Broadband Authority Program and Project Update

March 17, 2005

March 2005 2

Mission and Lending Criteria

Mission—attract investment to underserved communities and encourage competition and more affordable broadband services across the state in all markets

Tool for the above—loans made to broadband providers and grants combined with loans in limited areas (using bond sale proceeds and NO general fund dollars for this purpose)

Lending Criteria—adequate cash flow, solid business plan, sufficient borrower equity, guarantees and other security requirements as necessary

March 2005 3

Typical Loan Terms & Conditions

Terms—Senior lender with term loans ranging from 5 to 7 years and 12 to 24 month interest-only draw periods if necessary

Interest Rate—8 percent fixed (also have limited availability of a variable rate currently pegged at less than 5 percent)

Equity—100 percent project financing available but net equity on company balance sheet should equal 20 percent (at a minimum) of loan request.

Guarantees—Typically required but usually NOT collateralized. Operating deficit reserves and other alternatives to personal guarantees utilized on occasion

March 2005 4

$17.7 M Approved Projects

ISP Wireless

PCS Broadband

M-33 Access

Appia Communications

ACD.net

ACD.net WEST

SpeedNet

Michigan Lightwave

Merit Networks

UPLink Services Inc. (seed)

LDMI

Lighthouse Broadband

$10M in Applications

UPLink Services, Inc.

OneWorld

AriaLink

Endless Journey

$10M Near-Term Applications

Additional DDIP Applications

VoEx

Lucre.Net

Emmet Wireless

Grid 4

T2 Communications

NBD Communications

First Step

Michwave

QIC

$6-10M in likely loan applications

Fiber and wireless projects in underserved areas

2nd RFP for

Digital Divide Investment ProgramA

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March 2005 5

ISP Wireless

Project

• $341,836 loan for the expansion of fixed wireless broadband service in seven low-to-moderate income communities

• Purchase of tower antenna and customer premise equipment

Status

• ISP Wireless is expanding customer base

• Internet Service Provider (ISP) business since 1995

• Stable business and revenues

March 2005 6

PCS Broadband

Project• $510,000 loan for the expansion of fixed

wireless broadband service in areas where small-to-medium enterprises (SMEs) are underserved

• Purchase of tower antenna, routers and customer premise equipment

Status• Premise cabling company since 1992

and enterprise phone systems sales since 2000

March 2005 7

M-33 Access

Project• Expanding contract service to

community college and school districts

• Refinancing of existing debt and purchase of equipment (towers, antennae, customer premise equipment)

• $1.3 million loan

Status• Largest wireless broadband network grid

of its kind in the US

• New contract saving schools nearly $1 million and provide higher speed services

Note: Illustrative only – wireless coverage does not blanket entire counties

March 2005 8

ACD.net

Project

• Facilities-based carrier expands DSL service to new markets and within existing areas

• Re-financing of existing debt

• New financing for expansion into new markets, new fiber routes and new equipment

• $1.2 million loan

Status

• Expansions in mid-Michigan complete

• SBC mirroring activity

March 2005 9

ACD.net WEST

Project

• Acquisition of Quantum Connections assets and expansion of broadband service

• $1,681,139 loan

• Project will provide broadband service for business and residential customers

Status

• Nearing completion of acquisition and transition

March 2005 10

Appia Communications

Project

• $758,000 loan to Traverse City-based INSORS, Inc. (dba Appia Communications)

• Expansion and upgrades of network operations centers to expand service and provide redundancy

• Enhanced converged voice and data network services for small and medium-sized enterprises

Status

• Currently offers service in Kalamazoo, Detroit, Traverse City, Chicago and Indianapolis

• Loan expanding footprint into Lansing and Grand Rapids

March 2005 11

SpeedNetProject

• $1.5 million to finance the purchase of non-line-of-sight tower equipment and customer premise equipment and expansion in Tri-City area (Saginaw, Midland, Bay City)

Status

• SpeedNet LLC, with headquarters in Saginaw

• Uses licensed 2.1 GHz, 2.5 GHz and 2.6 GHz MMDS spectrum to provide fixed wireless broadband service

• Currently serves the Alpena, Saginaw and Mount Pleasant areas

March 2005 12

Michigan Lightwave

Project

• “Dark” fiber network in Macomb County

• Michigan Lightwave partnered with Macomb ISD and county government on network

• $826,327 loan for completion and purchase of dark fiber network

• New network will provide high-capacity, low-cost circuits for large enterprises

Status

• Michigan Lightwave, LLC

• Operates successful dark fiber network in Kalamazoo County Project serves 25 new communities in Macomb County

and extends into St. Clair and Oakland Counties

March 2005 13

Merit Networks

Project

• $4.1 million loan approved

• Acquisition of fiber IRUs and construction of laterals to improve their backbone network

Borrower

• Provider of high-speed data services to numerous universities and other public institutions throughout the State of Michigan

• Currently determining whether tax exempt financing possible

March 2005 14

LDMI

Project• Softswitch and broadband

gateways• $5 million loan to build out IP

network• Integrated voice and data services

to Southeastern Lower Michigan• Expand facilities-based

infrastructure

Borrower• Southfield-based Competitive

Local Exchange Carrier (CLEC)• 300 Plus Michigan employees

March 2005 15

UP Link

Project• $815,000 loan requested• Purchase of tower antennae,

customer premise equipment and construction of wireless tower

• $50,000 Seed Loan recipient• Underserved Upper Peninsula market• MBDA Board consideration in March

Borrower• UpLink Services, Inc. • Purchased earlier this year by several

Marquette investors with strong technology and finance background

March 2005 16

Lighthouse Broadband

Project

• $500,000 loan for capital build-out costs to deploy Broadband Over Powerline (BPL) Initiative

• CMS Partnership

• Approved in February

Borrower

• Shpigler Group (dba Lighthouse Broadband)

• Management consulting firm for communications and technology

• Operating two other BPL pilots across the country

• Selected by Consumers Energy to pilot BPL initiative in Grand Ledge and likely St. Johns.

March 2005 17

MBDA current portfolio of approved projects

Total number of counties at least partially impacted by approved loans: 45

Total number of cities impacted by approved loans once networks are built and lit: 150

Total number of loan applications received in last 12 months: 25

Total $ amount of approved projects: $17.7M

Total $ amount in project “pipeline” (approved, received and expected ’05 applications): $35 to $40M

March 2005 18

For More Information:

www.broadbandauthority.org