS-1 Local Loop Facility Termination

HFRST

UDLS1

257.82

3,073.55

1,245.84

Commingled DS3/DS1 Channel System

HFQC6

MQ3

84.32

Commingled DS3 Interoffice Channel Facility Termination

HFQC6

U1TF3

329.91

802.81

146.02

Commingled DS3 Interoffice Channel per mile

HFQC6

1L5XX

4.44

Commingled STS-1Interoffice Channel Facility Termination

HFRST

U1TFS

339.20

802.81

146.02

Commingled STS-1Interoffice Channel per mile

HFRST

1L5XX

4.44

Commingled Dark Fiber - Interoffice Transport, Per Four Fiber Strands, Per Route Mile Or Fraction Thereof

HEQDL

1L5DF

24.77

Commingled Dark Fiber - Interoffice Transport, Per Four Fiber Strands, Per Route Mile Or Fraction Thereof

HEQDL

UDF14

620.60

133.88

UNE to Commingled Conversion Tracking

XDH1X, HFQC6

CMGUN

0.00

0.00

0.00

0.00

0.00

SPA to Commingled Conversion Tracking

XDH1X, HFQC6

CMGSP

0.00

0.00

0.00

0.00

0.00

LNP Query Service

LNP Charge Per query

0.0007579

LNP Service Establishment Manual

12.16

LNP Service Provisioning with Point Code Establishment

576.33

294.43

911 PBX LOCATE

911 PBX LOCATE DATABASE CAPABILITY

Service Establishment per CLEC per End User Account

9PBDC

9PBEU

1,823.00

Changes to TN Range or Customer Profile

9PBDC

9PBTN

182.45

Per Telephone Number (Monthly)

9PBDC

9PBMM

0.07

Change Company (Service Provider) ID

9PBDC

9PBPC

535.57

PBX Locate Service Support per CLEC (Monthlt)

9PBDC

9PBMR

165.63

Service Order Charge

9PBDC

9PBSC

15.20

911 PBX LOCATE TRANSPORT COMPONENT

See Att 3

Note: Rates displaying an "I" in Interim column are interim as a result of a Commission order.

Page 11 of 11

UNBUNDLED NETWORK ELEMENTS - North Carolina

Att: 2 Exh: B

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES ($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add'l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates ($)

First

Add'l

First

Add'l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

UNBUNDLED EXCHANGE ACCESS LOOP

2-WIRE HIGH BIT RATE DIGITAL SUBSCRIBER LINE (HDSL) COMPATIBLE LOOP

2 Wire Unbundled HDSL Loop including manual service inquiry & facility reservation - Zone 1

1

UHL

UHL2X

9.14

2 Wire Unbundled HDSL Loop including manual service inquiry & facility reservation - Zone 2

2

UHL

UHL2X

10.52

2 Wire Unbundled HDSL Loop including manual service inquiry & facility reservation - Zone 3

3

UHL

UHL2X

10.96

2 Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 1

1

UHL

UHL2W

9.14

2 Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 2

2

UHL

UHL2W

10.52

2 Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 3

3

UHL

UHL2W

10.96

4-WIRE HIGH BIT RATE DIGITAL SUBSCRIBER LINE (HDSL) COMPATIBLE LOOP

4 Wire Unbundled HDSL Loop including manual service inquiry and facility reservation - Zone 1

1

UHL

UHL4X

12.66

4-Wire Unbundled HDSL Loop including manual service inquiry and facility reservation - Zone 2

2

UHL

UHL4X

14.03

4-Wire Unbundled HDSL Loop including manual service inquiry and facility reservation - Zone 3

3

UHL

UHL4X

15.51

4-Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 1

1

UHL

UHL4W

12.66

4-Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 2

2

UHL

UHL4W

14.03

4-Wire Unbundled HDSL Loop without manual service inquiry and facility reservation - Zone 3

3

UHL

UHL4W

15.51

4-WIRE DS1 DIGITAL LOOP

4-Wire DS1 Digital Loop - Zone 1

1

USL

USLXX

73.16

4-Wire DS1 Digital Loop - Zone 2

2

USL

USLXX

120.06

4-Wire DS1 Digital Loop - Zone 3

3

USL

USLXX

241.75

HIGH CAPACITY UNBUNDLED LOCAL LOOP

High Capacity Unbundled Local Loop - DS3 - Per Mile per month

UE3

1L5ND

14.89

High Capacity Unbundled Local Loop - DS3 - Facility Termination per month

UE3

UE3PX

264.38

High Capacity Unbundled Local Loop - STS-1 - Per Mile per month

UDLSX

1L5ND

14.89

High Capacity Unbundled Local Loop - STS-1 - Facility Termination per month

UDLSX

UDLS1

296.49

UNBUNDLED DEDICATED TRANSPORT

INTEROFFICE CHANNEL - DEDICATED TRANSPORT

Interoffice Channel - Dedicated Channel - DS1 - Per Mile per month

U1TD1

1L5XX

0.2229

Interoffice Channel - Dedicated Transport - DS1 - Facility Termination

U1TD1

U1TF1

35.87

Interoffice Channel - Dedicated Transport - DS3 - Per Mile per month

U1TD3

1L5XX

5.11

Interoffice Channel - Dedicated Transport - DS3 - Facility Termination per month

U1TD3

U1TF3

379.40

Interoffice Channel - Dedicated Transport - STS-1 - Per Mile per month

U1TS1

1L5XX

5.11

Interoffice Channel - Dedicated Transport - STS-1 - Facility Termination

U1TS1

U1TFS

390.08

UNBUNDLED DARK FIBER

Dark Fiber - Interoffice Transport, Per Four Fiber Strands, Per Route Mile Or Fraction Thereof

UDF, UDFCX

1L5DF

28.49

ENHANCED EXTENDED LINK (EELs)

NOTE: The monthly recurring and non-recurring charges below will apply and the Switch-As-Is Charge will not apply for UNE combinations provisioned as ' Ordinarily Combined' Network Elements.

NOTE: The monthly recurring and the Switch-As-Is Charge and not the non-recurring charges below will apply for UNE combinations provisioned as ' Currently Combined' Network Elements.

EXTENDED 4-WIRE DS1 DIGITAL EXTENDED LOOP WITH DEDICATED DS1 INTEROFFICE TRANSPORT

4-Wire DS1 Digital Loop in Combination - Zone 1

1

UNC1X

USLXX

73.16

4-Wire DS1 Digital Loop in Combination - Zone 2

2

UNC1X

USLXX

120.06

4-Wire DS1 Digital Loop in Combination - Zone 3

3

UNC1X

USLXX

241.75

Page 1 of 2

UNBUNDLED NETWORK ELEMENTS - North Carolina

Att: 2 Exh: B

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES ($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add'l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add'l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates ($)

First

Add'l

First

Add'l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

Interoffice Transport - Dedicated - DS1 combination - Per Mile per month

UNC1X

1L5XX

0.2229

Interoffice Transport - Dedicated - DS1 combination - Facility Termination per month

UNC1X

U1TF1

35.72

EXTENDED DS3 DIGITAL EXTENDED LOOP WITH DEDICATED DS3 INTEROFFICE TRANSPORT

DS3 Local Loop in combination - per mile per month

UNC3X

1L5ND

14.89

DS3 Local Loop in combination - Facility Termination per month

UNC3X

UE3PX

264.38

Interoffice Transport - Dedicated - DS3 - Per Mile per month

UNC3X

1L5XX

5.11

Interoffice Transport - Dedicated - DS3 combination - Facility Termination per month

UNC3X

U1TF3

379.40

EXTENDED STS-1 DIGITAL EXTENDED LOOP WITH DEDICATED STS-1 INTEROFFICE TRANSPORT

STS-1 Local Loop in combination - per mile per month

UNCSX

1L5ND

14.89

STS-1 Local Loop in combination - Facility Termination per month

UNCSX

UDLS1

390.08

Interoffice Transport - Dedicated - STS-1 combination - per mile per month

UNCSX

1L5XX

5.11

Interoffice Transport - Dedicated - STS-1 combination - Facility Termination per month

UNCSX

U1TFS

390.08

Page 2 of 2

Attachment 4-Central Office

Page 1

Attachment 4

Physical Collocation

Attachment 4-Central Office

Page 2

Table of Contents

		Page
1.	Scope of Attachment	3
2.	Space Availability Report	4
3.	Collocation Options	5
4.	Occupancy	9
5.	Use of Collocation Space	10
6.	Ordering and Preparation of Collocation Space	16
7.	Construction and Provisioning	20
8.	Rates and Charges	23
9.	Insurance	25
10.	Mechanics Liens	27
11.	Inspections	27
12.	Security and Safety Requirements	28
13.	Destruction of Collocation Space	31
14.	Eminent Domain	32
15.	Nonexclusivity	32
Environmental and Safety Principles		Exhibit A
Rates		Exhibit C

Attachment 4-Central Office

Page 3

PHYSICAL COLLOCATION

1. Scope of Attachment

1.1 The rates, terms, and conditions contained within this Attachment shall only apply when DeltaCom is physically collocated as a sole occupant or as a Host within a Premises location pursuant to this Attachment. BellSouth Premises include BellSouth Central Offices and Serving Wire Centers (hereinafter “Premises”). This Attachment is applicable to Premises owned or leased by BellSouth.

1.2 Right to Occupy. BellSouth shall offer to DeltaCom collocation on rates, terms, and conditions that are just, reasonable, non-discriminatory and consistent with the rules of the Federal Communications Commission (“FCC”). Subject to the rates, terms and conditions of this Attachment where space is available and it is technically feasible, BellSouth will allow DeltaCom to occupy that certain area designated by BellSouth within a BellSouth Premises, or on BellSouth property upon which the BellSouth Premises is located, of a size which is specified by DeltaCom and agreed to by BellSouth (hereinafter “Collocation Space”). The necessary rates, terms and conditions for BellSouth locations other than BellSouth Premises shall be negotiated upon request for collocation at such location(s).

1.2.1 Neither BellSouth nor any of BellSouth’s affiliates may reserve space for future use on more preferential terms than those set forth below.

1.3 Space Allocation. BellSouth shall attempt to accommodate DeltaCom’s requested preferences if any. In allocating Collocation Space, BellSouth shall not materially increase DeltaCom’s cost or materially delay DeltaCom’s occupation and use of the Collocation Space, shall not assign Collocation Space that will impair the quality of service or otherwise limit the service DeltaCom wishes to offer, and shall not reduce unreasonably the total space available for physical collocation or preclude unreasonably physical collocation within the Premises. Space shall not be available for collocation if it is: (a) physically occupied by non-obsolete equipment; (b) assigned to another collocator; (c) used to provide physical access to occupied space; (d) used to enable technicians to work on equipment located within occupied space; (e) properly reserved for future use, either by BellSouth or by another carrier; or (f) essential for the administration and proper functioning of BellSouth’s Premises. BellSouth may segregate Collocation Space and require separate entrances in accordance with FCC rules.

1.4 Space Reclamation. In the event of space exhaust within a Central Office Premises, BellSouth may include in its documentation for the Petition for Waiver filing any unutilized space in the Central Office Premises. DeltaCom will be responsible for any justification of unutilized space within its space, if the appropriate state commission requires such justification.

Attachment 4-Central Office

Page 4

1.5 Use of Space. DeltaCom shall use the Collocation Space for the purposes of installing, maintaining and operating DeltaCom’s equipment (to include testing and monitoring equipment) necessary for interconnection with BellSouth services and facilities or for accessing BellSouth unbundled network elements for the provision of telecommunications services, as specifically set forth in this Attachment. The Collocation Space may be used for no other purposes except as specifically described herein or in any amendment hereto.

1.6 Rates and Charges. DeltaCom agrees to pay the rates and charges identified in Exhibit C attached hereto.

1.7 Due Dates. If any due date contained in this Attachment falls on a weekend or National holiday, then the due date will be the next business day thereafter. For intervals of ten (10) days or less National holidays will be excluded.

1.8 The parties agree to comply with all applicable federal, state, county, local and administrative laws, rules, ordinances, regulations and codes in the performance of their obligations hereunder.

2. Space Availability Report

2.1 Space Availability Report. Upon request from DeltaCom, BellSouth will provide a written report (“Space Availability Report”) describing in detail the space that is available for collocation and specifying the amount of Collocation Space available at the Premises requested, the number of collocators present at the Premises, any modifications in the use of the space since the last report on the Premises requested and the measures BellSouth is taking to make additional space available for collocation arrangements. A Space Availability Report does not reserve space at the Premises.

2.1.0 The request from DeltaCom for a Space Availability Report must be written and must include the Premises street address, identified in the Local Exchange Routing Guide (“LERG”), and Common Language Location Identification (“CLLI”) code of the Premises. CLLI code information is located in the National Exchange Carriers Association (“NECA”) Tariff FCC No. 4.

2.1.1 BellSouth will respond to a request for a Space Availability Report for a particular Premises within ten (10) calendar days of receipt of such request. BellSouth will make best efforts to respond in ten (10) calendar days to such a request when the request includes from two (2) to five (5) Premises within the same state. The response time for requests of more than five (5) Premises shall be negotiated between the Parties. If BellSouth cannot meet the ten (10) calendar day response time, BellSouth shall notify DeltaCom and inform DeltaCom of the time frame under which it can respond.

Attachment 4-Central Office

Page 5

3. Collocation Options

3.1 Cageless. BellSouth shall allow DeltaCom to collocate DeltaCom’s equipment and facilities without requiring the construction of a cage or similar structure. BellSouth shall allow DeltaCom to have direct access to DeltaCom’s equipment and facilities. BellSouth shall make cageless collocation available in single bay increments. Except where DeltaCom’s equipment requires special technical considerations (e.g., special cable racking, isolated ground plane, etc.), BellSouth shall assign cageless Collocation Space in conventional equipment rack lineups where feasible. For equipment requiring special technical considerations, DeltaCom must provide the equipment layout, including spatial dimensions for such equipment pursuant to generic requirements contained in Telcordia GR-63-Core, and shall be responsible for compliance with all special technical requirements associated with such equipment.

3.2 Caged. At DeltaCom’s expense, DeltaCom may arrange with a Supplier certified by BellSouth (“BellSouth Certified Supplier”) to construct a collocation arrangement enclosure in accordance with BellSouth’s Technical References (TR) (“Specifications”) prior to starting equipment installation. BellSouth will provide Specifications upon request. Where local building codes require enclosure specifications more stringent than BellSouth’s standard enclosure specification, DeltaCom, if certified as a BellSouth Certified Supplier, and DeltaCom’s BellSouth Certified Supplier must comply with the more stringent local building code requirements. DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier shall be responsible for filing and receiving any and all necessary permits and/or licenses for such construction. BellSouth shall cooperate with DeltaCom and provide, at DeltaCom’s expense, the documentation, including existing building architectural drawings, enclosure drawings, and Specifications required and necessary for DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier to obtain the zoning, permits and/or other licenses. DeltaCom’s BellSouth Certified Supplier shall bill DeltaCom directly for all work performed for DeltaCom pursuant to this Attachment and BellSouth shall have no liability for nor responsibility to pay such charges imposed by DeltaCom’s BellSouth Certified Supplier. DeltaCom must provide the local BellSouth building contact with two Access Keys used to enter the locked enclosure. Except in case of emergency, BellSouth will not access DeltaCom’s locked enclosure prior to notifying DeltaCom. Upon request, BellSouth shall construct the enclosure for DeltaCom.

3.2.1 BellSouth may elect to review DeltaCom’s plans and specifications prior to allowing construction to start to ensure compliance with BellSouth’s Specifications. Notification to DeltaCom indicating BellSouth’s desire to execute this review will be provided in BellSouth’s response to the Initial Application, if DeltaCom has indicated its desire to construct its own enclosure. If DeltaCom’s Initial Application does not

Attachment 4-Central Office

Page 6

indicate its desire to construct its own enclosure, but its subsequent firm order does indicate its desire to construct its own enclosure, then notification to review will be given within ten (10) calendar days after the Firm Order date. BellSouth shall complete its review within fifteen (15) calendar days after the receipt of the plans and specifications. Regardless of whether or not BellSouth elects to review DeltaCom’s plans and specifications, BellSouth reserves the right to inspect the enclosure during and after construction to make sure it is constructed according to the submitted plans and specifications and BellSouth’s Specifications, as applicable. If BellSouth decides to inspect, BellSouth will complete its inspection within fifteen (15) calendar days after receipt of written notification of completion of the enclosure from DeltaCom. BellSouth shall require DeltaCom to remove or correct within fifteen (15) calendar days at DeltaCom’s expense any structure that does not meet these plans and specifications or, where applicable, BellSouth’s Specifications.

3.3 Shared Caged Collocation. DeltaCom may allow other telecommunications carriers to share DeltaCom’s caged collocation arrangement pursuant to terms and conditions agreed to by DeltaCom (“Host”) and other telecommunications carriers (“Guests”) and pursuant to this Section, except where the BellSouth Premises is located within a leased space and BellSouth is prohibited by said lease from offering such an option. DeltaCom shall notify BellSouth in writing upon execution of any agreement between the Host and its Guest within ten (10) calendar days of its execution and prior to any Firm Order. Further, such notice shall include the name of the Guest(s) and the term of the agreement, and shall contain a certification by DeltaCom that said agreement imposes upon the Guest(s) the same terms and conditions for Collocation Space as set forth in this Attachment between BellSouth and DeltaCom.

3.3.0 DeltaCom, as the Host, shall be the sole interface and responsible Party to BellSouth for the assessment and billing of rates and charges contained within this Attachment and for the purposes of ensuring that the safety and security requirements of this Attachment are fully complied with by the Guest(s), its employees and agents. BellSouth shall provide DeltaCom with a proration of the costs of the Collocation Space based on the number of collocators and the space used by each with a minimum charge of one (1) bay/rack per Host/Guest. In addition to the foregoing, DeltaCom shall be the responsible party to BellSouth for the purpose of submitting applications for initial and additional equipment placement of Guest. A separate Guest application shall require the assessment of an Initial or Subsequent Application Fee, as set forth in Exhibit C. Notwithstanding the foregoing, Guest may arrange directly with BellSouth for the provision of the interconnecting facilities between BellSouth and Guest and for the provision of the services and access to unbundled network elements.

3.3.1 DeltaCom shall indemnify and hold harmless BellSouth from any and all claims, actions, causes of action, of whatever kind or nature arising out of the presence of DeltaCom’s Guests in the Collocation Space except to the extent caused by BellSouth’s sole negligence, gross negligence, or willful misconduct.

Attachment 4-Central Office

Page 7

3.4 Adjacent Collocation. Subject to technical feasibility and space availability, BellSouth will permit adjacent collocation arrangements (“Adjacent Arrangement”) on the Premises’ property, where the Adjacent Arrangement does not interfere with access to existing or planned structures or facilities on the Premises property. The Adjacent Arrangement shall be constructed or procured by DeltaCom and in conformance with BellSouth’s design and construction Specifications. Further, DeltaCom shall construct, procure, maintain and operate said Adjacent Arrangement(s) pursuant to all of the rates, terms and conditions set forth in this Attachment.

3.4.0 Should DeltaCom elect Adjacent Collocation, DeltaCom must arrange with a BellSouth Certified Supplier to construct an Adjacent Arrangement structure in accordance with BellSouth’s Specifications. BellSouth will provide Specifications upon request. Where local building codes require enclosure specifications more stringent than BellSouth’s standard specification, DeltaCom and DeltaCom’s BellSouth Certified Supplier must comply with the more stringent local building code requirements. DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier shall be responsible for filing and receiving any and all necessary zoning, permits and/or licenses for such construction. DeltaCom’s BellSouth Certified Supplier shall bill DeltaCom directly for all work performed for DeltaCom pursuant to this Attachment and BellSouth shall have no liability for nor responsibility to pay such charges imposed by DeltaCom’s BellSouth Certified Supplier. DeltaCom must provide the local BellSouth building contact with two cards, keys or other access device used to enter the locked enclosure. Except in cases of emergency, BellSouth shall not access DeltaCom’s locked enclosure prior to notifying DeltaCom.

3.4.1 DeltaCom must submit its plans and specifications to BellSouth with its Firm Order. BellSouth shall review DeltaCom’s plans and specifications prior to construction of an Adjacent Arrangement(s) to ensure compliance with BellSouth’s Specifications. BellSouth shall complete its review within fifteen (15) calendar days after receipt of plans and specifications. BellSouth reserves the right to inspect the Adjacent Arrangement during and after construction to confirm it is constructed according to the submitted plans and specifications. If BellSouth decides to inspect, BellSouth will complete its inspection within fifteen (15) calendar days after receipt of written notification of completion of the enclosure from DeltaCom. BellSouth shall require DeltaCom to remove or correct within fifteen (15) calendar days at DeltaCom’s expense any structure that does not meet these plans and specifications or, where applicable, BellSouth’s Specifications.

3.4.2 DeltaCom shall provide a concrete pad, the structure housing the arrangement, heating/ventilation/air conditioning (“HVAC”), lighting, and all facilities that connect the structure (i.e. racking, conduits, etc.) to the BellSouth point of demarcation. At DeltaCom’s option, and where the local authority having jurisdiction permits, BellSouth shall provide an AC power source and access to physical collocation services and facilities subject to the same nondiscriminatory requirements as applicable to any other physical collocation arrangement.

Attachment 4-Central Office

Page 8

3.5 Co-Carrier Cross Connect (CCXC). The primary purpose of collocation is for a collocated telecommunications carrier to interconnect with BellSouth’s network or to access BellSouth’s unbundled network elements for the provision of telecommunications services within a BellSouth Premises. BellSouth will permit DeltaCom to interconnect between its virtual or physical collocation arrangements and those of another collocated telecommunications carrier within the same central office. Both DeltaCom’s agreement and the other collocated telecommunications carrier’s agreement must contain rates, terms and conditions for CCXC language. At no point in time shall DeltaCom use the Collocation Space for the sole or primary purpose of cross connecting to other collocated telecommunications carriers. DeltaCom, if certified as a BellSouth Certified Supplier, or its BellSouth Certified Supplier must place the CCXC. The CCXC shall be provisioned through facilities owned by DeltaCom.

3.5.0 Such connections to other carriers may be made using either optical or electrical facilities. DeltaCom may deploy such optical or electrical connections directly between its own facilities and the facilities of other collocated telecommunications carriers without being routed through BellSouth equipment. DeltaCom may not self-provision CCXC on any BellSouth distribution frame, POT (Point of Termination) Bay, DSX (Digital System Cross-connect) or LGX (Light Guide Cross-connect). DeltaCom is responsible for ensuring the integrity of the signal.

DeltaCom shall be responsible for providing written authorization to BellSouth from the other collocated telecommunications carrier prior to installing the CCXC. DeltaCom - -provisioned CCXC shall utilize common cable support structure. There will be a recurring charge per linear foot, per cable, of common cable support structure used. In cases where DeltaCom’s equipment and the equipment of the other interconnector are located in contiguous caged Collocation Spaces, DeltaCom will have the option of using DeltaCom’s own technicians to deploy co-carrier cross connects using copper (or ABAM or coaxial as appropriate) or optical facilities between the sets of equipment and construct its own dedicated cable support structure. If BellSouth cable support structure is used cable support charges shall be assessed per linear foot, per cable, of support structure used.

3.5.1 To order CCXCs DeltaCom must submit an Initial Application or Subsequent Application. If no modification to the Collocation Space is requested other than the placement of CCXCs, the Subsequent Application Fee for CCXC, as defined in Exhibit C, will apply. If modifications in addition to the placement of CCXCs are requested, the Initial Application or Subsequent Application Fee will apply. This non-recurring fee will be billed by BellSouth on the date that BellSouth provides an Application Response.

Attachment 4-Central Office

Page 9

4. Occupancy

4.1 Occupancy. BellSouth will notify DeltaCom in writing that the Collocation Space is ready for occupancy (“Space Ready Date”). DeltaCom will schedule and complete an acceptance walkthrough of each Collocation Space with BellSouth within fifteen (15) calendar days of BellSouth’s notifying DeltaCom that the Collocation Space is ready for occupancy. BellSouth will correct any deviations to DeltaCom’s original or jointly amended requirements within seven (7) calendar days after the walkthrough, unless the Parties jointly agree upon a different time frame, and BellSouth shall establish a new Space Ready Date. Another acceptance walkthrough will then be scheduled and conducted within fifteen (15) calendar days of the new Space Ready Date. This follow-up acceptance walkthrough will be limited to those items identified in the initial walkthrough. If DeltaCom has met the fifteen (15) calendar day interval(s), billing will begin upon the date of DeltaCom’s acceptance of the Collocation Space (“Space Acceptance Date”). In the event that DeltaCom fails to complete an acceptance walkthrough within the applicable fifteen (15) day interval, the Collocation Space shall be deemed accepted by DeltaCom. Billing will commence on the Space Ready Date or on the Space Acceptance Date, whichever is sooner. DeltaCom must notify BellSouth in writing that collocation equipment installation is complete and is operational with BellSouth’s network. BellSouth may, at its option, not accept orders for cross connects until receipt of such notice. For purposes of this paragraph, DeltaCom’s telecommunications equipment will be deemed operational when cross-connected to BellSouth’s network for the purpose of service provisioning.

4.2 Termination of Occupancy. In addition to any other provisions addressing termination of occupancy in this Agreement, DeltaCom may terminate occupancy in a particular Collocation Space by submitting a Subsequent Application requesting termination of occupancy. A Subsequent Application Fee will not apply for termination of occupancy. Either Party may terminate DeltaCom’s right to occupy the Collocation Space in the event either Party fails to comply with any provision of this Agreement. The Parties agree to resolve any disputes regarding either Party’s noncompliance through the Dispute Resolution procedures as outlined in Section 11 of the General Terms and Conditions of this Agreement.

4.2.1 Upon termination of occupancy, DeltaCom at its expense shall remove its equipment and other property from the Collocation Space. DeltaCom shall have thirty (30) calendar days from the termination date to complete such removal, including the removal of all equipment and facilities of DeltaCom’s Guest(s), unless DeltaCom’s Guest(s) has assumed responsibility for the collocation space housing the Guest(s)’s equipment and executed the documentation required by BellSouth prior to such removal date. DeltaCom shall continue payment of monthly fees to BellSouth until such date as DeltaCom, and if applicable DeltaCom’s Guest(s), has fully vacated the Collocation Space and the Space Relinquish Form has been accepted by BellSouth. Should DeltaCom or DeltaCom’s Guest(s) fail to vacate the Collocation Space within thirty (30) calendar days from the termination date, BellSouth shall have the right to remove the equipment and other property of DeltaCom or DeltaCom’s Guest(s) at

Attachment 4-Central Office

Page 10

DeltaCom’s expense and with no liability for damage or injury to DeltaCom or DeltaCom’s Guest(s)’s property unless caused by the gross negligence or intentional misconduct of BellSouth. Upon termination of DeltaCom’s right to occupy Collocation Space, the Collocation Space will revert back to BellSouth, and DeltaCom shall surrender such Collocation Space to BellSouth in the same condition as when first occupied by DeltaCom except for ordinary wear and tear, unless otherwise agreed to by the Parties. DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier shall be responsible for updating and making any necessary changes to BellSouth’s records as required by BellSouth’s Specifications including but not limited to Central Office Record Drawings and ERMA Records. DeltaCom shall be responsible for the cost of removing any DeltaCom constructed enclosure, together with all support structures (e.g., racking, conduits, power cables, etc.), at the termination of occupancy and restoring the grounds to their original condition minus any normal wear and tear.

5. Use of Collocation Space

5.1 Equipment Type. BellSouth permits the collocation of any type of equipment necessary for interconnection to BellSouth’s network or for access to BellSouth’s unbundled network elements in the provision of telecommunications services, as the term “necessary” is defined by FCC 47 C.F.R. Section 51.323 (b). In addition, DeltaCom may deploy DLC equipment (TR303 compliant) in DeltaCom’s collocation space or in DeltaCom’s network. The primary purpose and function of any equipment collocated in a Premises must be for interconnection to BellSouth’s network or for access to BellSouth’s unbundled network elements in the provision of telecommunications services.

5.1.0 Examples of equipment that would not be considered necessary include but are not limited to: Traditional circuit switching equipment, equipment used exclusively for call-related databases, computer servers used exclusively for providing information services, operations support system (OSS) equipment used to support collocated telecommunications carrier network operations, equipment that generates customer orders, manages trouble tickets or inventory, or stores customer records in centralized databases, etc. BellSouth will determine upon receipt of an application if the requested equipment is necessary based on the criteria established by the FCC. Multifunctional equipment placed on BellSouth’s Premises must not place any greater relative burden on BellSouth’s property than comparable single-function equipment. BellSouth reserves the right to permit collocation of any equipment on a nondiscriminatory basis.

5.1.1 Whenever BellSouth objects to collocation of equipment by DeltaCom for the purposes within the scope of Section 251(c)(6) of the Act, BellSouth shall prove to the Commission that the equipment is not necessary for the purpose of obtaining interconnection or access to unbundled network elements pursuant to FCC 47 C.F.R. 51.323 (b). BellSouth may not object to the collocation of equipment on the grounds

Attachment 4-Central Office

Page 11

that the equipment does not comply with safety or engineering standards that are more stringent than the safety or engineering standards that BellSouth applies to its own equipment. The applicable standards are set forth in Section 5.1.3. BellSouth may not object to the collocation of equipment on the ground that the equipment fails to comply with National Equipment and Building Specifications performance standards. Except where otherwise required by state Commission order, if BellSouth denies collocation of DeltaCom’s equipment, citing safety standards, BellSouth must provide to DeltaCom within five (5) business days of the denial a list of all equipment that BellSouth locates within the Premises in question, together with an affidavit attesting that all of that equipment meets or exceeds the safety standard that BellSouth contends DeltaCom’s equipment fails to meet.

5.1.2 Such equipment must at a minimum meet the following Telcordia Network Equipment Building Systems (NEBS) General Equipment Requirements: Criteria Level 1 requirements as outlined in the Telcordia Special Report SR-3580, Issue 1; equipment design spatial requirements per GR-63-CORE, Section 2; thermal heat dissipation per GR-063-CORE, Section 4, Criteria 77-79; acoustic noise per GR-063-CORE, Section 4, Criterion 128, and National Electric Code standards.

5.1.3 DeltaCom shall not request more DS0, DS1, DS3 and optical terminations for a collocation arrangement than the total port or termination capacity of the transmission equipment, (including but not limited; to transmission equipment, multiplexers, DSLAMS, DLC’s, signal regenerators, cross connect panels) physically installed in the arrangement. The total capacity of the transmission equipment collocated in the arrangement will include transmission equipment contained in the application, as well as the transmission equipment already placed in the collocation arrangement. If full network termination capacity of the equipment being installed is not requested in the application, additional network terminations for the installed equipment will require the submission of another application. In the event that DeltaCom submits an application for terminations that exceed the total capacity of the collocated equipment, DeltaCom will be informed of the discrepancy and will be required to submit a revision to the application.

5.2 DeltaCom will provide a list of those entities with a security interest in collocation equipment in DeltaCom’s collocation site to BellSouth. This list will be updated by DeltaCom annually. This information shall be expressly covered by the confidentiality provisions contained in Section 9 of the General Terms and Conditions of this Agreement. In no event shall BellSouth use the list of entities with an interest in equipment in DeltaCom’s collocation space for marketing BellSouth’s telecommunications services. Furthermore, BellSouth shall make a good faith effort to notify DeltaCom prior to contacting any such entity that has a financial interest, secured or otherwise, in the equipment in DeltaCom’s collocation space.

