The following discussion and analysis provides information concerning the results of operations and financial condition of the Company and should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto. This discussion and analysis also should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2008. References in this item to "we," "our," or "us" are to the Company and its subsidiaries on a consolidated basis unless the context otherwise requires.

Cautions Concerning Forward Looking Statements

This document contains certain "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding, among other items, our expected financial position, expected capital expenditures, the impact of the economic downturn, the impact of accounting changes, expense trends, future liquidity and capital resources, expected revenue mix, growth or stability from particular customer segments, the effects of consolidation in the telecommunications industry, anticipated customer disconnections and churn, Modified EBITDA trends, expected network expansion and grooming, and business and financing plans. These forward-looking statements are based on management's current expectations and are naturally subject to risks, uncertainties, and changes in circumstances, certain of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements.

The words "believe," "plan," "target," "expect," "intend," and "anticipate," and expressions of similar substance identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that those expectations will prove to be correct or fully accurate. Important factors that may cause actual results to differ materially from the expectations described in this report are set forth under "Risk Factors" in Item 1A and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2008, and elsewhere in this report. In addition, actual results may differ from our expectations due to increased customer disconnections and churn, increased competition, inability to obtain rights to build networks into commercial buildings, the current or a future economic downturn, delays in launching new products, decreased demand for our products, further declines in the prices of and revenue from our services due to competitive pressures, industry consolidation and other industry conditions, and increases in the price we pay for use of facilities of ILECs due to consolidation in the industry or further deregulation and adverse regulatory rulings or legislative developments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

We amended our Restated Certificate of Incorporation to change our corporate name to tw telecom inc. on March 12, 2008. Our stockholders approved the name change by written consent on September 26, 2006. On July 1, 2008, we began using tw telecom inc. as our name and tw telecom as our brand.

We are a leading national provider of managed network services, specializing in Ethernet and data networking, Internet access, local and long distance voice, VPN, VoIP and network security services to enterprise organizations and communications services companies throughout the U.S, and for IP-VPN services, to their global locations. Our customers include, among others, enterprise organizations in the distribution, health care, finance, service and manufacturing industries, state, local and federal government entities and long distance carriers, ILECs, CLECs, wireless communications companies, and ISPs.

Through our subsidiaries, we operate in 75 U.S. metropolitan markets. As of September 30, 2009, our fiber networks spanned approximately 27,100 route miles directly connecting approximately 10,200 buildings served by our metropolitan fiber facilities (on-net) excluding inactive buildings and LEC local servicing offices connected with our fiber. We continue to expand our footprint within our existing markets by connecting our network into additional buildings. We have continued to expand our IP backbone data networking capability between markets supporting end-to-end Ethernet and VPN connections for customers, and also have selectively interconnected existing service areas within regional clusters with fiber optic facilities that we own or lease. In addition, we provide on-net inter-city switched services between our markets that offer customers a virtual presence in a remote city.

On October 31, 2006, we acquired Xspedius Communications, LLC ("Xspedius"), which expanded our markets served from 44 to 75 and increased our market density in 12 markets that we already served. This acquisition provided us with additional opportunities to serve multi-city and multi-location customers and to provide our full product portfolio in additional markets.

Our revenue is derived primarily from business communications services, including network, voice, data, and high-speed Internet access services. Our revenue by customer type by quarter in 2008 and 2009 is as follows:

                                                                                    For the Three Months Ended
                                                                  2008                                                                2009
                                  March 31,         June 30,         September 30,         December 31,         March 31,         June 30,         September 30,
Enterprise / End Users                   71 %             72 %                  73 %                 74 %              74 %             75 %                  75 %
Carrier                                  25 %             25 %                  24 %                 23 %              23 %             22 %                  22 %
Intercarrier Compensation                 4 %              3 %                   3 %                  3 %               3 %              3 %                   3 %

Total Revenue                           100 %            100 %                 100 %                100 %             100 %            100 %                 100 %

The key elements of our business strategy include:

• Leveraging our extensive local and regional fiber networks and IP backbone networks to increase customer and building penetration in our existing markets;

• Increasing revenue by focusing on service offerings that meet the sophisticated data needs of our customers, such as our Ethernet and IP business-to-business VPN services, Internet-based services, managed services and converged voice and data bundled services, and developing future services to enhance our customers' voice and data networking capabilities;

• Continuing to diversify our customer base and increasing revenue from enterprise customers, including businesses and local, state and federal government entities;

• Pursuing opportunities to expand our network reach to serve new customers and additional locations for existing customers;

• Continuing our disciplined approach to capital and operating expenditures in order to increase operating efficiencies, preserve our liquidity and drive us towards greater profitability; and

• Delivering a proactive and comprehensive customer care strategy that differentiates us from our competitors.

