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FINANCIAL STATEMENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Commission File Number 1-11965)

ICG COMMUNICATIONS, INC.
(Exact names of registrant as specified in its charter)

161 Inverness Drive West
Englewood, Colorado 80112
(Address of principal executive offices)

Registrant's telephone numbers, including area codes: (888) 424-1144 or (303) 414-5000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value (8,000,000 shares deemed outstanding for financial reporting purposes, of which 7,839,338 shares had actually been distributed to stockholders as of February 27, 2004)
(Title of class)

Warrants to purchase Common Stock (800,000 warrants outstanding for financial reporting purposes, of which 780,506 shares had actually been distributed to stockholders as of February 27, 2004)
(Title of class)

        Indicate by check mark whether the registrants: (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ý    No o

        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 registrants' 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. ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o    No ý

        As of March 30, 2004 the aggregate market value of ICG Communications, Inc. Common Stock held by non-affiliates (using the closing price of $5.55 on March 30, 2004) was approximately $21,455,151. This amount does not include approximately 4,134,207 shares held by persons who beneficially owned five percent or more of the Company's outstanding voting securities as of December 10, 2003 and were deemed to be affiliates.

        Indicate by check 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 ý    No o

        Portions of the definitive proxy statement of the Registrant's 2004 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

Table of Contents

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PART I

ITEM 1. BUSINESS

        Unless the context otherwise requires, the term "ICG", "we", "us" or "our" means the combined business operations of ICG Communications, Inc. and its subsidiaries. All dollar amounts are in U.S. dollars.

OVERVIEW

        We are a nationwide communications provider focused on delivering data and voice services to corporate customers, Internet service providers and telecommunication carriers using a network that we own and operate. We are a certified competitive local exchange carrier in most states, which means that we provide local exchange services in competition with the incumbent local exchange carriers. We have interconnection agreements with every major incumbent local exchange carrier. Through our network of fiber optic cable, voice and data switches, data points of presence, and peering arrangements, we provide corporate services, point-to-point broadband services and dial-up services. We were organized as a Delaware corporation on April 11, 1996.

        In September 2003 we terminated early four dial-up data services agreements with Qwest, formerly our largest customer, in exchange for a cash payment from Qwest of approximately $106.8 million, which included payment of approximately $31.0 million for dial-up data services provided and to be provided by us under the agreements during the six months ended December 31, 2003, and approximately $75.8 million of early termination revenue.

        In October 2003 we used approximately $81.2 million of the proceeds from the Qwest transaction to prepay in full the outstanding indebtedness under our secured notes and senior subordinated term loan. In connection with the prepayment, approximately $42.1 million of cash held in a cash collateral account for the benefit of our lenders was released to us.

        To offset the significant losses of revenue and operating cash flows from the Qwest transaction, in the fourth quarter of 2003 management initiated several operating initiatives to increase sales and to reduce operating expenses and capital expenditures. Management also began discussions with financial and legal advisors regarding its strategic options and began exploring opportunities to divest certain non-core assets.

        On April 1, 2004, we closed an agreement with Level 3 Communications, Inc., or Level 3, whereby Level 3 agreed to pay us approximately $35 million in cash in consideration for the right to provide remote access service to our customers, $25 million of which was paid at closing, $5 million of which will be paid on July 1, 2004 and $5 million of which will be paid on October 1, 2004, subject to ICG's performance under a transition services agreement. The revenue from the customers will begin to accrue to the benefit of Level 3 on April 1, 2004. We expect to complete the transition of our remote access service customers from our network to Level 3's network no later than October 1, 2004, during which time Level 3 will reimburse ICG for certain costs of supporting the remote access service customers in accordance with the agreement.

        We have also agreed, pursuant to a Non-Disclosure, Non-Competition and Non-Solicitation agreement between us and Level 3 Communications, not to compete against Level 3 in providing dial-up Internet access to Internet service providers and their customers for a period of 3 years from April 1, 2004. This non-competition agreement does not apply to our direct Internet access and primary rate interface businesses.