5.3 DeltaCom shall not use the Collocation Space for marketing purposes nor shall it place any identifying signs or markings outside the Collocation Space or on the grounds of the Premises.

Attachment 4-Central Office

Page 12

5.4 DeltaCom shall place a plaque or other identification affixed to DeltaCom’s equipment necessary to identify DeltaCom’s equipment, including a list of emergency contacts with telephone numbers.

5.5 Entrance Facilities. DeltaCom may elect to place DeltaCom-owned or DeltaCom-leased fiber entrance facilities into the Collocation Space. BellSouth will designate the point of interconnection in close proximity to the Premises building housing the Collocation Space, such as an entrance manhole or a cable vault, which are physically accessible by both Parties. DeltaCom will provide and place fiber cable at the point of entrance of sufficient length to be pulled through conduit and into the splice location. DeltaCom will provide and install a sufficient length of fire retardant riser cable, to which the entrance cable will be spliced by BellSouth, which will extend from the splice location to DeltaCom’s equipment in the Collocation Space. In the event DeltaCom utilizes a non-metallic, riser-type entrance facility, a splice will not be required. DeltaCom must contact BellSouth for instructions prior to placing the entrance facility cable in the manhole. DeltaCom is responsible for maintenance of the entrance facilities. At DeltaCom’s option BellSouth will accommodate where technically feasible a microwave entrance facility pursuant to separately negotiated terms and conditions. In the case of adjacent collocation, unless BellSouth determines that limited space is available for the entrance facilities, copper facilities may be used between the adjacent collocation arrangement and the central office demarcation point.

5.5.1 Dual Entrance. BellSouth will provide at least two interconnection points at each Premise where there are at least two such interconnection points available and where capacity exists. Upon receipt of a request for physical collocation under this Attachment, BellSouth shall provide DeltaCom with information regarding BellSouth’s capacity to accommodate dual entrance facilities. If conduit in the serving manhole(s) is available and is not reserved for another purpose for utilization within 12 months of the receipt of an application for collocation, BellSouth will make the requested conduit space available for installing a second entrance facility to DeltaCom’s arrangement. The location of the serving manhole(s) will be determined at the sole discretion of BellSouth. Where dual entrance is not available due to lack of capacity, BellSouth will so state in the Application Response.

5.5.2 Shared Use. DeltaCom may utilize spare capacity on an existing interconnector entrance facility for the purpose of providing an entrance facility to DeltaCom’s collocation arrangement within the same BellSouth Premises. BellSouth shall allow the splice, provided that the fiber is non-working fiber. DeltaCom must arrange with BellSouth for BellSouth to splice the DeltaCom provided riser cable to the spare capacity on the entrance facility. The rates set forth in Exhibit C will apply. If DeltaCom desires to allow another telecommunications carrier to use its entrance facilities, additional rates, terms and conditions will apply and shall be negotiated between the parties.

Attachment 4-Central Office

Page 13

5.6 Demarcation Point. BellSouth will designate the point(s) of demarcation between DeltaCom’s equipment and/or network and BellSouth’s network. Each Party will be responsible for maintenance and operation of all equipment/facilities on its side of the demarcation point. For 2-wire and 4-wire connections to BellSouth’s network, the demarcation point shall be a common block on the BellSouth designated conventional distributing frame (CDF). DeltaCom shall be responsible for providing, and DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier shall be responsible for installing and properly labeling/stenciling, the common block, and necessary cabling pursuant to Section 6. For all other terminations BellSouth shall designate a demarcation point on a per arrangement basis. DeltaCom or its agent must perform all required maintenance to equipment/facilities on its side of the demarcation point, pursuant to Section 5.6, following, and may self-provision cross-connects that may be required within the Collocation Space to activate service requests.

5.6.1 Existing point(s) of demarcation – DeltaCom provided Pot Bay. BellSouth will grandfather existing point(s) of demarcation established at a DeltaCom provided Pot Bay pursuant to this Attachment. DeltaCom shall order services using the existing terminations in the DeltaCom provided Pot Bay.

5.6.2 Existing point(s) of demarcation – BellSouth provided Pot Bay. BellSouth will grandfather existing point(s) of demarcation established at a BellSouth provided Pot Bay. DeltaCom shall order services using the existing terminations in the BellSouth provided Pot Bay.

5.7 DeltaCom’s Equipment and Facilities. DeltaCom, or if required by this Attachment, DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier, is solely responsible for the design, engineering, installation, testing, provisioning, performance, monitoring, maintenance and repair of the equipment and facilities used by DeltaCom which must be performed in compliance with all applicable BellSouth policies and guidelines. Such equipment and facilities may include but are not limited to cable(s), equipment, and point of termination connections. DeltaCom and its selected BellSouth Certified Supplier must follow and comply with all BellSouth requirements outlined in BellSouth’s TR 73503, TR 73519, TR 73572, and TR 73564.

5.8 BellSouth’s Access to Collocation Space. From time to time BellSouth may require access to the Collocation Space. BellSouth retains the right to access such space for the purpose of making BellSouth equipment and building modifications (e.g., running, altering or removing racking, ducts, electrical wiring, HVAC, and cables). BellSouth will give notice to DeltaCom at least forty-eight (48) hours before access to the Collocation Space is required. DeltaCom may elect to be present whenever BellSouth performs work in the Collocation Space. The Parties agree that DeltaCom will not bear any of the expense associated with this work.

Attachment 4-Central Office

Page 14

5.9 Access. Pursuant to Section 11, DeltaCom shall have access to the Collocation Space twenty-four (24) hours a day, seven (7) days a week. DeltaCom agrees to provide the name and social security number or date of birth or driver’s license number of each employee, supplier, or agent of DeltaCom or DeltaCom’s Guest(s) provided with access keys or devices (“Access Keys”) prior to the issuance of said Access Keys. Key acknowledgement forms must be signed by DeltaCom and returned to BellSouth Access Management within 15 calendar days of DeltaCom’s receipt. Failure to return properly acknowledged forms will result in the holding of subsequent requests until acknowledgements are current. Access Keys shall not be duplicated under any circumstances. DeltaCom agrees to be responsible for all Access Keys and for the return of all said Access Keys in the possession of DeltaCom employees, suppliers, Guests, or agents after termination of the employment relationship, contractual obligation with DeltaCom or upon the termination of this Attachment or the termination of occupancy of an individual collocation arrangement.

5.9.1 BellSouth will permit one accompanied site visit to DeltaCom’s designated collocation arrangement location after receipt of the Bona Fide Firm Order without charge to DeltaCom. DeltaCom must submit to BellSouth the completed Access Control Request Form for all employees or agents requiring access to the BellSouth Premises a minimum of thirty (30) calendar days prior to the date DeltaCom desires access to the Collocation Space. In order to permit reasonable access during construction of the Collocation Space, DeltaCom may submit such a request at any time subsequent to BellSouth’s receipt of the BFFO. In the event DeltaCom desires access to the Collocation Space after submitting such a request but prior to access being approved, in addition to the first accompanied free visit, BellSouth shall permit DeltaCom to access the Collocation Space accompanied by a security escort at DeltaCom’s expense. DeltaCom must request escorted access at least three (3) business days prior to the date such access is desired.

5.10 Lost or Stolen Access Keys. DeltaCom shall notify BellSouth in writing immediately in the case of lost or stolen Access Keys. Should it become necessary for BellSouth to re-key buildings or deactivate a card as a result of a lost Access Key(s) or for failure to return an Access Key(s), DeltaCom shall pay for all reasonable costs associated with the re-keying or deactivating the card.

5.11 Interference or Impairment. Notwithstanding any other provisions of this Attachment, DeltaCom shall not use any product or service provided under this Agreement, any other service related thereto or used in combination therewith, or place or use any equipment or facilities in any manner that 1) significantly degrades, interferes with or impairs service provided by BellSouth or by any other entity or any person’s use of its telecommunications service; 2) endangers or damages the equipment, facilities or other property of BellSouth or of any other entity or person; 3) compromises the privacy of any communications; or 4) creates an unreasonable risk of injury or death to any individual or to the public. If BellSouth reasonably determines that any equipment or facilities of DeltaCom violates the provisions of this paragraph, BellSouth shall give written notice to DeltaCom, which notice shall direct DeltaCom

Attachment 4-Central Office

Page 15

to cure the violation within forty-eight (48) hours of DeltaCom’s actual receipt of written notice or, at a minimum, to commence curative measures within twenty-four (24) hours and to exercise reasonable diligence to complete such measures as soon as possible thereafter. After receipt of the notice, the Parties agree to consult immediately and, if necessary, to inspect the arrangement.

5.11.1 Except in the case of the deployment of an advanced service which significantly degrades the performance of other advanced services or traditional voice band services, if DeltaCom fails to take curative action within forty-eight (48) hours or if the violation is of a character which poses an immediate and substantial threat of damage to property, injury or death to any person, or any other significant degradation, interference or impairment of BellSouth’s or another entity’s service, then and only in that event BellSouth may take such action as it deems appropriate to correct the violation, including without limitation the interruption of electrical power to DeltaCom’s equipment. BellSouth will endeavor, but is not required, to provide notice to DeltaCom prior to taking such action and shall have no liability to DeltaCom for any damages arising from such action, except to the extent that such action by BellSouth constitutes willful misconduct.

5.11.2 For purposes of this Section, the term significantly degrade shall mean an action that noticeably impairs a service from a user’s perspective. In the case of the deployment of an advanced service which significantly degrades the performance of other advanced services or traditional voice band services and DeltaCom fails to take curative action within forty-eight (48) hours then BellSouth will establish before the relevant Commission that the technology deployment is causing the significant degradation. Any claims of network harm presented to DeltaCom or, if subsequently necessary, the relevant Commission must be supported with specific and verifiable information. Where BellSouth demonstrates that a deployed technology is significantly degrading the performance of other advanced services or traditional voice band services, DeltaCom shall discontinue deployment of that technology and migrate its customers to technologies that will not significantly degrade the performance of other such services. Where the only degraded service itself is a known disturber, and the newly deployed technology satisfies at least one of the criteria for a presumption that is acceptable for deployment under section 47 C.F.R. 51.230, the degraded service shall not prevail against the newly-deployed technology.

5.12 Personalty and its Removal. Facilities and equipment placed by DeltaCom in the Collocation Space shall not become a part of the Collocation Space, even if nailed, screwed or otherwise fastened to the Collocation Space, but shall retain their status as personal property and may be removed by DeltaCom at any time. Any damage caused to the Collocation Space by DeltaCom’s employees, agents or representatives during the removal of such property shall be promptly repaired by DeltaCom at its expense except for normal wear and tear. If DeltaCom decides to remove equipment from its Collocation Space and the removal requires no physical change, BellSouth will bill DeltaCom a Supplemental Application Fee (Administrative Only Application Fee) as set forth in Exhibit C. This non-recurring fee will be billed on the date that BellSouth provides an Application Response.

Attachment 4-Central Office

Page 16

5.13 Alterations. In no case shall DeltaCom or any person acting on behalf of DeltaCom make any rearrangement, modification, improvement, addition, or other alteration which could affect in any way space, power, HVAC, and/or safety considerations to the Collocation Space or the BellSouth Premises without the written consent of BellSouth, which consent shall not be unreasonably withheld. The cost of any such specialized alterations shall be paid by DeltaCom. Any such material rearrangement, modification, improvement, addition, or other alteration shall require a Subsequent Application and Subsequent Application Fee which will be billed by BellSouth on the date that BellSouth makes an Application Response.

5.14 Janitorial Service. DeltaCom shall be responsible for the general upkeep of the Collocation Space. DeltaCom shall arrange directly with a BellSouth Certified Supplier for janitorial services applicable to Caged Collocation Space. BellSouth shall provide a list of such suppliers on a site-specific basis upon request.

6. Ordering and Preparation of Collocation Space

6.1 Should any state or federal regulatory agency impose procedures or intervals applicable to DeltaCom and BellSouth that are different from procedures or intervals set forth in this section, whether now in effect or that become effective after execution of this Agreement, those procedures or intervals shall supersede the requirements set forth herein for that jurisdiction for all applications submitted for the first time after the effective date thereof.

6.2 Initial Application. For DeltaCom or DeltaCom’s Guest(s) initial equipment placement, DeltaCom shall submit to BellSouth a Physical Expanded Interconnection Application Document (“Initial Application”). The Initial Application is Bona Fide when it is complete and accurate, meaning that all required fields on the application are completed with the appropriate type of information. An application fee will apply which will be billed by BellSouth on the date that BellSouth makes an Application Response.

6.3 Subsequent Application. In the event DeltaCom or DeltaCom’s Guest(s) desires to modify the use of the Collocation Space after a BFFO, DeltaCom shall complete an Application detailing all information regarding the modification to the Collocation Space (“Subsequent Application”). The Subsequent Application is Bona Fide when it is complete and accurate, meaning that all required fields on the Subsequent Application are completed with the appropriate type of information. BellSouth shall determine what modifications, if any, to the Premises are required to accommodate the change requested by DeltaCom in the Application. Such necessary modifications to the Premises may include, but are not limited to, floor loading changes, changes necessary to meet HVAC requirements, changes to power plant requirements, equipment additions, etc.

Attachment 4-Central Office

Page 17

6.3.1 Subsequent Application Fee.

The application fee paid by DeltaCom for its request to modify the use of the Collocations Space shall be dependent upon the level of assessment needed for the modification requested. Where the Subsequent Application does not require assessment for provisioning or construction work but requires administrative costs by BellSouth, an Administrative Only Application Fee will be assessed to DeltaCom as set forth in Exhibit C. This fee shall remain in effect until the appropriate Commission adopts a permanent rate for the Administrative Only Application Fee. At that time, the fee shall be amended in accordance with Section 15, Modification of Agreement, as contained in the General Terms and Conditions of this Agreement to reflect the new Administrative Only Fee and will become effective on the date of the Commission’s Order. The Administrative Only Application Fee will be applicable in instances such as Transfer of Ownership of the Collocation Space, Removal of Equipment from the Collocation Space, modification to an application prior to BFFO and V-to-P Conversion (In Place). The fee for a Subsequent Application where the modification requested has limited effect (e.g.), requires labor expenditure but no capital expenditure by BellSouth and sufficient cable support structure, HVAC, power and terminations, are available) shall be the Subsequent Application Fee as set forth in Exhibit C. If the modification requires capital expenditure, an Initial Application Fee shall apply. The nonrecurring fee will be billed on the date that BellSouth provides DeltaCom with an Application response.

6.4 Space Preferences. If DeltaCom has previously requested and received a Space Availability Report for the Premises, DeltaCom may submit up to three (3) space preferences on their application identifying specific space identification numbers as referenced on the Space Availability Report. In the event that BellSouth cannot accommodate the DeltaCom’s preference(s), DeltaCom may elect to accept the space allocated by BellSouth or may cancel its application and submit another application requesting additional preferences, which will be treated as a new application and an application fee will apply which will be billed by BellSouth on the date that BellSouth makes an Application Response.

6.5 Space Availability Notification.

6.5.1 BellSouth will respond to an application within ten (10) calendar days as to whether space is available or not available within a BellSouth Premises. BellSouth will also respond as to whether the Application is Bona Fide and if it is not Bona Fide the items necessary to cause the Application to become Bona Fide. If the amount of space requested is not available, BellSouth will notify DeltaCom of the amount of space that is available and no Application Fee shall apply. When BellSouth’s response includes an amount of space less than that requested by DeltaCom, or differently configured, DeltaCom must resubmit its Application to reflect the actual space available.

Attachment 4-Central Office

Page 18

6.6 Denial of Application. If BellSouth notifies DeltaCom that no space is available (“Denial of Application”), BellSouth will not assess an Application Fee. After notifying DeltaCom that BellSouth has no available space in the requested Premises, BellSouth will allow DeltaCom, upon request, to tour the entire Premises within ten (10) calendar days of such Denial of Application. In order to schedule said tour within ten (10) calendar days, the request for a tour of the Premises must be received by BellSouth within five (5) calendar days of the Denial of Application.

6.7 Filing of Petition for Waiver. Upon Denial of Application, BellSouth will timely file a petition with the Commission pursuant to 47 U.S.C. § 251(c)(6). BellSouth shall provide to the Commission any information requested by that Commission. Such information shall include which space, if any, BellSouth or any of BellSouth’s affiliates have reserved for future use and a detailed description of the specific future uses for which the space has been reserved. Subject to an appropriate nondisclosure agreement or provision, BellSouth shall permit DeltaCom to inspect any floor plans or diagrams that BellSouth provides to the Commission.

6.8 Waiting List. On a first-come, first-served basis governed by the date of receipt of an Application or Letter of Intent, BellSouth will maintain a waiting list of requesting carriers who have either received a Denial of Application or, where it is publicly known that the Premises is out of space, have submitted a Letter of Intent to collocate. BellSouth will notify the telecommunications carriers on the waiting list that can be accommodated by the amount of space that becomes available according to the position of the telecommunications carriers on said waiting list.

6.8.1 When space becomes available, DeltaCom must submit an updated, complete, and correct Application to BellSouth within 30 calendar days of such notification. If DeltaCom has originally requested caged collocation space and cageless collocation space becomes available, DeltaCom may refuse such space and notify BellSouth in writing within that time that DeltaCom wants to maintain its place on the waiting list without accepting such space. DeltaCom may accept an amount of space less than its original request by submitting an Application as set forth above, and upon request, may maintain its position on the waiting list for the remaining space that was initially requested. If DeltaCom does not submit such an Application or notify BellSouth in writing as described above, BellSouth will offer such space to the next CLEC on the waiting list and remove DeltaCom from the waiting list. Upon request, BellSouth will advise DeltaCom as to its position on the list.

6.9 Public Notification. BellSouth will maintain on its Interconnection Services website a notification document that will indicate all Central Offices that are without available space. BellSouth shall update such document within ten (10) calendar days of the date BellSouth becomes aware that there is insufficient space to accommodate physical collocation. BellSouth will also post a document on its Interconnection Services website that contains a general notice where space has become available in a Central Office previously on the space exhaust list.

Attachment 4-Central Office

Page 19

6.10 Application Response.

6.10.1 When space has been determined to be available for physical (caged or cageless), Collocation arrangements, BellSouth will provide an Application Response within twenty (20) calendar days of the receipt of a Bona Fide application, which will include, at a minimum, the configuration of the space, the Cable Installation Fee, Cable Records Fee, and any other applicable space preparation fees, described in Section 8.

6.11 Application Modifications

6.11.1 If a modification or revision is made to any information in the Bona Fide Application prior to a BFFO, with the exception of modifications to Customer Information, Contact Information or Billing Contact Information, at the request of DeltaCom, or necessitated by technical considerations, the application shall be considered a new application and handled as a new application with respect to the response and provisioning intervals. BellSouth will charge DeltaCom the appropriate application fee associated with the level of assessment performed by BellSouth. If the modification requires no labor or capital expenditure by BellSouth, but BellSouth must perform an assessment of the application to evaluate whether or not BellSouth would be required to perform necessary infrastructure or provisioning activities, than an Administrative Only Application Fee shall apply. The fee for an application modification where the modification requested has limited effect (e.g., requires labor expenditure but no capital expenditure by BellSouth and sufficient cable support structure, HVAC, power and terminations are available) shall be the Subsequent Application Fee as set forth in Exhibit C. A modification involving a capital expenditure by BellSouth shall require DeltaCom to submit the application with an Initial Application Fee. The nonrecurring fee will be billed by BellSouth on the date that BellSouth provides DeltaCom with an Application Response.

6.11.2 Bona Fide Firm Order.

6.11.2.1 DeltaCom shall indicate its intent to proceed with equipment installation in a BellSouth Premises by submitting a Physical Expanded Interconnection Firm Order document (“Firm Order”) to BellSouth. A Firm Order shall be considered Bona Fide when DeltaCom has completed the Application/Inquiry process described in Section 6, preceding, and has submitted the Firm Order document indicating acceptance of the Application Response provided by BellSouth. The BFFO must be received by BellSouth no later than thirty (30) calendar days after BellSouth’s Application Response to DeltaCom’s Bona Fide application or the application will expire.

6.11.2.2 BellSouth will establish a firm order date based upon the date BellSouth is in receipt of a BFFO. BellSouth will acknowledge the receipt of DeltaCom’s BFFO within

Attachment 4-Central Office

Page 20

seven (7) calendar days of receipt indicating that the BFFO has been received. A BellSouth response to a BFFO will include a Firm Order Confirmation containing the firm order date. No revisions will be made to a BFFO.

7. Construction and Provisioning

7.1 Construction and Provisioning Intervals

7.1.1 BellSouth will complete construction for caged collocation arrangements under ordinary conditions as soon as possible and within a maximum of ninety (90) calendar days from receipt of a BFFO or as agreed to by the Parties. BellSouth will complete construction for cageless collocation arrangements under ordinary conditions as soon as possible and within a maximum of sixty (60) calendar days from receipt of a BFFO and ninety (90) calendar days for extraordinary conditions or as agreed to by the Parties. Ordinary conditions are defined as space available with only minor changes to support systems required, such as but not limited to, HVAC, cabling and the power plant(s). Extraordinary conditions are defined to include but are not limited to major BellSouth equipment rearrangement or addition; power plant addition or upgrade; major mechanical addition or upgrade; major upgrade for ADA compliance; environmental hazard or hazardous materials abatement; and arrangements for which equipment shipping intervals are extraordinary in length. The Parties may mutually agree to renegotiate an alternative provisioning interval or BellSouth may seek a waiver from this interval from the Commission.

7.1.2 Records Only Change. When DeltaCom adds equipment, that was originally included on DeltaCom’s Initial Application or a Subsequent Application, and the addition of this equipment requires no additional space preparation work or cable terminations on the part of BellSouth, then BellSouth will impose no additional charges or intervals.

7.2 Joint Planning. Joint planning between BellSouth and DeltaCom will commence within a maximum of twenty (20) calendar days from BellSouth’s receipt of a BFFO. BellSouth will provide the preliminary design of the Collocation Space and the equipment configuration requirements as reflected in the Bona Fide Application and affirmed in the BFFO. The Collocation Space completion time period will be provided to DeltaCom during joint planning.

7.3 Permits. Each Party or its agents will diligently pursue filing for the permits required for the scope of work to be performed by that Party or its agents within ten (10) calendar days of the completion of finalized construction designs and specifications.

7.4 Acceptance Walkthrough. DeltaCom will schedule and complete an acceptance walkthrough of each Collocation Space with BellSouth within fifteen (15) calendar days of BellSouth’s notifying DeltaCom that the collocation space is ready for occupancy (Space Ready Date). In the event that DeltaCom fails to complete an acceptance walkthrough within this fifteen (15) calendar day interval(s) and BellSouth was available for an acceptance walkthrough within the applicable fifteen (15) calendar day interval(s), the Collocation Space shall be deemed accepted by

Attachment 4-Central Office

Page 21

DeltaCom. BellSouth will correct any deviations to DeltaCom’s original or jointly amended requirements within seven (7) calendar days after the walkthrough, unless the Parties jointly agree upon a different time frame.

7.5 Circuit Facility Assignments (CFAs). Unless otherwise specified, BellSouth will provide CFAs to DeltaCom prior to the applicable provisioning interval set forth herein (“Provisioning Interval”) for those Premises in which DeltaCom has a physical collocation arrangement with no POT bay or with a POT bay provided by BellSouth prior to 6/1/99. BellSouth cannot provide CFAs to DeltaCom prior to the Provisioning Interval for those Premises in which DeltaCom has a physical collocation arrangement with a POT bay provided by DeltaCom prior to 6/1/99 or a virtual collocation arrangement until DeltaCom provides BellSouth with the following information:

For DeltaCom -provided POT bay—a complete layout of the POT panels (equipment inventory update (EIU) form) showing locations, speeds, etc.

For virtual—a complete layout of DeltaCom’s equipment (equipment inventory update (EIU) form), including the locations of the low speed ports and the specific frame terminations to which the equipment will be wired by DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier.

BellSouth cannot begin work on the CFAs until the complete and accurate EIU form is received from DeltaCom. If this EIU is provided ten (10) calendar days prior to the Provisioning Interval, then CFAs will be made available by the Provisioning Interval. If this EIU is not received ten (10) calendar days prior to the Provisioning Interval, then the CFAs will be provided within ten (10) calendar days of receipt of the EIU.

7.6 Use of BellSouth Certified Supplier. DeltaCom shall select a supplier which has been approved as a BellSouth Certified Supplier to perform all engineering and installation work. DeltaCom and DeltaCom’s BellSouth Certified Supplier must follow and comply with all BellSouth requirements outlined in BellSouth’s TR 73503, TR 73519, TR 73572, and TR 73564. In some cases, DeltaCom must select separate BellSouth Certified Suppliers for transmission equipment, switching equipment and power equipment. BellSouth shall provide DeltaCom with a list of BellSouth Certified Suppliers upon request. The BellSouth Certified Supplier(s) shall be responsible for installing DeltaCom’s equipment and components, extending power cabling to the BellSouth power distribution frame, performing operational tests after installation is complete, and notifying BellSouth’s equipment engineers and DeltaCom upon successful completion of installation, etc. The BellSouth Certified Supplier shall bill DeltaCom directly for all work performed for DeltaCom pursuant to this Attachment and BellSouth shall have no liability for nor responsibility to pay such charges imposed by the BellSouth Certified Supplier. BellSouth shall consider certifying DeltaCom or any supplier proposed by DeltaCom. All work performed by or for DeltaCom shall conform to generally accepted industry guidelines and standards.

Attachment 4-Central Office

Page 22

7.7 Alarm and Monitoring. BellSouth shall place environmental alarms in the Premises for the protection of BellSouth equipment and facilities. DeltaCom shall be responsible for placement, monitoring and removal of environmental and equipment alarms used to service DeltaCom’s Collocation Space. Upon request, BellSouth will provide DeltaCom with applicable tariffed service(s) to facilitate remote monitoring of collocated equipment by DeltaCom. Both Parties shall use best efforts to notify the other of any verified environmental condition known to that Party.

7.8 Virtual to Physical Collocation Relocation. In the event physical collocation space was previously denied at a location due to technical reasons or space limitations, and physical collocation space has subsequently become available, DeltaCom may relocate its virtual collocation arrangements to physical collocation arrangements and pay the appropriate fees for physical collocation and for the rearrangement or reconfiguration of services terminated in the virtual collocation arrangement, as outlined in the appropriate BellSouth tariffs. In the event that BellSouth knows when additional space for physical collocation may become available at the location requested by DeltaCom, such information will be provided to DeltaCom in BellSouth’s written denial of physical collocation. To the extent that (i) physical Collocation Space becomes available to DeltaCom within 180 calendar days of BellSouth’s written denial of DeltaCom’s request for physical collocation, (ii) BellSouth had knowledge that the space was going to become available, and (iii) DeltaCom was not informed in the written denial that physical Collocation Space would become available within such 180 calendar days, then DeltaCom may relocate its virtual collocation arrangement to a physical collocation arrangement and will receive a credit for any nonrecurring charges previously paid for such virtual collocation. DeltaCom must arrange with a BellSouth Certified Supplier for the relocation of equipment from its virtual Collocation Space to its physical Collocation Space and will bear the cost of such relocation.

7.9 Virtual to Physical Conversion (In Place). Virtual collocation arrangements may be converted to “in-place” physical arrangements if the potential conversion meets the following four criteria: 1) there is no change in the amount of equipment or the configuration of the equipment that was in the virtual collocation arrangement; 2) the conversion of the virtual collocation arrangement will not cause the equipment or the results of that conversion to be located in a space that BellSouth has reserved for its own future needs; 3) the converted arrangement does not limit BellSouth’s ability to secure its own equipment and facilities due to the location of the virtual collocation arrangement; and 4) any changes to the arrangement can be accommodated by existing power, HVAC, and other requirements. The application fee for the conversion from virtual to in-place, physical collocation is as set forth in Exhibit C. Unless otherwise specified, BellSouth will complete virtual to in-place physical collocation conversions within sixty (60) calendar days. BellSouth will bill DeltaCom an Administrative Only Application Fee as set forth in Exhibit C for these charges on the date that BellSouth provides an Application Response.

Attachment 4-Central Office

Page 23

7.10 Cancellation. If, at anytime prior to space acceptance, DeltaCom cancels its order for the Collocation Space(s) (“Cancellation”), BellSouth will bill the applicable nonrecurring rate for any and all work processes for which work has begun.

7.11 Licenses. DeltaCom, at its own expense, will be solely responsible for obtaining from governmental authorities, and any other appropriate agency, entity, or person, all rights, privileges, and licenses necessary or required to operate as a provider of telecommunications services to the public or to occupy the Collocation Space.

7.12 Environmental Compliance. The Parties agree to utilize and adhere to the Environmental Hazard Guidelines identified as Exhibit A attached hereto.

8. Rates and Charges

8.1 Recurring Charges. If DeltaCom has met the applicable fifteen (15) calendar day walkthrough interval(s) specified in Section 4 and BellSouth was available for an acceptance walkthrough within the applicable fifteen (15) calendar day interval, billing for recurring charges will begin upon the Space Acceptance Date. In the event that DeltaCom fails to complete an acceptance walkthrough within the applicable fifteen (15) calendar day interval and BellSouth was available for an acceptance walkthrough within the applicable fifteen (15) calendar day interval, billing for recurring charges will commence on the Space Ready Date.

8.2 Application Fee. BellSouth shall assess an Application Fee via a service order, which shall be issued at the time BellSouth responds that space is available pursuant to Section 6 (Application Response). Payment of said Application Fee will be due as dictated by DeltaCom’s current billing cycle and is non-refundable.

8.3 Space Preparation. Space preparation fees consist of a nonrecurring charge for firm order processing and monthly recurring charges for central office modifications, assessed per arrangement, per square foot, and common systems modifications, assessed per arrangement, per square foot for cageless collocation and per cage for caged collocation. DeltaCom shall remit payment of the nonrecurring firm order-processing fee coincident with submission of a BFFO. The charges recover the costs associated with preparing the Collocation Space, which includes survey, engineering of the Collocation Space, which includes survey, engineering of the Collocation Space, design and modification costs for network, building and support systems. In the event DeltaCom opts for cageless space, the space preparation fees will be assessed based on the total floor space dedicated to DeltaCom as prescribed in this Section.

Attachment 4-Central Office

Page 24

8.4 Cable Installation. Cable Installation Fee(s) are assessed per entrance cable placed. This non-recurring fee will be billed by BellSouth upon receipt of the DeltaCom’s BFFO.

8.5 Floor Space. The Floor Space Charge includes reasonable charges for lighting, HVAC, and other allocated expenses associated with maintenance of the Premises but does not recover any power-related costs incurred by BellSouth. When the Collocation Space is enclosed, DeltaCom shall pay floor space charges based upon the number of square feet so enclosed. When the Collocation Space is not enclosed, DeltaCom shall pay floor space charges based upon the following floor space calculation: [(depth of the equipment lineup in which the rack is placed) + (0.5 x maintenance aisle depth) + (0.5 x wiring aisle depth)] X (width of rack and spacers). For purposes of this calculation, the depth of the equipment lineup shall consider the footprint of equipment racks plus any equipment overhang. BellSouth will assign unenclosed Collocation Space in conventional equipment rack lineups where feasible. In the event DeltaCom’s collocated equipment requires special cable racking, isolated grounding or other treatment which prevents placement within conventional equipment rack lineups, DeltaCom shall be required to request an amount of floor space sufficient to accommodate the total equipment arrangement.