Enterprise Customer Revenue

Revenue from enterprise customers has increased for the past 29 consecutive quarters, including the three months ended September 30, 2009, primarily through sales of our data and Internet services such as Ethernet and IP based products. Revenue from our enterprise customers represented 75% of our total revenue for the three

months ended September 30, 2009 compared to 73% and 70% for the three months ended September 30, 2008 and 2007, respectively. We expect a growing percentage of our revenue will continue to come from our enterprise customer base. Our expanded market footprint resulting from the acquired operations and new capabilities has provided us with opportunities to extend our customer reach and product portfolio. While enterprise revenue continues to grow and service installations have been at consistent levels, the rate of year over year growth has been declining over the past eight quarters primarily due to revenue churn that we believe was mainly related to the economic environment and re-pricing of services in connection with contract renewals (see "Revenue and Customer Churn"), and to a lesser extent, because the revenue base is growing which has impacted the rate of growth.

Carrier Customer Revenue

Revenue from carrier customers declined 2% for the three months ended September 30, 2009 as compared to the same period in 2008. Carrier revenue, at 22% of our total revenue for the three months ended September 30, 2009, represented a smaller percentage of our total revenue than in the comparable prior year period. The continued decline as a percentage of total revenue was due to growth in revenue from enterprise customers, re-pricing of certain services in connection with contract renewals and disconnections resulting from business contractions and cost cutting measures driven by the economic environment. We believe revenue declines from carriers and ISPs may continue due to disconnections, re-pricing and other factors.

Intercarrier Compensation Revenue

Intercarrier compensation revenue, which consists of switched access and reciprocal compensation, represented 3% of our total revenue for both the three months ended September 30, 2009 and 2008, and may decline as a percentage of total revenue due to growth in revenue from enterprise customers and federal and state mandated rate reductions. Intercarrier compensation revenue may also fluctuate from quarter to quarter based on variations in minutes of use terminating on our network and the resolution of disputes. We believe intercarrier compensation revenue will continue to decline as a result of expected further federal and state mandated rate reductions and possible changes in the regulatory regime for intercarrier compensation. Switched access revenue is compensation we receive from other carriers for the delivery of traffic between a long distance carrier's point of presence and an end user's premises provided through our switching facilities. Switched access rates are regulated by the FCC and state public utility commissions. Reciprocal compensation represents compensation from a LEC for local exchange traffic originated on their facilities and terminated on our facilities. Reciprocal compensation rates are established by interconnection agreements between the parties based on federal and state regulatory and judicial rulings.

Revenue and Customer Churn

Average lost recurring monthly billing from service disconnects was 1.2.% of monthly revenue for each of the three months ended September 30, 2009 and 2008 compared to an average of 1.2% and 1.1% for the years ended December 31, 2008 and 2007, respectively. Customer and service disconnects occur as part of the normal course of business and are primarily associated with industry consolidation, customer network optimization, cost cutting, business contractions, customer financial difficulties, discontinuance of certain acquired products and price competition from other providers. We also believe that the economic downturn contributed to an increase in churn beginning in late 2007 and continued into the nine months ended September 30, 2009 primarily from customers in our acquired customer base that buy less complex services, other smaller customers, mortgage-related customers and carriers. We are also experiencing increased disconnections in our other enterprise customer segments and we expect elevated revenue churn to continue to pressure revenue growth.

Average monthly customer churn was 1.2% for the three months ended September 30, 2009 compared to 1.5% for the three months ended September 30, 2008 and 1.4% and 1.2% for the years ended December 31, 2008 and 2007, respectively. We define customer churn as the average number of customers disconnecting their

services entirely divided by our monthly customer count. The majority of this customer churn, which we expect to continue, came from our smaller customers.

Our ability to continue to grow revenue depends on increasing sales production and customer acquisition and retention to outpace the impacts of churn and re-pricing of services for renewed contracts. We believe that our future growth rates will be influenced by the initiatives we have implemented to improve sales production and customer retention, product offerings targeted at enterprise customers, our ability to compete for multi-location customers, the extension of our product portfolio into our acquired markets, our extensive fiber network and our strong liquidity, which provides us the ability to invest in opportunities that we believe will increase our revenue. However, we cannot predict whether these initiatives or other factors will offset the impacts of revenue and customer churn, re-pricing of services related to contract renewals or other pressures to revenue growth caused by the current economic conditions and other factors. There is no assurance that we will be able to continue to maintain our sales at a level that will result in future revenue growth if the higher churn that we experienced since late 2007 due to the economic downturn continues.

