JS It is nice talking to you again Carroll. How are things going for you?

CM Things are going well. We’re feeling very good about everything. We’re finally starting to make some progress towards the implementation of our business plan, as you’re probably well aware.

JS What does your plan entail? What’s the direction you’re going in now?

CM Our business plan is to build out as much of our spectrum as we can for wireless broadband data communications, beginning with Internet access, and ultimately, to include IP telephony. So, our mission is to become a wireless, facilities-based alternative to the ILEC in our markets.

JS And most of your markets being rural, you even have less competition.

CM I wouldn’t want to classify most of our markets as being "rural." Our markets are medium to small markets. If you look at where the preponderance of our households are, they’re in markets like Corpus, Waco, Temple, Midland, Lubbock, Amarillo, Tyler, then into Oklahoma -- Tulsa, and Bartlesville. We have Springfield, Missouri, Topeka, Kansas, and so on. With MMDS, we’re able to cover a thirty-five-mile radius around those towns.

JS Don’t you own most of the channels in all those markets?

CM Right. We do, and so we can and we do cover rural America, but the preponderance of our households are actually in the towns, and so our business plan starts out being SOHOs and small business and telecommuters.

JS Are you looking at MDUs at all?

CM Absolutely. We intend to serve MDUs. First of all, let me tell you that the technology platforms are still in development. That’s one of the reasons that MMDS has taken so long to be licensed and deployed. In that regard, we’re in the same boat with WorldCom and Sprint. It’s unclear exactly what configuration will best serve an MDU. It is likely that we would serve MDU consumers before we can serve single-family consumers. We also intend to serve the multi-tenant business complex as well.

JS Do you see yourselves serving MDUs and MTUs ,or do you see yourselves as also being a bandwidth provider to other local competitive players, such as a private cable operator looking to provide broadband to some of their properties? Would you be a provider to them, or is this something that you would considered?

CM We never say "never." We would certainly sell our bandwidth at wholesale rates under the right conditions, but that is not our primary business strategy. Our primary business strategy is to be a "retail, multi-service, and bundled-package provider." We intend to offer it directly to the end user.

JS Do you expect to continue to deliver video programming in some of these markets?

CM Yes, particularly in the smaller markets. We have such capacity with MMDS that we’re able to continue to offer video on a reduced set of our MMDS channels, and indeed, that’s been part of our strategy for quite some time. We take a reduced set of channels and match it with the DirecTV satellite offering, so we are able to offer consumers the DirecTV package on a single set-top box. We then offer local channels via MMDS, and we’re able to populate some of their most popular basic channels on other sets within the home without them having to buy a second and third DirecTV set-top.

JS So you expect to be able to deliver the full convergence of voice, video and data services.

CM Yes, we do.

JS What’s your rollout schedule looking like? I believe you just deployed a Cisco system in Austin, TX.

CM We just installed the very first Cisco cell site in Austin. It’s up and on the air as a test cell site. We’re installing the very first customer-premise equipment in selected trial businesses and telecommuters in Austin area as well. This installation process is going on this month. We intend to run our Austin single-cell trial through June and July. We expect to install a multi-cell system with a hundred or more trial customers in Amarillo in the June and July time frame, and continue through August and September.

JS Are you still looking at multiple vendors, or is Cisco going to be your partner?

CM We have selected Cisco as our primary supplier. The obvious objective is to be successful in these trials. We have every reason to believe that we will be. But that doesn’t rule out that we would look for some of the other suppliers, particularly in the very small markets where a cellular system may not be the most economical way to cover the area.

JS Were you ever approached by Sprint/MCI WorldCom, or do you needs match up?

CM Everybody wants me to address this question. What I say is that we have had numerous discussions with them from time to time about various and sundry coordination issues within the industry. It would be inappropriate for me to comment on any discussions beyond that. I think it’s clear that no one has come along and made an offer to our shareholders that would convince them to pursue a different business plan right now. The company has not been, nor is it now up for sale, we just don’t comment on discussions in that regard.