8.6 Power. BellSouth shall make available –48 Volt (-48V) DC power for DeltaCom’s Collocation Space at a BellSouth Power Board or BellSouth Battery Distribution Fuse Bay (BDFB) at DeltaCom’s option within the Premises.

8.6.1 When obtaining power from a BDFB, fuses and power cables (A&B) must be engineered (sized), and installed by DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier. When obtaining power from a BellSouth power board, power cables (A&B) must be engineered (sized), and installed by DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier. DeltaCom is responsible for contracting with a BellSouth Certified Supplier for power distribution feeder cable runs from a BellSouth BDFB or power board to DeltaCom’s equipment. The determination of the BellSouth BDFB or BellSouth power board as the power source will be made at BellSouth’s sole, but reasonable, discretion. The BellSouth Certified Supplier contracted by DeltaCom must provide BellSouth a copy of the engineering power specification prior to the day on which DeltaCom’s equipment becomes operational. BellSouth will provide the common power feeder cable support structure between the BellSouth BDFB or power board and DeltaCom’s arrangement area. DeltaCom shall contract with a BellSouth Certified Supplier who will be responsible for the following: dedicated power cable support structure within DeltaCom’s arrangement, power cable feeds, and terminations of cable. Any terminations at a BellSouth power board must be performed by a BellSouth Certified power Supplier. DeltaCom shall comply with all applicable National Electric Code (NEC), BellSouth TR73503, Telcordia and ANSI Standards regarding power cabling.

Attachment 4-Central Office

Page 25

8.6.2 If DeltaCom elects to install its own DC Power Plant, BellSouth shall provide AC power to feed DeltaCom’s DC Power Plant. Charges for AC power will be assessed per breaker ampere per month. Rates include the provision of commercial and standby AC power. When obtaining power from a BellSouth service panel, protection devices and power cables must be engineered (sized), and installed by DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier except that BellSouth shall engineer and install protection devices and power cables for Adjacent Collocation. DeltaCom, if certified as a BellSouth Certified Supplier, or DeltaCom’s BellSouth Certified Supplier must also provide a copy of the engineering power specification prior to the equipment becoming operational. Charges for AC power shall be assessed pursuant to the rates specified in Exhibit C. AC power voltage and phase ratings shall be determined on a per location basis. At DeltaCom’s option, DeltaCom may arrange for AC power in an Adjacent Collocation arrangement from a retail provider of electrical power.

8.6.5 If DeltaCom requests a reduction in the amount of power that BellSouth is currently providing DeltaCom must submit a Subsequent Application. If no modification to the Collocation Space is requested other than the reduction in power, the Subsequent Application Fee for Power Reduction as set forth in Exhibit C will apply. If modifications are requested in addition to the reduction of power the Subsequent Application Fee will apply. This non-recurring fee will be billed by BellSouth on the date that BellSouth provides an Application Response.

8.6 Security Escort. A security escort will be required whenever DeltaCom or its approved agent desires access to the entrance manhole or must have access to the Premises after the one accompanied site visit allowed pursuant to Section 5 prior to completing BellSouth’s Security Training requirements. Rates for a security escort are as set forth in Exhibit C beginning with the scheduled escort time. BellSouth will wait for one-half (1/2) hour after the scheduled time for such an escort and DeltaCom shall pay for such half-hour charges in the event DeltaCom fails to show up.

8.7 Cable Record charges. These charges apply for work required to build cable records in BellSouth systems. The VG/DS0 per cable record charge is for a maximum of 3600 records. The Fiber cable record charge is for a maximum of 99 records. These non-recurring fees will be billed upon receipt of DeltaCom’s BFFO.

8.8 Other. If no rate is identified in the contract, the rate for the specific service or function will be negotiated by the Parties upon request by either Party.

9. Insurance

9.1 DeltaCom shall, at its sole cost and expense, procure, maintain, and keep in force insurance as specified in this Section 9 and underwritten by insurance companies licensed to do business in the states applicable under this Attachment and having a Best’s Insurance Rating of A-.

Attachment 4-Central Office

Page 26

9.2 DeltaCom shall maintain the following specific coverage:

9.2.1 Commercial General Liability coverage in the amount of ten million dollars ($10,000,000.00) or a combination of Commercial General Liability and Excess/Umbrella coverage totaling not less than ten million dollars ($10,000,000.00). BellSouth shall be named as an Additional Insured on the Commercial General Liability policy as specified herein.

9.2.2 Statutory Workers Compensation coverage and Employers Liability coverage in the amount of one hundred thousand dollars ($100,000.00) each accident, one hundred thousand dollars ($100,000.00) each employee by disease, and five hundred thousand dollars ($500,000.00) policy limit by disease.

9.2.3 All Risk Property coverage on a full replacement cost basis insuring all of DeltaCom’s real and personal property situated on or within BellSouth’s Central Office location(s).

9.2.4 DeltaCom may elect to purchase business interruption and contingent business interruption insurance, having been advised that BellSouth assumes no liability for loss of profit or revenues should an interruption of service occur.

9.3 The limits set forth in Section 9.2 above may be increased by BellSouth from time to time during the term of this Attachment upon thirty (30) days notice to DeltaCom to at least such minimum limits as shall then be customary with respect to comparable occupancy of BellSouth structures.

9.4 All policies purchased by DeltaCom shall be deemed to be primary and not contributing to or in excess of any similar coverage purchased by BellSouth. All insurance must be in effect on or before the date equipment is delivered to BellSouth’s Premises and shall remain in effect for the term of this Attachment or until all DeltaCom’s property has been removed from BellSouth’s Premises, whichever period is longer. If DeltaCom fails to maintain required coverage, BellSouth may pay the premiums thereon and seek reimbursement of same from DeltaCom.

9.5 DeltaCom shall submit certificates of insurance reflecting the coverage required pursuant to this Section a minimum of ten (10) business days prior to the commencement of any work in the Collocation Space. Failure to meet this interval may result in construction and equipment installation delays. DeltaCom shall arrange for BellSouth to receive thirty (30) business days’ advance notice of cancellation from DeltaCom’s insurance company. DeltaCom shall forward a certificate of insurance and notice of cancellation/non-renewal to BellSouth at the following address:

BellSouth Telecommunications, Inc.

Attn.: Risk Management Coordinator

17H53 BellSouth Center

675 W. Peachtree Street

Atlanta, Georgia 30375

Attachment 4-Central Office

Page 27

9.6 DeltaCom must conform to recommendations made by BellSouth’s fire insurance company to the extent BellSouth has agreed to, or shall hereafter agree to, such recommendations.

9.7 Self-Insurance. If DeltaCom’s net worth exceeds five hundred million dollars ($500,000,000), DeltaCom may elect to request self-insurance status in lieu of obtaining any of the insurance required in Sections 9.2.1 and 9.2.2. DeltaCom shall provide audited financial statements to BellSouth thirty (30) calendar days prior to the commencement of any work in the Collocation Space. BellSouth shall then review such audited financial statements and respond in writing to DeltaCom in the event that self-insurance status is not granted to DeltaCom. If BellSouth approves DeltaCom for self-insurance, DeltaCom shall annually furnish to BellSouth, and keep current, evidence of such net worth that is attested to by one of DeltaCom’s corporate officers. The ability to self-insure shall continue so long as the DeltaCom meets all of the requirements of this Section. If the DeltaCom subsequently no longer satisfies this Section, DeltaCom is required to purchase insurance as indicated by Sections 9.2.1 and 9.2.2.

9.8 The net worth requirements set forth in Section 9.7 may be increased by BellSouth from time to time during the term of this Attachment upon thirty (30) calendar days’ notice to DeltaCom to at least such minimum limits as shall then be customary with respect to comparable occupancy of BellSouth structures.

9.9 Failure to comply with the provisions of this Section will be deemed a material breach of this Attachment.

10. Mechanics Liens

10.1 If any mechanics lien or other liens shall be filed against property of either Party (BellSouth or DeltaCom), or any improvement thereon by reason of or arising out of any labor or materials furnished or alleged to have been furnished or to be furnished to or for the other Party or by reason of any changes, or additions to said property made at the request or under the direction of the other Party, the other Party directing or requesting those changes shall, within thirty (30) business days after receipt of written notice from the Party against whose property said lien has been filed, either pay such lien or cause the same to be bonded off the affected property in the manner provided by law. The Party causing said lien to be placed against the property of the other shall also defend, at its sole cost and expense, on behalf of the other, any action, suit or proceeding which may be brought for the enforcement of such liens and shall pay any damage and discharge any judgment entered thereon.

11. Inspections

11.1 BellSouth may conduct an inspection of DeltaCom’s equipment and facilities in the Collocation Space(s) prior to the activation of facilities between DeltaCom’s

Attachment 4-Central Office

Page 28

equipment and equipment of BellSouth. BellSouth may conduct an inspection if DeltaCom adds equipment and may otherwise conduct routine inspections at reasonable intervals mutually agreed upon by the Parties. BellSouth shall provide DeltaCom with a minimum of forty-eight (48) hours or two (2) business days, whichever is greater, advance notice of all such inspections. All costs of such inspection shall be borne by BellSouth.

12. Security and Safety Requirements

12.1 Unless otherwise specified, DeltaCom will be required, at its own expense, to conduct a statewide investigation of criminal history records for each DeltaCom employee hired in the past five (5) years being considered for work on the BellSouth Premises, for the states/counties where the DeltaCom employee has worked and lived for the past five (5) years. Where state law does not permit statewide collection or reporting, an investigation of the applicable counties is acceptable. DeltaCom shall not be required to perform this investigation if an affiliated company of DeltaCom has performed an investigation of the DeltaCom employee seeking access, if such investigation meets the criteria set forth above. This requirement will not apply if DeltaCom has performed a pre-employment statewide investigation of criminal history records of the DeltaCom employee for the states/counties where the DeltaCom employee has worked and lived for the past five (5) years or, where state law does not permit a statewide investigation, an investigation of the applicable counties.

12.2 DeltaCom will be required to administer to their personnel assigned to the BellSouth Premises security training either provided by BellSouth, or meeting criteria defined by BellSouth.

12.3 DeltaCom shall provide its employees and agents with picture identification, which must be worn, and visible at all times while in the Collocation Space or other areas in or around the Premises. The photo identification card shall bear, at a minimum, the employee’s name and photo, and DeltaCom’s name. BellSouth reserves the right to remove from its premises any employee of DeltaCom not possessing identification issued by DeltaCom or who has violated any of BellSouth’s policies as outlined in the CLEC Security Training documents. DeltaCom shall hold BellSouth harmless for any damages resulting from such removal of its personnel from BellSouth premises. DeltaCom shall be solely responsible for ensuring that any Guest of DeltaCom is in compliance with all subsections of this Section.

12.4 DeltaCom shall not assign to the BellSouth Premises any personnel with records of felony criminal convictions. DeltaCom shall not assign to the BellSouth Premises any personnel with records of misdemeanor convictions, except for misdemeanor traffic violations, without advising BellSouth of the nature and gravity of the offense(s). BellSouth reserves the right to refuse building access to any DeltaCom personnel who have been identified to have misdemeanor criminal convictions. Notwithstanding the foregoing, in the event that DeltaCom chooses not to advise BellSouth of the nature and gravity of any misdemeanor conviction, DeltaCom may, in the alternative, certify to BellSouth that it shall not assign to the BellSouth Premises any personnel with records of misdemeanor convictions (other than misdemeanor traffic violations).

Attachment 4-Central Office

Page 29

12.4.1 DeltaCom shall not knowingly assign to the BellSouth Premises any individual who was a former employee of BellSouth and whose employment with BellSouth was terminated for a criminal offense whether or not BellSouth sought prosecution of the individual for the criminal offense.

12.4.2 DeltaCom shall not knowingly assign to the BellSouth Premises any individual who was a former supplier of BellSouth and whose access to a BellSouth Premises was revoked due to commission of a criminal offense whether or not BellSouth sought prosecution of the individual for the criminal offense.

12.5 For each DeltaCom employee or agent hired by DeltaCom within five (5) years of being considered for work on the BellSouth Premises, who requires access to a BellSouth Premises pursuant to this agreement, DeltaCom shall furnish BellSouth, prior to an employee or agent gaining such access, a certification that the aforementioned background check and security training were completed. The certification will contain a statement that no felony convictions were found and certifying that the security training was completed by the employee. If the employee’s criminal history includes misdemeanor convictions, DeltaCom will disclose the nature of the convictions to BellSouth at that time. In the alternative, DeltaCom may certify to BellSouth that it shall not assign to the BellSouth Premises any personnel with records of misdemeanor convictions other than misdemeanor traffic violations.

12.5.1 For all other DeltaCom employees requiring access to a BellSouth Premises pursuant to this Attachment, DeltaCom shall furnish BellSouth, prior to an employee gaining such access, a certification that the employee is not subject to the requirements of Section 12.5 above and that security training was completed by the employee.

12.6 At BellSouth’s request, DeltaCom shall promptly remove from BellSouth’s Premises any employee of DeltaCom BellSouth does not wish to grant access to its premises 1) pursuant to any investigation conducted by BellSouth or 2) prior to the initiation of an investigation if an employee of DeltaCom is found interfering with the property or personnel of BellSouth or another collocated telecommunications carrier, provided that an investigation shall promptly be commenced by BellSouth.

12.7 Security Violations. BellSouth reserves the right to interview DeltaCom’s employees, agents or suppliers in the event of wrongdoing in or around BellSouth’s property or involving BellSouth’s or another telecommunications carrier’s property or personnel, provided that BellSouth shall provide 24 hours notice (or such shorter notice as may be agreed to by the Parties as reasonable under the circumstances) to DeltaCom’s Security representative of such interview. DeltaCom reserves the right to have its Security representative present during the interview. DeltaCom and its suppliers shall reasonably cooperate with BellSouth’s investigation into allegations of wrongdoing or criminal conduct committed by, witnessed by or involving DeltaCom’s employees, agents, or suppliers. Additionally, BellSouth reserves the right to bill DeltaCom for

Attachment 4-Central Office

Page 30

all reasonable costs associated with investigations involving its employees, agents, or suppliers if it is established and mutually agreed in good faith that DeltaCom’s employees, agents, or suppliers are responsible for the alleged act. BellSouth shall bill DeltaCom for BellSouth property which is stolen or damaged where an investigation determines the culpability of DeltaCom’s employees, agents, or suppliers and where DeltaCom agree, in good faith, with the results of such investigation. DeltaCom shall notify BellSouth in writing immediately in the event that DeltaCom discovers one of its employees already working on the BellSouth Premises is a possible security risk. Upon request of the other Party, the Party who is the employer shall discipline consistent with its employment practices, up to and including removal from the BellSouth Premises, any employee found to have violated the security and safety requirements of this Section. DeltaCom shall hold BellSouth harmless for any damages resulting from such removal of its personnel from BellSouth’s Premises.

12.7.1 DeltaCom reserves the right to interview BellSouth’s employees, agents, or suppliers in the event of wrongdoing in or around DeltaCom’s property or involving DeltaCom’s personnel, provided that DeltaCom shall provide 24 hours notice (or such shorter notice as may be agreed to by the Parties as reasonable under the circumstances) to BellSouth’s Security representative of such interview. BellSouth reserves the right to have its Security representative present during the interview. BellSouth and its suppliers shall reasonably cooperate with DeltaCom’s investigation into allegations of wrongdoing or criminal conduct committed by, witnessed by, or involving BellSouth’s employees, agents, or suppliers. Additionally, DeltaCom reserves the right to bill BellSouth for all reasonable costs associated with investigations involving its employees, agents, or suppliers if it is established and mutually agreed in good faith that BellSouth’s employees, agents, or suppliers are responsible for the alleged act. DeltaCom shall bill BellSouth for DeltaCom property which is stolen or damaged where an investigation determines the culpability of BellSouth’s employees, agents, or suppliers and where BellSouth agrees, in good faith, with the results of such investigation. BellSouth shall notify DeltaCom in writing immediately in the event that BellSouth discovers one of its employees is a possible security risk to DeltaCom property. Upon request of the other Party, the Party who is the employer shall discipline consistent with its employment practices, up to and including removal from access to DeltaCom’s collocation space and/or equipment, any employee found to have violated the security and safety requirements of this Section. BellSouth shall hold DeltaCom harmless for any damages resulting from such removal of its personnel from DeltaCom’s collocation space and/or access to DeltaCom’s equipment.

12.8 Use of Supplies. Unauthorized use of equipment, supplies, or other property by either Party, whether or not used routinely to provide telephone service will be strictly prohibited and handled appropriately. Costs associated with such unauthorized use may be charged to the offending Party, as may be all associated investigative costs.

Attachment 4-Central Office

Page 31

12.9 Use of Official Lines. Except for non-toll calls necessary in the performance of their work, neither Party shall use the telephones of the other Party on the BellSouth Premises. Charges for unauthorized telephone calls may be charged to the offending Party, as may be all associated investigative costs.

12.10 Accountability. Full compliance with the Security requirements of this section shall in no way limit the accountability of either Party to the other for the improper actions of its employees.

13. Destruction of Collocation Space

13.1 In the event a Collocation Space is wholly or partially damaged by fire, windstorm, tornado, flood or by similar causes to such an extent as to be rendered wholly unsuitable for DeltaCom’s permitted use hereunder, then either Party may elect within ten (10) business days after such damage, to terminate occupancy of the damaged Collocation Space, and if either Party shall so elect, by giving the other written notice of termination, both Parties shall stand released of and from further liability under the terms hereof. If the Collocation Space shall suffer only minor damage and shall not be rendered wholly unsuitable for DeltaCom’s permitted use, or is damaged and the option to terminate is not exercised by either Party, BellSouth covenants and agrees to proceed promptly without expense to DeltaCom, except for improvements not the property of BellSouth, to repair the damage. BellSouth shall, at parity with repairs made to their own space, have a reasonable time within which to rebuild or make any repairs, and such rebuilding and repairing shall be subject to delays caused by storms, shortages of labor and materials, government regulations, strikes, walkouts, and causes beyond the control of BellSouth, which causes shall not be construed as limiting factors, but as exemplary only. DeltaCom may, at its own expense, accelerate the rebuild of its collocated space and equipment provided however that a BellSouth Certified Supplier is used and the necessary space preparation has been completed. If DeltaCom’s acceleration of the project increases the cost of the project, then those additional charges will be incurred by DeltaCom. Where allowed and where practical, DeltaCom may erect a temporary facility while BellSouth rebuilds or makes repairs. In all cases where the Collocation Space shall be rebuilt or repaired, DeltaCom shall be entitled to an equitable abatement of rent and other charges, depending upon the unsuitability of the Collocation Space for DeltaCom’s permitted use, until such Collocation Space is fully repaired and restored and DeltaCom’s equipment installed therein (but in no event later than thirty (30) business days after the Collocation Space is fully repaired and restored). Where DeltaCom has placed an Adjacent Arrangement pursuant to Section 3, DeltaCom shall have the sole responsibility to repair or replace said Adjacent Arrangement provided herein. Pursuant to this section, BellSouth will restore the associated services to the Adjacent Arrangement.

Attachment 4-Central Office

Page 32

14. Eminent Domain

14.1 If the whole of a Collocation Space or Adjacent Arrangement shall be taken by any public authority under the power of eminent domain, then this Attachment shall terminate with respect to such Collocation Space or Adjacent Arrangement as of the day possession shall be taken by such public authority and rent and other charges for the Collocation Space or Adjacent Arrangement shall be paid up to that day with proportionate refund by BellSouth of such rent and charges as may have been paid in advance for a period subsequent to the date of the taking. If any part of the Collocation Space or Adjacent Arrangement shall be taken under eminent domain, BellSouth and DeltaCom shall each have the right to terminate this Attachment with respect to such Collocation Space or Adjacent Arrangement and declare the same null and void, by written notice of such intention to the other Party within ten (10) business days after such taking.

15. Nonexclusivity

15.1 DeltaCom understands that this Attachment is not exclusive and that BellSouth may enter into similar agreements with other Parties. Assignment of space pursuant to all such agreements shall be determined by space availability and made on a first come, first served basis.

Attachment 4-Central Office

Exhibit A

Page 33

ENVIRONMENTAL AND SAFETY

PRINCIPLES

The following principles provide basic guidance on environmental and safety issues when applying for and establishing Physical Collocation arrangements.

1. GENERAL PRINCIPLES

1.1 Compliance with Applicable Law. BellSouth and DeltaCom agree to comply with applicable federal, state, and local environmental and safety laws and regulations including U.S. Environmental Protection Agency (USEPA) regulations issued under the Clean Air Act (CAA), Clean Water Act (CWA), Resource Conservation and Recovery Act (RCRA), Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), Superfund Amendments and Reauthorization Act (SARA), the Toxic Substances Control Act (TSCA), and OSHA regulations issued under the Occupational Safety and Health Act of 1970, as amended and NFPA and National Electrical Codes (NEC) and the NESC (“Applicable Laws”). Each Party shall notify the other if compliance inspections are conducted by regulatory agencies and/or citations are issued that relate to any aspect of this Attachment.

1.2 Notice. BellSouth and DeltaCom shall provide notice to the other, including Material Safety Data Sheets (MSDSs), of known and recognized physical hazards or Hazardous Chemicals existing on site or brought on site. Each Party is required to provide specific notice for known potential Imminent Danger conditions. DeltaCom should contact 1-800-743-6737 for BellSouth MSDS sheets.

1.3 Practices/Procedures. BellSouth may make available additional environmental control procedures for DeltaCom to follow when working at a BellSouth Premises (See Section 2, below). These practices/procedures will represent the regular work practices required to be followed by the employees and contractors of BellSouth for environmental protection. DeltaCom will require its contractors, agents and others accessing the BellSouth Premises to comply with these practices. Section 2 lists the Environmental categories where BST practices should be followed by DeltaCom when operating in the BellSouth Premises.

1.4 Environmental and Safety Inspections. BellSouth reserves the right to inspect the DeltaCom space with proper notification. BellSouth reserves the right to stop any DeltaCom work operation that imposes Imminent Danger to the environment, employees or other persons in the area or Facility.

1.5 Hazardous Materials Brought On Site. Any hazardous materials brought into, used, stored or abandoned at the BellSouth Premises by DeltaCom are owned by DeltaCom. DeltaCom will indemnify BellSouth for claims, lawsuits or damages to persons or property caused by these materials. Without prior written BellSouth approval, no substantial new safety or environmental hazards can be created by DeltaCom or different hazardous materials used by DeltaCom at BellSouth Facility. DeltaCom must demonstrate adequate emergency response capabilities for its materials used or remaining at the BellSouth Facility.

Attachment 4-Central Office

Exhibit A

Page 34

1.6 Spills and Releases. When contamination is discovered at a BellSouth Premises, the Party discovering the condition must notify BellSouth. All Spills or Releases of regulated materials will immediately be reported by DeltaCom to BellSouth.

1.7 Coordinated Environmental Plans and Permits. BellSouth and DeltaCom will coordinate plans, permits or information required to be submitted to government agencies, such as emergency response plans, spill prevention control and countermeasures (SPCC) plans and community reporting. If fees are associated with filing, BellSouth and DeltaCom will develop a cost sharing procedure. If BellSouth’s permit or EPA identification number must be used, DeltaCom must comply with all of BellSouth’s permit conditions and environmental processes, including environmental “best management practices (BMP)” (see Section 2, below) and/or selection of BST disposition vendors and disposal sites.

1.8 Environmental and Safety Indemnification. BellSouth and DeltaCom shall indemnify, defend and hold harmless the other Party from and against any claims (including, without limitation, third-party claims for personal injury or death or real or personal property damage), judgments, damages, (including direct and indirect damages, and punitive damages), penalties, fines, forfeitures, costs, liabilities, interest and losses arising in connection with the violation or alleged violation of any Applicable Law or contractual obligation or the presence or alleged presence of contamination arising out of the acts or omissions of the indemnifying Party, its agents, contractors, or employees concerning its operations at the Facility.

2. CATEGORIES FOR CONSIDERATION OF ENVIRONMENTAL ISSUES

2.1 When performing functions that fall under the following Environmental categories on BellSouth’s Premises, DeltaCom agrees to comply with the applicable sections of the current issue of BellSouth’s Environmental and Safety Methods and Procedures (M&Ps), incorporated herein by this reference. DeltaCom further agrees to cooperate with BellSouth to ensure that DeltaCom’s employees, agents, and/or subcontractors are knowledgeable of and satisfy those provisions of BellSouth’s Environmental M&Ps which apply to the specific Environmental function being performed by DeltaCom, its employees, agents and/or subcontractors.

2.2 The most current version of reference documentation must be requested from BellSouth.

ENVIRONMENTAL CATEGORIES	ENVIRONMENTAL ISSUES	ADDRESSED BY THE FOLLOWING DOCUMENTATION
Disposal of hazardous material or other regulated material (e.g., batteries, fluorescent tubes, solvents & cleaning materials)	Compliance with all applicable local, state, & federal laws and regulations Pollution liability insurance EVET approval of contractor	Std T&C 450 Fact Sheet Series 17000 Std T&C 660-3 Approved Environmental Vendor List (Contact ATCC

Attachment 4-Central Office

Exhibit A

Page 35

		Representative)
Emergency response	Hazmat/waste release/spill fire safety emergency	Fact Sheet Series 17000 Building Emergency Operations Plan (EOP) (specific to and located on Premises)
Contract labor/outsourcing for services with environmental implications to be performed on BellSouth Premises (e.g., disposition of hazardous material/waste; maintenance of storage tanks)	Compliance with all applicable local, state, & federal laws and regulations Performance of services in accordance with BST’s environmental M&Ps Insurance	Std T&C 450 Std T&C 450-B (Contact ATCC Representative for copy of appropriate E/S M&Ps.) Std T&C 660
Transportation of hazardous material	Compliance with all applicable local, state, & federal laws and regulations Pollution liability insurance EVET approval of contractor	Std T&C 450 Fact Sheet Series 17000 Std T&C 660-3 Approved Environmental Vendor List (Contact ATCC Representative)
Maintenance/operations work which may produce a waste Other maintenance work	Compliance with all application local, state, & federal laws and regulations Protection of BST employees and equipment	Std T&C 450 29CFR 1910.147 (OSHA Standard) 29CFR 1910 Subpart O (OSHA Standard)
Janitorial services	All waste removal and disposal must conform to all applicable federal, state and local regulations All Hazardous Material and Waste Asbestos notification and protection of employees and equipment	P&SM Manager - Procurement Fact Sheet Series 17000 GU-BTEN-001BT, Chapter 3 BSP 010-170-001BS (Hazcom)

Attachment 4-Central Office

Exhibit A

Page 36

Manhole cleaning	Compliance with all applicable local, state, & federal laws and regulations Pollution liability insurance EVET approval of contractor	Std T&C 450 Fact Sheet 14050 BSP 620-145-011PR Issue A, August 1996 Std T&C 660-3 Approved Environmental Vendor List (Contact ATCC Representative)
Removing or disturbing building materials that may contain asbestos	Asbestos work practices	GU-BTEN-001BT, Chapter 3 For questions regarding removing or disturbing materials that contain asbestos, call the BellSouth Building Service Center: AL, MS, TN, KY & LA (local area code) 557-6194 FL, GA, NC & SC (local area code) 780-2740

3. DEFINITIONS

Generator. Under RCRA, the person whose act produces a Hazardous Waste, as defined in 40 CFR 261, or whose act first causes a Hazardous Waste to become subject to regulation. The Generator is legally responsible for the proper management and disposal of Hazardous Wastes in accordance with regulations.

Hazardous Chemical. As defined in the U.S. Occupational Safety and Health (OSHA) hazard communication standard (29 CFR 1910.1200), any chemical which is a health hazard or physical hazard.

Hazardous Waste. As defined in section 1004 of RCRA.

Imminent Danger. Any conditions or practices at a facility which are such that a danger exists which could reasonably be expected to cause immediate death or serious harm to people or immediate significant damage to the environment or natural resources.

Spill or Release. As defined in Section 101 of CERCLA.

4. ACRONYMS

ATCC – Account Team Collocation Coordinator

Attachment 4-Central Office

Exhibit A

Page 37

BST—BellSouth Telecommunications

CRES—Corporate Real Estate and Services (formerly PS&M)

DEC/LDEC—Department Environmental Coordinator/Local Department Environmental Coordinator

E/S—Environmental/Safety

EVET—Environmental Vendor Evaluation Team

GU-BTEN-001BT—BellSouth Environmental Methods and Procedures

NESC—National Electrical Safety Codes

P&SM—Property & Services Management

Std. T&C—Standard Terms & Conditions

COLLOCATION - North Carolina

Att: 4 Exh: B

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add’l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add’l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add’l

First

Add’l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

PHYSICAL COLLOCATION

Application

Physical Collocation - Initial Application Fee

CLO

PE1BA

2,322.00

Physical Collocation - Subsequent Application Fee

CLO

PE1CA

2,311.00

Physical Collocation - Co-Carrier Cross Connects/Direct Connect, Application Fee, per application

CLO

PE1DT

317.20

Physical Collocation Administrative Only - Application Fee

CLO

PE1BL

741.44

Physical Collocation - Application Cost, Simple Augment

CLO

PE1KS

269.83

1.15

Physical Collocation - Application Cost, Minor Augment

CLO

PE1KM

493.40

1.15

Physical Collocation - Application Cost, Intermediate Augment

CLO

PE1K1

1,012.00

1.15

Physical Collocation - Application Cost - Major Augment

CLO

PE1KJ

2,343.00

1.15

Space Preparation

Physical Collocation - Floor Space, per sq feet

CLO

PE1PJ

2.69

Physical Collocation - Space Enclosure, welded wire, first 50 square feet

CLO

PE1BX

534.44

Physical Collocation - Space enclosure, welded wire, first 100 square feet

CLO

PE1BW

559.81

Physical Collocation - Space enclosure, welded wire, each additional 50 square feet

CLO

PE1CW

25.37

Physical Collocation - Space Preparation - C.O. Modification per square ft.