        Although these transactions have allowed us to reduce our future debt service payments and increased our available cash, management believes that we will need to obtain additional funding through debt or equity financing no later than the third quarter of 2004 if sufficient asset sales do not

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occur first. Management believes that under current conditions such additional financing may not be available on reasonable terms, if at all. See additional discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources".

        As a result of the foregoing, there can be no assurance that we will continue as a going concern. The independent auditors' report dated April 1, 2004, on our financial statements states that our recurring losses from operations and a net capital deficiency raise substantial doubt about our ability to continue as a going concern. This "going concern" opinion issued by our independent auditors may materially adversely affect our ability to obtain additional financing and our relationships with third parties, including customers and suppliers.

        Early in the first quarter of 2004 we engaged financial and legal advisors to assist us in exploring strategic alternatives, including possible strategic alliances, business combinations or sale of the ICG assets. Such transactions may involve a restructuring of ICG under the United States Bankruptcy Code. We continue to explore all alternatives as of the date of this filing.

        We made an assessment as of December 31, 2003, of whether our network assets were impaired under the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". The result of the assessment was that we recorded a provision for impairment of long-lived assets of approximately $89 million.

        On November 30, 2003, Randall E. Curran, our former Chairman of the Board of Directors and Chief Executive Officer, ceased his employment, and our Board of Directors named Mr. Jeffrey R. Pearl as Interim Chief Executive Officer. Mr. Pearl is expected to continue to serve in this capacity until a permanent replacement is found. If we fail to attract and retain a new permanent CEO, our ability to generate revenue, operate our business, obtain financing and compete could be adversely affected.

BUSINESS STRATEGY

        Our goal is to be a leading provider of telecommunications services primarily to business users in the markets we serve and to other carriers. To achieve this goal, we are actively implementing the following strategies:

•

Increase our market share within the corporate services sector;



•

Leverage our existing fiber optic and local access networks;



•

Reduce our network costs; and



•

Dispose of non-strategic assets.

Increase Our Market Share in Corporate Services

        Based on data obtained from Dun & Bradstreet reports, we estimate that aggregate annual wire line spending by medium to large size businesses in our addressable markets totals approximately $13 billion. While demand for voice services by these businesses has been relatively stable, we expect demand for data services in commercial applications to increase significantly over the next several years as businesses address their growing need for data connections, greater bandwidth and outsourcing network and information technology infrastructure. Our corporate services product offerings, especially our voice and Internet protocol telephony converged services, such as VoicePipe™ and iConverge™, have been designed to address this growing need. We believe that our Internet protocol telephony and converged services should be the solution of choice for our targeted businesses because of these services' compatibility with broadband, their power to integrate end user communications tools such as the personal computer and telephone, and their ability to be bundled with other services, such as long-distance, local access and dedicated Internet access.

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        In order to reach these potential customers and increase our market share, we have increased our sales force from 96 sales professionals in July 2003 to 237 at the end of February 2004. We have deployed skilled and market knowledgeable regional sales teams and an indirect sales channel that work with our seasoned sales leadership team to promote our corporate services product offerings. As a result of this sales force growth and our renewed focus, we are positioned to fulfill on our strategy through robust sales efforts, targeted marketing and a diverse set of product offerings meeting the needs of both business and carrier customers.

Leverage Our Existing Network Assets

        Our network architecture supports the convergence of circuit switched or traditional public switched telephone network and packet switched Internet protocol technology, which allows us to provide converged services such as VoicePipe™ and iConverge™. Our data network footprint currently covers approximately 75% of the U.S. population (as determined by U.S. Census population data reporting) and our local network currently serves all of our 33 U.S. markets. The coverage of our data network will be reduced to 33 U.S. markets upon the completion of the remote access service transition to Level 3. We intend to maximize the capability of our existing integrated fiber optic and local access networks to deliver voice, data and Internet access solutions that meet our customers' needs. By leveraging our existing network assets, we expect to be able to offer a full range of voice and data services to our target market quickly and with minimal capital investment.