Pricing

Our revenue continues to be impacted by competitive pricing pressure from other telecommunications service providers that have reduced their prices on various services, particularly with respect to smaller bandwidth customers with single-site needs and very large customers, as well as customers' heightened cost cutting initiatives due to the economy. In addition, revenue has been impacted by pricing declines to current levels for some existing customers that renewed services with expired terms. We expect this pricing pressure may continue.

Pricing of Special Access Services

We provide special access services over our own fiber facilities in competition with ILECs, and we also purchase special access and other services from ILECs to extend the reach of our network. The ILECs have argued before the FCC that the broadband services that they sell, including special access services we buy from them, should no longer be subject to regulations governing price and quality of service. If the special access services we buy from the ILECs were to be further deregulated, ILECs would have a greater ability to increase the price and reduce the service quality of special access services they sell to us.

We have advocated that the FCC should modify its special access pricing flexibility rules to return these services to price-cap regulation to protect against unreasonable price increases. The FCC is reviewing its regulation of special access pricing in a pending proceeding. In addition, the ILECs have filed numerous petitions for forbearance from regulation of their broadband special access services, including Ethernet services offered as special access. The FCC has generally granted these petitions with the result that prices for the Ethernet and OC-n high capacity data services of the petitioning carriers are no longer regulated. The D.C. Circuit Court of Appeals upheld the FCC's rulings upon appeal by us and other CLECs. These FCC actions did not impact the availability of the tariffed time division multiplexed special access circuits that we use for access to buildings that are not connected to our network with our fiber. We expect that the ILECs will continue to advocate deregulation of all forms of special access services, and we cannot predict the outcome of the FCC's proceedings in this regard or the impact of that outcome on our business.

We have a five-year wholesale service agreement with AT&T Inc. (formerly SBC Communications Inc.) under which AT&T supplies us with special access and other services for end user access and transport with certain service level commitments through June 2010 in SBC's former 13 state local service territories. We have agreed to maintain certain volume levels in order to receive specified discounts and other terms and conditions, and are subject to certain penalties for early termination of the contract. We have agreements or tariffed term and

volume plans with AT&T for the former BellSouth territory and with the other ILECs, which in some cases do not preclude prospective price increases. However, the ability of the ILECs to increase their special access prices is in some cases subject to regulatory constraints.

Other Financial Trends

We have historically experienced and expect to continue to experience fluctuations in our revenue, margins, and cash flows in the normal course of business from customer and service disconnects, the timing of sales and installations, seasonality of sales and usage, customer disputes and dispute resolutions, repricing of services upon contract renewals, ongoing revenue churn and fluctuations in expenses and capital expenditures. The current economic climate may magnify the impact of some of these factors. However, we cannot predict the total impact or timing on revenue, margins, and cash flows from these items.

We have undertaken several initiatives to increase revenue growth, margins and cash flows including revenue assurance and retention initiatives, cost reduction measures such as network grooming and cost optimization intended to reduce as a percentage of revenue the overall access costs paid to carriers, enhancing back office support systems to improve operating efficiencies and network investment initiatives to reduce the cost of equipment to increase overall capital efficiency. We cannot predict whether these initiatives will be sufficient to maintain our current financial performance.

Due to successful collection efforts aided by system enhancements, internal controls and our revenue recognition policies, our bad debt expense remained at less than 1% of our total revenue for 2008 and 2009. However, customers that have experienced financial difficulties have increased our bad debt expense in 2009. Bad debt expense increased to 0.7% for the nine months ended September 30, 2009 compared to 0.6% for the nine months ended September 30, 2008.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, see Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2008, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

Recently Adopted Accounting Pronouncements

Effective July 2009, the FASB ASC became the single source of authoritative nongovernmental U.S. GAAP, other than guidance issued by the Securities and Exchange Commission. The ASC is not intended to change or alter existing GAAP. The adoption of the ASC did not have an impact on our condensed consolidated financial statements but changes references to specific accounting standards in the footnotes to our condensed consolidated financial statements.