CLO

PE1SK

2.42

Physical Collocation - Space Preparation, Common Systems Modifications-Cageless, per square foot

CLO

PE1SL

2.88

Physical Collocation - Space Preparation - Common Systems Modifications-Caged, per cage

CLO

PE1SM

97.98

Physical Collocation - Space Preparation - Firm Order Processing

CLO

PE1SJ

1,196.00

Physical Collocation - Space Availability Report, per Central Office Requested

CLO

PE1SR

2,140.00

Power

Physical Collocation - Power, -48V DC Power - per Fused Amp Requested

CLO

PE1PL

7.65

Physical Collocation - Power, 120V AC Power, Single Phase, per Breaker Amp

CLO

PE1FB

5.50

Physical Collocation - Power, 240V AC Power, Single Phase, per Breaker Amp

CLO

PE1FD

11.01

Physical Collocation - Power, 120V AC Power, Three Phase, per Breaker Amp

CLO

PE1FE

16.51

Physical Collocation - Power, 277V AC Power, Three Phase, per Breaker Amp

CLO

PE1FG

38.12

Cross Connects (Cross Connects, Co-Carrier Cross Connects, and Ports)

Physical Collocation - 2-wire cross-connect, loop, provisioning

UEANL,UEQ, UNCNX, UEA, UCL, UAL, UHL, UDN, UNCVX

PE1P2

0.0309

19.77

14.95

Physical Collocation - 4-wire cross-connect, loop, provisioning

UEA, UHL, UNCVX, UNCDX, UCL, UDL

PE1P4

0.0618

19.95

15.05

Physical Collocation -DS1 Cross-Connect for Physical Collocation, provisioning

WDS1L, WDS1S, UXTD1, ULDD1, USLEL, UNLD1, U1TD1, UNC1X, UEPSR, UEPSB, UEPSE, UEPSP, USL, UEPEX, UEPDX

PE1P1

1.38

39.15

23.20

Physical Collocation - DS3 Cross-Connect, provisioning

UE3, U1TD3, UXTD3, UXTS1, UNC3X, UNCSX, ULDD3, U1TS1, ULDS1, UNLD3, UEPEX, UEPDX, UEPSR, UEPSB, UEPSE, UEPSP

PE1P3

17.62

38.25

21.94

Page 1 of 4

COLLOCATION - North Carolina

Att: 4 Exh: B

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic- 1st

Incremental Charge - Manual Svc Order vs. Electronic- Add’l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add’l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add’l

First

Add’l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

Physical Collocation - 2-Fiber Cross-Connect

CLO, ULDO3, ULD12, ULD48, U1TO3, U1T12, U1T48, UDLO3, UDL12, UDF

PE1F2

3.50

38.25

21.94

Physical Collocation - 4-Fiber Cross-Connect

ULDO3, ULD12, ULD48, U1TO3, U1T12, U1T48, UDLO3, UDL12, UDF, UDFCX

PE1F4

6.20

43.96

26.17

Physical Collocation - Co-Carrier Cross Connects/Direct Connect - Fiber Cable Support Structure, per linear foot, per cable.

CLO

PE1ES

0.0028

Physical Collocation - Co-Carrier Cross Connect/Direct Connect - Copper/Coax Cable Support Structure, per linear foot, per cable.

CLO

PE1DS

0.0041

Physical Collocation 2-Wire Cross Connect, Port

UEPSR, UEPSP, UEPSE, UEPSB, UEPSX, UEP2C

PE1R2

0.0309

19.77

14.95

26.94

12.76

Physical Collocation 4-Wire Cross Connect, Port

UEPEX, UEPDD

PE1R4

0.0618

19.95

15.05

26.94

12.76

Security

Physical Collocation - Security Escort for Basic Time - normally scheduled work, per half hour

CLO

PE1BT

33.68

21.34

Physical Collocation - Security Escort for Overtime - outside of normally scheduled working hours on a scheduled work day, per half hour

CLO

PE1OT

43.87

27.57

Physical Collocation - Security Escort for Premium Time - outside of scheduled work day, per half hour

CLO

PE1PT

54.06

33.80

Physical Collocation - Security Access System - Security System per Central Office, per Sq. Ft.

CLO

PE1AY

0.0135

Physical Collocation -Security Access System - New Card Activation, per Card Activation (First), per State

CLO

PE1A1

0.0622

15.00

Physical Collocation-Security Access System-Administrative Change, existing Access Card, per Request, per State, per Card

CLO

PE1AA

15.51

Physical Collocation - Security Access System - Replace Lost or Stolen Card, per Card

CLO

PE1AR

15.00

Physical Collocation - Security Access - Initial Key, per Key

CLO

PE1AK

15.00

Physical Collocation - Security Access - Key, Replace Lost or Stolen Key, per Key

CLO

PE1AL

15.00

CFA

Physical Collocation - CFA Information Resend Request, per premises, per arrangement, per request

CLO

PE1C9

77.48

Cable Records - Note: The rates in the First & Additional columns will actually be billed as “Initial I” and “Subsequent S” respectively

Physical Collocation - Cable Records, per request

CLO

PE1CR

I    1458.00

S    937.29

245.00

245.00

Physical Collocation, Cable Records, VG/DS0 Cable, per cable record (maximum 3600 records)

CLO

PE1CD

622.69

622.69

346.35

346.35

Physical Collocation, Cable Records, VG/DS0 Cable, per each 100 pair

CLO

PE1CO

8.77

8.77

10.32

10.32

Physical Collocation, Cable Records, DS1, per T1 TIE

CLO

PE1C1

4.35

4.35

5.11

5.11

Physical Collocation, Cable Records, DS3, per T3 TIE

CLO

PE1C3

15.22

15.22

17.90

17.90

Physical Collocation - Cable Records, Fiber Cable, per cable record (maximum 99 records)

CLO

PE1CB

163.61

163.61

143.32

143.32

Physical Collocation, Cable Records,CAT5/RJ45

CLO

PE1C5

2.27

2.78

Virtual to Physical

Physical Collocation - Virtual to Physical Collocation Relocation, per Voice Grade Circuit

CLO

PE1BV

33.00

Physical Collocation - Virtual to Physical Collocation Relocation, per DSO Circuit

CLO

PE1BO

33.00

Physical Collocation - Virtual to Physical Collocation Relocation, per DS1 Circuit

CLO

PE1B1

52.00

Physical Collocation - Virtual to Physical Collocation Relocation, per DS3 Circuit

CLO

PE1B3

52.00

Physical Collocation - Virtual to Physical Collocation In-Place, Per Voice Grade Circuit

CLO

PE1BR

69.51

20.45

Page 2 of 4

COLLOCATION - North Carolina

Att: 4 Exh: B

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic-1st

Incremental Charge - Manual Svc Order vs. Electronic- Add’l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add’l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add’l

First

Add’l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

Physical Collocation Virtual to Physical Collocation In-Place, Per DSO Circuit

CLO

PE1BP

69.51

20.45

Physical Collocation - Virtual to Physical Collocation In-Place, Per DS1 Circuit

CLO

PE1BS

78.93

29.87

Physical Collocation - Virtual to Physical Collocation In-Place, per DS3 Circuit

CLO

PE1BE

75.11

26.04

Entrance Cable

Physical Collocation - Fiber Cable Installation, Pricing, non-recurring charge, per Entrance Cable

CLO

PE1BD

1,233.00

Physical Collocation - Fiber Cable Support Structure, per Entrance Cable

CLO

PE1PM

20.57

Physical Collocation - Fiber Entrance Cable Installation, per Fiber

CLO

PE1ED

7.79

POT Bays

Physical Collocation - POT Bay arrangement prior to 6/1/99 - 2-wire cross connect, per cross connect

UEANL, UEA, UDN, UDC, UAL, UHL, UCL, UEQ, CLO, UDL, UNCVX, UNCDX, UNCNX

PE1PE

0.1054

Physical Collocation - POT Bay arrangement prior to 6/1/99 - 4-wire cross connect, per cross connect

UEANL, UEA, UDN, UDC, UAL, UHL, UCL, UEQ, CLO, USL, UNCVX, UNCDX

PE1PF

0.2108

Physical Collocation - POT Bay arrangement prior to 6/1/99 - DS1 cross connect, per cross connect

UEANL, UEA, UDN, UDC, UAL, UHL, UCL, UEQ, CLO, WDS1L, WDS1S, USL, U1TD1, UXTD1, UNC1X, ULDD1, USLEL, UNLD1

PE1PG

1.49

Physical Collocation - POT Bay arrangement prior to 6/1/99 - DS3 cross connect, per cross connect

UEANL, UEA, UDN, UDC, UAL, UHL, UCL, UEQ, CLO, UE3, U1TD3, UXTD3, UXTS1, UNC3X, UNCSX, ULDD3, U1TS1, ULDS1, UNLD3, UDL, UDLSX

PE1PH

13.27

Physical Collocation - POT Bay arrangement prior to 6/1/99 - 2-fiber cross connect, per cross connect

UEANL, UEA, UDN, UDC, UAL, UHL, UCL, UEQ, CLO, ULDO3, ULD12, ULD48, U1TO3, U1T12, U1T48, UDLO3, UDL12, UDF

PE1B2

45.30

Physical Collocation - POT Bay arrangement prior to 6/1/99 - 4-fiber cross connect, per cross connect

UEANL, UEA, UDN, UDC, UAL, UHL, UCL, UEQ, CLO, ULDO3, ULD12, ULD48, U1TO3, U1T12, U1T48, UDLO3, UDL12, UDF

PE1B4

61.09

VIRTUAL COLLOCATION

Application

Virtual Collocation - Application Fee

AMTFS

EAF

1,195.00

Virtual Collocation - Co-Carrier Cross Connects/Direct Connect, Application Fee, per application

AMTFS

VE1CA

317.20

Virtual Collocation Administrative Only - Application Fee

AMTFS

VE1AF

741.44

Space Preparation

Virtual Collocation - Floor Space, per sq. ft.

I

AMTFS

ESPVX

2.69

Power

Virtual Collocation - Power, per fused amp

I

AMTFS

ESPAX

7.65

Cross Connects (Cross Connects, Co-Carrier Cross Connects, and Ports)

Virtual Collocation - 2-wire cross-connect, loop, provisioning

UEANL, UEA, UDN, UAL, UHL, UCL, UEQ, UNCVX, UNCDX, UNCNX

UEAC2

0.0225

19.77

14.95

Page 3 of 4

COLLOCATION - North Carolina

Att: 4 Exh: B

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic- 1st

Incremental Charge - Manual Svc Order vs. Electronic- Add’l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add’l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add’l

First

Add’l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

Virtual Collocation - 4-wire cross-connect, loop, provisioning

UEA, UHL, UCL, UDL, UNCVX, UNCDX

UEAC4

0.0449

19.95

15.05

Virtual collocation - Special Access & UNE, cross-connect per DS1

ULR, UXTD1, UNC1X, ULDD1, U1TD1, USLEL, UNLD1, USL, UEPEX, UEPDX

CNC1X

0.4195

39.15

23.20

Virtual collocation - Special Access & UNE, cross-connect per DS3

USL, UE3, U1TD3, UXTS1, UXTD3, UNC3X, UNCSX, ULDD3, U1TS1, ULDS1, UDLSX, UNLD3, XDEST

CND3X

4.41

38.25

21.94

Virtual Collocation - 2-Fiber Cross Connects

UDL12, UDLO3, U1T48, U1T12, U1TO3, ULDO3, ULD12, ULD48, UDF

CNC2F

1.96

38.25

21.94

Virtual Collocation - 4-Fiber Cross Connects

UDL12, UDLO3, U1T48, U1T12, U1TO3, ULDO3, ULD12, ULD48, UDF

CNC4F

3.93

43.96

26.17

Virtual Collocation - Co-Carrier Cross Connects/Direct Connect - Fiber Cable Support Structure, per linear foot, per cable

AMTFS

VE1CB

0.0028

Virtual Collocation - Co-Carrier Cross Connects/Direct Connect - Copper/Coax Cable Support Structure, per linear foot, per cable

AMTFS

VE1CD

0.0041

Virtual Collocation 2-Wire Cross Connect, Port

UEPSX, UEPSB, UEPSE, UEPSP, UEPSR, UEP2C

VE1R2

0.0225

19.77

14.95

Virtual Collocation 4-Wire Cross Connect, Port

UEPDD, UEPEX

VE1R4

0.0449

19.95

15.05

CFA

Virtual Collocation - CFA Information Resend Request, per Premises, per Arrangement, per request

AMTFS

VE1QR

77.48

Cable Records - Note: The rates in the First & Additional columns will actually be billed as “Initial I” & “Subsequent S” respectively

Virtual Collocation Cable Records - per request

AMTFS

VE1BA

I    1458.00

S    937.29

245.00

245.00

Virtual Collocation Cable Records - VG/DS0 Cable, per cable record

AMTFS

VE1BB

622.69

622.69

346.35

346.35

Virtual Collocation Cable Records - VG/DS0 Cable, per each 100 pair

AMTFS

VE1BC

8.77

8.77

10.32

10.32

Virtual Collocation Cable Records - DS1, per T1TIE

AMTFS

VE1BD

4.35

4.35

5.11

5.11

Virtual Collocation Cable Records - DS3, per T3TIE

AMTFS

VE1BE

15.22

15.22

17.90

17.90

Virtual Collocation Cable Records - Fiber Cable, per 99 fiber records

AMTFS

VE1BF

163.61

163.61

143.32

143.32

Virtual Collocation Cable Records - CAT 5/RJ45

AMTFS

VE1B5

4.35

4.35

5.11

5.11

Security

Virtual collocation - Security escort, basic time, normally scheduled work hours

AMTFS

SPTBX

33.68

21.34

Virtual collocation - Security escort, overtime, outside of normally scheduled work hours on a normal working day

AMTFS

SPTOX

43.87

27.57

Virtual collocation - Security escort, premium time, outside of a scheduled work day

AMTFS

SPTPX

54.06

33.80

Maintenance

Virtual collocation - Maintenance in CO - Basic, per half hour

AMTFS

CTRLX

52.03

21.22

Virtual collocation - Maintenance in CO - Overtime, per half hour

AMTFS

SPTOM

69.48

27.81

Virtual collocation - Maintenance in CO - Premium per half hour

AMTFS

SPTPM

86.94

34.40

Entrance Cable

Virtual Collocation - Cable Installation Charge, per cable

AMTFS

ESPCX

1,233.00

Virtual Collocation - Cable Support Structure, per cable

AMTFS

ESPSX

13.28

Note: Rates displaying an “I” in Interim column are interim as a result of a Commission order.

Page 4 of 4

Attachment 7

Page 1            

Attachment 7

Billing and Billing Accuracy Certification

Attachment 7

Page 2            

Table of Contents

1.	Payment and Billing Arrangements	3
2.	Billing and Billing Accuracy Certification	10
3.	Billing Disputes	11
4.	RAO Hosting	12
Escalation List		Exhibit A
Rates		Exhibit B

Attachment 7

Page 3            

BILLING AND BILLING ACCURACY CERTIFICATION

1. Payment and Billing Arrangements

1.1 The terms and conditions set forth in this Attachment shall apply to all services ordered and provisioned pursuant to this Agreement.

1.2 Billing. Currently, BellSouth provides billing through the Carrier Access Billing System (CABS), Integrated Billing System (IBS) and through the Customer Records Information System (CRIS) depending on the particular service(s) that DeltaCom requests. BellSouth will bill and record in accordance with this agreement those charges DeltaCom incurs as a result of DeltaCom purchasing from BellSouth Network Elements, Combinations, and Local Services, as set forth in this agreement. BellSouth will format all bills in CBOS Standard or CLUB/EDI format, depending on the type of service ordered. BellSouth’s bills to DeltaCom for unbundled network elements and resold services purchased by DeltaCom shall include the item (USOC), quantity and price of such purchased services. For those services where standards have not yet been developed, BellSouth’s billing shall be consistent with Ordering and Billing Forum (OBF) standards.

1.2.1 At either party’s request, multiple billing media or additional copies of bills will be provided at a reasonable cost.

1.2.2 BellSouth will render bills each month for resold lines on established bill days for each of DeltaCom's accounts.

1.2.3 Master Account. The Parties have established accounts with each other.

1.3 Payment Responsibility. Payment of all charges will be the responsibility of DeltaCom or BellSouth as applicable. DeltaCom and BellSouth shall make payment to each other for all services billed. Neither Party shall be responsible for payments not received by the other Party’s customers. Neither Party shall become involved in billing disputes that may arise between the other Party and its customers. Payments made by either Party as payment on account shall be credited to an accounts receivable master account and not to an end user's account.

Attachment 7

Page 4            

1.4 Tax Exemption. Upon proof of tax exempt certification, the total amount billed shall not include any taxes due from the end user. The Retail Service provider shall be solely responsible for the computation, tracking, reporting and payment of all federal, state and/or local jurisdiction taxes associated with the services resold to the end user.

1.5 Miscellaneous. BellSouth will bill DeltaCom in advance for all resold services to be provided during the ensuing billing period except charges associated with service usage, which will be billed in arrears. Charges will be calculated on an individual End User account level, including, if applicable, any charge for usage or usage allowances. BellSouth will also bill DeltaCom and DeltaCom will be responsible for and remit to BellSouth, all charges applicable to resold services including but not limited to 911 and E911 charges, federal subscriber line charges, telecommunications relay charges (TRS), and franchise fees.

1.6 Late Payment. If any portion of the payment is received by the Party after the payment due date as set forth herein, or if any portion of the payment is received by the Party in funds that are not immediately available to the Party, then a late payment charge shall be due to the Party. The late payment charge shall be the portion of the payment not received by the payment due date multiplied by a late factor and will be applied on a per bill basis. For billing from BellSouth, the late factor shall be as set forth in Section A2 of the General Subscriber Services Tariff, Section B2 of the Private Line Service Tariff or Section E2 of the Intrastate Access Tariff, as appropriate. For billing from DeltaCom, the late factor shall be as set forth in the appropriate DeltaCom's tariff, but in no event, shall such late factor exceed that set forth in the applicable BST tariff. In addition to any applicable late payment charges, the Party may be charged a fee for all returned checks as set forth in Section A2 of the General Subscriber Services Tariff or pursuant to the applicable state law.

1.7 Access Charges for Resold Services. Any Switched Access charges associated with interexchange carrier access to the resold local exchange lines will be billed by, and due to, BellSouth. No additional charges are to be assessed to DeltaCom.

1.8 End User Common Line Charge for Resold Services. Pursuant to 47 CFR Section 51.617, BellSouth will bill DeltaCom end user common line charges identical to the end user common line charges BellSouth bills its end users.

Attachment 7

Page 5            

1.9 Discontinuing Service. The procedures for discontinuing service to DeltaCom or BellSouth are as follows:

1.9.2 Each party reserves the right to suspend or terminate service for nonpayment in accordance with applicable state and federal regulations.

1.9.3 If payment of account is not received by the bill day in the month after the original bill day, the billing Party may provide written notice via certified U.S. Mail to the other Party pursuant to the Notice Provision in Section 20.3 of General Terms and Conditions that additional applications for service will be refused and that any pending orders for service will not be completed if payment is not received by the fifteenth day following the date of the notice. In addition the billing party may, at the same time, give thirty days notice to the person designated by the other party to receive notices of noncompliance, to discontinue the provision of existing services at any time thereafter.

1.9.4 In the case of such discontinuance, all billed charges, as well as applicable termination charges, shall become due.

1.9.5 If the billing party does not discontinue the provision of the services involved on the date specified in the thirty days notice and the other Party’s noncompliance continues, nothing contained herein shall preclude the billing party’s right to discontinue the provision of the services without further notice.

1.9.6 If payment is not received or satisfactory arrangements made for payment by the date given in the written notification, the billed party’s services may be discontinued. Upon discontinuance of service on the billed party’s account, service to the billed party’s end users will be denied. The billing party will reestablish service at the request of the end user or the other Party upon payment of the appropriate connection fee and subject to the billing party’s normal application procedures. The billed party is solely responsible for notifying the end user of the proposed service disconnection.

1.9.7 If within fifteen days after an end user's service has been denied no contact has been made in reference to restoring service, the end user's service shall be disconnected.

1.10 Deposit Policy. The Parties agree that the purpose of this Deposit is to provide assurance to BellSouth that timely payments for services performed and accurately billed are made by DeltaCom to BellSouth. The Parties also agree that the remedies of this Deposit Policy shall be applied

Attachment 7

Page 6            

in good faith and not under circumstances caused by an administrative error. BellSouth reserves the right to secure the accounts of new and existing customers only as provided for pursuant to this section. Customer, for purposes of this Section 1.10, is defined as DeltaCom, Inc. or any entity authorized to conduct business as a CLEC in the state and does not include any parents or separate affiliates. Notice, for purposes of this Deposit Policy, is defined as written notification to the Chief Financial Officer, General Counsel, and Vice President of Line Cost Accounting of DeltaCom.

1.10.1 New Customers and existing Customers may satisfy the requirements of this section with a D&B credit rating of 5A1 or through the presentation of a payment guarantee executed by another existing customer of BellSouth and with terms acceptable to Bellsouth where said guarantor has a credit rating equal to 5A1. Upon request, Customer shall complete the BellSouth credit profile and provide information, reasonably necessary, to BellSouth regarding creditworthiness.

1.10.2 With the exception of new Customers with a D&B credit rating equal to 5A1, BellSouth may secure the accounts of all new Customers as set forth in subsection 1.10.4. In addition, new Customers will be treated as such until twelve months from their first bill/invoice date, and will be treated as existing Customers thereafter.

1.10.3 If a Customer has filed for bankruptcy protection within twelve (12) months of the effective date of this Agreement, BellSouth may treat Customer, for purposes of establishing a security on its accounts as a new customer as set forth in subsection 1.10.7.

1.10.4 The security required by BellSouth shall take the form of cash, an Irrevocable Letter of Credit (BellSouth Form), Surety Bond (BellSouth Form), or, in BellSouth's sole discretion, some other form of security proposed by Customer. The amount of the security shall not exceed one months' estimated billing for services billed in advance and two months billing for services billed in arrears and if provided in cash, interest on said cash security shall accrue and be paid in accordance with the terms in the Commission approved General Subscriber BellSouth tariff for the appropriate state.

1.10.5 Any such security shall in no way release Customer from the obligation to make complete and timely payments of its bill.

1.10.6 No security deposit shall be required of an existing Customer who has a good payment history and meets two (2) liquidity benchmarks set forth

Attachment 7

Page 7            

below in Sections 1.10.6.2 and 1.10.6.3. BellSouth may secure, pursuant to Section 1.10.9, the accounts of existing Customers where an existing Customer does not have a good payment history as defined in Section 1.10.6.1. If an existing Customer has a good payment history but fails to meet the two (2) liquidity benchmarks defined in Section 1.10.6.2 and 1.10.6.3, BellSouth may secure the Customer's accounts, pursuant to Section 1.10.9.

1.10.6.1 Payment history is based upon the preceding twelve (12) month period. A good payment history shall mean that less than 10% of the non-disputed receivable balance is aged over thirty (30) days from the invoice/bill date at any given time. The existing Customer's payment history shall be predicated on net-thirty (30) day terms from the invoice/bill date. Only good faith disputes submitted to BellSouth pursuant to the procedures set forth in the parties' interconnection agreement, as amended, will be considered in determining the "non-disputed receivable balance". Where Customer has disputed a rate change initiated by BellSouth as a result of the Triennial Review Order and/or the appeal of that order by the U.S. District Court for the District of Columbia (referred to as "USTAII), BellSouth shall treat that dispute as a dispute in good faith pending any final determination made pursuant to the dispute resolution mechanism as set forth in the parties' interconnection agreement. If an invoice/bill is delivered electronically, and such electronic invoice/bill is transmitted by BellSouth more than ten (10) business days after the invoice/bill date, the calculation of Customer's payment history as to said invoice shall be on net-thirty (30) day terms from the date the invoice/bill is transmitted for such invoice/bill.

1.10.6.1.1 If Customer fails to comply with the requirements of this Section 1.10.6.1, BellSouth will provide Customer with three (3) business days Notice of default of this Section 1.10.6.1. If Customer fails to either cure said default, or to demonstrate that there is no default, within the three (3) business days notice period, BellSouth may secure Customer's accounts pursuant to Section 1.10.9.

1.10.6.2 The existing Customer's liquidity status, based upon a review of EBITDA, is EBITDA positive for the prior four (4) quarters of reported financials excluding any nonrecurring charges or special restructuring charges. EBITDA means, for any period, the sum, determined on a Consolidated basis, of (a) net income, (b) interest expense, (c) income tax expense, (d) depreciation expense, (e) amortization expense, and (f) the aggregate of all non-cased deducted in arriving at net income in clause (a) above, as long a this information is included in publicly available financial data audited annually by a domestic Certified Public Accountant, including, but not limited to, asset impairment charges and any restructuring charges.

Attachment 7

Page 8            

1.10.6.3 The existing Customer has a current bond rating of BBB or above or Customer has no bond rating or a current bond rating between CCC and BB and meets the following criteria for the reported financials of the last Fiscal Year End, audited by a domestic Certified Public Accountant ("Last Fiscal Year End"), and for the prior four (4) quarters of reported financials on a cumulative basis.

1.10.6.3.1 Positive cash flow from operations minus cash dividends, Negative cash flow from operations directly due to one time charges from merger and acquisition of other extraordinary items will not automatically as a trigger for a deposit. Customer will disclose the nature and amount of such charges to BellSouth, and BellSouth will review such amounts and shall waive this condition if exclusion of such items would result in positive cash flow from operations, and Customer has adequate cash or liquidity to fund such adjustments.

1.10.6.3.2 Positive tangible net worth:

1.10.6.3.3 Debt/tangible net worth between zero and 2.5. For purposes of computing debt/tangible net worth, the redeemable preferred stuck presented in the mezzanine section of the Customer's balance sheet will be included as equity; and

1.10.6.3.4 Customer is compliant with all financial maintenance covenants.

1.10.7 If Customer files for bankruptcy protection during the term of this Agreement, Customer acknowledges that BellSouth is entitled to adequate assurance of payment in the form of a deposit of one months' estimated billing for services billed in advance and two months billing for service billed in arrears or other means of security during the pendency of the bankruptcy proceeding. Upon confirmation of the reorganization plan and the emergence of Customer from bankruptcy, if BellSouth's agreements were not cured 100% and BellSouth incurred a loss on the pre-petition account of Customer of the bankruptcy, Customer shall be treated as a new customer, as "new Customer" is treated under this section, for a period of one year in regard to BellSouth's right to secure the accounts of Customer.

1.10.8 Upon notice of default of a bank (or other loan provider's) financial maintenance covenant and upon Customer's failure to either cure or obtain a waiver from such default within seven (7) calendar days of notice,

Attachment 7

Page 9            

BellSouth may utilize the remedies set forth in subsection 1.10.8 unless Customer can demonstrate to the reasonable satisfaction of BellSouth that Customer has ample liquidity to fund said debt should the debt payment obligation become accelerated.

1.10.9 If, at any time during the term of this Agreement, Customer fails to comply with the requirements of Section 1.10.6 or 1.10.8, BellSouth shall provide Notice to Customer of its intent to implement this subsection 1.10.9.

1.10.9.1 Upon receipt of notice, Customer shall pay all current amounts by due date and pay past due nondisputed amounts immediately. Customer shall also immediately pay disputed amounts to the extent the amount in dispute is greater than 30% of total charges for the current month. Customer shall thereafter pay the charges for future services billed by BellSouth pursuant to an accelerated payment schedule, which shall provide for half of the charges to be paid within fifteen (15) days of invoice/bill date and the remainder to be paid within thirty (30) days of invoice/bill date. If any invoice/bill is delivered electronically for future services, and such electronic invoice/bill is transmitted more than ten (10) business days from invoice/bill date, the accelerated payment schedule will be adjusted for said invoice/bill and shall provide for half of the charges to be paid within fifteen (15) days of said invoice/bill transmit date and the remainder to be paid within thirty (30) days of said invoice/bill transmit dated. Further, Customer shall pay all disputed amounts to the extent the amount in dispute is greater than 30% of the total charges for the current month, within the accelerated payment schedule timeframe. If paid disputed amounts are resolved in the Customer's favor, the Customer will be issued a credit for the resolved amount and BellSouth shall credit Customer's account for accrued interest at the same rate of interest that BellSouth assesses under its tariffs for late payment. Customer shall make all payments from readily available funds by wire transfer or some other equivalent electronic means. If Customer fails to comply with the requirements of this Section 1.10.9.1, BellSouth will provide Customer with three (3) business days Notice of default of this Section. If Customer fails to either cure said default, or to demonstrate that there is no default, within the three (3) business days notice period, BellSouth may secure Customer's accounts pursuant to Section 1.10.9.2.

1.10.9.2 If Customer defaults on above Section 1.10.9.1, then BellSouth may secure accounts with a one (1) months deposit of average billing services billed in advance and two (2) months billing for services billed in arrears during prior six (6) month period. Said deposit shall be paid to BellSouth within thirty (30) days from the date of BellSouth Notice pursuant to

Attachment 7

Page 10            

1.10.6.1. The security required by BellSouth shall take the form of cash, an Irrevocable Letter of Credit (BellSouth Form), Surety Bond (BellSouth Form), or, in BellSouth's sole discretion, some other form of security proposed by Customer. If the amount of security is provided in cash, interest on said cash security shall accrue and be paid in accordance with the terms in the appropriate BellSouth tariff. If Customer fails to comply with the requirements of Section 1.10.9.2, BellSouth will provide Customer with three (3) business days notice of default of this Section 1.10.9.2. If Customer fails to cure said default within the three (3) business days notice period, BellSouth shall have the right to begin immediate termination of services provided under this Agreement without regard to any other provision contained within this Agreement.

1.10.10 Once a deposit is provided to BellSouth by Customer under any criterion, if, after twelve (12) months, Customer meets the criterion specified in above Section 1.10.6, the deposit and all interest will be applied to Customer's account. If at any time subsequent to the return of a deposit, Customer evinces a poor payment history or fails to satisfy the conditions set forth in this deposit policy, BellSouth may require a security deposit.

1.10.11 In the event BellSouth demands, a deposit form Customer and Customer can show that BellSouth's demand is contrary to the terms and intent of this Section 1.10, Customer reserves its right to seek Commission review of BellSouth's deposit demand.

1.11 Neither Party will perform billing and collection services for the other as a result of the execution of this Agreement. All requests for billing services should be referred to the appropriate entity or operational group of the other Party.

2. Billing and Billing Accuracy Certification

2.1 At the option of DeltaCom, BellSouth and DeltaCom shall mutually agree upon a billing quality assurance program for all billing elements covered in this Agreement that shall eliminate the need for post-billing reconciliation. Appropriate terms for access to any BellSouth documents, systems, records, and procedures for the recording and billing of charges shall be part of that program.

2.2 As part of the billing quality assurance program, BellSouth and DeltaCom will develop standards, measurements, and performance requirements for a local billing measurements process. On a regular basis the billing party will provide the other party with mutually agreed upon performance measurement data that substantiates the accuracy, reliability, and integrity of the billing process for local billing. In return, each party shall pay all bills received from the other party in full by the payment due date.

Attachment 7

Page 11            

2.3 Local billing discrepancies will be addressed in an orderly manner via a mutually agreed upon billing exemption process.

2.3.1 Each party agrees to notify the other Party upon identifying a billing discrepancy. The Parties shall endeavor to resolve any billing discrepancy within sixty (60) calendar days of the notification date. A mutually agreed upon escalation process shall be established for resolving local billing discrepancies as part of the billing quality assurance program.

2.3.2 Closure of a specific billing period shall occur by joint agreement of the Parties whereby the Parties agree that such billing period is closed to any further analysis and financial transactions except those resulting from regulatory mandates. Closure will take place within a mutually agreed upon time interval from the Bill Date. The month being closed represents those charges that were billed or should have been billed by the designated Bill Date.

3. Billing Disputes

3.1 Where the parties have not agreed upon a billing quality assurance program, billing disputes shall be handled pursuant to the terms of this section. Provided, that nothing herein shall preclude either party from filing complaints, at any time, in accordance with the dispute resolution provisions included in the General Terms and Conditions to the Agreement.

3.2 Each Party agrees to notify the other Party upon the discovery of a billing dispute. Each Party shall report all billing disputes using the Billing Adjustment Request Form (BAR Form RF 1461). In the event of a billing dispute, the Parties will endeavor to resolve the dispute within sixty (60) calendar days of the Bill Date on which such disputed charges appear. Resolution of the dispute is expected to occur at the first level of management as set forth in Exhibit A, resulting in a recommendation for settlement of the dispute and closure of a specific billing period. If the issues are not resolved within the allotted time frame, the following resolution procedure will begin.

