794323--3/1/2007--LEVEL_3_COMMUNICATIONS

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Risks Related to Our Businesses Our financial condition and growth depends upon the successful integration of our acquired businesses. We may not be able to efficiently and effectively integrate recently acquired operations, and thus may not fully realize the anticipated benefits from such acquisitions. We need to continue to increase the volume of traffic on our network to become profitable. Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services or subject us to expensive intellectual property litigation. Our business requires the continued development of effective business support systems to implement customer orders and to provide and bill for services. Our revenue is concentrated in a limited number of customers. We may lose customers if we experience system failures that significantly disrupt the availability and quality of the services that we provide. There is no guarantee that we will be successful in combining our existing service offering with our recently acquired content distribution services. Rapid technological changes can lead to further competition. Failure to complete development, testing and introduction of new services, including VoIP services, could affect our ability to compete in the industry. During our communications business operating history, we have generated substantial losses, which we expect to continue. The prices we are able to charge for certain of our communications services have been decreasing in the past and may decrease over time resulting in lost revenue for which we may be unable to compensate. Over the past few years, the prices that we are able to charge for certain of our communications services have been decreasing. These decreases resulted from downward market pressure and other factors including: As our prices for communications services decrease for whatever reason, if we are unable to increase traffic volume through additional services from which we can derive additional revenue or if we are unable to reduce our operating expenses, our operating results will decline. Excluding the effects of acquisitions, we also continue to expect managed modem related revenue to continue to decline primarily due to: We may be liable for the material that content providers distribute over our network. Because our VoIP services are relatively new services there is no guarantee that these services will gain broad market acceptance. The success of our subscriber based VoIP services is dependent on the growth and public acceptance of VoIP telephony in general. The need to obtain additional capacity for our network from other providers increases our costs. We may be unable to hire and retain sufficient qualified personnel; the loss of any of our key executive officers could adversely affect on our business. We must obtain and maintain permits and rights-of-way to operate our network. Termination of relationships with key suppliers could cause delay and costs. Increased industry capacity and other factors could lead to lower prices for our services. Recent acquisitions by AT T and Verizon will create a tendency for the ILEC acquirer to favor their wholly owned or fully integrated interexchange carrier. The opportunity to obtain access from competitive access providers to the ILECs has been significantly reduced as a result of the AT T and Verizon mergers. We are subject to significant regulation that could change in an adverse manner. Canadian law currently does not permit us to offer services directly in Canada. Potential regulation of Internet service providers in the United States could adversely affect our operations. The communications industry is highly competitive with participants that have greater resources and a greater number of existing customers. We may be unable to successfully identify, manage and assimilate future acquisitions, investments and strategic alliances, which could adversely affect our results of operations. Revenue under our agreement with SBC Services is expected to continue to decline materially. Environmental liabilities from our historical operations could be material. Potential liabilities and claims arising from coal operations could be significant. If we are unable to comply with the restrictions and covenants in our debt agreements, there would be a default under the terms of these agreements, and this could result in an acceleration of payment of funds that have been borrowed. We have substantial debt, which may hinder our growth and put us at a competitive disadvantage. We may not be able to repay our existing debt; failure to do so or refinance the debt could prevent us from implementing our strategy and realizing anticipated profits. Restrictions and covenants in our debt agreements limit our ability to conduct our business and could prevent us from obtaining needed funds in the future. If certain transactions occur with respect to our capital stock, we may be unable to fully utilize our net operating loss carryforwards to reduce our income taxes. The unpredictability of our quarterly results may adversely affect the trading price of our common stock. Increased scrutiny of financial disclosure, particularly in the telecommunications industry in which we operate, could adversely affect investor confidence, and any restatement of earnings could increase litigation risks and limit our ability to access the capital markets. Terrorist attacks and other acts of violence or war may adversely affect the financial markets and our business. Our international operations and investments expose us to risks that could materially adversely affect the business. Additional issuances of equity securities by us would dilute the ownership of our existing stockholders If a large number of shares of our common stock is sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital Anti-takeover provisions in our charter and by-laws could limit the share price and delay a change of management The market price of our common stock has been subject to volatility and, in the future, the market price of our common stock may fluctuate substantially due to a variety of factors

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794323--3/1/2007--LEVEL_3_COMMUNICATIONS_INC