JS I won’t ask you to comment on acquisitions, but it seems that you have past most of the dangerous areas of your transition. You’re entering a point where you will have both infrastructure and subscribers. Doesn't that create a far superior value than just selling spectrum?

CM Well, we are nearing a point where we will have both infrastructure and subscribers. We have the two developmental systems going in Sherman and Austin. We have marketed those on a very slow-go basis because we want to see how the Cisco equipment trials out.

JS Isn’t technology starting to get to a point where it’s more affordable? I know, a couple of years ago, the customer-premise equipment was around fifteen hundred dollars for carrier-class type equipment.

CM Right. Customer-premise equipment prices have come down as well as infrastructure equipment. They need to come down even more to gain wide acceptance and full competitiveness with other broadband methodologies. That’s another reason we’re optimistic about the Cisco arrangement. Cisco has created a consortium of companies -- if they’re successful -- can create a de facto standard, which should drive the manufacturing volumes up. This in turn would drive the unit cost of customer-premise equipment down, which would drive the market even faster.

JS Is it fair to say you are pretty happy now, after your two years of turbulence?

CM Yes, we’re pretty happy. We’re not frustrated at anyone in particular, but we’re frustrated that it’s taken so long to get the technology and licensing ready. We’re now finally actively engaged in this. We’re rolling out our trials, and preparing our application for filing in the July window. We’re optimistic that we’ll be finally deploying full-scale commercial service by the end of the year.

JS Step back a couple of years. What do you see as the significant factors that allowed a company such as yours to file Chapter Eleven, reorganize, and emerge from it with a plan that was approved by shareholders and creditors and now be in a tremendous position for growth over the next few years. Other companies in this market in a similar position never could have pulled that off. What was it about your company that inspired the debtors and creditors to say, "Let’s do business?"

CM I think a couple of things. One is that Heartland brought in a new management team, beginning with me. It wasn’t so much me as it was the new management team. When the new management team -- after six or eight months -- went to the shareholder and bondholder base and said, "The analog TV model is not going to be a successful model. You’ll never be able to succeed with this." This statement had more credibility because we were a new management team.

Secondly, we did this with someone who had previous operating success. I’ve operated companies successfully before, so that had some credibility.

Third and final, we went to them early enough that we could preserve some of the cash resources of the company and not actually hit the wall and be at the mercy of the creditors.

JS You mentioned IP telephony. Is that something that you’re going to trial in Austin now?

CM The very first tests that we are doing are strictly data, but sometime before the end of the year, we will do voiceover IP trials. The Cisco equipment is capable of voiceover IP.

JS Where do you see yourselves two, four years from today?

CM We expect that 2001 and 2002 will be filled with, and preoccupied with, deployment. We have so many markets to try to get deployed into. During that period of time, we expect a couple of things to happen. One is, we expect the customer-premise equipment prices to come down, and secondly, we expect the other enhanced features and services to be added to our product mix, beginning with voice telephony, and ultimately adding other data communication services - VPNs, etc. And so a couple of years out, we expect to be a full-fledged alternative to the ILEC.

JS Do you see enough progress being made in the regulatory area?

CM Yes. We don’t really view the licensing delay as a FCC issue. It is true that the FCC has taken a long time to get to this point of opening the window, but we as an industry have had bigger issues such as getting the technology platforms ready. From a regulatory standpoint, the licensing is coming at a propitious time.

JS What other areas do you believe this industry may address?

CM There is a number of other things that need to be done in the near future. Chief among them is the preservation of the spectrum in the face of an international movement to try to designate the MMDS band internationally as a place for 3G. We need to make certain that our regulatory bodies don’t let that happen in the U.S now that we’re finally getting ready to deploy.

Secondly, there needs to be some clarification about voiceover IP to make certain that we don’t end up regulating voice services and inadvertently regulating the Internet.

Finally, in our more rural areas, we want to be able to make certain that the universal service rules that evolve over the course of this year and next year make the opportunity for all competitive telecom offers roughly equivalent.

So there’s quite a bit yet to be done but the big issue is the finalization of the two-way licensing. It appears that it will finally happen this year, and that’s the major hurdle that we need to cross.