3.2.1 If the dispute is not resolved within sixty (60) days of the Bill Date, the dispute will be escalated to the second level of management as set forth in Exhibit A for each of the respective Parties for resolution. If the dispute is not resolved within ninety (90) days of the Bill Date, the dispute will be escalated to the third level of management as set forth in Exhibit A for each of the respective Parties for resolution.

Attachment 7

Page 12          

3.2.2 If the dispute is not resolved within one hundred and twenty (120) days of the Bill Date, the dispute will be escalated to the fourth level of management as set forth in Exhibit A for each of the respective Parties for resolution.

3.3 If a Party disputes a charge and does not pay such charge by the payment due date, such charges shall be subject to late payment charges as set forth in the Late Payment Charges provision of this Attachment. If a Party disputes charges and the dispute is resolved in favor of such Party, the other Party shall credit the bill of the disputing Party for the amount of the disputed charges along with any late payment charges assessed no later than the second Bill Date after the resolution of the dispute. Accordingly, if a Party disputes charges and the dispute is resolved in favor of the other Party, the disputing Party shall pay the other Party the amount of the disputed charges and any associated late payment charges assessed no later than the second bill payment due date after the resolution of the dispute. In no event, however, shall any late payment charges be assessed on any previously assessed late payment charges.

3.4 The Parties can backbill for services rendered under this Agreement up to twelve (12) months after the invoice for those services has been rendered however, either Party may petition the Commission to allow back billing for a particular charge up to thirty-six (36) months upon the showing of good cause, including changes arising out of governmental mandates, regulatory actions including true-ups and similar proceedings.

4. Audits and Inspections

4.1 Subject to BellSouth's reasonable security requirements and except as may be otherwise specifically provided in this Agreement, DeltaCom may audit BellSouth’s books, records and other documents once in each Contract Year for the purpose of evaluating the accuracy of BellSouth’s billing and invoicing. DeltaCom may employ other persons or firms for this purpose. The Parties shall define the period to be audited prior to commencing the audit. Such audit shall take place at a time and place agreed on by the Parties no later than thirty (30) days after notice thereof to BellSouth and shall be conducted over a reasonable period of time.

4.1.1 BellSouth shall promptly correct any billing error that is revealed in an audit, including making refund of any overpayment by DeltaCom in the

Attachment 7

Page 13          

form of a credit as well as placing a debit on the invoice for underbilling. The credit or debit will be accomplished within two billing cycles after the Parties have agreed upon the accuracy of the audit results. Any Disputes concerning audit results shall be resolved pursuant to the dispute resolution procedures described in Section 11 of the General Terms and Conditions of this Agreement.

4.1.2 BellSouth shall cooperate fully in any such audit, providing reasonable access to necessary BellSouth employees and books, records and other documents reasonably necessary to assess the accuracy of BellSouth's bills.

4.1.3 DeltaCom may audit BellSouth's books, records and documents more than once during any Contract Year if the previous audit found previously uncorrected net variances or errors in invoices in BellSouth's favor with an aggregate value of at least two percent (2%) of the amounts payable by DeltaCom for Services and Elements or Combinations provided during the period covered by the audit.

4.1.4 Audits shall be at DeltaCom’s expense, subject to reimbursement by BellSouth in the event that an audit finds an adjustment in the charges or in any invoice paid or payable by DeltaCom hereunder by an amount that is, on an annualized basis, greater than two percent (2%) of the aggregate charges for the Services and Elements during the period covered by the audit.

4.1.5 Upon (i) the discovery by BellSouth of overcharges not previously reimbursed to DeltaCom or (ii) the resolution of disputed audits, BellSouth shall promptly reimburse DeltaCom the amount of any overpayment times the highest interest rate (in decimal value) which may be levied by law for commercial transactions, compounded daily for the number of days from the date of overpayment to and including the date that payment is actually made. In no event, however, shall interest be assessed on any previously assessed or accrued late payment charges.

4.2 Subject to reasonable security requirement, either Party may audit the books, records and other documents of the other for the purpose of evaluating usage pertaining to transport and termination of local traffic. Where such usage data is being transmitted through CABS, the audit shall be conducted in accordance with CABS or other applicable requirements approved by the appropriate Commission. If data is not being transferred via CABS, either Party may request an audit for such purpose once each Contract Year. The Parties shall define the period to be audited prior to commencing the audit. Either Party may employ other persons or firms

Attachment 7

Page 14          

for this purpose. Any such audit shall take place no later than thirty (30) days after notice thereof to the other Party and shall be conducted over a reasonable period of time.

4.2.1 Either Party shall promptly correct any reported usage error that is revealed in an audit, including making a refund of any overpayment by DeltaCom to be audited prior to commencing the audit. Any Disputes concerning audit results shall be resolved pursuant to the dispute resolution procedures described in Section 11 of the General Terms and Conditions of this Agreement.

4.2.2 The Parties shall cooperate fully in any such audit, providing reasonable access to necessary employees and books, records and other documents reasonably necessary to assess the usage pertaining to transport and terminating of local traffic.

5. RAO Hosting

5.1 RAO Hosting, Credit Card and Third Number Settlement System (CATS) and Non-Intercompany Settlement System (NICS) services provided to DeltaCom by BellSouth will be in accordance with the methods and practices regularly adopted and applied by BellSouth to its own operations during the term of this Agreement, including such revisions as may be made from time to time by BellSouth.

5.2 DeltaCom shall furnish all relevant information required by BellSouth for the provision of RAO Hosting, CATS and NICS.

5.3 Applicable compensation amounts will be billed by BellSouth to DeltaCom on a monthly basis in arrears. Amounts due from one Party to the other (excluding adjustments) are payable within thirty (30) days of receipt of the billing statement.

5.4 DeltaCom must have its own unique RAO code. Requests for establishment of RAO status where BellSouth is the selected CMDS interfacing host, require written notification from DeltaCom to the BellSouth RAO Hosting coordinator at least eight (8) weeks prior to the proposed effective date. The proposed effective date will be mutually agreed upon between the Parties with consideration given to time necessary for the completion of required Telecordia functions. BellSouth will request the assignment of an RAO code from its connecting contractor on behalf of DeltaCom and will coordinate all associated conversion activities.

Attachment 7

Page 15          

5.5 BellSouth will receive messages from DeltaCom that are to be processed by BellSouth, another LEC or CLEC in the BellSouth region or a LEC outside the BellSouth region.

5.6 BellSouth will perform invoice sequence checking, standard EMI format editing, and balancing of message data with the EMI trailer record counts on all data received from DeltaCom.

5.7 All data received from DeltaCom that is to be processed or billed by another LEC or CLEC within the BellSouth region will be distributed to that LEC or CLEC in accordance with the agreement(s) which may be in effect between BellSouth and the involved LEC or CLEC.

5.8 All data received from DeltaCom that is to be placed on the CMDS network for distribution outside the BellSouth region will be handled in accordance with the agreement(s) which may be in effect between BellSouth and its connecting contractor.

5.9 BellSouth will receive messages from the CMDS network that are destined to be processed by DeltaCom and will forward them to DeltaCom on a daily basis.

5.10 Transmission of message data between BellSouth and DeltaCom will be via CONNECT:Direct.

5.11 All messages and related data exchanged between BellSouth and DeltaCom will be formatted in accordance with accepted industry standards for EMI formatted records and packed between appropriate EMI header and trailer records, also in accordance with accepted industry standards.

5.12 DeltaCom will ensure that the recorded message detail necessary to recreate files provided to BellSouth will be maintained for back-up purposes for a period of three (3) calendar months beyond the related message dates.

5.13 Should it become necessary for DeltaCom to send data to BellSouth more than sixty (60) days past the message date(s), DeltaCom will notify BellSouth in advance of the transmission of the data. If there will be impacts outside the BellSouth region, BellSouth will work with its connecting contractor and DeltaCom to notify all affected Parties.

5.14 In the event that data to be exchanged between the two Parties should become lost or destroyed, both Parties shall work together to determine the

Attachment 7

Page 16        

source of the problem. Once the cause of the problem has been jointly determined and the responsible Party (BellSouth or DeltaCom) identified and agreed to, the company responsible for creating the data (BellSouth or DeltaCom) shall make every effort to have the affected data restored and retransmitted. If the data cannot be retrieved, the responsible Party will be liable to the other Party for any resulting lost revenue. Lost revenue may be a combination of revenues that could not be billed to the end users and associated access revenues. Both Parties will work together to estimate the revenue amount based upon a reasonable estimate of three to twelve months of prior usage. The resulting estimated revenue loss will be paid by the responsible Party to the other Party within three (3) calendar months of the date of problem resolution, or as mutually agreed upon by the Parties. If access usage data is not processed and delivered by either Party in a timely manner such that the other Party is unable to bill the IXC, the responsible Party shall be liable for the amount of lost revenue. The Parties agree that the term “timely manner” as used herein shall be defined in accordance with OBF guidelines. Until such time as OBF addresses this issue, the term “timely manner” shall be reasonably determined on a case-by-case basis.

5.15 Should an error be detected by the EMI format edits performed by BellSouth on data received from DeltaCom, the entire pack containing the affected data will not be processed by BellSouth. BellSouth will notify DeltaCom of the error condition. DeltaCom will correct the error(s) and will resend the entire pack to BellSouth for processing. In the event that an out-of-sequence condition occurs on subsequent packs, DeltaCom will resend these packs to BellSouth after the pack containing the error has been successfully reprocessed by BellSouth. Both Parties agree to provide the other Party notification of any discovered errors within 7 business days of the discovery.

5.16 In association with message distribution service, BellSouth will provide DeltaCom with associated intercompany settlements reports (CATS and NICS) as appropriate.

5.17 Other than as specified in Section 5.14 and 5.15 above, in no case shall either Party be liable to the other for any direct or consequential damages incurred as a result of the obligations set out in this agreement.

5.18 RAO Compensation

5.18.1 Rates for message distribution service provided by BellSouth for DeltaCom are as set forth in Exhibit B of this Agreement.

Attachment 7

Page 17          

5.18.2 Rates for data transmission associated with message distribution service are as set forth in Exhibit B of this Agreement.

5.18.3 Data circuits (private line or dial-up) will be required between BellSouth and DeltaCom for the purpose of data transmission. Where a dedicated line is required, DeltaCom will be responsible for ordering the circuit, overseeing its installation and coordinating the installation with BellSouth. DeltaCom shall be responsible for the initial costs of establishing the data circuit. Each party shall be responsible for the recurring charges for the data circuit to the mutually agreed upon meet point. Equipment required on the BellSouth end to attach the line to the mainframe computer and to transmit successfully ongoing will be negotiated on an individual case basis. Where a dial-up facility is required, dial circuits will be installed in the BellSouth data center by BellSouth and the associated charges assessed to BellSouth. Additionally, all message toll charges associated with the use of the dial circuit by BellSouth and DeltaCom will be borne by DeltaCom.

5.18.4 All equipment, including modems and software, that is required on the DeltaCom end for the purpose of data transmission will be the responsibility of DeltaCom.

5.19 Intercompany Settlements Messages

5.19.1 This Section addresses the settlement of revenues associated with traffic originated from or billed by DeltaCom as a facilities based provider of local exchange telecommunications services outside the BellSouth region. Only traffic that originates in one company’s operating territory and bills in another company’s operating territory is included. Traffic that originates and bills within the same company’s operating territory will be settled on a local basis between DeltaCom and the involved company(ies), unless that company is participating in NICS.

5.19.2 Both traffic that originates outside the BellSouth region by DeltaCom and is billed within the BellSouth region, and traffic that originates within the BellSouth region and is billed outside the BellSouth region by DeltaCom, is covered by this Agreement (CATS). Also covered is traffic that either is originated by or billed by DeltaCom, involves a company other than DeltaCom, qualifies for inclusion in the CATS settlement, and is not originated or billed within the BellSouth region (NICS).

5.19.3 Revenues associated with calls originated and billed within the BellSouth region will be settled via BellCore’s, its successor or assign, NICS system.

Attachment 7

Page 18        

5.19.4 BellSouth shall receive the monthly NICS reports from BellCore, its successor or assign, on behalf of DeltaCom. BellSouth will distribute copies of these reports to DeltaCom on a monthly basis.

5.19.5 BellSouth shall receive the monthly Credit Card and Third Number Settlement System (CATS) reports from BellCore, its successor or assign, on behalf of DeltaCom. BellSouth will distribute copies of these reports to DeltaCom on a monthly basis.

5.19.6 BellSouth shall collect the revenue earned by DeltaCom from the operating company in whose territory the messages are billed (CATS), less a per message billing and collection fee of five cents ($0.05), on behalf of DeltaCom. BellSouth will remit the revenue billed by DeltaCom to the operating company in whose territory the messages originated, less a per message billing and collection fee of five cents ($0.05), on behalf of DeltaCom. These two amounts will be netted together by BellSouth and the resulting charge or credit issued to DeltaCom via a monthly Carrier Access Billing System (CABS) miscellaneous bill.

5.19.7 BellSouth shall collect the revenue earned by DeltaCom within the BellSouth territory from another CLEC also within the BellSouth territory (NICS) where the messages are billed, less a per message billing and collection fee of five cents ($0.05), on behalf of DeltaCom. BellSouth will remit the revenue billed by DeltaCom within the BellSouth region to the CLEC also within the BellSouth region, where the messages originated, less a per message billing and collection fee of five cents ($0.05). These two amounts will be netted together by BellSouth and the resulting charge or credit issued to DeltaCom via a monthly Carrier Access Billing System (CABS) miscellaneous bill.

  BellSouth and DeltaCom agree that monthly netted amounts of less than fifty dollars ($50.00) shall not be settled.

CMDS - North Carolina

Attachment: 7 Exh A

CATEGORY

RATE ELEMENTS

Interim

Zone

BCS

USOC

RATES($)

Svc Order Submitted Elec per LSR

Svc Order Submitted Manually per LSR

Incremental Charge - Manual Svc Order vs. Electronic- 1st

Incremental Charge - Manual Svc Order vs. Electronic- Add’l

Incremental Charge - Manual Svc Order vs. Electronic- Disc 1st

Incremental Charge - Manual Svc Order vs. Electronic- Disc Add’l

Rec

Nonrecurring

Nonrecurring Disconnect

OSS Rates($)

First

Add’l

First

Add’l

SOMEC

SOMAN

SOMAN

SOMAN

SOMAN

SOMAN

CMDS

CENTRALIZED MESSAGE DISTRIBUTION SERVICE (CMDS)

CMDS: Message Processing, per message

0.004

CMDS: Data Transmission (CONNECT:DIRECT), per message

0.001

Page 1 of 1

EX-10.9.3

Exhibit 10.9.3

AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT

This AMENDMENT NO. 1 TO NOTE PURCHASE AGREEMENT (this “Amendment No. 1”), dated as of October 27, 2006 (the “Execution Date”), to the Note Purchase Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., a Delaware corporation (the “Parent”), Interstate FiberNet, Inc., a Delaware corporation (the “Issuer”), each of the Subsidiary Guarantors identified on the signature pages hereto, each of the New Note Purchasers identified on the signature pages hereto (each, a “New Note Purchaser” and collectively, the “New Note Purchasers”), Tennenbaum Capital Partners, LLC, a Delaware limited liability company, as agent (the “Agent”), and TCP Agency Services, LLC, a Delaware limited liability company, as collateral agent (the “Collateral Agent” and together with the Agent, the “Agents”). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Note Purchase Agreement (as defined below).

WITNESSETH:

WHEREAS, the Parent, the Issuer, the Subsidiary Guarantors, the Note Purchasers party thereto and the Agents entered into the Note Purchase Agreement, dated as of July 26, 2005 (as amended, supplemented, restated or otherwise modified from time to time, the “Note Purchase Agreement”), pursuant to which the Note Purchasers purchased Notes from the Issuer in an aggregate principal amount of $209,000,000;

WHEREAS, pursuant to the Note Purchase Agreement and the other Note Purchase Documents, the Agent (acting at the direction of the Required Holders), together with the Issuer, may amend the terms of the Note Purchase Agreement, without any further consent from any other person, to increase the principal amount of the Notes up to $230,000,000 (determined without regard to PIK interest paid on the Notes from time to time), less any principal already repaid, thereby allowing an aggregate increase in the principal amount of the Notes of $21,000,000 (i.e., $230,000,000 minus $209,000,000);

WHEREAS, the Issuer has requested that the New Note Purchasers purchase additional Notes (the “Additional Notes”) from the Issuer in an aggregate principal amount not to exceed $21,000,000;

WHEREAS, the Issuer and the Subsidiary Guarantors have agreed that the Additional Notes shall be secured by the Liens created under the Note Purchase Documents;

WHEREAS, pursuant to the Note Purchase Agreement and the other Note Purchase Documents, the Required Holders (or the Agent acting at the direction of the Required Holders), together with the Issuer, may amend the terms of the financial covenants set forth in the Note Purchase Agreement, without any further consent from any other person;

WHEREAS, pursuant to the agreement attached hereto as Exhibit A (the “P&H Agreement”), Business Telecom, Inc., a Guarantor, wishes to refinance the P&H Note identified on Existing Schedule (as hereinafter defined) 4.01(t) to the Note Purchase Agreement with new notes having materially different terms (such refinancing, the “P&H Refinancing”); and

WHEREAS, subject to and in accordance with the terms and conditions hereinafter set forth, the New Note Purchasers are willing to purchase the Additional Notes from the Issuer, and the Agent, at the direction of the Required Holders, is willing to amend certain financial covenants and other provisions of the Note Purchase Agreement and to permit the P&H Refinancing;

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

I. AMENDMENTS TO BE EFFECTIVE ON THE EXECUTION DATE.

Subject to the terms and provisions herein, the provisions set forth in this Article I shall become effective as of the Execution Date.

Section 1.1. Amendment to the Preamble of the Note Purchase Agreement. The first sentence of the preamble of the Note Purchase Agreement is hereby amended by replacing “This Note Purchase Agreement is made and entered into as of July 26, 2005 (this “Agreement”)” with “This Note Purchase Agreement, is made and entered into as of July 26, 2005 (as amended as of October 27, 2006, and as it may thereafter be further amended, supplemented, restated or otherwise modified from time to time, this “Agreement”).”

Section 1.2. Amendments to Section 1.01 of the Note Purchase Agreement. Section 1.01 of the Note Purchase Agreement is hereby amended by adding the following definition in the appropriate place in alphabetical order:

“Amendment No. 1” means Amendment No. 1 to Note Purchase Agreement, dated as of October 27, 2006, by and among the Parent, the Issuer, the Subsidiary Guarantors party thereto, the New Note Purchasers, the Agent and the Collateral Agent, which Amendment No. 1 amends this Agreement.

Section 1.3. Amendment to Section 5.02(b) of the Note Purchase Agreement. The final sentence in Section 5.02(b) of the Note Purchase Agreement is hereby amended and restated in full by deleting it in its entirety and replacing it with the following:

“Notwithstanding any other provision under this Section 5.02(b), (A) the Parent and Business Telecom, Inc. may once only incur the Debt and Contingent Obligations contemplated by the agreement attached hereto as Exhibit J, and (B) any Obligor may Incur Debt owed to any other Obligor. Notwithstanding anything contained herein to the contrary, the Debt and Contingent Obligations contemplated by the agreement attached hereto as Exhibit J shall constitute Surviving Debt for all purposes of this Agreement.”

2

Section 1.4. Amendment to Section 5.02(k) of the Note Purchase Agreement. Section 5.02(k) of the Note Purchase Agreement is hereby amended by adding the following paragraph to the end of such section:

“Notwithstanding any other provision under this Section 5.02(k), the Parent and Business Telecom, Inc. may once only make the prepayments, amendments, modifications and changes to the Surviving Debt contemplated by the agreement attached hereto as Exhibit J.”

Section 1.5. Amendment to the Schedules of the Note Purchase Agreement.

The Note Purchase Agreement is hereby amended by supplementing the existing Schedules thereto (collectively, the “Existing Schedules,” and individually, an “Existing Schedule”) with the Schedules appended hereto as Exhibit B (collectively, the “New Schedules,” and individually, a “New Schedule”). Subject to the terms and provisions herein, references to a “Schedule” in any Note Purchase Document dated as of the Execution Date or later shall be a reference to a New Schedule, unless otherwise specifically provided.

Section 1.6. Amendment to the Exhibits of the Note Purchase Agreement. The Note Purchase Agreement is hereby amended by attaching the P&H Agreement thereto as Exhibit J.

II. AMENDMENTS TO BE EFFECTIVE ON THE SECONDARY CLOSING DATE.

Subject to the terms and provisions herein, the provisions set forth in this Article II shall become effective as of the Secondary Closing Date.

Section 2.1. Amendments to Section 1.01 of the Note Purchase Agreement.

a. Section 1.01 of the Note Purchase Agreement is hereby amended by deleting and replacing, or adding, as applicable, the following definitions in the appropriate place in alphabetical order:

i. “Interest Coverage Ratio” means, at any date of determination, the ratio of (a) Consolidated EBITDA of the Parent and its Subsidiaries to (b) the cumulative cash interest paid in respect of all Debt for Borrowed Money of or by the Parent and its Subsidiaries. For the fiscal quarter ending September 30, 2005, cumulative cash interest paid shall be calculated as cumulative cash interest paid for the nine-month period then ended multiplied by twelve divided by nine; for fiscal quarters ending December 31, 2005 and thereafter, cumulative cash interest paid shall be calculated based on the twelve-month period ending on the last date of the most recently ended fiscal quarter. If any such date of determination falls on a date that would be an Interest Payment Date but such date is not a Business Day, the Interest Coverage Ratio for such date

3

of determination shall be calculated as if the cash interest due on such Interest Payment Date was actually paid on such date of determination (rather than on the actual Interest Payment Date), so long as the cash interest is actually paid on such actual Interest Payment Date. As used in the preceding sentence, the term Interest Payment Date shall include any Interest Payment Date as defined herein, any date on which interest is due pursuant to the Amended Second Lien Credit Agreement and any Interest Payment Date as defined in the New Third Lien Credit Agreement.

ii. “New Note Purchasers” has the meaning given thereto in the first paragraph of Amendment No. 1.

iii. “Note Purchasers” has the meaning set forth in the preamble to this Note Purchase Agreement and includes each Person that shall become a Note Purchaser hereunder, including the New Note Purchasers, for so long as such Note Purchaser or Person, as the case may be, shall be a party to this Agreement.

iv. “Original Note Purchasers” means the Note Purchasers who purchased Notes on the Closing.

v. “Secondary Closing” has the meaning specified in Section 2.02(b).

vi. “Secondary Closing Date” means the date on which the Secondary Closing occurs.

vii. “Secondary Note Purchase” has the meaning specified in Section 2.01(b).

viii. “Senior Debt Ratio” means, as of any date of determination, the ratio of (a) Senior Debt as of such date to (b) Consolidated EBITDA of the Parent and its Subsidiaries. If any such date of determination falls on a date that would be an Interest Payment Date but such date is not a Business Day, the Senior Debt Ratio for such date of determination shall be calculated as if the cash interest due on such Interest Payment Date was actually paid on such date of determination (rather than on the actual Interest Payment Date), so long as the cash interest is actually paid on such actual Interest Payment Date. As used in the preceding sentence, the term Interest Payment Date shall include any Interest Payment Date as defined herein, any date on which interest is due pursuant to the Amended Second Lien Credit Agreement and any Interest Payment Date as defined in the New Third Lien Credit Agreement.

ix. “Total Leverage Ratio” means, at any date of determination, the ratio of (x) Consolidated Debt as of such date to (y) Consolidated EBITDA of the Parent and its Subsidiaries. For

4

purposes of computing Total Leverage Ratio only, the term “Debt” as used in clause (x) above means, without duplication, the aggregate of all Debt of the type described in clauses (a), (b), (c), (d), (e), (h) and (j) of the definition of “Debt” and Contingent Obligations (other than Contingent Obligations relating to minimum purchase requirements under agreements entered into in the ordinary course of business of the Parent and its Subsidiaries) of the Parent and its Subsidiaries in respect of the foregoing. If any such date of determination falls on a date that would be an Interest Payment Date but such date is not a Business Day, the Total Leverage Ratio for such date of determination shall be calculated as if the cash interest due on such Interest Payment Date was actually paid on such date of determination (rather than on the actual Interest Payment Date), so long as the cash interest is actually paid on such actual Interest Payment Date. As used in the preceding sentence, the term Interest Payment Date shall include any Interest Payment Date as defined herein, any date on which interest is due pursuant to the Amended Second Lien Credit Agreement and any Interest Payment Date as defined in the New Third Lien Credit Agreement.

b. Section 1.01 of the Note Purchase Agreement is hereby amended by replacing the reference to Section 2.02 in the definition of “Closing” with a reference to Section 2.02(a).

Section 2.2. Amendment to Section 2.01(a) of the Note Purchase Agreement. The first sentence of Section 2.01(a) of the Note Purchase Agreement is hereby amended by replacing “The Issuer shall authorize the issue and sale of $209,000,000” with “The Issuer shall authorize the issue and sale of $230,000,000.”

Section 2.3. Amendment to Section 2.01(b) of the Note Purchase Agreement. Section 2.01(b) of the Note Purchase Agreement is hereby amended and restated in full by deleting it in its entirety and replacing it with the following:

“(b) Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Issuer hereby agrees to sell, and the Note Purchasers hereby agree to purchase from the Issuer, the Notes. Each Original Note Purchaser purchased the amount of such Note Purchaser’s Commitment as set forth on Schedule I hereto at the purchase price of 100% of the principal amount thereof (the “Note Purchase”) on the Closing Date. Each New Note Purchaser agrees to purchase the amount of such New Note Purchaser’s Commitment as set forth on Schedule I(a) hereto at the purchase price of 100% of the principal amount thereof (the “Secondary Note Purchase”). The Issuer shall execute and deliver a Note to each Note Purchaser. Each Note shall represent the obligation of the Issuer to repay the principal amount set forth thereon, together with interest thereon as prescribed in Section 2.03. Each Note Purchaser’s Commitment is expressed in U.S. dollars and as a percentage of the whole as of the Closing as set forth in Schedule I hereto (in respect of the Note Purchase) and Schedule I(a) hereto (in respect of the Secondary Note Purchase).”

5

Section 2.4. Amendment to Section 2.02 of the Note Purchase Agreement. Section 2.02 of the Note Purchase Agreement is hereby amended and restated in full by deleting it in its entirety and replacing it with the following:

“Section 2.02 Closing; Secondary Closing.

(a) Closing. The closing of the Note Purchase shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom LLP at Four Times Square, New York, NY 10036, commencing at 10:00 A.M. local time on the Closing Date by wire transfer of immediately available U.S. funds payable to the order of the Issuer against delivery of the Notes in the aggregate amount of the Note Purchase (the “Closing”).

(b) Secondary Closing. The closing of the Secondary Note Purchase shall be made at the offices of Milbank, Tweed, Hadley & McCloy LLP at 1 Chase Manhattan Plaza, New York, NY 10005, commencing at 10:00 A.M. local time on the Secondary Closing Date by wire transfer of immediately available U.S. funds payable to the order of the Issuer against delivery of the Notes in the aggregate amount of the Secondary Note Purchase (the “Secondary Closing”).”

Section 2.5. Amendment to Section 5.01 of the Note Purchase Agreement. Section 5.01 of the Note Purchase Agreement is hereby amended by adding the following as Section 5.01(v):

“(v) Regulatory Consents regarding the Additional Notes. The Parent shall, and shall cause each of its Subsidiaries to, use its diligent efforts to obtain or make, within 180 days after the Secondary Closing Date, all governmental licenses, permits, approvals, authorizations, actions, notices and filings set forth on Part II of New Schedule 4.01(d) in connection with the Secondary Note Purchase (without the imposition of conditions that are not reasonably acceptable to the Agent).”

Section 2.6. Amendment to Section 5.02(r) of the Note Purchase Agreement. Subsections (i), (ii) (iii), (iv) and (vi) of Section 5.02(r) of the Note Purchase Agreement are hereby amended and restated in full by deleting such subsections in their entirety and replacing them with the following:

“(i) Maximum Capital Expenditures. Make or commit to make, or allow any of its Subsidiaries to make or commit to make, Capital Expenditures exceeding, in the aggregate for each period set forth below:

Period	Amount
For the calendar year ending December 31, 2005	$	34,545,000
For the calendar year ending December 31, 2006	$	51,349,000
For the calendar year ending December 31, 2007	$	53,094,000
For the calendar year ending December 31, 2008	$	49,135,000
For the two quarters ending June 30, 2009	$	23,984,000

6

Notwithstanding the amounts set forth in this Section 5.02(r)(i), the Obligors may carry over to the next calendar year the lesser of (x) 50% of the prior year’s unused Capital Expenditure amount set forth or determined in accordance with the foregoing and (y) 20% of the prior year’s Capital Expenditure amount. Any such carry over amounts shall carry over to the immediately succeeding year and shall not be cumulative from year to year.

(ii) Senior Debt Ratio. Commencing on the last day of the fiscal quarter ending September 30, 2005 and, measured on the last day of each fiscal quarter thereafter until the Termination Date, the Senior Debt Ratio shall not exceed the following:

Period	Ratio
September 30, 2005	3.55
December 31, 2005	3.79
March 31, 2006	3.88
June 30, 2006	4.26
September 30, 2006	4.20
December 31, 2006	3.91
March 31, 2007	3.65
June 30, 2007	3.54
September 30, 2007	3.52
December 31, 2007	3.50
March 31, 2008	3.27
June 30, 2008	3.07
September 30, 2008	2.95
December 31, 2008	2.85
March 31, 2009	2.85
June 30, 2009	2.85

(iii) Total Leverage Ratio. Commencing on the last day of the fiscal quarter ending September 30, 2005, and measured on the last day of each fiscal quarter thereafter until the Termination Date, the Total Leverage Ratio shall not exceed the ratio set forth below opposite the applicable date:

Period	Ratio
September 30, 2005	5.84
December 31, 2005	6.22
March 31, 2006	6.36
June 30, 2006	6.99
September 30, 2006	6.90
December 31, 2006	6.20
March 31, 2007	5.89
June 30, 2007	5.70
September 30, 2007	5.38
December 31, 2007	5.36
March 31, 2008	5.01
June 30, 2008	4.72
September 30, 2008	4.52
December 31, 2008	4.46
March 31, 2009	4.40
June 30, 2009	4.42

7

(iv) Interest Coverage Ratio. Commencing on the last day of the fiscal quarter ending September 30, 2005, and measured on the last day of each fiscal quarter thereafter until the Termination Date, the Interest Coverage Ratio shall not be less than the ratio set forth below opposite the applicable date:

Period	Ratio
September 30, 2005	2.00
December 31, 2005	1.74
March 31, 2006	1.43
June 30, 2006	1.25
September 30, 2006	1.23
December 31, 2006	1.47
March 31, 2007	1.42
June 30, 2007	1.54
September 30, 2007	1.54
December 31, 2007	1.54
March 31, 2008	1.65
June 30, 2008	1.75
September 30, 2008	1.87
December 31, 2008	1.92
March 31, 2009	1.91
June 30, 2009	1.90	”

“(vi) Minimum Consolidated EBITDA. As of each date set forth below, permit Consolidated EBITDA (as measured by the cumulative sum of Consolidated EBITDA for the last twelve months preceding such date) to be less than:

Date	Amount
December 31, 2006	$	60,000,000
June 30, 2007	$	66,700,000
December 31, 2007	$	70,000,000
June 30, 2008	$	77,000,000	”

Section 2.7. Amendment to the Schedules of the Note Purchase Agreement.

