The telecommunications industry is comprised of companies involved in the transmission of voice, data and video communications over various media and through various technologies. There are two predominant types of local telephone service providers, or carriers, in the telecommunications industry: ILECs and CLECs. An ILEC refers to the regional bell operating companies, which were the local telephone companies created from the break up of AT&T in 1984 and independent telephone companies which sell local telephone service. These ILECs were the traditional monopoly providers of local telephone service prior to the break up of AT&T.

In general, telecommunications service in rural areas is more costly to provide than service in urban areas because the lower customer density necessitates higher capital expenditures on a per customer basis. In rural areas, local access line density is relatively low, typically less than 100 local access lines per square mile versus urban areas that can be in excess of 300 local access lines per square mile. This low customer density in rural areas means that switching and other facilities serve few customers. It also means that a given length of cable, connecting the telephone company office to end users, serves fewer customers than it would in a more densely populated area. As a result, the average operating and capital cost per line is higher for RLECs than non-rural operators. An industry source estimates that the total investment cost per loop for rural operators is $5,000, compared to $3,000 for non-rural carriers. The amount is estimated to be as high as $10,000 for the smallest rural carriers.

The long distance telecommunications market is highly competitive. Competition in the long distance business is based primarily on price, although service bundling, branding, customer service, billing service and quality play a role in customers’ choices.

The Company offers the local customer the ability to originate and receive an unlimited number of calls within a defined local calling area. The customer is charged a flat monthly fee for basic service, including local calls, and service charges for custom calling features, value added services and local private line services.

The Company offers long distance and other carriers the opportunity to use its Illinois network to originate or terminate long distance calls in Illinois service area. The Company offers intrastate and interstate long distance services provided to local customers in Illinois. The Company offers DSL, non-local private line service, dial-up Internet access and frame relay networks and related enhanced Internet services. The Company offers other services, including billing and collection services and commissions from the sale of advertising for yellow and white pages directories.

The Company serves residential and business customers in east Texas and rural and suburban areas surrounding Houston. The Company sells directory advertising and publishes yellow and white pages directories in and around its Texas RLECs’ service areas. The directories are each published once per year and have a combined circulation in excess of 400,000. The Company provides connectivity to customers within Texas over a fiber optic transport network consisting of approximately 2,500 route-miles of fiber. This transport network supports the Company’s long distance, Internet access and data services in Texas and provides bandwidth on a wholesale basis to third party customers, including national long distance and wireless carriers.

The Company provides local and long distance service and automated collect calling from county jails and state prisons in Illinois under multi-year contracts. The Company offers both live and automated local and long distance operator assistance in Texas and national directory assistance on a wholesale and retail basis to ILECs, CLECs, long distance companies and payphone providers.

The Company provides telemarketing and order fulfillment services to customers nationwide. The Company sells, installs and maintains telecommunications equipment and wiring to residential and business customers in Illinois service area and in nearby, larger markets including Champaign, Decatur and Springfield, Illinois.

Operating expenses increased by $39.0 million, to $67.4 million for the three months ended March 31, 2005 from $28.4 for the three months ended March 31, 2004.

Income from operations increased $6.7 million, to $12.4 million for the three months ended March 31, 2005 from $5.7 million for the three months ended March 31, 2004.

Interest expense, net increased by $8.6 million, to $11.4 million for the three months ended March 31, 2005 from $2.8 million for the three months ended March 31, 2004.

Net income decreased by 61.1%, or $1.1 million, to $0.7 million for the three months ended March 31, 2005 from $1.8 million for the three months ended March 31, 2004.