Effective January 1, 2009, we adopted the cash conversion guidance within ASC 470-20, which requires our Convertible Debentures to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar instrument without the conversion feature. The difference between the convertible debt instrument cash proceeds and this estimated fair value is recorded as a debt discount and is amortized to interest expense using the interest rate method over the expected term of the convertible debt instrument. ASC 470-20 changes the accounting treatment for our Convertible Debentures and requires retrospective application to all periods presented in the financial statements. Although ASC 470-20 does not impact our actual past or future cash flows, the impact to non-cash interest expense and results of operations was $4.3 million, or $0.03 per share and $4.0 million, or $0.03 per share, for the three months ended September 30, 2009 and 2008, respectively, and $12.7 million, or

$0.09 per share and $11.7 million, or $0.08 per share, for the nine months ended September 30, 2009 and 2008, respectively. We expect the impact to our non-cash interest expense and results of operations to be approximately $17 million and $19 million for the full years ended December 31, 2009 and 2010, respectively. See Note 2 to our condensed consolidated financial statements.

Effective January 1, 2009, we adopted the disclosure requirements within ASC 815, which changed the disclosure requirements for derivative instruments and hedging activities. Companies are required to provide enhanced disclosures about how and why they use derivative instruments, how derivative instruments and related hedged items are accounted for, and how derivative instruments and related hedged items affect their financial position, financial performance, and cash flows. The adoption of the disclosure requirements within ASC 815 did not have an impact on our consolidated financial position and results of operations. See Note 3 to our condensed consolidated financial statements.

In April 2009, the FASB issued expanded guidance and disclosure requirements within ASC 820 which provides additional guidance on estimating fair value for an asset or liability when the volume and level of activity have significantly decreased in relation to normal market activity for the asset or liability. ASC 820 also provides additional guidance on circumstances that may indicate that a transaction is not orderly and requires additional disclosure about fair value measurement in annual and interim reporting periods. The expanded guidance and disclosure requirements within ASC 820 was effective beginning with our reporting period ended June 30, 2009 and did not have an impact on our consolidated financial statements.

In April 2009, the FASB issued expanded disclosure requirements within ASC 825, which extends annual disclosure requirements to interim financial statements of publicly traded companies. The expanded disclosure requirements within ASC 825 were effective beginning with our reporting period ended June 30, 2009 and did not have an impact on our consolidated financial statements. We have provided the additional disclosures required in Note 4 to our condensed consolidated financial statements.

In April 2009, the FASB issued expanded guidance and disclosure requirements within ASC 320, which provides further guidance on the measurement, recognition and presentation of other than temporary impairments of assets and requires additional disclosures. The expanded guidance and disclosure requirements within ASC 320 were effective beginning with our reporting period ended June 30, 2009 and did not have an impact on our consolidated financial statements. We have provided the additional disclosures required in "Cash Equivalents and Investments" in Note 1 to our condensed consolidated financial statements.

In May 2009, the FASB issued ASC 855, Subsequent Events which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. ASC 855 was effective for our reporting period ended June 30, 2009, and must be applied prospectively. The adoption of this statement did not have an effect on our condensed consolidated financial statements except for additional disclosures provided in "Basis of Presentation" in Note 1 to our condensed consolidated financial statements.

Results of Operations

The following table sets forth certain data from our unaudited condensed
consolidated financial statements presented in thousands of dollars and
expressed as a percentage of total revenue. This table should be read together
with our condensed consolidated financial statements, including the notes
thereto, appearing elsewhere in this report:



                                         Three Months Ended September 30,                  Nine Months Ended September 30,
                                           2009                     2008                    2009                     2008
                                              (amounts in thousands,                            (amounts in thousands,
                                             except per share amounts)                        except per share amounts)
Statements of Operations Data:
Revenue:
Data and Internet services          $  119,977       39 %    $ 102,282       35 %    $  347,848       38 %    $  292,390       34 %
Network services                        93,233       31         96,152       33         280,396       31         291,762       34
Voice services                          83,799       27         83,927       29         250,414       28         251,707       29
Intercarrier compensation                7,757        3          9,258        3          24,798        3          28,514        3

Total revenue                          304,766      100        291,619      100         903,456      100         864,373      100

Costs and expenses (1):
Operating (exclusive of
depreciation, amortization, and
accretion shown separately below)
(1)                                    127,155       42        123,051       42         374,105       41         365,146       42
Selling, general, and
administrative (1)                      74,611       24         71,408       24         225,935       25         221,371       26
Depreciation, amortization, and
accretion                               74,280       24         71,537       25         221,877       25         212,315       25

Total costs and expenses               276,046       91        265,996       91         821,917       91         798,832       92

Operating income                        28,720        9         25,623        9          81,539        9          65,541        7
Interest expense                       (20,732 )     (7 )      (22,758 )     (8 )       (63,217 )     (7 )       (70,031 )     (8 )
Interest income                            116       -           1,518        1             327       -            5,742        1
Other loss                                  -        -          (3,672 )     (1 )            -        -           (7,767 )     (1 )
. . .