The Note Purchase Agreement is hereby amended by adding the Schedule I(a) appended hereto.

8

III. REPRESENTATIONS AND WARRANTIES.

Section 3.1. Representations and Warranties of the Obligors. To induce the Agent and the Note Purchasers to enter into this Amendment No. 1, the Obligors represent and warrant, jointly and severally, to the Agents and the Note Purchasers as follows as of the Execution Date and the Secondary Closing Date:

(a) This Amendment No. 1, the Note Purchase Agreement as amended hereby, and the other Note Purchase Documents to which any Obligor is a party have been duly authorized, executed and delivered and constitute legal, valid and binding obligations of each such Obligor party thereto enforceable against each such Obligor in accordance with its terms. The issuance of the Additional Notes by the Issuer has been duly authorized and the Additional Notes constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms.

(b) Neither the execution or delivery by each Obligor of this Amendment No. 1, nor performance by any of them of this Amendment No. 1 and the Note Purchase Agreement, nor the issuance of the Additional Notes shall (i) contravene such Obligor’s charter or bylaws, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any loan agreement, indenture, mortgage, deed of trust, or material contract, lease or other instrument binding on or affecting any Obligor, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Note Purchase Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Obligor or any of its Subsidiaries. No Obligor or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which could be reasonably likely to have a Material Adverse Effect.

(c) The representations and warranties contained in the Note Purchase Agreement are true, correct and complete in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) on and as of the date hereof as if made on the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case they were true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule.

(d) Prior to and after giving effect to this Amendment No. 1, no Default or Event of Default has occurred or is continuing.

9

(e) After giving effect to this Amendment No. 1, the Collateral Documents continue to create a valid first priority security interest in the Collateral, securing the payment of the Secured Obligations, and assuming that all filings delivered to the Collateral Agent on or before the Closing Date have been duly filed in accordance with the provisions of the Security Agreement and assuming that all filings required as a result of the operation of Section 9-507(c) of the UCC (as defined in the Security Agreement) have been duly filed, such first priority security interest shall continue to be perfected. The Obligors are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the Liens and security interests created or permitted under the Note Purchase Documents.

(f) After giving effect to this Amendment No. 1, the Guaranties in favor of the Secured Parties, granted pursuant to the Note Purchase Documents, shall continue to be valid and enforceable against the respective Subsidiary Guarantors thereunder.

(g) Each Obligor is and, after giving effect to the transactions contemplated hereby (including, without limitation, the issuance of the Additional Notes), shall be, Solvent. No transfer of Property is being made by the Parent or any of its Subsidiaries, and no obligation is being incurred by the Parent or any of its Subsidiaries in connection with the transactions contemplated by this Amendment No. 1 or the other Note Purchase Documents with the intent to hinder, delay, or defraud either present or future creditors of the Parent and its Subsidiaries.

Section 3.2. Representations and Warranties of each New Note Purchaser. Each New Note Purchaser represents and warrants, severally and not jointly, to the Obligors, as follows as of the Execution Date and the Secondary Closing Date:

(a) Such New Note Purchaser is a “Qualified Institutional Buyer,” as defined in Rule 144A under the Securities Act or an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act and the Additional Notes to be acquired by it pursuant to this Amendment No. 1 are being acquired for its own account and without a view to, or for resale in connection with, any distribution thereof or any interest therein within the meaning of the Securities Act; provided that the provisions of this Section 3.2(a) shall not prejudice such New Note Purchaser’s right at all times to sell or otherwise dispose in accordance with the terms of this Agreement of all or any part of the Additional Notes so acquired pursuant to a registration under the Securities Act or an exemption from such registration available under the Securities Act;

(b) Such New Note Purchaser understands that: (i) the sale or re-sale of the Additional Notes has not been and shall not be registered under the Securities Act or any applicable state securities laws by the Issuer, and the Additional Notes may not be sold, distributed or otherwise transferred unless the Additional Notes (a) are sold, distributed or transferred pursuant to an effective registration statement under the Securities Act and applicable state securities laws, or (b) the Additional Notes are sold pursuant to Rule 144 under the Securities Act or any other exemption from registration available under the Securities Act; (ii) any sale of the Additional Notes made in reliance on Rule 144 may be made only in accordance with the terms of such Rule and further, if such Rule is not

10

applicable, any sale of the Additional Notes under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with another exemption under the Securities Act; (iii) neither the Parent nor any other Person is under any obligation to register the Additional Notes under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder; and (iv) no governmental entity has passed upon or made any recommendation or endorsement of the Additional Notes;

(c) The execution, delivery and performance of this Amendment No. 1 and the purchase of the Additional Notes pursuant hereto are within such New Note Purchaser’s corporate, partnership or limited liability company, as applicable, powers and have been duly and validly authorized by all requisite corporate, partnership or limited liability company, as applicable, action;

(d) This Amendment No. 1 has been duly executed and delivered by such New Note Purchaser;

(e) This Amendment No. 1 constitutes a valid and binding agreement of such New Note Purchaser;

(f) Such New Note Purchaser has such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Additional Notes and such New Note Purchaser is capable of bearing the economic risks of such investment;

(g) Such New Note Purchaser has been given access to all documents, records, and other information, has received physical or electronic delivery of all such documents, records and information which such New Note Purchaser has requested, and has had adequate opportunity to ask questions of, and receive answers from, the Parent, the Issuer and the Subsidiary Guarantors and their respective officers, employees, agents, accountants, and representatives concerning the Issuer’s business, operations, financial condition, assets, liabilities, and all other matters relevant to its investment in the Additional Notes;

(h) The address set forth on Schedule I(a) hereto for such New Note Purchaser is its principal place of business; and

(i) Such New Note Purchaser acknowledges that the Additional Notes shall bear a restrictive legend substantially in the following form:

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES MAY NOT BE SOLD, PLEDGED,

11

TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE CORPORATION RESERVES THE RIGHT PRIOR TO ANY SUCH TRANSACTION TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE FOREGOING RESTRICTIONS.

IV. CONDITIONS PRECEDENT.

Section 4.1. Conditions Precedent to Execution Date Amendments. The provisions of Article I of this Amendment No. 1 shall not become effective unless all of the following conditions precedent shall have been satisfied or waived before the Execution Date, or such earlier time specifically provided:

(a) Amendment No. 1; Consent and Authorization. On or prior to the Execution Date, the Agent shall have received by hand, courier, mail, email or facsimile transmission (i) duly executed counterparts to this Amendment No. 1 which, when taken together, bear the authorized signatures of the Parent, the Issuer and the Subsidiary Guarantors, and (ii) duly executed consents and/or authorizations (each, a “Consent”) from the Required Holders consenting to the matters set forth herein (each such consenting Note Purchaser, a “Consenting Note Purchaser”).

(b) Representations and Warranties; Performance; No Default. The representations and warranties of the Obligors contained in this Amendment No. 1 and the Note Purchase Agreement as in effect before the effectiveness of this Amendment No. 1 shall be true and correct as of the Execution Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case they were true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule); the representations and warranties of the Obligors contained in the other Note Purchase Documents shall be true and correct as of the Execution Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case they were true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule); the representations and warranties of the New Note Purchasers contained in this Amendment No. 1 shall be true and correct as of the Execution Date; the Parent, the Issuer and the Subsidiary Guarantors shall have performed all covenants and agreements and satisfied all of the conditions on their part to be performed or satisfied under this Amendment No. 1 and under the Note Purchase Documents at or prior to the Execution Date; and no Default or Event of Default under any Note Purchase Document shall have occurred and be continuing.

12

(c) Waiver. The Agent shall have received a copy of a waiver and amendment signed by the Required Holders (as defined in the New Third Lien Securities Purchase Agreement) and dated on or before the Execution Date, pursuant to which such Required Holders agree to the transactions contemplated by the P&H Agreement (including the incurrence of Debt and Contingent Obligations as contemplated thereby), which waiver and amendment shall be reasonably satisfactory to the Agent.

Section 4.2. Conditions Precedent to Secondary Closing Date Amendments. The provisions of Article II of this Amendment No. 1 shall not become effective unless all of the following conditions precedent shall have been satisfied or waived before the Secondary Closing Date, or such earlier time specifically provided:

(a) Fees and Expenses. The Issuer shall have reimbursed the Agent and the Collateral Agent for (i) their reasonable costs and expenses (including, without limitation, legal, accounting and other professional fees and expenses) relating to this Amendment No. 1, and (ii) all other unpaid reasonable costs and expenses of the Agent and the Collateral Agent (including, without limitation, legal, accounting and other professional fees and expenses) that are reimbursable pursuant to Section 10.04 of the Note Purchase Agreement.

(b) Amendment No. 1; Consent and Authorization. On or prior to the Execution Date, the Agent shall have received by hand, courier, mail, email or facsimile transmission (i) duly executed counterparts to this Amendment No. 1 which, when taken together, bear the authorized signatures of the Parent, the Issuer and the Subsidiary Guarantors, and (ii) duly executed Consents from the Required Holders consenting to the matters set forth herein.

(c) Consent Fee. The Issuer shall have paid to each Consenting Note Purchaser a consent fee in an amount equal to 0.35% of the principal amount (including capitalized PIK interest) of the Notes held by such Consenting Note Purchaser in respect of which such Consenting Note Purchaser has delivered a Consent; provided that the Agent shall have received such Consent no later than noon, Los Angeles time, on November 2, 2006 (the “Consent Receipt Date”) and such Consent shall not have been revoked on or before the effective date of the Consent; and provided further that the Secondary Closing shall have occurred.

(d) Representations and Warranties; Performance; No Default. The representations and warranties of the Obligors contained in this Amendment No. 1 and the Note Purchase Agreement as in effect before the effectiveness of this Amendment No. 1 shall be true and correct as of the Execution Date and as of the Secondary Closing Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case they were (or shall be) true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule); the representations and warranties of the Obligors contained in the other Note Purchase Documents shall be true and correct as of the Execution Date and as of the Secondary Closing Date (except to the

13

extent that such representations and warranties expressly relate to an earlier date, in which case they were (or shall be) true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule); the representations and warranties of the New Note Purchasers contained in this Amendment No. 1 shall be true and correct as of the Execution Date and the Secondary Closing Date; the Parent, the Issuer and the Subsidiary Guarantors shall have performed all covenants and agreements and satisfied all of the conditions on their part to be performed or satisfied under this Amendment No. 1 and under the Note Purchase Documents at or prior to the Secondary Closing Date; and immediately prior to and after giving effect to the issuance of the Additional Notes, no Default or Event of Default under any Note Purchase Document shall have occurred and be continuing.

(e) No Injunction. The issuance of the Additional Notes by the Issuer hereunder shall not be enjoined (temporarily or permanently) on the Secondary Closing Date.

(f) Documentation. The Note Purchasers shall have been furnished with such documents, letters, schedules, opinions, certificates, instruments and other information as they may reasonably request relating to the issuance of the Additional Notes and maintenance of the Liens imposed by the Collateral Documents and the business, corporate, legal and financial affairs of the Obligors.

(g) Opinion of Obligors’ Counsel. Counsel to the Obligors identified in the forms of opinion attached hereto as Exhibit C shall have furnished to the Agents and the Note Purchasers favorable opinions in form and substance reasonably satisfactory to the Agent, in the forms attached hereto as Exhibit C and as to such other matters as any Note Purchaser through the Agent may reasonably request.

(h) Solvency Certificate. The Agent shall have received an officer’s certificate duly executed by the Chief Financial Officer of the Issuer in substantially the form of Exhibit D hereto (a “Solvency Certificate”) (i) to the effect that the Parent and its Subsidiaries shall be Solvent upon the consummation of the transactions contemplated herein and in the other Note Purchase Documents; and (ii) containing such other statements with respect to the solvency of the Parent and its Subsidiaries and matters related thereto as the Agent or the Note Purchasers shall request.

(i) Opinions, etc. The Agent and Collateral Agent shall have received (with a copy for the Note Purchasers) on the Secondary Closing Date in form and substance reasonably satisfactory to the Note Purchasers such other approvals, opinions, certificates or documents as the Note Purchasers, the Agent or the Collateral Agent may reasonably request.

(j) Consents and Approvals. All governmental and third party consents and approvals set forth on Part I of New Schedule 4.01(d) in connection with the Secondary Note Purchase shall have been obtained (without the imposition of any conditions that are not reasonably acceptable to the New Note Purchasers) and shall remain in effect (other than any consents and approvals the absence of which, either individually or in the

14

aggregate, would not have a Material Adverse Effect); all applicable waiting periods in connection therewith shall have expired without any action being taken by any competent authority (other than any action which either individually or in the aggregate with all such actions would not reasonably be expected to have a Material Adverse Effect), and no law or regulation shall be applicable in the reasonable judgment of the New Note Purchasers in each case that restrains, prevents or imposes materially adverse conditions upon the Secondary Note Purchase or the rights of the Obligors or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

(k) Additional Notes. The Issuer shall have executed and delivered the Additional Notes payable to the order of the New Note Purchasers.

(l) Certificates. The Agent shall have received the following, each dated the Secondary Closing Date (unless otherwise specified), in form and substance satisfactory to the Agent (unless otherwise specified) and in sufficient copies for each Note Purchaser:

(i) Certified copies of the resolutions of the Board of Directors of each Obligor approving the transactions contemplated by this Amendment No. 1 and of all documents evidencing other necessary corporate action with respect to the transactions contemplated by this Amendment No. 1.

(ii) A copy of a certificate of the Secretary of State of the jurisdiction of incorporation of each Obligor, dated reasonably near the date of the Secondary Closing Date, certifying (A) as to a true and correct copy of the charter of such Obligor and each amendment thereto on file in such Secretary’s office and (B) that (1) such amendments are the only amendments to such Obligor’s charter on file in such Secretary’s office, (2) to the extent that the Secretary of State of the applicable jurisdiction of incorporation provides such a certification, such Obligor has paid all franchise taxes to the date of such certificate and (C) such Obligor is duly incorporated and in good standing or presently subsisting under the laws of the State of the jurisdiction of its incorporation.

(iii) A copy of a certificate of the Secretary of State in each jurisdiction in which each Obligor is qualified to do business, dated reasonably near the date of the Secondary Closing Date, stating that such Obligor is duly qualified and in good standing as a foreign corporation in such State and has filed all annual reports required to be filed to the date of such certificate except where the failure to be so qualified and in good standing does not have a Material Adverse Effect.

(iv) A certificate of each Obligor, signed on behalf of such Obligor by its President or a Vice President and its Secretary or any Assistant Secretary, dated the Secondary Closing Date (the statements made in which certificate shall be true on and as of the Secondary Closing Date), certifying as to (A) the absence of any amendments to the charter of such Obligor since the date of the Secretary of State’s certificate referred to in Section 4.2(l)(iii), (B) the absence of any amendments to the bylaws of such Obligor since certified copies thereof were delivered to the Note Purchasers on the Closing Date,

15

pursuant to Section 3.01(b)(vii) of the Note Purchase Agreement, and that such bylaws were in effect on the date on which the resolutions referred to in Section 4.2(l)(i) were adopted and on the Secondary Closing Date, (C) the due incorporation and good standing or valid existence of such Obligor as a corporation organized under the laws of the jurisdiction of its incorporation, and the absence of any proceeding for the dissolution or liquidation of such Obligor, (D) the truth of the representations and warranties contained in this Amendment No. 1 and the Note Purchase Documents as though made on and as of the Secondary Closing Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case they were true and correct as of such earlier date), and (E) the absence of any event occurring and continuing, or resulting from entering into this Agreement, that constitutes a Default.

(v) A certificate of the Secretary or an Assistant Secretary of each Obligor certifying the names and true signatures of the officers of such Obligor authorized to sign this Amendment No. 1 and each other Note Purchase Document to be signed on the Secondary Closing Date to which it is or is to be a party and the other documents to be delivered hereunder and thereunder.

(vi) Such other certificates and documents as the Agent may reasonably request.

All opinions, letters, evidence and certificates mentioned in this Article IV or elsewhere in this Amendment No. 1 shall be deemed to be in compliance with the provisions hereof only if they are in form and substance satisfactory to counsel for the Agents.

V. NO PREJUDICE OR WAIVER; REAFFIRMATION.

Section 5.1. No Prejudice or Waiver. The terms of this Amendment No. 1 shall not operate as a waiver by the Agent, the Collateral Agent or the Note Purchasers of, or otherwise prejudice the Agent’s, the Collateral Agent’s or the Note Purchasers’ rights, remedies or powers under the Note Purchase Documents or under any applicable law. No terms or provisions of any Note Purchase Document, except insofar as this Amendment No. 1 amends the Note Purchase Agreement, are waived, modified or changed by this Amendment No. 1, and the terms and provisions of the Note Purchase Documents shall continue in full force and effect

16

Section 5.2. Acknowledgements and Reaffirmations.

(a) On and after the Execution Date, each reference in the Note Purchase Documents to the “Note Purchase Agreement” shall be deemed to be a reference to the Note Purchase Agreement as amended by this Amendment No. 1.

(b) Each Obligor hereby acknowledges and reaffirms all of its obligations and duties under the Note Purchase Documents as to all of the Notes.

(c) Each Obligor hereby acknowledges and reaffirms that the Collateral Agent has and shall continue to have valid, secured, Liens in the Collateral, as set forth in the Note Purchase Documents as to all of the Notes and acknowledges and confirms that on and after the Secondary Closing Date, as a result of the issuance of the Additional Notes, “Obligations” and “Secured Obligations” as those terms are defined in the Note Purchase Documents shall include, without limitation, all obligations under the Additional Notes.

(c) Each Obligor hereby acknowledges and reaffirms all of its obligations and duties under Article VII of the Note Purchase Agreement and acknowledges and confirms that on and after the Secondary Closing Date, as a result of the issuance of the Additional Notes, “Guaranteed Obligations” as that term is defined in the Note Purchase Documents shall include, without limitation, all obligations under the Additional Notes.

VI. TERMINATION.

Section 6.1. Partial Termination. If, after December 31, 2006, the Secondary Closing shall not have occurred but the P&H Refinancing shall have been consummated, the Agent may, upon written notice to the Parent, terminate this Amendment No. 1 solely with respect to the provisions of Article II at any time before the occurrence of the Secondary Closing. Upon such a termination pursuant to this Section 6.1, the provisions of Article II and the transactions contemplated thereby shall forthwith become void ab initio, and there shall be no further obligations on the part of any party hereto under this Amendment No. 1 with respect to the provisions of Article II; provided that the calculations of the Interest Coverage Ratio and the Total Leverage Ratio subsequent to the date of such termination shall exclude the impact of the P&H Refinancing. Any such termination shall not affect the continued effectiveness of this Amendment No. 1 with respect to the provisions of Article I.

Section 6.2. Complete Termination. If, after December 31, 2006, neither the Secondary Closing shall have occurred nor the P&H Refinancing shall have been consummated, the Agent may, upon written notice to the Parent, terminate this Amendment No. 1 at any time before the occurrence of the Secondary Closing. If this Amendment No. 1 is terminated pursuant to this Section 6.3, this Amendment No. 1, and the amendments and the transactions contemplated hereby, shall forthwith become void ab initio and there shall be no further obligations on the part of any party hereto with respect to this Amendment No. 1.

17

VII. MISCELLANEOUS.

Section 7.1. Governing Law. This Amendment No. 1 shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

Section 7.2. Counterparts. This Amendment No. 1 may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Issuer and the Agent.

Section 7.3. Headings Descriptive. The headings of the several sections and subsections of this Amendment No. 1 are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Amendment No. 1.

Section 7.4. Waivers and Consents. Neither this Amendment No. 1 nor any term hereof may be changed, waived, discharged or terminated orally, or by any action or inaction, but only by an instrument in writing signed in accordance with the amendment and waiver provisions set forth in the Note Purchase Agreement.

Section 7.5. Survival. All warranties, representations, certifications and covenants made by or on behalf of the Parent, the Issuer and/or the Subsidiary Guarantors herein or in any of the other Note Purchase Documents or in any certificate or other instrument delivered pursuant hereto or pursuant to any other Note Purchase Document shall be considered to have been relied upon by the Agent, the Collateral Agent and the Note Purchasers and shall survive the execution hereof and of the other Note Purchase Documents, regardless of any investigation made by or on behalf of the Agent, the Collateral Agent or the Note Purchasers. All statements in any such certificate or other instrument shall constitute representations and warranties of the Issuer and/or such Subsidiary Guarantors hereunder.

Section 7.6. Note Purchase Documents. This Amendment No. 1 and all other documents executed in favor of the Agent, the Collateral Agent and/or the Note Purchasers in connection herewith shall be deemed to be Note Purchase Documents for all purposes under the Note Purchase Agreement.

Section. 7.7. Further Assurances. Each party hereto agrees that, from time to time upon the written request of any other party hereto, such party will execute and deliver such further documents and do such other acts and things as such other party may reasonably request in order fully to effectuate the purposes of this Amendment No. 1.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

18

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

TENNENBAUM CAPITAL PARTNERS, LLC, as Agent

TCP AGENCY SERVICES, LLC, as Collateral Agent

Each of the above by:

/s/ Howard Levkowitz

Name:  Howard Levkowitz

Title:    Managing Partner

WATERSHED CAPITAL PARTNERS, L.P.
By:	WS Partners, L.LC.
Its General Partner
By:	/s/ Kevin D. Katari
Name:	Kevin D. Katari
Title:	Managing Member
WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.
By:	WS Partners, L.L.C.
Its General Partner
By:	/s/ Kevin D. Katari
Name:	Kevin D. Katari
Title:	Managing Member

CANPARTNERS INVESTMENTS IV, LLC
By:	/s/ Mitchell R. Julis
Name:	Mitchell R. Julis
Title:	Managing Partner

INTERSTATE FIBERNET INC., as Issuer
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
ITC^DELTACOM, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
DELTACOM, INC. (formerly known as ITC^DeltaCom Communications, Inc.), as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
DELTACOM INFORMATION SYSTEMS, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer

BTI TELECOM CORP., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
BUSINESS TELECOM, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
BUSINESS TELECOM OF VIRGINIA, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer

EX-10.11.3

Exhibit 10.11.3

AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT

This AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT (this “Amendment No. 1”), dated as of October 27, 2006 (the “Execution Date”), to the Securities Purchase Agreement, dated as of July 26, 2005, among ITC^DeltaCom, Inc., a Delaware corporation (the “Parent”), Interstate FiberNet, Inc., a Delaware corporation (the “Issuer”), each of the Subsidiary Guarantors identified on the signature pages hereto, Tennenbaum Capital Partners, LLC, a Delaware limited liability company, as agent (the “Agent”), and TCP Agency Services, LLC, a Delaware limited liability company, as collateral agent (the “Collateral Agent” and together with the Agent, the “Agents”). Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Securities Purchase Agreement (as defined below).

W I T N E S S E T H:

WHEREAS, the Parent, the Issuer, the Subsidiary Guarantors, the New Purchasers party thereto, the Existing Purchasers party thereto and the Agents entered into the Securities Purchase Agreement, dated as of July 26, 2005 (as amended, supplemented, restated or otherwise modified from time to time, the “Securities Purchase Agreement”), pursuant to which the Existing Purchasers and the New Purchasers purchased from the Issuer (i) Notes in an aggregate principal amount of $50,000,000, plus the aggregate amount of capitalized PIK interest on the Existing Third Lien Notes, and (ii) the Warrants;

WHEREAS, pursuant to the agreement attached hereto as Exhibit A (the “P&H Agreement”), Business Telecom, Inc., a Guarantor, wishes to refinance the P&H Note identified on Existing Schedule (as hereinafter defined) 4.01(t) to the Securities Purchase Agreement with new notes having materially different terms (such refinancing, the “P&H Refinancing”); and

WHEREAS, pursuant to the Securities Purchase Agreement and the other Purchase Documents, the Required Holders (or the Agent acting at the direction of the Required Holders), together with the Issuer, may amend the terms of the Securities Purchase Agreement to permit the P&H Refinancing;

WHEREAS, subject to and in accordance with the terms and conditions hereinafter set forth, the Agent, at the direction of the Required Holders, is willing to amend certain provisions of the Securities Purchase Agreement to permit the P&H Refinancing;

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

I. AMENDMENTS.

Subject to the terms and provisions herein, the provisions set forth in this Article I shall become effective as of the Execution Date.

Section 1.1. Amendment to the Preamble of the Securities Purchase Agreement. The first sentence of the preamble of the Securities Purchase Agreement is hereby amended by replacing “This Securities Purchase Agreement is made and entered into as of July 26, 2005 (this “Agreement”)” with “This Securities Purchase Agreement is made and entered into as of July 26, 2005 (as amended as of October 27, 2006, and as it may thereafter be further amended, supplemented, restated or otherwise modified from time to time, this “Agreement”).”

Section 1.2. Amendments to Section 1.01 of the Securities Purchase Agreement. Section 1.01 of the Securities Purchase Agreement is hereby amended by adding the following definition in the appropriate place in alphabetical order:

“Amendment No. 1” means Amendment No. 1 to Securities Purchase Agreement, dated as of October 27, 2006, by and among the Parent, the Issuer, the Subsidiary Guarantors party thereto, the Agent and the Collateral Agent, which Amendment No. 1 amends this Agreement.

Section 1.3. Amendment to Section 5.02(b) of the Securities Purchase Agreement. The final sentence in Section 5.02(b) of the Securities Purchase Agreement is hereby amended and restated in full by deleting it in its entirety and replacing it with the following:

“Notwithstanding any other provision under this Section 5.02(b), (A) the Parent and Business Telecom, Inc. may once only incur the Debt and Contingent Obligations contemplated by the agreement attached hereto as Exhibit J, and (B) any Obligor may Incur Debt owed to any other Obligor. Notwithstanding anything contained herein to the contrary, the Debt and Contingent Obligations contemplated by the agreement attached hereto as Exhibit J shall constitute Surviving Debt for all purposes of this Agreement.”

Section 1.4. Amendment to Section 5.02(k) of the Securities Purchase Agreement. Section 5.02(k) of the Securities Purchase Agreement is hereby amended by adding the following paragraph to the end of such section:

“Notwithstanding any other provision under this Section 5.02(k), the Parent and Business Telecom, Inc. may once only make the prepayments, amendments, modifications and changes to the Surviving Debt contemplated by the agreement attached hereto as Exhibit J.”

Section 1.5. Amendment to the Schedules of the Securities Purchase Agreement.

The Securities Purchase Agreement is hereby amended by supplementing the existing Schedules thereto (collectively, the “Existing Schedules,” and individually, an “Existing Schedule”) with the Schedules appended hereto as Exhibit B (collectively, the “New Schedules,” and individually, a “New Schedule”). Subject to the terms and provisions herein, references to a “Schedule” in any Purchase Document dated as of the Execution Date or later shall be a reference to a New Schedule, unless otherwise specifically provided.

2

Section 1.6. Amendment to the Exhibits of the Securities Purchase Agreement. The Securities Purchase Agreement is hereby amended by attaching the P&H Agreement thereto as Exhibit J.

II. REPRESENTATIONS AND WARRANTIES.

Section 2.1. Representations and Warranties of the Obligors. To induce the Purchasers to direct the Agent to enter into this Amendment No. 1, the Obligors represent and warrant, jointly and severally, to the Agents and the Purchasers as follows as of the Execution Date:

(a) This Amendment No. 1, the Securities Purchase Agreement as amended hereby, and the other Purchase Documents to which any Obligor is a party have been duly authorized, executed and delivered and constitute legal, valid and binding obligations of each such Obligor party thereto enforceable against each such Obligor in accordance with its terms.

(b) Neither the execution or delivery by each Obligor of this Amendment No. 1, nor performance by any of them of this Amendment No. 1 and the Securities Purchase Agreement shall (i) contravene such Obligor’s charter or bylaws, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any loan agreement, indenture, mortgage, deed of trust, or material contract, lease or other instrument binding on or affecting any Obligor, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Purchase Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Obligor or any of its Subsidiaries. No Obligor or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which could be reasonably likely to have a Material Adverse Effect.

(c) The representations and warranties contained in the Securities Purchase Agreement are true, correct and complete in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) on and as of the date hereof as if made on the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case they were true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule.

(d) Prior to and after giving effect to this Amendment No. 1, no Default or Event of Default has occurred or is continuing.

3

(e) After giving effect to this Amendment No. 1, the Collateral Documents continue to create a valid first priority security interest in the Collateral, securing the payment of the Secured Obligations, and assuming that all filings delivered to the Collateral Agent on or before the Closing Date have been duly filed in accordance with the provisions of the Security Agreement and assuming that all filings required as a result of the operation of Section 9-507(c) of the UCC (as defined in the Security Agreement) have been duly filed, such first priority security interest shall continue to be perfected. The Obligors are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the Liens and security interests created or permitted under the Purchase Documents.

(f) After giving effect to this Amendment No. 1, the Guaranties in favor of the Secured Parties, granted pursuant to the Purchase Documents, shall continue to be valid and enforceable against the respective Subsidiary Guarantors thereunder.

(g) Each Obligor is and, after giving effect to the transactions contemplated hereby, shall be Solvent. No transfer of Property is being made by the Parent or any of its Subsidiaries, and no obligation is being incurred by the Parent or any of its Subsidiaries in connection with the transactions contemplated by this Amendment No. 1 or the other Purchase Documents with the intent to hinder, delay, or defraud either present or future creditors of the Parent and its Subsidiaries.

III. CONDITIONS PRECEDENT.

Section 3.1. Conditions Precedent to Execution Date Amendments. The provisions of Article I of this Amendment No. 1 shall not become effective unless all of the following conditions precedent shall have been satisfied or waived before the Execution Date, or such earlier time specifically provided:

(a) Amendment No. 1; Consent and Authorization. On or prior to the Execution Date, the Agent shall have received by hand, courier, mail, email or facsimile transmission (i) duly executed counterparts to this Amendment No. 1 which, when taken together, bear the authorized signatures of the Parent, the Issuer and the Subsidiary Guarantors, and (ii) duly executed consents and/or authorizations from the Required Holders consenting to the matters set forth herein.

(b) Representations and Warranties; Performance; No Default. The representations and warranties of the Obligors contained in this Amendment No. 1 and the Securities Purchase Agreement as in effect before the effectiveness of this Amendment No. 1 shall be true and correct as of the Execution Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case they were true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule); the representations and warranties of the Obligors contained in the other Purchase Documents shall be true and correct as of the Execution Date (except to the extent that such representations and warranties expressly relate to an

4

earlier date, in which case they were true and correct as of such earlier date, and except that references to a Schedule in any such representation and warranty shall be deemed to be a reference to the corresponding New Schedule); the Parent, the Issuer and the Subsidiary Guarantors shall have performed all covenants and agreements and satisfied all of the conditions on their part to be performed or satisfied under this Amendment No. 1 and under the Purchase Documents at or prior to the Execution Date; and no Default or Event of Default under any Purchase Document shall have occurred and be continuing.

(c) Waiver. The Agent shall have received a copy of a waiver and amendment signed by the Required Holders (as defined in the First Lien Note Purchase Agreement) and dated on or before the Execution Date, pursuant to which such Required Holders agree to the transactions contemplated by the P&H Agreement (including the incurrence of Debt and Contingent Obligations as contemplated thereby), which waiver and amendment shall be reasonably satisfactory to the Agent.

