American Fiber Systems Applauds GAO Analysis of Dedicated Access Based Competition.

- GAO analysis suggests that competition in dedicated access services does not promote effective competition. Calls upon the FCC to define "effective competition" by true network facilities access into buildings and not by resale of copper loop, incumbent dedicated access resale or co-location standards as economically modeled but empirically unchallenged until now-

- Only 6% of office buildings in the United States are serviced by more than one network facilities based competitor after ten years of Federal deregulation policy-

ROCHESTER, N.Y. -- Privately held American Fiber Systems, Incorporated, a leading provider of metropolitan fiber optic network infrastructure and local access services in 12 states, today applauded the released United States Government Accountability Office (GAO) analysis titled "FCC Needs to Improve Its Ability to Monitor and Determine the Extent of Competition in Dedicated Access Services." The report is critical of present state last mile dedicated access competition, the lack of true facilities based competition and meaningful empirical measures of effective competition by the FCC.

The analysis calls into question dedicated access based "virtual" competition and dedicated access resale as a means of measure for effective competition resulting in less than 6% of business buildings being served by one or more network owners. The 82-page United States GAO report may be found at www.gao.gov/new.items/d0780.pdf or at http://www.americanfibersystems.com/GAO2006.pdf.

"American Fiber Systems is pleased to see GAO empirical underpinnings which suggest that after ten years of deregulation effort, the only effective and sustaining ability to compete in local telecommunication requires physical network diversity by ownership," said Dave Rusin, President & CEO for AFS. "We have never been big advocates of arbitrage renting from an ILEC as a form of competition through subsidization by the ILEC."

"Although American Fiber Systems relies principally upon its own fiber optic network facilities, we do use limited dedicated access services purchased from incumbent local exchange carriers, like AT&T, Embarq or Qwest to reach customers not served directly by our fiber optic cable, however our preference would be to extend our fiber access with our wholesale carrier partners."

"With the driving force of consolidation around metropolitan fiber optic facilities ownership along with the GAO analysis as a back drop, it may be time for Congress to act in reformulating what really constitutes effective competition. If Congress were to fiat legislation whereby after a five year period the ILECs would no longer be required to make available dedicated access to competitors, we believe such clarity would create free market capital formation whereby virtual network operators would have an incentive to work with companies who own independent fiber optic networks, build out their own fiber optic networks or create partnerships," Rusin added.

The GAO analysis calls into question the FCC's reluctance to conduct its own empirical findings as stated: "FCC uses various data to assess competition in dedicated access, but these data are limited in their ability to describe the state of competition accurately. For example, these data measure potential competition at one point in time and are not revised or updated, even though competitors may enter bankruptcy or be bought by the incumbent firmC*FCC's data also have limited reliability for assessing competition in dedicated access. Outside parties are often economically interested parties that have an incentive to provide incomplete or biased data. For example, most of the outside parties in the rulemaking procedure on competition in dedicated access are parties that would directly profit from further regulation or deregulation. FCC is limited in its ability to assess the reliability of these parties information. Instead, it relies on other parties to challenge or affirm these data's reliabilities."

"One thing is for certain after reading the GAO report, if our industry remains at status quo, there is little incentive for virtual operators to own or operate competitive facilities. As the ILECs continue to install FTTx networks the reality is that virtual network operators will be stranded on copper as limited incentive exists for independent fiber providers to lease building access or fiber to virtual network operators." Rusin added, "Customers will lack true choice and shareholders of virtual network operator's will end up disadvantaged in the long run."

American Fiber Systems is one of the successful fiber-based metropolitan telecom carriers that is leading in the deployment of local diverse competitive fiber optic networks on a wholesale basis. The data centric company leases metropolitan dark fiber, offers metro IP Ethernet services, SONET services and optical Internet access to competitive carriers and large enterprises in second tier markets.

About American Fiber Systems

American Fiber Systems, a provider of metropolitan fiber optic network infrastructure and wholesale transport services, is dedicated to enabling wireline, wireless carriers and large enterprises achieve a competitive advantage from optical broadband communications technology. AFS has deployed of high-capacity, high-bandwidth metropolitan fiber optic cable in several cities, including Atlanta, GA; Boise, ID; Cleveland, OH; Kansas City KS/MO; Las Vegas, NV; Minneapolis/St. Paul, MN, Nashville, TN; Reno, NV; and Salt Lake City, UT. They connect to a city's most important points of communications presence, including ILEC central offices and wire centers; CLEC POPs; Internet Service Providers (ISP) and data center locations; Inter-exchange "carrier hotels;" wireless providers and cable company head ends; and Fortune 1000 companies. AFS has over 500 capacity enabled on-net buildings. Please visit our website: www.americanfibersystems.com