2006 Annual Report

INREVIEW

M I N N E S O T A T E L E C O M

A L L I A N C E

Dear Friends,

For the MTA, 2006 was another year of successes and challenges. It was a year when we made great strides to address the needs of our industry as well as strengthen our alliance to be more effective. As I reflect on 2006, I want to take a moment to share my thoughts about our industry and our association.

At the state legislature, we saw considerably fewer bills passed during the short session. Only two of the 113 bills passed affected our members. On the regulatory front, the Public Utilities Commission approved joint recommendations of the Department of Commerce and MTA to implement the 8-1-1 national abbreviated dialing code in Minnesota. You can read more about our legislative and regulatory efforts later in this publication.

At MTA, the Board of Directors implemented several measures to help us operate more efficiently and better address the needs of our members. The Board along with the MTA staff also completed all action items developed at the 2005 Strategic Planning conference. This proved to be excellent teamwork.

Despite the impact from challenges to traditional revenue sources, MTA members continue to deploy voice, video and data capabilities in advance of their communities' communications needs. We’re even deploying high-speed data infrastructure in markets with less than 300 people.

The strong support from MTA's diverse membership of small and large companies, rural and metro, incumbent and competitive, public and private helps the MTA remain a results-oriented trade association.

We will continue to represent the varied interests of members and to use member input to develop an industry-leading trade association. If this year’s membership survey is any indication, we are on the right track. In June we conducted a membership survey to measure our progress in meeting the needs of members. The results indicated that we are meeting the target in providing members the information and resources they expect from a modern, effective organization.

As I conclude my two-year term as chairman, I want to express my sincere appreciation for the opportunity to serve among such dedicated, professional members and staff. I’m proud of the accomplishments we have made in helping the alliance operate more efficiently and responsively to our members. Clearly, it wouldn’t be possible without the full support of those who serve on committees and volunteer for MTA projects.

Thank you for your continued support of Minnesota's premiere telecom trade association.

Kevin T. Larson Chairman, Minnesota Telecom Alliance CEO/General Manager, CTC

Legislative & Regulatory Representation The 2006 Minnesota legislature passed and sent 113 bills to the governor. The number of bills passed was considerably fewer than prior “short year” legislative sessions. Only two of those bills directly affected the state’s telecommunications companies.

HF 2656 - Omnibus Public Safety Policy Bill made a number of changes in the 911 law. The significant changes include:

• Secondary Public Safety Answering Points (PSAPs) were added to the 911 Emergency Communications System. The purpose is to cover five ambulance companies that have multi-county contracts with designated hospitals.

• Eliminated the mandate that the county or agency operating the PSAP be a party to every contract or service agreement. The law makes it optional for PSAPs to request being a party to any contract or agreement between the state and service providers.

• Wireless companies are now required to provide an annual report of their costs and progress in implementing wireless 911 service into the enhanced 911 networks to meet the Federal Communications Commission’s phase one wireless enhanced 911 standards.

• Makes it a petty misdemeanor for drivers under 18 to use a cellular phone while driving.

SF 3132 – Omnibus Data Practices Bill contained language that makes it a crime (gross misdemeanor) to obtain telephone customer call records by fraudulent, deceptive or false means, or attempt to sell or receive any such customer call records without the customer’s authorization.

Regulatory Relations

On the regulatory front, MTA was successful in getting the Public Utilities Commission to approve its petition to modify the lifeline verification survey requirements. The Commission changed the sample size based on a company’s number of lifeline recipients. The change makes it easier for MTA members to administer the program. In other regulatory action, the PUC approved the joint recommendations of the Department of Commerce and MTA to implement the 8-1-1 national abbreviated dialing code in Minnesota. The order requires every carrier that provides access to the state’s One Call Center to activate the 8-1-1 dialing code by April 13, 2007.

MTA On The Road MTA staff was on the road in 2006 visiting a number of our Active member companies. Some of the companies we visited:

Ace Communications Group (Houston), Arvig Telephone Company (Pequot Lakes), Arvig Communications Systems, (Perham), Albany Mutual Telephone Association (Albany). Benton Cooperative Telephone Co. (Rice), Cannon Valley Telecom, (Bricelyn), Consolidated Telephone Co. (Brainerd), Sherburne TeleSystems (Big Lake), diversiCOM Melrose Telephone Co. (Melrose), En-Tel Communications (Willmar), Embarq(St. Paul), Hector Communications Corporation (Hector) HickoryTech (Mankato), Hutchinson Telephone Company (Hutchinson), Lakedale Telephone Co. (Annandale), Onvoy (Minneapolis), Mid-State Telephone Company (New London), Runestone Telephone Association (Hoffman), Sytek Communications (Upsala), TDS Telecom (Pequot Lakes), and West Central Telephone Associations (Sebeka) .

A History of Service

In 2006, Park Region Mutual Telephone Company,Underwood, celebrated its centennial anniversaries. Congratulations for reaching this historic milestone.