All documents mentioned in this Article III or elsewhere in this Amendment No. 1 shall be deemed to be in compliance with the provisions hereof only if they are in form and substance satisfactory to counsel for the Agents.

IV. NO PREJUDICE OR WAIVER; REAFFIRMATION.

Section 4.1. No Prejudice or Waiver. The terms of this Amendment No. 1 shall not operate as a waiver by the Agent, the Collateral Agent or the Purchasers of, or otherwise prejudice the Agent’s, the Collateral Agent’s or the Purchasers’ rights, remedies or powers under the Purchase Documents or under any applicable law. No terms or provisions of any Purchase Document, except insofar as this Amendment No. 1 amends the Securities Purchase Agreement, are waived, modified or changed by this Amendment No. 1, and the terms and provisions of the Purchase Documents shall continue in full force and effect

Section 4.2. Acknowledgements and Reaffirmations.

(a) On and after the Execution Date, each reference in the Purchase Documents to the “Securities Purchase Agreement” shall be deemed to be a reference to the Securities Purchase Agreement as amended by this Amendment No. 1.

(b) Each Obligor hereby acknowledges and reaffirms all of its obligations and duties under the Purchase Documents as to all of the Notes and the Warrants.

(c) Each Obligor hereby acknowledges and reaffirms that the Collateral Agent has and shall continue to have valid, secured, Liens in the Collateral, as set forth in the Purchase Documents as to all of the Notes.

(c) Each Obligor hereby acknowledges and reaffirms all of its obligations and duties under Article VII of the Securities Purchase Agreement.

5

V. TERMINATION.

Section 5.1. Termination. If, after December 31, 2006, the P&H Refinancing shall not have been consummated, the Agent may, upon written notice to the Parent, terminate this Amendment No. 1 at any time. If this Amendment No. 1 is terminated pursuant to this Section 5.1, this Amendment No. 1, and the amendments contemplated hereby, shall forthwith become void ab initio and there shall be no further obligations on the part of any party hereto with respect to this Amendment No. 1.

VI. MISCELLANEOUS.

Section 6.1. Governing Law. This Amendment No. 1 shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

Section 6.2. Counterparts. This Amendment No. 1 may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Issuer and the Agent.

Section 6.3. Headings Descriptive. The headings of the several sections and subsections of this Amendment No. 1 are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Amendment No. 1.

Section 6.4. Waivers and Consents. Neither this Amendment No. 1 nor any term hereof may be changed, waived, discharged or terminated orally, or by any action or inaction, but only by an instrument in writing signed in accordance with the amendment and waiver provisions set forth in the Securities Purchase Agreement.

Section 6.5. Survival. All warranties, representations, certifications and covenants made by or on behalf of the Parent, the Issuer and/or the Subsidiary Guarantors herein or in any of the other Purchase Documents or in any certificate or other instrument delivered pursuant hereto or pursuant to any other Purchase Document shall be considered to have been relied upon by the Agent, the Collateral Agent and the Purchasers and shall survive the execution hereof and of the other Purchase Documents, regardless of any investigation made by or on behalf of the Agent, the Collateral Agent or the Purchasers. All statements in any such certificate or other instrument shall constitute representations and warranties of the Issuer and/or such Subsidiary Guarantors hereunder.

Section 6.6. Purchase Documents. This Amendment No. 1 and all other documents executed in favor of the Agent, the Collateral Agent and/or the Purchasers in connection herewith shall be deemed to be Purchase Documents for all purposes under the Securities Purchase Agreement.

Section. 6.7. Further Assurances. Each party hereto agrees that, from time to time upon the written request of any other party hereto, such party will execute and deliver such further documents and do such other acts and things as such other party may reasonably request in order fully to effectuate the purposes of this Amendment No. 1.

6

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

TENNENBAUM CAPITAL PARTNERS, LLC,

    as Agent

TCP AGENCY SERVICES, LLC,

    as Collateral Agent

Each of the above by:

/s/ Howard Levkowitz

Name:  Howard Levkowitz

Title:    Managing Partner

INTERSTATE FIBERNET INC., as Issuer
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
ITC^DELTACOM, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
DELTACOM, INC. (formerly known as ITC^DeltaCom Communications, Inc.), as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
DELTACOM INFORMATION SYSTEMS, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer

BTI TELECOM CORP., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
BUSINESS TELECOM, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer
BUSINESS TELECOM OF VIRGINIA, INC., as Guarantor
By:	/s/ Richard E. Fish
Name:	Richard E. Fish
Title:	Chief Financial Officer

EX-10.16.1

Exhibit 10.16.1

ITC^DELTACOM, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

TABLE OF CONTENTS

			Page
1.	PURPOSE		1
2.	DEFINITIONS		1
3.	ADMINISTRATION OF THE PLAN		6
	3.1.	Board.	6
	3.2.	Committee.	6
	3.3.	Grants.	7
	3.4.	No Liability.	8
4.	STOCK SUBJECT TO THE PLAN		8
	4.1.	Aggregate Limitation.	8
	4.2.	Other Plan Limits.	8
	4.3.	Payment Shares.	9
	4.4.	Application of Aggregate Limitation.	9
	4.5.	Per-Grantee Limitation.	9
	4.6.	Book Entry.	10
5.	EFFECTIVE DATE AND TERM OF THE PLAN		10
	5.1.	Effective Date.	10
	5.2.	Term.	10
6.	PERMISSIBLE GRANTEES		10
	6.1.	Employees and Service Providers.	10
	6.2.	Multiple Grants.	10
7.	LIMITATIONS ON GRANTS OF INCENTIVE STOCK OPTIONS		10
8.	AWARD AGREEMENT		11
9.	OPTION PRICE		11
10.	VESTING, TERM AND EXERCISE OF OPTIONS		11
	10.1.	Vesting and Option Period.	11
	10.2.	Term.	11
	10.3.	Acceleration.	12
	10.4.	Termination of Employment or Other Relationship for a Reason Other than Death or Disability.	12
	10.5.	Rights in the Event of Death.	12
	10.6.	Rights in the Event of Disability.	13
	10.7.	Limitations on Exercise of Option.	13
	10.8.	Method of Exercise.	13
	10.9.	Rights as a Stockholder; Dividend Equivalents.	14
	10.10.	Delivery of Stock Certificates.	15
11.	TRANSFERABILITY OF OPTIONS		15
	11.1.	General Rule.	15
	11.2.	Family Transfers.	15
12.	RESTRICTED STOCK		15
	12.1.	Grant of Restricted Stock or Stock Units.	15

	12.2.	Restrictions.	16
	12.3.	Restricted Stock Certificates.	16
	12.4.	Rights of Holders of Restricted Stock.	16
	12.5.	Rights of Holders of Stock Units.	17
	12.6.	Termination of Employment or Other Relationship for a Reason Other than Death or Disability.	17
	12.7.	Rights in the Event of Death.	17
	12.8.	Rights in the Event of Disability.	18
	12.9.	Delivery of Shares and Payment Therefor.	18
13.	STOCK APPRECIATION RIGHTS		18
	13.1.	Grant of Stock Appreciation Rights.	18
	13.2.	Nature of a Stock Appreciation Right.	18
	13.3.	Terms and Conditions Governing SARs.	18
14.	UNRESTRICTED STOCK		19
15.	PERFORMANCE AND ANNUAL INCENTIVE AWARDS		19
	15.1.	Performance Conditions.	19
	15.2.	Performance or Annual Incentive Awards Granted to Designated Covered Employees.	19
	15.3.	Written Determinations.	20
	15.4.	Status of Section 15.2 Awards Under Code Section 162(m).	21
16.	PARACHUTE LIMITATIONS		21
17.	TERMINATION FOR CAUSE		22
18.	REQUIREMENTS OF LAW		22
	18.1.	General.	22
	18.2.	Rule 16b-3.	23
19.	AMENDMENT AND TERMINATION OF THE PLAN		23
20.	EFFECT OF CHANGES IN CAPITALIZATION		24
	20.1.	Capitalization Change.	24
	20.2.	Reorganizations in Which the Company is the Surviving Corporation not Involving a Change of Ownership.	24
	20.3.	Reorganization in Which the Company is not the Surviving Corporation or Involving a Change of Ownership; Sale of Assets or Stock.	25
	20.4.	Adjustments.	26
	20.5.	No Limitations on Company.	26
21.	DISCLAIMER OF RIGHTS		26
22.	NONEXCLUSIVITY OF THE PLAN		26
23.	WITHHOLDING TAXES		27
24.	CAPTIONS		27
25.	OTHER PROVISIONS		27
26.	NUMBER AND GENDER		27
27.	SEVERABILITY		28
28.	GOVERNING LAW		28

ITC^DELTACOM, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

ITC^DELTACOM, Inc., a Delaware corporation (the “Company”), sets forth herein the terms of its Amended and Restated Stock Incentive Plan (the “Plan”) as follows:

1. PURPOSE

The Plan is intended to enhance the Company’s ability to attract and retain highly qualified officers, key employees, outside directors and other persons, and to motivate such officers, key employees, outside directors and other persons to serve the Company and its Affiliates (as defined herein) and to expend maximum effort to improve the business results and earnings of the Company, by providing to such officers, key employees, outside directors and other persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of stock options, restricted stock, stock units, unrestricted stock, stock appreciation rights and cash-based performance awards in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein, except that stock options granted to outside directors and all Service Providers (as defined herein) shall in all cases be non-qualified stock options.

2. DEFINITIONS

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

2.1. “Affiliate” of, or Person “affiliated” with, a Person means any company or other Person that controls, is controlled by or is under common control with such first Person within the meaning of Rule 405 of Regulation C under the Securities Act.

2.2. “Annual Incentive Award” means a Grant made subject to the attainment of performance goals (as described in Section 15 hereof) over a performance period of up to one year (which shall be the Company’s fiscal year, unless otherwise specified by the Committee).

2.3. “Award Agreement” means the stock option agreement, restricted stock agreement, stock unit agreement, stock appreciation right agreement or other written agreement between the Company and a Grantee that evidences and sets forth the terms and conditions of a Grant.

2.4. “Board” means the Board of Directors of the Company.

-1-

2.5. “Capitalization Change” means a transaction in which the number of outstanding shares of Stock is increased or decreased or changed into or exchanged for a different number or kind of shares of capital stock or other securities of the Company by reason of any recapitalization, reclassification, stock split-up, combination of shares of capital stock, exchange of shares of capital stock, stock dividend or other distribution payable in shares of capital stock, or other increase or decrease in shares of capital stock effectuated without receipt of consideration by the Company, which occurs after the Effective Date.

2.6. “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

2.7. “Committee” means the Compensation Committee of the Board or other committee of, and designated from time to time by resolution of, the Board, which shall consist of no fewer than two members of the Board. During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act, at least two members of the Committee shall qualify in all respects as (i) “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act or any successor rule or regulation, (ii) “outside directors” for purposes of Code section 162(m) and (iii) “independent directors” as required by rules, regulations or practices promulgated by The NASDAQ Stock Market, Inc. or any other stock exchange or market on which the Stock is traded (but only to the extent so required), unless in the case of each of clauses (i), (ii) and (iii) the Board determines that satisfaction of such requirements is impracticable, unnecessary or inconsistent with contractual obligations of the Company.

2.8. “Company” means ITC^DeltaCom, Inc., a Delaware corporation.

2.9. “Corporate Transaction” means any of the following transactions: (i) the dissolution or liquidation of the Company; (ii) a merger, consolidation or reorganization of the Company in which the Company is not the surviving corporation; (iii) a sale of all or substantially all of the assets of the Company to another Person; or (iv) any other transaction (including a merger or reorganization in which the Company is the surviving corporation) that results in any Person, other than the Existing Stockholders, beneficially owning (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the combined voting power of all classes of voting securities of the Company.

2.10. “Covered Employee” means a Grantee who is a Covered Employee within the meaning of Code section 162(m)(3).

2.11. “Director” means a member of the Board.

2.12. “Disability” means permanent and total disability as defined in Code section 22(e)(3).

- 2 -

2.13. “Effective Date” means October 29, 2002.

2.14. “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

2.15. “Executive Officer” means “executive officer” of the Company within the meaning of Rule 3b-7 under the Exchange Act, and, solely for purposes of Section 10.8 hereof, to the extent inconsistent with Rule 3b-7 under the Exchange Act, each other individual who may be deemed to be an “executive officer” within the meaning of Section 402 of the Sarbanes-Oxley Act of 2002.

2.16. “Existing Stockholders” means the WCAS Securityholders and their Affiliates.

2.17. “Fair Market Value,” with respect to any Grant Date or other date of determination, means the closing price of a share of Stock reported on the Stock Exchange on such Grant Date or other date of determination or, if no closing price was reported on such Grant Date or other date of determination, the closing price of a share of Stock reported on the Stock Exchange on the most recent trading date immediately preceding such Grant Date or other date of determination on which a closing price was so reported. Notwithstanding the foregoing, in the event that the shares of Stock are listed or admitted to trading on more than one Stock Exchange, Fair Market Value means the closing price of a share of Stock reported on the Stock Exchange that trades the largest volume of shares of Stock on the applicable trading date. If the Stock is not at the time listed or admitted to trading on a Stock Exchange, Fair Market Value means the mean between the lowest reported bid price and highest reported asked price of a share of Stock on the applicable trading date in the over-the-counter market, as such prices are reported in a publication of general circulation selected by the Board and regularly reporting the market price of the Stock in such market. If the Stock is not listed or admitted to trading on any Stock Exchange or traded in the over-the-counter market, Fair Market Value shall be as determined in good faith by the Board.

2.18. “Governance Agreement” means the Governance Agreement, dated as of July 2, 2003, as amended from time to time, among the Company, WCAS Capital Partners III, L.P., Welsh, Carson, Anderson & Stowe VIII, L.P., WCAS Information Partners, L.P. and certain individual investors and trusts listed on the signature pages thereto.

2.19. “Grant” means an award of an Option, Restricted Stock, a Stock Unit, Unrestricted Stock, a Stock Appreciation Right, a Performance Award or an Annual Incentive Award under the Plan.

- 3 -

2.20. “Grant Date” means, as determined by the Board or authorized Committee, (i) the date as of which the Board or such Committee approves a Grant or (ii) such other date as may be specified by the Board or such Committee.

2.21. “Grantee” means a Person who receives or holds a Grant of an Option, Restricted Stock, a Stock Unit, a Stock Appreciation Right, Unrestricted Stock, a Performance Award or an Annual Incentive Award under the Plan.

2.22. “Immediate Family Members” of a Grantee means the child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the Grantee, including adoptive relationships, or any individual sharing the Grantee’s household (other than a tenant or employee).

2.23. “Incentive Stock Option” means an “incentive stock option” within the meaning of Code section 422.

2.24. “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

2.25. “Option Period” means the period during which Options may be exercised as set forth in Section 10 hereof.

2.26. “Option Price” means the purchase price for each share of Stock subject to an Option.

2.27. “Outside Director” means a member of the Board who is not an officer or employee of the Company or any Subsidiary.

2.28. “Performance Award” means a Grant made subject to the attainment of performance goals (as described in Section 15 hereof) over a performance period of up to ten (10) years.

2.29. “Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock issuer, trust or unincorporated organization (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business).

2.30. “Plan” means this ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan, as amended from time to time.

2.31. “Plan of Reorganization” means the Company’s plan of reorganization confirmed by order of the United States Bankruptcy Court for the District of Delaware entered on October 17, 2002 in In re ITC^DeltaCom, Inc. (Case No. 02-11848) (MFW)).

- 4 -

2.32. “Reporting Person” means a Person who is required to file reports under Section 16(a) of the Exchange Act.

2.33. “Restricted Period” means the period during which Restricted Stock or Stock Units are subject to restrictions or conditions pursuant to Section 12.2 hereof.

2.34. “Restricted Stock” means shares of Stock awarded to a Grantee pursuant to Section 12 hereof that are subject to restrictions and to a risk of forfeiture.

2.35. “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

2.36. “Service Provider” means a consultant or adviser to the Company or a Subsidiary, a manager of the properties or affairs of the Company or a Subsidiary, or other similar service provider or Affiliate of the Company or a Subsidiary, and employees of any of the foregoing, as such persons may be designated from time to time by the Board pursuant to Section 6 hereof.

2.37. “Stock” means the common stock, par value $0.01 per share, of the Company.

2.38. “Stock Appreciation Right” or “SAR” means a right granted to a Grantee pursuant to Section 13 hereof.

2.39. “Stock Exchange” means the OTC Bulletin Board, The NASDAQ Stock Market, Inc. and any established national or regional stock exchange on which the Stock is listed or admitted to trading.

2.40. “Stock Unit” means a unit awarded to a Grantee pursuant to Section 12 hereof, which represents a conditional right to receive a share of Stock in the future, and which is subject to restrictions and to a risk of forfeiture.

2.41. “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Code section 424(f).

2.42. “Successor” means any corporation that is a successor corporation to the Company in a transaction described in Section 20.3 hereof, and any parent or subsidiary corporation thereof.

2.43. “Unrestricted Stock” means an award of Stock granted to a Grantee pursuant to Section 14 hereof.

2.44. “WCAS Securityholders” means, collectively, (i) WCAS Capital Partners III, L.P., (ii) Welsh, Carson, Anderson & Stowe VIII, L.P., (iii) WCAS Information Partners, L.P., (iv) each of the individual investors and trusts that executed the

- 5 -

Governance Agreement as “WCAS Securityholders,” (v) the Affiliates of any of the persons referred to in clauses (i), (ii), (iii) and (iv) above, (vi) the related persons of any of the persons referred to in clauses (i), (ii), (iii) and (iv) above and (vii) the WCAS Securityholder Permitted Transferees.

2.45. “WCAS Securityholder Permitted Transferees” means the individuals who are the heirs, executors, administrators, testamentary trustees, legatees, beneficiaries, spouses or lineal descendants of any of the WCAS Securityholders who are natural persons.

3. ADMINISTRATION OF THE PLAN

3.1. Board.

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation, bylaws and applicable law. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Grant or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Grant or any Award Agreement. All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Company’s certificate of incorporation, bylaws and applicable law. The interpretation and construction by the Board of any provision of the Plan, any Grant or any Award Agreement shall be final, binding and conclusive. As permitted by law, the Board may delegate its authority under the Plan to a member of the Board or an Executive Officer; provided, however, that, unless otherwise provided by resolution of the Board, only the Board or the Committee may make a Grant to a Reporting Person of the Company and establish the number of shares of Stock that may be subject to Grants with respect to any fiscal period.

3.2. Committee.

The Board from time to time may delegate to a Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 hereof and in other applicable provisions of the Plan, as the Board shall determine, consistent with the Company’s certificate of incorporation, bylaws and applicable law. In the event of any such delegation to a Committee, and as the context requires, reference in this Plan to the Board shall be a reference to the Committee. In the event that the Plan, any Grant or any Award Agreement provides for any action to be taken or determination to be made by the Board, such action may be taken by or such determination may be made by the Committee if the power and authority to do so has

- 6 -

been delegated to the Committee by the Board as provided for in this Section 3.2. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. As permitted by law, the Committee may delegate the authority delegated to it by the Board under the Plan to a member of the Board or an Executive Officer; provided, however, that, unless otherwise provided by the Board, only the Board or the Committee may make a Grant to a Reporting Person of the Company and establish the number of shares of Stock that may be subject to Grants during any fiscal period.

3.3. Grants.

Subject to the other terms and conditions of the Plan, the Board shall have full and final authority (i) to designate Grantees, (ii) to determine the types of Grants to be made to a Grantee, (iii) to determine the number of shares of Stock to be subject to a Grant, (iv) to establish the terms and conditions of each Grant, including, without limitation, the Option Price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof, including any lapse relating to a change in control of the Company) relating to the vesting, exercise, transfer or forfeiture of a Grant or the shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options, (v) to prescribe the form of each Award Agreement evidencing a Grant, (vi) to make Grants alone, in addition to, in tandem with, or in substitution or exchange for any other Grant or any other award granted under another plan of the Company or a Subsidiary and (vii) to amend, modify or supplement the terms of any outstanding Grant. Such authority shall specifically include the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to modify Grants to eligible individuals who are foreign nationals or are individuals who are employed outside the United States of America to recognize differences in local law, tax policy or custom. As a condition to any subsequent Grant, the Board shall have the right, in its sole discretion, to require Grantees to return to the Company any Grants previously awarded under the Plan. Subject to the terms and conditions of the Plan, any such subsequent Grant shall be upon such terms and conditions as are specified by the Board at the time the subsequent Grant is made. The Board’s authority pursuant to this Section 3.3 shall include the authority, with the consent of the affected Grantee, to cancel any Option or other Grant and to substitute a new Option or other Grant covering the same or a different number of shares of Stock and with the same or different vesting schedule and other terms. Without limiting the generality of the foregoing, in the case of a substitute Option, the new Option may have the same, a higher or a lower Option Price. The Board’s authority pursuant to this Section 3.3 shall include the authority to implement an exchange of Grants by means of an exchange offer.

The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of, or in conflict with, any non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee.

- 7 -

The Board may permit or require the deferral of any award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, including the converting of such credits into deferred Stock equivalents.

3.4. No Liability.

No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Grant or Award Agreement.

4. STOCK SUBJECT TO THE PLAN

4.1. Aggregate Limitation.

Subject to adjustment as provided in Section 20 hereof, the aggregate number of shares of Stock available for issuance under the Plan pursuant to Options or other Grants shall be three million five thousand three hundred thirty-four (3,005,334) shares, which may be authorized but unissued shares, treasury shares, or issued and outstanding shares that are purchased in the open market or otherwise. Any shares of Stock granted under the Plan which are forfeited to the Company because of the failure to meet an award contingency or condition shall again be available for issuance pursuant to new awards granted under the Plan. Any shares of Stock covered by an award (or portion of an award) granted under the Plan which is forfeited or canceled, expires or is settled in cash shall be deemed not to have been issued for purposes of determining the maximum number of shares of Stock available for issuance under the Plan. If any Option is exercised by tendering shares of Stock, either actually or by attestation, to the Company as full or partial payment in connection with the exercise of an Option or a stock option under any prior plan of the Company as herein described, only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed issued for purposes of determining the maximum number of shares of Stock available for issuance under the Plan. Shares of Stock issued under the Plan through the settlement, assumption or substitution of outstanding awards or obligations to grant future awards resulting from the acquisition of another Person shall not reduce the maximum number of shares available for issuance under the Plan.

4.2. Other Plan Limits.

Subject to adjustment as provided in Section 20 hereof, the maximum number of shares of Stock that may be delivered through Options intended to be Incentive Stock Options shall be one million two hundred sixteen thousand six hundred sixty-seven (1,216,667) shares.

- 8 -

4.3. Payment Shares.

Subject to the overall limitation on the number of shares of Stock that may be delivered under the Plan, the Board may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company, including the plan of any Person acquired by the Company, and such shares of Stock used as such payment shall not count against the limitation on the maximum number of shares specified in Section 4.2 hereof.

4.4. Application of Aggregate Limitation.

The Board may adopt reasonable counting procedures to ensure appropriate counting, to avoid double counting (as, for example, in the case of tandem or substitute awards) and to make adjustments if the number of shares of Stock actually delivered differs from the number of shares of Stock previously counted in connection with a Grant.

4.5. Per-Grantee Limitation.

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act:

(i) in any fiscal year, no Person eligible for a Grant under Section 6 hereof may be awarded Options for purposes of the Plan exercisable for greater than three hundred thirty-three thousand three hundred thirty-four (333,334) shares of Stock (subject to adjustment as provided in Section 20 hereof);

(ii) in any fiscal year, the maximum number of shares of Restricted Stock that may be awarded under the Plan (including for this purpose any shares of Stock represented by Stock Units) to any Person eligible for a Grant under Sections 12 and 14 hereof is three hundred thirty-three thousand three hundred thirty-four (333,334) shares for purposes of the Plan (subject to adjustment as provided in Section 20 hereof);

(iii) in any fiscal year, the maximum number of shares of Stock that may be the subject of SARs awarded to any Grantee under Section 13 hereof is one hundred sixty-six thousand six hundred sixty-seven (166,667) shares for purposes of the Plan (subject to adjustment as provided in Section 20 hereof); and

(iv) the maximum amount that may be earned as an Annual Incentive Award or other cash Grant in any fiscal year by any one Grantee shall be $3,000,000 and the maximum amount that may be earned as a Performance Award or other cash Grant in respect of a performance period by any one Grantee shall be $5,000,000.

- 9 -

4.6. Book Entry.

Notwithstanding any other provision of the Plan to the contrary, the Company may, in its sole discretion, use the book-entry method of recording Stock ownership in lieu of issuing certificates evidencing Stock ownership for any purpose under the Plan.

5. EFFECTIVE DATE AND TERM OF THE PLAN

5.1. Effective Date.

The Plan was effective as of the Effective Date. The Plan as amended and restated as of October 28, 2003 was effective as of October 28, 2003 (the “Amendment and Restatement Date”).

5.2. Term.

The Plan shall terminate ten years after the Amendment and Restatement Date.

6. PERMISSIBLE GRANTEES

6.1. Employees and Service Providers.

Subject to the provisions of Section 7 hereof, Grants may be made under the Plan to (i) any employee of the Company or a Subsidiary, including any such employee who is an officer or director of the Company, (ii) an Outside Director, (iii) a Service Provider or employee of a Service Provider who provides, or who has provided, services to the Company or any Subsidiary, and (iv) any other individual whose participation in the Plan is determined by the Board to be in the best interests of the Company, as the Board shall determine and designate from time to time.

6.2. Multiple Grants.

An eligible Person may receive more than one Grant, subject to such restrictions as are provided in the Plan.

7. LIMITATIONS ON GRANTS OF INCENTIVE STOCK OPTIONS

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or a Subsidiary, (ii) to the extent specifically provided in the related Award Agreement and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which such Options were granted.

- 10 -

8. AWARD AGREEMENT

Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award Agreements issued from time to time or at the same time need not contain similar provisions, but shall be consistent with the terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify whether such Options are intended to be non-qualified stock options or Incentive Stock Options, and in the absence of such specification such options shall be deemed to be non-qualified stock options.

9. OPTION PRICE

The Option Price of each Option shall be no less than the Fair Market Value of a share of Stock on the Grant Date and stated in the Award Agreement evidencing such Option; provided, however, that in the event that a Grantee would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of Code sections 422(b)(6) and 424(d) (relating to ownership of more than ten percent (10%) of the Company’s outstanding shares of Stock), the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a share of Stock. Notwithstanding the foregoing, the Options for 666,667 shares of Stock granted by the Company pursuant to the Plan of Reorganization shall have the Option Prices set forth in the Plan of Reorganization and shall be non-qualified stock options.

10. VESTING, TERM AND EXERCISE OF OPTIONS

10.1. Vesting and Option Period.

Subject to Sections 10.2 and 20 hereof, each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this Section 10.1, fractional numbers of shares of Stock subject to an Option shall be rounded down to the next nearest whole number. The period during which any Option shall be exercisable shall constitute the “Option Period” with respect to such Option.

10.2. Term.

Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten years from the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and thereafter stated in the Award Agreement relating to such Option; provided, however, that isn the event that the Grantee

- 11 -

would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of Code sections 422(b)(6) and 424(d) (relating to ownership of more than ten percent (10%) of the Company’s outstanding shares of Stock), an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five years from its date of grant.

10.3. Acceleration.

Any limitation on the exercise of an Option contained in any Award Agreement may be rescinded, modified or waived by the Board, in its sole discretion, at any time and from time to time after the Grant Date of such Option, so as to accelerate the time at which the Option may be exercised.

10.4. Termination of Employment or Other Relationship for a Reason Other than Death or Disability.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, upon the termination of a Grantee’s employment or other relationship with the Company and its Subsidiaries other than by reason of death or Disability, any Option or portion thereof held by such Grantee that has not vested in accordance with the provisions of Section 10.1 hereof shall terminate immediately, and any Option or portion thereof that has vested in accordance with the provisions of Section 10.1 hereof but has not been exercised shall, subject to Section 17 hereof, terminate at the close of business upon the expiration of three months following the Grantee’s termination of employment or other relationship (or, if such day is a Saturday, Sunday or holiday, at the close of business on the next preceding day that is not a Saturday, Sunday or holiday). Upon such termination of an Option or portion thereof, the Grantee shall have no further right to purchase shares of Stock pursuant to such Option or portion thereof. Whether a leave of absence or leave on military or government service shall constitute a termination of employment or other relationship for purposes of the Plan shall be determined by the Board, whose determination shall be final, binding and conclusive. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if the Grantee is immediately thereafter employed with the Company, a Subsidiary or a Service Provider, or is engaged as a Service Provider or an Outside Director. Whether a termination of a Grantee’s employment or other relationship with the Company and its Subsidiaries shall have occurred shall be determined by the Board, whose determination shall be final, binding and conclusive.

10.5. Rights in the Event of Death.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, if a Grantee dies while employed by or providing services to the Company or a Subsidiary, all Options granted to such Grantee that have not previously terminated shall fully vest on the date of such Grantee’s death, and the executors or administrators or

- 12 -

legatees or distributees of such Grantee’s estate shall have the right, at any time within one year after the date of such Grantee’s death and prior to termination of any Option pursuant to Section 10.2 hereof, to exercise any Option held by such Grantee at the date of such Grantee’s death.

10.6. Rights in the Event of Disability.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, if a Grantee’s employment or other relationship with the Company or a Subsidiary is terminated by reason of the Disability of such Grantee, such Grantee’s Options that have not previously terminated shall fully vest, and shall be exercisable for a period of one year after such termination of employment or other relationship, subject to earlier termination of such Options as provided in Section 10.2 hereof. Whether a termination of employment or other relationship is considered to be by reason of Disability for purposes of the Plan shall be determined by the Board, whose determination shall be final, binding and conclusive.

10.7. Limitations on Exercise of Option.

Notwithstanding any other provision of the Plan, in no event may any Option granted pursuant to the amended and restated Plan be exercised, in whole or in part, prior to the date on which the amended and restated Plan is approved by the stockholders of the Company as provided in Section 5.1 hereof, or after ten years following the date upon which any Option is granted, or after the occurrence of an event referred to in Section 20 hereof which results in termination of the Option.

10.8. Method of Exercise.

An Option that is exercisable may be exercised by the Grantee’s delivery to the Company of written notice of exercise on any business day, at the Company’s principal office, addressed to the attention of the Board. Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares of Stock for which the Option is being exercised. The minimum number of shares of Stock with respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser of (i) 100 shares or such lesser number set forth in the applicable Award Agreement and (ii) the maximum number of shares of Stock available for purchase under the Option at the time of exercise. Payment of the Option Price for the shares of Stock purchased pursuant to the exercise of an Option shall be made (a) in cash or in cash equivalents acceptable to the Company; (b) to the extent permitted by law and at the Board’s discretion, through the actual or constructive tender to the Company of shares of Stock, which shares of Stock, if acquired from the Company, shall have been held for at least six months prior to such tender and which shall be valued, for purposes of determining the extent to which the Option Price has been paid thereby, at their Fair Market Value on the date of exercise; or (c) to the extent permitted by law and at the Board’s discretion, by a combination of the methods described in clauses (a) and (b) above.