Reduce Our Network Costs

        We are focused on reducing our network costs and increasing operating efficiencies. To achieve this, we are concentrating primarily on consolidating our switches and reducing the costs of network infrastructure we lease from long-distance carriers and local exchange carriers.

        Because of the breadth and depth of our transport network, we can migrate network traffic from one switch to another without reducing footprint coverage or service quality. We have decommissioned 4 switches from our network as of February 2004, and are targeting 6 to 8 more switches for removal from our network by mid to late 2004. The switches being decommissioned are located primarily in markets where we have more than one switch. In some instances, however, we may decide to decommission switches in markets where we only have one switch, such as in markets that become unprofitable for us after the completion of the Level 3 transaction. The decommissioning of switches will limit our ability to provide dial-tone service in these markets. The consolidation of switches is expected to result in reduced maintenance, utilities, leased infrastructure and personnel costs. Once an asset is identified for decommissioning, the remaining useful life of the asset is evaluated and depreciation expense adjusted accordingly.

        We have also established a team whose goal is to reduce the cost of our leased facilities by monitoring the usage of these facilities and eliminating those facilities that are not cost-effective. In addition, this team is monitoring the billing of leased facilities for accuracy. We anticipate eliminating, by the second quarter of 2004, approximately 30% of the leased network facilities infrastructure costs we incurred during the third quarter of 2003, which savings are estimated to be to approximately $45 million annually, excluding a reduction in facilities costs associated with the sale to Level 3 of remote access service customers.

        We are evaluating the opportunity to increase our liquidity through further dispositions of non-strategic assets, including excess network transport equipment, switches and other assets that are either not optimized or are under-performing. The early retirement of our assets may result in accelerated depreciation expense and/or an impairment charge.

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TELECOMMUNICATIONS NETWORKS AND FACILITIES

Combined Network Overview

        We have designed and built our local and regional fiber optic networks to serve geographic locations where we believe there are large numbers of potential customers. Our network architecture reflects a convergence of circuit switched technology used in our public switched telephone network and packet switched technology used in our Internet protocol network. Using Internet protocol in our converged network, transmissions from multiple voice and data sources share the same path. Network capacity is not saved for the exclusive use of devices when they are idle. This convergence allows us to provide converged services such as VoicePipe™ and iConverge™.

        Our network infrastructure allows us to quickly scale to meet customer demand, address network issues and control the costs and features of our product offerings. The key components of this network include transport, voice and data digital switches, signaling system 7 and Internet protocol. We have access to customer facilities, local exchange carrier and long-distance carrier facilities, and connectivity between our own switches. Our voice and data digital switches serve 33 markets across the country and allow us to offer a wide range of voice and data services. Our own signaling system 7 network enables us to maintain and monitor certain critical aspects of our network without having to rely on an outside entity. Signaling system 7 is a standard signaling system used by telephone providers to manage line supervision (determining whether a line is "busy" or "free"), call alert ("ringing" the phone to indicate an incoming call), and call routing. Signaling system 7 allows companies to offer optional service features such as caller ID and call forwarding. Finally, our Internet protocol infrastructure allows us to route both data and Internet protocol voice services across our entire network.

Internet Protocol Network

        Our Internet protocol data network has been built to provide the nationwide bandwidth for all of our Internet protocol services. Our data network operates at OC-48 capacity and interconnects our major network access points and points of presence. Our network is built with redundant self-healing paths and uses the latest in traffic routing technologies. A diagram showing the design of our Internet protocol network backbone is presented below:

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        We have deployed softswitches to support some of our dial-up and all of our Internet protocol converged services. Softswitches are programmable central office switches built on standard computer platforms using standard protocols, which makes them less costly than traditional switches. Softswitches also offer flexible functionality, thereby promoting a flexible cost structure, which means that we will be able to support new customers and network growth over time without having to invest a large amount of capital to increase capacity. By using softswitches, we realize cost savings over traditional switches, reduce the load on our voice and data switches, simplify administration, and maximize resource utilization.

