In recent years, a wide array of new services and technologies has emerged as competitive alternatives to incumbent local exchange carriers, or ILEC, services for consumer and enterprise telephony. The increasingly diverse market now includes wireless, cable telephony, wireline and VoIP companies. As these competitive carriers have expanded their customer base, the amount of traffic exchanged between them has also increased and is expected to grow in the future.

IDC Research estimates that the number of wireless subscribers in the U.S. is expected to grow from 203.9 million as of year end 2005 to over 262.5 million as of year end 2010, representing a compounded annual growth rate, or CAGR, of 5.2%

IDC Research estimates that the number of cable telephony and VoIP subscribers in the U.S. is expected to grow from 4.2 million as of year-end 2005 to approximately 44.0 million by the end of 2010, representing a CAGR of approximately 60%

According to the Local Exchange Routing Guide, or LERG, an industry standard guide used by carriers, there are approximately 1.4 billion telephone numbers assigned to carriers in North America.

Growth in intercarrier traffic switched through ILEC tandems has created switch capacity shortages known in the industry as ILEC “tandem exhaust,” where overloaded ILEC tandems become a bottleneck for competitive carriers. This has increased call blocking and given rise to service quality issues for competitive carriers.

Once connected to the Company’s network, carriers can route their traffic to other destinations (telephone numbers) that are addressable by its network. The Company has an established system for monitoring and tracking customer traffic volumes, and have historically been able to predict these volumes with relative accuracy.

The Company uses proprietary software tools (many of which are patent-pending) to manage and track routing combinations associated with hundreds of millions of telephone numbers. The Company’s services include ongoing customer notification of new routing options that become available as the Company adds new customers to its network or enter new markets.

The Company also provides its customers with invoices, management reports and call detail records in paper and electronic formats along with monthly savings summary reports. ILECs do not currently provide customers with many of these value-added services.

The Company’s managed tandem network includes technologically advanced IP and Time Division Multiplexing, or TDM, switching platforms linked together by an IP backbone. The Company’s network is capable of automatically switching IP-originated or conventional TDM traffic to terminating carriers using either protocol. The Company supports IP-to-IP, IP-to-TDM, TDM-to-IP and TDM-to-TDM traffic with appropriate protocol conversion and gateway functionality.

The Company’s network currently connects 580 unique competitive carrier switches, creating up to 335,820 unique switch-to-switch routes serving 151 million telephone numbers assigned to these carriers.

In the quarter ended September 30, 2006, the Company’s network carried approximately 2.5 billion minutes of traffic per month.

Operating expenses increased from $18.7 million in the nine months ended September 30, 2005 to $31.2 million in the nine months ended September 30, 2006, or 82.3% of revenue.

Operations expenses increased from $5.9 million in the nine months ended September 30, 2005, or 32.3% of revenue, to $8.2 million in the nine months ended September 30, 2006, or 21.5% of revenue.

Depreciation and amortization expense increased from $2.0 million in the nine months ended September 30, 2005, or 11.1% of revenue, to $4.5 million in the nine months ended September 30, 2006, or 11.8% of revenue.

Sales and marketing expense increased from $1.0 million in the nine months ended September 30, 2005, or 5.5% of revenue, to $1.1 million in the nine months ended September 30, 2006, or 3.0% of revenue.