- 13 -

Except as otherwise provided in the applicable Award Agreement as approved by the Board, and subject to the limitation provided in the last sentence of this paragraph with regard to the Company’s Executive Officers and Directors, if at the time of exercise the Stock is publicly traded on the OTC Bulletin Board, The NASDAQ Stock Market, Inc., an established securities exchange or any other market, the Grantee may exercise an Option by delivering a written direction to the Company that such Option will be exercised pursuant to a “cashless” exercise/sale procedure (pursuant to which funds to pay for exercise of the option shall be delivered to the Company by a broker upon receipt of stock certificates from the Company) or a “cashless” exercise/loan procedure (pursuant to which the Grantee shall obtain a margin loan from a broker to fund the exercise). Such a procedure shall be effectuated through a licensed broker acceptable to the Company. The certificate or certificates for the shares of Stock for which the Option is exercised shall be delivered to such broker as the agent for the individual exercising such Option and the broker shall deliver to the Company cash (or cash equivalents acceptable to the Company) equal to the Option Price for the shares of Stock purchased pursuant to the exercise of such Option, plus the amount (if any) of federal and other taxes that the Company may, in its judgment, be required to withhold with respect to the exercise of such Option. The Company’s Executive Officers and Directors shall not be permitted to use the “cashless” method of exercise described in this paragraph without the express prior consent of the Board.

Any attempt to exercise any Option granted hereunder other than as set forth above shall be invalid and of no force and effect.

10.9. Rights as a Stockholder; Dividend Equivalents.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, an individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid and issued to such individual. Except as provided in Section 20 hereof, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance. However, the Board may, on such conditions as it deems appropriate, provide that a Grantee shall receive a benefit in lieu of cash dividends that would have been payable on any or all shares of Stock subject to the Grant if such shares of Stock had been outstanding. Without limiting the generality of the foregoing, the Board may provide for payment to the Grantee of amounts representing such dividends, either currently or in the future, or for the investment of such amounts on behalf of the Grantee.

- 14 -

10.10. Delivery of Stock Certificates.

After the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a certificate or certificates evidencing such Grantee’s ownership of the shares of Stock subject to such Option.

11. TRANSFERABILITY OF OPTIONS

11.1. General Rule.

Except as provided in Section 11.2 hereof, during the lifetime of a Grantee, only such Grantee (or, in the event of such Grantee’s legal incapacity or incompetency, such Grantee’s guardian or legal representative) may exercise an Option. Except as provided in Section 11.2 hereof, no Option shall be assignable or transferable by the Grantee to whom such Option is granted, other than by will or the laws of descent and distribution.

11.2. Family Transfers.

To the extent permitted by the Board and under such terms and conditions as may be imposed by the Board, a Grantee may transfer all or part of an Option that is not an Incentive Stock Option to (i) any Immediate Family Member, (ii) any trust in which Immediate Family Members have more than 50% of the beneficial interest, (iii) any foundation in which Immediate Family Members (or the Grantee) control the management of the assets or (iv) any other entity in which Immediate Family Members (or the Grantee) own more than 50% of the voting interests; provided that (a) there may be no consideration for any such transfer, and (b) subsequent transfers of transferred Options or transfers of an interest in a trust, foundation or other entity to which an Option has been transferred, except those transfers effectuated in accordance with this Section 11.2 or by will or the laws of descent and distribution, are prohibited. Following such transfer, any such Option shall continue to be subject to the same terms and conditions that were applicable to such Option immediately prior to such transfer, provided that, for purposes of this Section 11.2, the term “Grantee” shall be deemed to refer to the transferee of such Option. The events of termination of employment or other relationship referred to in Section 10.4 hereof shall continue to be applicable with respect to the original Grantee, following which events the applicable Option shall be exercisable by the transferee thereof only to the extent and for the periods specified in Section 10.4, 10.5 or 10.6 hereof.

12. RESTRICTED STOCK

12.1. Grant of Restricted Stock or Stock Units.

The Board from time to time may grant Restricted Stock or Stock Units to persons eligible to receive Grants under Section 6 hereof, subject to such restrictions, conditions and other terms as the Board may determine.

- 15 -

12.2. Restrictions.

At the time a Grant of Restricted Stock or Stock Units is made, the Board shall establish a period of time (the “Restricted Period”) applicable to such Restricted Stock or Stock Units. Each Grant of Restricted Stock or Stock Units may be subject to a different Restricted Period. At the time a Grant of Restricted Stock or Stock Units is made, the Board may, in its sole discretion, prescribe restrictions in addition to or other than the expiration of the Restricted Period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Stock or Stock Units. Subject to Section 15 hereof, the Board also may, in its sole discretion, shorten or terminate the Restricted Period or waive any other restrictions applicable to all or any portion of the Restricted Stock or Stock Units. Neither Restricted Stock nor Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other restrictions prescribed by the Board with respect to such Restricted Stock or Stock Units.

12.3. Restricted Stock Certificates.

Promptly after the Grant Date, the Company shall issue, in the name of each Grantee to whom Restricted Stock has been granted, certificates representing the total number of shares of Restricted Stock granted to such Grantee. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends complying with the applicable securities laws and regulations and making appropriate reference to the restrictions imposed under the Plan and such Award Agreement.

12.4. Rights of Holders of Restricted Stock.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, holders of shares of Restricted Stock shall have the right to vote such shares of Restricted Stock and the right to receive any dividends declared or paid with respect to such shares of Restricted Stock. The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions which are applicable to such Restricted Stock. All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares or other similar transaction shall be subject to the restrictions applicable to the original Grant.

- 16 -

12.5. Rights of Holders of Stock Units.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, holders of Stock Units shall have no rights as stockholders of the Company. The Board may provide in an Award Agreement evidencing a Grant of Stock Units that the holder of such Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding shares of Stock, a cash payment for each Stock Unit held equal to the per-share dividend paid on the shares of Stock. Such Award Agreement may also provide that such cash payment shall be deemed reinvested in additional Stock Units at a price per unit equal to the Fair Market Value of a share on the date that such dividend is paid.

12.6. Termination of Employment or Other Relationship for a Reason Other than Death or Disability.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, upon the termination of a Grantee’s employment or other relationship with the Company and its Subsidiaries, in either case other than, in the case of individuals, by reason of death or Disability, any Restricted Stock or Stock Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of such Restricted Stock or Stock Units, the Grantee shall have no further rights with respect to such Grant, including, without limitation, any right to vote such Restricted Stock or any right to receive dividends with respect to Restricted Stock or Stock Units. Whether a leave of absence or leave on military or government service shall constitute a termination of employment or other relationship for purposes of the Plan shall be determined by the Board, whose determination shall be final, binding and conclusive. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if the Grantee is immediately thereafter employed with the Company, a Subsidiary or a Service Provider, or is engaged as a Service Provider or an Outside Director. Whether a termination of a Grantee’s employment or other relationship with the Company and its Subsidiaries shall have occurred shall be determined by the Board, whose determination shall be final, binding and conclusive.

12.7. Rights in the Event of Death.

If a Grantee dies while employed by the Company, a Subsidiary or a Service Provider, or while serving as a Service Provider, all Restricted Stock or Stock Units granted to such Grantee shall fully vest on the date of death unless provided otherwise in the applicable Award Agreement relating to such Restricted Stock or Stock Units as approved by the Board. Upon such vesting, the shares of Stock represented thereby shall be deliverable in accordance with the terms of the Plan to the executors, administrators, legatees or distributees of the Grantee’s estate.

- 17 -

12.8. Rights in the Event of Disability.

Unless otherwise provided in the applicable Award Agreement as approved by the Board, if a Grantee’s employment or other relationship with the Company, a Subsidiary or a Service Provider, or service as a Service Provider, is terminated by reason of the Disability of such Grantee, such Grantee’s then unvested Restricted Stock or Stock Units shall be fully vested.

12.9. Delivery of Shares and Payment Therefor.

Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to Restricted Stock or Stock Units shall lapse, and, unless otherwise provided in the applicable Award Agreement relating to such Restricted Stock or Stock Units as approved by the Board, upon payment by the Grantee to the Company, in cash or by check, of the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted Stock or Stock Units or (ii) the purchase price, if any, specified in such Award Agreement, a certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be. In the discretion of the Board, if the purchase price is par value for the Restricted Stock or Stock Units, such purchase price may be deemed paid in consideration for past Services rendered to the Company or an Affiliate.

13. STOCK APPRECIATION RIGHTS

13.1. Grant of Stock Appreciation Rights.

The Board may from time to time grant SARs to persons eligible to receive grants under Section 6 hereof, subject to the provisions of this Section 13 and to such restrictions, conditions and other terms as the Board may determine.

13.2. Nature of a Stock Appreciation Right.

An SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (x) the Fair Market Value of one share of Stock on the date of exercise over (y) the grant price of the SAR, as determined by the Board. Unless the Board provides otherwise in the Award Agreement, the grant price of an SAR shall not be less than the Fair Market Value of a share of Stock on the Grant Date.

13.3. Terms and Conditions Governing SARs.

The Board shall determine at the Grant Date or thereafter (i) the time or times at which and the circumstances under which an SAR may be exercised in whole or in part (including exercise based on achievement of performance objectives or future service requirements), (ii) the time or times at which and the circumstances under which an SAR

- 18 -

shall cease to be exercisable, (iii) the method of exercise, (iv) the method of settlement, (v) the form of consideration payable in settlement, (vi) whether or not an SAR shall be in tandem or in combination with any other Grant, and (vii) any other terms and conditions of any SAR.

14. UNRESTRICTED STOCK

The Board may, in its sole discretion, grant Stock (or authorize the Company to sell Stock at par value or such other higher purchase price determined by the Board) free of restrictions other than those required under federal or state securities laws (“Unrestricted Stock”) to persons eligible to receive grants under Section 6 hereof. Unrestricted Stock may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to the Grantee thereof.

15. PERFORMANCE AND ANNUAL INCENTIVE AWARDS

15.1. Performance Conditions.

The right of a Grantee to exercise or receive a grant or settlement of a Grant, and the timing thereof, may be subject to such performance conditions as may be specified by the Board. The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance conditions, except as limited under Section 15.2 hereof in the case of a Performance Award or an Annual Incentive Award intended to qualify under Code section 162(m). If and to the extent required under Code section 162(m), any power or authority relating to a Performance Award or an Annual Incentive Award intended to qualify under Code section 162(m) shall be exercised by the Committee and not the Board.

15.2. Performance or Annual Incentive Awards Granted to Designated Covered Employees.

If and to the extent that the Committee determines that a Performance Award or an Annual Incentive Award to be granted to a Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code section 162(m), the grant, exercise and/or settlement of such Performance Award or Annual Incentive Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 15.2. The performance goals for such Performance or Annual Incentive Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 15.2. Performance goals shall be objective and shall otherwise meet the requirements of Code section 162(m) and regulations thereunder, including the

- 19 -

requirement that the level or levels of performance targeted by the Committee shall result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Performance or Annual Incentive Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance or Annual Incentive Awards. Performance goals may differ for Performance or Annual Incentive Awards granted to any one Grantee or to different Grantees.

One or more of the following business criteria for the Company, on a consolidated basis, and/or specified subsidiaries, business units or business lines of the Company (except with respect to the total stockholder return and earnings per share criteria), shall be used exclusively by the Committee in establishing performance goals for such Performance or Annual Incentive Awards: (i) total stockholder return; (ii) such total stockholder return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard & Poor’s 500 Stock Index; (iii) net income; (iv) pretax earnings; (v) earnings before interest expense, taxes, depreciation and amortization; (vi) pretax operating earnings after interest expense and before bonuses, service fees, and extraordinary or special items; (vii) operating margin; (viii) earnings per share; (ix) return on equity; (x) return on capital; (xi) return on investment; (xii) operating earnings; (xiii) working capital; (xiv) revenue; (xv) financial ratios as provided in the Company’s credit agreements; (xvi) minimum cash and cash equivalents, whether restricted or unrestricted; and (xvii) cost savings in connection with acquisitions of other businesses or companies.

Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Performance or Annual Incentive Awards, or at such other date as may be required or permitted for “performance-based compensation” under Code section 162(m). The Committee may establish a Performance Award or an Annual Incentive Award pool, which shall be an unfunded pool, for purposes of measuring Company performance in connection with Performance or Annual Incentive Awards. Settlement of such Performance or Annual Incentive Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance or Annual Incentive Awards. The Committee shall specify the circumstances in which such Performance or Annual Incentive Awards shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a performance period or settlement of Performance Awards.

15.3. Written Determinations.

All determinations by the Committee as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards, and the amount of any Annual Incentive Award pool or potential individual Annual Incentive Awards and the amount of final Annual Incentive Awards, shall be made in

- 20 -

writing in the case of any Award intended to qualify under Code section 162(m). To the extent required to comply with Code section 162(m), the Committee may delegate any responsibility relating to such Performance Awards or Annual Incentive Awards.

15.4. Status of Section 15.2 Awards Under Code Section 162(m).

It is the intent of the Company that Performance Awards and Annual Incentive Awards under Section 15.2 hereof which are granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute “qualified performance-based compensation” within the meaning of Code section 162(m) and regulations thereunder. Accordingly, the terms of Section 15.2, including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Grantee will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a Person designated by the Committee, at the time of grant of a Performance Award or an Annual Incentive Award, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement relating to such Performance Award or Annual Incentive Award does not comply or is inconsistent with the requirements of Code section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements or regulations.

16. PARACHUTE LIMITATIONS

If the Grantee is a “disqualified individual” (as defined in Code section 280G(c)), any Grant and any other right to receive any payment or benefit under the Plan shall not vest or become exercisable (i) to the extent that the right to vest or any other right to any payment or benefit, taking into account all other rights, payments or benefits to or for the Grantee, would cause any payment or benefit to the Grantee under the Plan to be considered a “parachute payment” within the meaning of Code section 280G(b)(2) as then in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under any Award Agreements, the Plan and all other rights, payments or benefits to or for the Grantee would be less than the maximum after-tax amount that could be received by the Grantee without causing the payment or benefit to be considered a Parachute Payment. In the event that, but for the provisions of this Section 16, the Grantee would be considered to have received a Parachute Payment under any Award Agreements that would have the effect of decreasing the after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the Grantee’s sole discretion, to designate any rights, payments or benefits under any Award Agreements, the Plan, any other agreements and any benefit arrangements to be reduced or eliminated so as to avoid having the payment or benefit to the Grantee under any Award Agreements be deemed to be a Parachute Payment.

- 21 -

17. TERMINATION FOR CAUSE

If a Grantee’s employment with the Company or an Affiliate is terminated for Cause (as defined in this Section 17), all vested and unvested Options and SARs held by the Grantee shall terminate immediately. In addition, upon a termination for Cause, the Grantee shall forfeit to the Company an amount equal to the aggregate gain the Grantee recognized pursuant to the vesting or exercise of Grants during the twelve (12) month period preceding the Grantee’s termination of employment (the “Look-back Period”). For this purpose, the aggregate gain recognized by the Grantee shall be equal to the sum of the following: (i) the aggregate spread value of all Options and SARs exercised by the Grantee (including Options and SARs exercised by a family member or family trust) during the Look-back Period, in which the spread value is the difference between the Fair Market Value of the Stock on the date of the Option or SAR exercise and the Option Price or SAR exercise price; (ii) the aggregate value of all shares of Restricted Stock owned by the Grantee that vested during the Look-back Period, minus the purchase price, if any, of such shares of Restricted Stock; and (iii) the aggregate value of all shares of Stock or cash delivered to the Grantee pursuant to Grants of Stock Units or Unrestricted Stock during the Look-back Period. “Cause” means, as determined by the Board and unless otherwise provided in an applicable employment agreement between the Grantee and the Company or an Affiliate (whether or not such employment agreement is effective before the Effective Date), (a) the Grantee’s gross negligence or willful misconduct in connection with the performance of the Grantee’s duties, (b) the Grantee’s conviction of a criminal offense (other than minor traffic offenses) or (c) the Grantee’s material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreement between the Grantee and the Company or an Affiliate. Any amount required to be paid by the Grantee to the Company pursuant to this Section 17 shall be reduced by any amount repaid by the Grantee to the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.

18. REQUIREMENTS OF LAW

18.1. General.

The Company shall not be required to sell or issue any shares of Stock under any Grant if the sale or issuance of such shares of Stock would constitute a violation by the Grantee, any other Person exercising a right emanating from such Grant, or the Company of any provision of any law or regulation of any governmental authority, including, without limitation, any federal or state securities laws or regulations. If at any time the Board shall determine, in its sole discretion, that the listing, registration or qualification of any shares of Stock subject to a Grant on The NASDAQ Stock Market, Inc. or any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares of Stock

- 22 -

hereunder, no shares of Stock may be issued or sold to the Grantee or any other Person exercising a right emanating from such Grant unless such listing, registration, qualification, consent or approval shall have been effectuated or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Grant. Without limiting the generality of the foregoing, upon the exercise of any Option or any SAR that may be settled in shares of Stock or the delivery of any Restricted Stock or shares of Stock underlying Stock Units, unless a registration statement under the Securities Act is in effect with respect to the shares of Stock covered by such Grant, the Company shall not be required to sell or issue such shares of Stock unless the Board has received evidence satisfactory to it that the Grantee or any other Person exercising a right emanating from such Grant may acquire such shares of Stock pursuant to an exemption from registration under the Securities Act. Any such determination by the Board shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or an SAR or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in shares of Stock) shall not be exercisable until the shares of Stock covered by such Option (or SAR) are registered or are exempt from registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

18.2. Rule 16b-3.

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Grants pursuant to the Plan and the exercise of Options and SARs granted hereunder shall qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, such provision or action shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify the Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement. Those provisions of the Plan that make express reference to Rule 16b-3 under the Exchange Act shall apply only to Reporting Persons of the Company.

19. AMENDMENT AND TERMINATION OF THE PLAN

The Board may amend, suspend or terminate the Plan as to any shares of Stock as to which Grants have not been awarded. Except as permitted under Section 20 hereof, no amendment, suspension or termination of the Plan shall alter or impair any rights or

- 23 -

obligations under any Grant previously awarded under the Plan. However, with the consent of the Grantee, the Board may amend any outstanding Award Agreement in a manner not inconsistent with the Plan. Amendments to the Plan not requiring stockholder approval shall become effective when the Board adopts such amendments. Unless otherwise determined by the Board, amendments requiring stockholder approval shall become effective when the Board adopts such amendments, but no Incentive Stock Option issued after the date of any such amendment may be exercised (unless the Option could have been exercised without regard to the amendment) unless and until such amendment shall have been approved by the Company’s stockholders. If such stockholder approval is not obtained within one year after the Board’s adoption of such amendment, any Incentive Stock Option granted on or after the date of such amendment shall be canceled to the extent that such amendment to the Plan was required to enable the Company to grant such Incentive Stock Option.

20. EFFECT OF CHANGES IN CAPITALIZATION

20.1. Capitalization Change.

Subject to Section 20.2 hereof, if there is a Capitalization Change, (i) a proportionate adjustment shall be made in the number and kind of shares which may be delivered under Section 4 hereof and in the Grant limits under Section 4 hereof and (ii) such adjustment shall be made in the number and kind of and price of shares subject to outstanding Grants as may be determined to be appropriate and equitable by the Board, in its sole discretion, to prevent dilution or enlargement of existing rights. Without limiting the generality of the foregoing, the Company shall adjust the number of shares of Stock subject to outstanding Grants and shall use its reasonable efforts otherwise to adjust such outstanding Grants so that the proportionate interest of the holder of such Grants immediately after a Capitalization Change shall be substantially the same as immediately before such Capitalization Change. Any adjustment in outstanding Grants shall not change the aggregate exercise price, if any, payable with respect to shares subject to the unexercised portion of such Grants, but shall include a proportionate adjustment in the exercise price per share of such Grants. In making adjustments under this Section 20.1, the Company shall follow the rules of Code section 424(a) and the regulations under that section (whether or not any Option is an Incentive Stock Option).

20.2. Reorganizations in Which the Company is the Surviving Corporation not Involving a Change of Ownership.

If the Company is the surviving corporation in any reorganization, merger or consolidation that is not a Corporate Transaction, any Option or SAR granted under the Plan shall apply to the securities that a holder of the number of shares of Stock subject to such Option or SAR would have been entitled to receive immediately following the transaction if the Grantee had exercised such Option or SAR in full immediately before the transaction, with an adjustment of the Option Price of such Option or exercise price

- 24 -

per share of such SAR so that the aggregate exercise price of such Option or SAR shall not change. In making adjustments under this Section 20, the Company shall follow the rules of Code section 424(a) and the regulations under that section (whether or not the Option is an Incentive Stock Option). In the event of a transaction described in this Section 20.2, Stock Units shall be adjusted so as to apply to the securities that a holder of the number of shares of Stock subject to the Stock Units would have been entitled to receive immediately following such transaction.

20.3. Reorganization in Which the Company is not the Surviving Corporation or Involving a Change of Ownership; Sale of Assets or Stock.

Upon the occurrence of any Corporate Transaction, the Plan and all outstanding Options and SARs shall terminate, unless the Company or its Successor agrees in writing in connection with the Corporate Transaction to continue the Plan and/or to assume the Options and SARs or to substitute new Options and SARs covering the capital stock of a Successor and to make appropriate equitable adjustments in the number and kind of shares covered by the Options and SARs and the exercise prices of the Options and SARs, in which event the Plan, Options and SARs shall continue on such basis. If the Options, SARs and the Plan are terminated under this Section 20: (i) the vesting of all outstanding Options and SARs shall be accelerated as if each individual holding an outstanding Option or SAR had been employed or provided services for an additional twelve (12) months at the time of such termination; and (ii) each individual holding an outstanding Option or SAR shall be entitled to exercise such Option or SAR, to the extent such Option or SAR is vested, for at least 30 days before the Option or SAR terminates, except that the Board may impose reasonable limitations on a Grantee’s right to exercise an unvested Option or SAR to the extent necessary to avoid the penalty tax that Code section 4999 imposes on excess parachute payments. The Board may provide for additional accelerated vesting in the event of a termination under this Section 20 in an Award Agreement or an applicable employment agreement between the Grantee and the Company or an Affiliate (whether or not such employment agreement is effective before the Effective Date). The Board shall send written notice of a Corporate Transaction that will result in such a termination to all individuals who hold Options or SARs not later than the time when the Company mails notice of the proposed transaction to its stockholders. Unvested shares of Restricted Stock and unvested Stock Units shall not become vested or forfeited in the case of a Corporate Transaction unless otherwise provided in the Award Agreement with respect to such shares of Restricted Stock or Stock Units or in an applicable employment agreement between the Grantee and the Company or an Affiliate (whether or not such employment agreement is effective before the Effective Date). The treatment of Performance and Annual Incentive Awards in the case of a Corporate Transaction shall be set forth in the applicable Award Agreement.

- 25 -

20.4. Adjustments.

The Board shall make the adjustments to the Stock or securities under this Section 20, and the Board’s reasonable determination in that respect shall be final, binding and conclusive. Neither the Company nor any Successor shall be required to issue any fractional shares of Stock or units of other securities, and any fractions resulting from any adjustment shall be eliminated in each case by rounding upward to the nearest whole share or unit (except that such rounding shall be downward in the case of an Incentive Stock Option).

20.5. No Limitations on Company.

The awarding of Grants pursuant to the Plan shall not affect or limit in any way the Company’s right or power to make adjustments, reclassifications, reorganizations or changes of the Company’s capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of the Company’s business or assets, without the consent of any Grantee.

21. DISCLAIMER OF RIGHTS

No provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate thereof, or to interfere in any way with any contractual or other right or authority of the Company, a Subsidiary or a Service Provider either to increase or decrease the compensation or other payments to any Grantee at any time, or to terminate any employment or other relationship between any Grantee and the Company or any Affiliate thereof. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement or employment agreement, no Grant awarded under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a director, officer, consultant or employee of the Company or a Subsidiary. The obligation of the Company to pay any benefits pursuant to the Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third-party trustee or otherwise hold any amounts in trust or escrow for payment to any participant or beneficiary under the terms of the Plan. No Grantee shall have any of the rights of a stockholder with respect to the shares of Stock subject to an Option or SAR except to the extent such shares of Stock shall have been issued upon the exercise of such Option or SAR.

22. NONEXCLUSIVITY OF THE PLAN

Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements

- 26 -

(which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of Stock options otherwise than under the Plan.

23. WITHHOLDING TAXES

The Company or a Subsidiary, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to Restricted Stock or Stock Units or upon the exercise of an Option or SAR or the grant of Unrestricted Stock. At the time of such vesting, lapse or exercise, the Grantee shall pay to the Company or such Subsidiary, as the case may be, any amount that the Company or such Subsidiary may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or such Subsidiary, which may be withheld by the Company or such Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or such Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering to the Company or such Subsidiary shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 23 may satisfy such Grantee’s withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirement.

24. CAPTIONS

The use of captions in the Plan or any Award Agreement is for convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

25. OTHER PROVISIONS

Each Grant awarded under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.

26. NUMBER AND GENDER

With respect to words used in this Plan, the singular form shall include the plural form and, the masculine gender shall include the feminine gender, as the context requires.

- 27 -

27. SEVERABILITY

If any provision of the Plan or any Award Agreement shall be finally determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

28. GOVERNING LAW

The validity and construction of the Plan and the instruments evidencing the Grants awarded hereunder shall be governed by the laws of the State of Delaware (without giving effect to the choice of law provisions thereof).

* * * *

- 28 -

The Plan was duly adopted and approved by the Board of Directors of the Company as of October 29, 2002. The Plan was amended and restated effective October 28, 2003 and on November 7, 2006.

The Plan, as amended and restated effective October 28, 2003, was duly approved by the stockholders of the Company on December 18, 2003.

/s/ J. Thomas Mullis

Secretary

- 29 -

EX-10.23

Exhibit 10.23

ITC^DeltaCom, Inc.

Description of Non-Employee Director Compensation

Non-employee directors of ITC^DeltaCom, Inc. (the “Company”) who are not members of or affiliated with the Welsh, Carson, Anderson & Stowe group of the Company’s stockholders or with Tennenbaum Capital Partners, LLC receive cash fees for their service on the board of directors of the Company and on committees of the board. All independent directors are eligible to receive equity-based fees pursuant to the ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan for their board and committee service.

Independent directors receive annual fees of $30,000, fees of $1,000 for each board or committee meeting attended in person and fees of $500 for each board or committee meeting attended by conference telephone. The chairman of the audit committee receives an additional annual fee of $5,000. All such fees are paid in cash. All directors are entitled to reimbursement for their reasonable out-of-pocket expenditures incurred in connection with their board and committee service.

Independent directors also are eligible to receive awards of restricted stock units and other awards pursuant to the Amended and Restated Stock Incentive Plan upon their initial appointment to the board of directors and from time to time thereafter. Such awards, if any, are made at the discretion of the board.

EX-10.24

Exhibit 10.24

ITC^DeltaCom, Inc.

Description of Certain Management Compensatory Plans and Arrangements

Components of Executive Compensation

The executive compensation program of ITC^DeltaCom, Inc., (the “Company”) principally includes a base salary and eligibility for annual cash bonuses and long-term incentive compensation in the form of restricted stock units, stock options and other equity-based awards issued under the ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan. The Company also provides its executive officers with executive benefits, including perquisites, some of which are not generally available to more junior employees. Certain terms of compensation for all of the Company’s executive officers, other than the Senior Vice President-Finance, are set forth in employment agreements between the Company and the executives, which have been filed as exhibits to the Company’s reports filed with the Securities and Exchange Commission.

Base Salary. Base salaries of executive officers are initially determined by evaluating the responsibilities of the position, the experience and knowledge of the executive, and the competitive marketplace for executive talent, including a comparison to base salaries for comparable positions at companies in the Company’s peer group. Base salaries for executive officers are reviewed annually by the compensation committee based upon, among other things, individual performance and responsibilities.

Annual Cash Bonuses. The Company pays annual cash bonuses to its Chief Executive Officer, other executive officers, and other employees under the Company’s annual cash bonus plan. Under the plan, eligible employees, including the Company’s executive officers and other senior executives, generally are entitled to receive a cash bonus in an amount up to a specified maximum percentage of the employee’s annual base salary, subject to the Company’s achievement of tiered financial performance goals, including revenue, EBITDA (generally defined for these purposes as the sum of net income (or net loss) after eliminating interest expense, income tax expense, depreciation expense, amortization expense, and specified extraordinary and non-recurring items), cash flow and capital budget targets. If the Company achieves the financial performance goals at the highest established tier, the employee will be entitled to receive a cash bonus that is equal to 100% of the specified maximum percentage of the employee’s annual base salary. If the Company achieves the financial performance goals at a lower tier, the percentage of the specified maximum percentage of the employee’s annual base salary that the employee will be entitled to receive as a cash bonus will be reduced to the percentage attributed to that tier. Performance objectives are approved annually by the compensation committee, and factors other than those set forth above may be considered.

Long-Term Incentive Compensation. The Company maintains the ITC^DeltaCom, Inc. Amended and Restated Stock Incentive Plan for the benefit of its executive officers and other employees and maintains the ITC^DeltaCom, Inc. Executive Stock Incentive Plan for the benefit of the Chief Executive Officer, Executive Vice President and Chief Financial Officer, and Executive Vice President-Operations. Awards under the plans are equity-based awards and are made by the compensation committee, subject to the terms of any applicable employment agreements. In determining the amount of stock options, restricted stock units and other equity-based awards under the Amended and Restated Stock Incentive Plan, the compensation committee considers each executive’s current performance and anticipated future contributions to the Company’s performance, as well as the amount and terms of other equity-based awards previously granted to the executive by the Company.

Other Compensatory Plans

The Company’s executive officers also are eligible to participate in the Company’s 401(k) plan and other benefit plans, which are available to all regular Company employees.

EX-21

Exhibit 21

Subsidiaries of ITC^DeltaCom, Inc.

Interstate FiberNet, Inc., a Delaware corporation.

DeltaCom, Inc., an Alabama corporation.

DeltaCom Information Systems, Inc., an Alabama corporation

BTI Telecom Corp., a North Carolina corporation

Business Telecom, Inc., a North Carolina corporation

Business Telecom of Virginia, Inc., a Virginia corporation

EX-23

Exhibit 23

[Letterhead of BDO Seidman, LLP]

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ITC^DeltaCom, Inc.

Huntsville, Ala.

We hereby consent to the incorporation by reference in the Registration Statements on Form
S-8 (No. 333-101007 and 333-111329 and 333-139202) of ITC^DeltaCom, Inc. of our report dated March 22, 2007, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ BDO Seidman, LLP

Atlanta, Georgia

March 28, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Randall E. Curran, certify that:

1. I have reviewed the annual report on Form 10-K of ITC^DeltaCom, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 29, 2007

/s/ Randall E. Curran

Randall E. Curran

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard E. Fish, Jr., certify that:

1. I have reviewed the annual report on Form 10-K of ITC^DeltaCom, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 29, 2007

/s/ Richard E. Fish, Jr.

Richard E. Fish, Jr.

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-32

Exhibit 32

Written Statement of Chief Executive Officer and Chief Financial Officer

Pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the

Securities Exchange Act of 1934 and 18 U.S.C. 1350

Each of the undersigned, the Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of ITC^DeltaCom, Inc., hereby certifies that, on the date hereof:

1. The annual report on Form 10-K of ITC^DeltaCom, Inc. for the year ended December 31, 2006 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ITC^DeltaCom, Inc.

Date: March 29, 2007	/s/ Randall E. Curran
	Randall E. Curran Chief Executive Officer
Date: March 29, 2007	/s/ Richard E. Fish, Jr.
	Richard E. Fish, Jr. Executive Vice President and Chief Financial Officer