        We provide connectivity from our network backbone to the rest of the Internet via a mixture of public and private peering connections. These connections are provided via numerous OC3, OC12 and Gigabit capacity Ethernet connections in seven geographically diverse locations.

Local Network

        Our network covers approximately 5,500 route miles and approximately 175,000 strand miles of owned and leased regional (intercity) and metropolitan (local or intracity) fiber. We offer service to approximately 5,200 buildings, either through our facilities (on-net), through the use of another carrier's facilities (off-net), or a combination of both (hybrid).

        The majority of our network is built utilizing synchronous optical network ring architecture. In addition, we have been deploying dense wave division multiplexing technology to enable us to maximize the capacity of our fiber optic network. We extend synchronous optical network rings or point-to-point links from rings to each customer's premises over our own fiber optic cable. We then place necessary electronic equipment at a location near or in the customer's premises to terminate the link.

        We serve our customers from one or more central offices or hubs strategically positioned throughout our network. The central offices house the transmission, switching, and Internet protocol equipment needed to interconnect customers with each other, the long distance carriers, and other local exchange networks. As of December 31, 2003, we maintained approximately 148 collocations with other local exchange carriers. In addition, we maintain our own signaling system 7 network, which affords us increased control of our overall network, provides cost savings by eliminating the need to pay another entity for this function.

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        The following table sets forth information about our network, organized by market served, as of December 31, 2003:

(1)

We added voice capacity in these 6 markets in January 2004.

(2)

Market data was obtained from Dun & Bradstreet for businesses with more than 10 employees. Wire line spending includes data and voice, but not wireless, telecommunications spending.

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Network Monitoring and Management

        Through our dedicated network operations center, located in Englewood, Colorado, our experienced team of technicians monitor, detect, isolate, and correct network problems 24 hours a day, 7 days a week, 365 days a year. The network operations center is divided into three distinctive groups, each having responsibility for certain aspects of our network. We seek to identify and detect problems before they affect our customers. Network operations center technicians utilize a suite of operational support system tools to monitor the network looking for potential issues and signal degradation as well as troubleshooting network events when there are outages.

PRODUCT OFFERINGS

        We have three primary product offerings, which are described in detail below:

•

Corporate Services



•

Point-To-Point Broadband Services; and



•

Dial-Up Data Services.

        Corporate Services offerings are focused on retail services to businesses with voice, data, long distance and other communications services requirements. Point-To-Point Broadband Services and Dial-Up Data Services are focused on wholesale services to Internet service providers and other carriers. In addition, we earn Reciprocal Compensation revenue primarily pursuant to interconnection agreements with incumbent local exchange carriers for the transport and termination of calls originated by these carriers' customers. Corporate Services, Point-To-Point Broadband Services, Dial-Up Data Services and Reciprocal Compensation comprise Communications revenue. In addition, in 2003 we earned $75.8 million in early termination revenue pursuant to the 2003 Qwest agreement. The historical financial performance of our product offerings is discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Corporate Services

Internet Protocol Telephony and Converged Services

VoicePipe™

        VoicePipe™ is an Internet protocol telephony communications solution that combines customers' voice and data communications and aggregates them onto a dedicated line with a DS1-to-DS3 capacity. As of December 31, 2003, we had launched VoicePipe™ in 25 of our 33 markets. In January 2004 we added voice capacity to another 6 markets.

        VoicePipe™ is a managed service and provides businesses with a lower total cost of ownership solution when compared to traditional phone systems, brings greater mobility to the workforce, and reduces the number of vendors required to provide local, long-distance and Internet access. In addition, VoicePipe™ requires no investment in a telephone system and works with both analog and certain Internet protocol phones. VoicePipe™ offers all of the features and functionality of a traditional phone system with the upgraded feature of a web interface/portal for each user. The web interface/portal allows customers to manage their phone calls, voice mails, personal directories, "find me follow me," and a variety of other options all with the click of their mouse. We are targeting VoicePipe™ to businesses, particularly those with multiple locations. Remote workers and VoicePipe™ users with multiple locations can recognize added efficiencies and benefit from abbreviated dialing between locations, as well as reduced intrastate toll calling charges.