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Continuing Education

Jerry Knickerbocker, Vice President of Government Relations, discusses the regulatory and legislative issues facing the industry at the New Leaders Academy in November.

New Leaders Academy MTA hosted the New Leaders Academy in November. Six employees from member companies attended the one-day training. This management training is designed to help new and future leaders learn about Minnesota's telecommunications industry including the regulatory and legislative functions under which our members operate. Participants heard from MTA leaders on the organization's mission and goals, attended a Minnesota Public Utilities Commission meeting, and learned about the various responsibilities of MTA in the regulatory and legislative arenas.

This year’s new leaders were Mark Birkholz, Arvig Communications Systems; Jefferson Bishop, Lakedale Communications; Jenelle Lemke, Ace Communications Group; Jay Nusbaum, Integra Telecom; Timothy Poirier, Lowry Hill Law Offices; and Jennifer Rise, 702 Communications.

Annual Convention & Conferences MTA offered several opportunities throughout the year for individuals to network with other telecom professionals. Our convention, golf day, and communications seminar-fall conference are the main programs we present yearly and are also the most popular among members. Additional educational opportunities are available through the MTA Safety Program and MTA-U.

MTA 97th Annual Convention The theme of the 97th Annual convention was-- That’s Entertainment. That’s Telecom. That’s Us! The event, which got under way on a Monday this year instead of a Sunday, brought together 1,883 attendees and 185 exhibitors to the Hyatt Regency and Millennium Hotels in Minneapolis. There were plenty of educational and networking opportunities through the Breakout Sessions, General Sessions and receptions. Golf Day The 33rd MTA Golf Day, held July 11 held at the Crow River Country Club in Hutchinson, attracted 200 golfers and 35 hole sponsors. Golf Day remains one of our most popular events for members and provides a great opportunity to relax and network with friends and other industry professionals. Fall Conference & Communications Seminar We moved the Fall Conference and Communications Seminar to a new venue–Arrowwood Resorts in Alexandria.. The 110 people attending the half-day Communications Seminar gave the program excellent reviews for the variety and insightful presentations. Attendees listened to presentations on media relations, telecom trends in rural and small communities, and personal development. After adjourning, a bus of more than 50 attendees went to Carlos Creek Winery for a tasting and tour. The one-day Fall Conference brought together 148 participants. Prior to three educational breakout sessions, members heard about the future impact of IMS (Internet Protocol Multimedia Subsystems), an overview of the year’s activities from an MTA perspective from Chairman Kevin Larson and President Michael Nowick. The event concluded with a touching presentation by bestselling author Ross Bernstein, who shared some of the leadership traits that made legendary hockey coach Herb Brooks so successful.

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Member Recognition 21st Century Leadership Awards

The sixth annual 21st Century Leadership Awards were presented during the annual meeting at the 97th Annual Convention in the following categories:

Humanitarian – Julie Spanier,Benton Cooperative Telephone Company

Public Service – Tom Maroney, Halstad Telephone Company and Curtis Sampson, Hector Communications Corporation

Industry Leadership – Richard Keane,Pine Island Telephone Company Associate Member Leadership – Dean Laliberte,Power Product Services, Hibbing Economic Development – KM Telecom, Kasson

MTA Safety Awards The annual MTA Safety Awards were presented to five member companies during the 97th annual meeting in Minneapolis.

Small Company Award — Emily Telephone Company

Medium Company—Alliance Communications

Large Company Award —Sherburne Tele-Systems

Safety Director’s Award — Alliance Communications

Safety Leadership Award—Tom Campbell, Sherburne TeleSystems.

2006 Safety Program Activities The MTA Safety Program provides a total safety, health, environmental and loss control consulting service designed to meet the rapidly changing need of participating members. The staff, headed by Director Erik Monsos, added a new consultant, Mike O’Connor to bring the number of safety consultants to three. Another consultant is scheduled to be added in the coming year. 2006 proved to be another busy year for the MTA Safety Program. Here is a brief summary of the safety staff’s activities.

• 630 safety meetings • 22 unique safety topics delivered on-site to members • 176 field observations • 64 manager / supervisor meetings • Approximately 174,000 miles driven without incident

21st Century Award winners display their awards. Pictured left to right: Dean Laliberte, Curtis Sampson, Richard Keane, Tom Maroney, Mary Ehmke, Beth Tollefson and MTA President Michael Nowick. (right photo) Julie Spanier and Nowick.

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MTA University

For the second consecutive year, the MTA Education & Safety Committee partnered with Cronin Associates to conduct MTA University courses during the year. "MTA U" is an educational workshop designed to help personnel from all levels of a telecom organization stay up-to-date on industry trends, terms and technology.

In April, MTA-U held Telecom 101 training for new employees. Later in the year, a course on employment law was held and received rave reviews from participants. The last MTA-U course, Survivor: Telecom Island was held in December in St. Cloud and Mankato. Most of the classes held during the year sold out before the entry deadline.