        In 2003 we deployed VoicePipe™ on most of our employees' phones. The use of VoicePipe™ within ICG is expected to increase product knowledge and productivity within the sales, provisioning

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and client services organizations. Employees' daily usage of VoicePipe™ is also expected to further enhance our ability to deliver quality customer support.

        Since the introduction of VoicePipe™ in February 2003, we have increased its functionality, adding the ability to support more extensions, allowing for multiple locations, and adding remote user features. We anticipate continuing to enhance our VoicePipe™ functionality by adding more features in the near future, including the ability to integrate with business software packages.

        The VoicePipe™ service can use one line with a capacity of DS1or greater for the last mile to the customer. VoicePipe™ distinguishes voice packets from data packets, and allocates bandwidth accordingly to prioritize voice traffic to ensure quality of service and give customers the most efficient usage of their bandwidth. Customers are able to use the full DS1-capacity bandwidth for data needs when phone call volume is low; however, when numerous phone calls are engaged, VoicePipe™ will automatically adjust the use of the bandwidth. Unlike many voice-over Internet protocol services, VoicePipe™ users' communications travel to ICG's facilities and then onto the appropriate voice or data networks, rather than being routed over the public Internet. The following diagram illustrates how traffic travels between the customer premise, the public switched telephone network and the Internet using VoicePipe™:

VoicePipe™ Configuration

iConverge™

        iConverge™ combines high-speed Internet access and reliable voice services on a single DS1-capacity line, allowing customers to choose how much bandwidth to dedicate to "always-on" Internet access versus voice service based on their business requirements. Additionally, customers have the ability to monitor their service on a secure web-based management center.

        iConverge™ represents a first step for businesses seeking to incorporate Internet protocol telephony solutions in the future since it interfaces with existing traditional telephone equipment. Small to medium size businesses can take advantage of the cost-saving benefits of convergence without sacrificing prior capital investment. iConverge™ features include local voice services, voicemail, long

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distance and e-mail. The following diagram illustrates how traffic travels between the customer premise, the public switched telephone network and the Internet using iConverge™:

iConverge™ Configuration

Dedicated Internet Access

        Dedicated Internet Access provides businesses a full-time high-speed dedicated Internet connection at bandwidth speeds varying from DS1 to DS3. We offer basic Dedicated Internet Access, burstable DS3-capacity enhanced service, which delivers Internet connectivity but with flexible bandwidth to accommodate peak demand, and NxT1, which allows customers a cost effective alternative by combining two to four DS1-capacity lines to meet growing demand. Our Dedicated Internet Access service offers high levels of customer service and network reliability at a competitive price. Our Dedicated Internet Access service also comes with an industry-leading service level agreement that proactively provides invoice credits in the event of a network outage.

Voice

        Our local voice service consists of basic local exchange lines and trunks with local calling, local toll calling and business-related voice line features (e.g., voicemail). Under our business strategy, sales of voice services will concentrate on customers with a minimum of 24 lines. We believe that we provide a more responsive service delivery alternative to existing providers, as well as excellent customer service and network reliability critical to meet customer expectations for voice applications.

        Our long distance service provides cost-effective intrastate, interstate, international and toll-free calling along with worldwide calling card access. Our long distance, which is available in all of our markets, uses our fiber optic network and regional switches to ensure quality transmissions and network efficiencies.

        We currently offer reservationless audio conferencing, which allows customers to initiate meetings at any time by telephone. In addition, in the first quarter of 2004 we introduced a new audio and web combined service, or Voice+Web Conferencing. Voice+Web Conferencing is an integrated service that gives users the ability to control phone and online meetings, run training seminars, and software applications as well as view websites simultaneously. Voice+Web Conferencing is available on a nationwide basis, is being targeted to our existing local voice service customers, and can integrate with VoicePipe™.

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Point-to-Point Broadband

        We provide the following Point-to-Point Broadband services to a customer base that is comprised primarily of long-distance carriers, Internet service providers and medium- to large-sized businesses.

Private Line (formerly Special Access)

        We provide both local and intercity private line services to long-distance carriers, Internet service providers and medium to large end-user business customers. This involves providing a dedicated facility used to connect:

(i)

end user to end user;



(ii)

end-users to long distance carrier facilities;



(iii)

long distance carrier facilities to local telephone company central offices; and



(iv)

different facilities of the same carrier.

        Private line services are offered at DS1, DS3, OC-3, OC-12, OC-48 and OC-192 capacities. Our private line services are available within all of our fiber based metropolitan networks and on an intercity basis between our served metro areas.

Dial-Up Data Services

        Our Dial-Up Data Services are offered on a wholesale basis to Internet service providers and enable the Internet service providers' subscribers to connect to the Internet service provider and the Internet. It is not economically feasible for many Internet service providers to build and maintain their own networks, and consequently many prefer to outsource network facilities management in order to focus internal resources on their core Internet service provider business. Our services range from connection to facilities to complete turnkey modem management.

        Our Dial-Up Data Services customers include some of the largest national and regional Internet service providers. We estimate that our combined voice and data network systems are serving approximately 5% of all Dial-Up Internet subscribers in the United States, based upon an industry average of ten end-users per port.

        ICG's Dial-Up Data Services are supported by our nationwide fiber optic backbone that connects to numerous public and private peering sites with major Internet service providers and long-distance carriers. The network, in combination with certain leased long-haul assets, carries data traffic associated with our Internet service provider business. The design of the physical network permits us to offer flexible, high-speed services to our customers. Currently, our network footprint has the capability to provide Dial-Up Data Services to over 75% of the nation's population (as determined by U.S. Census population data reporting) .

        We provide the following Dial-Up Data products and services:

Primary Rate Interface

        Primary Rate Interface uses our network to route Internet service provider end-user calls through an ICG phone number from the public switched network to the Internet service provider-owned modem banks. The Internet service provider's own remote access service equipment is typically collocated at one of our central office facilities. Primary rate interface is billed at a fixed monthly rate per line. We will continue to provide and support the primary rate interface service after the Level 3 transaction is completed.

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Remote Access Service

        Unlike Primary Rate Interface, which requires the Internet service provider to actively oversee their own data infrastructure, Remote Access service is a turnkey Dial-Up Internet access service toward which many Internet service providers have migrated. Remote Access service adds network management services as it "connects, sends and routes" customer data traffic. This service has the capability to route data directly over our network to the Internet, allowing the Internet service provider to outsource its infrastructure and create a national footprint with minimal investment in fixed assets. Remote Access service is offered with a variety of billing options including monthly port, hourly and per subscriber usage.

        We will no longer provide or support remote access service after completing the Level 3 transaction. See additional discussion of the Level 3 transaction under "Management's Discussion and Analysis of Financial Conditions and Results of Operations".

CUSTOMER CONCENTRATION, MARKETING AND SALES

Customer Concentration

        A significant amount of our revenue has been derived from contracts with certain large customers. In 2003, four customers each represented more than 5% of our Communications revenue: Qwest, WorldCom, and two large national Internet service providers (see table below), with whom we have entered into confidentiality agreements. Revenue from the top four customers accounted for approximately 53% of our 2003 communications revenue.

        As discussed further under "Management's Discussion and Analysis of Financial Conditions and Results of Operations", we executed agreements with Qwest and Level 3 in September 2003 and April 2004, respectively. As a result of the Qwest agreement, we no longer provide dial-up services to Qwest. As a result of the Level 3 agreement, we will no longer provide remote access service at all, which will eliminate all revenue from the two large Internet service providers. The table below shows a reconciliation of "As Reported" and "Ongoing" Communications revenue by significant customer in 2003; the latter represents the amount of Communications revenue we would have generated had the Qwest transaction and the Level 3 transaction been completed as of December 31, 2002.