MTA Web Site Gets Hits The redesigned MTA Web site—www.mnta.org -- is hitting the mark with members as evident by the study traffic of visitors to the site. The MTA Web site had more than 264,000 visitors last year with a daily average of 311. Not surprisingly, the most active months were December, January, and February, months that lead up to the annual convention. Besides convention information, other popular sections include the publications and job board. MTA continues to work to strategically integrate the Web site with the association’s goals and objectives. Members visiting the site have access to all publications, including the HR Bulletin and Weekly Bulletin, member news and tools, and education and safety information.

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2006 Committee Chairpersons

The success of MTA is due in large part to the many individuals who volunteer their time to our member committees. Listed below are MTA committees and current chair.

Associate Members Convention Committee Chris Danielson, Farmers Union Insurance, Roseville

Associate Members Golf Committee Thomas R. Farm, Olsen Thielen & Co., Ltd., St. Paul

Budget, Dues & Bylaws Committee John Finke, HickoryTech, Mankato

CLEC Committee Paul Hoge, Emily Cooperative Telephone Co., Emily

Convention Planning Committee Kevin T. Larson, CTC Telcom, Brainerd

Directors Nominating Committee Kevin T. Larson, CTC Telcom, Brainerd

Education and Human Resources Committee Kris Nelson, CTC Telcom, Brainerd

Executive Committee Kevin T. Larson, CTC Telcom, Brainerd Fall Conference Program Committee

Ronald Laqua, Halstad Telephone Company, Halstad Financial Review Committee

William Eckles, BEVCOMM, Blue Earth Information Technology Committee

Preston Pearson, Hutchinson Telephone Company, Hutchinson Legislative Committee

Brent Christensen, Christensen Communications, Madelia Marketing and Communications Committee

Robert M. Gannon, Blackduck Telephone Co., Blackduck Officers Nominating Committee

Richard D. Keane, Pine Island Telephone Co., Pine Island

Regulatory, Tariffs & Services Committee James Beattie, BEVCOMM, Blue Earth

Safety Committee Richard D. Keane, Pine Island Telephone Co., Pine Island

Small Companies Committee Dave Bickett, Park Region Telephone Company, Underwood

Video Committee Steve W. Katka, Albany Mutual Telephone Association, Albany

Technology & Engineering Committee Fritz Hendricks, Onvoy, Minneapolis

Wireless Committee Sean Simpson, Midwest Wireless, Mankato

Membership At–A-Glance (As of December 31, 2006)

ASSOCIATE 300

A Premier Telecom Alliance Member retention and recruitment remains a strong priority for a membership-based organization like the MTA. We worked diligently throughout the year to acquire and maintain members. Despite consolidations and mergers, MTA was able to hold membership decline to a minimum. Overall membership increased by one for affiliates, and by three for associate membership. The decline took place in active (down three), and wireless (down one member). The number of telecom carrier members remained at two.

Looking ahead to the next twelve months, we anticipate further challenges to retaining a strong membership base for the same reasons this year. To achieve this objective, we will continue to evaluate our services to ensure that they are valued and desired. We will use member feedback to define enhancements to membership training and education. And we will represent the entire Minnesota telecom industry to policy-makers, media and consumers.

For the complete financial picture please refer to the financial statement that was mailed to MTA member companies.

2006 Board of Directors Chairman

KEVIN T. LARSON, CTC Telcom, Brainerd

Vice-Chairman JOHN FINKE

HickoryTech, Mankato

President MICHAEL J. NOWICK

MTA, St. Paul

Secretary-Treasurer RICHARD D. KEANE

Pine Island Telephone Co., Pine Island Directors

DAVE BICKETT

Park Region Mutual Telephone Company, Underwood

BRENT J. CHRISTENSEN Christensen Communications Company, Madelia

CATHY E. CLUCAS Embarq, Saint Paul

CHRIS DANIELSON Farmers Union Insurance Companies, Roseville

WILLIAM ECKLES BEVCOMM, Blue Earth

ROBERT K. EDDY Sherburne TeleSystems Big Lake

PAUL FREUDE Paul Bunyan Rural Telephone Co-op., Bemidji

ROBERT M. GANNON Blackduck Telephone, Blackduck

PAUL HOFF Onvoy, Minneapolis

PAUL HOGE Crosslake Communications, Crosslake

RONALD LAQUA Halstad Telephone Company, Halstad

JOHN LASS Frontier Communications, Mound

BILL OTIS New Ulm Telecom, New Ulm

CHERY L .SCAPANSKI Benton Cooperative Telephone Company, Rice

SEAN SIMPSON Midwest Wireless, Mankato

GENE R.SOUTH Sr, Lakedale Telephone Company, Annandale

CAROL WIRSBINSKI Integra Telecom, Minneapolis

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AFFILIATE 43

WIRELESS 5

ACTIVE 95

TELECOM CARRIER 2

1650 MINNESOTA WORLD TRADE CENTER 30 EAST SEVENTH STREET SAINT PAUL, MN 55101-4901 651-291-7311 (voice) 651-291-2795 (fax) info@mnta.org (e-mail) www.mnta.org

M I N N E S O T A T E L E C O M A L L I A N C E