AT&T Wireless 2010 Annual Report Download - page 40

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
38 AT&T Inc.
The 2010 decrease was primarily due to the following:
 •Pension/OPEBservicecostandotheremployee-related
expense of $734. This decrease was primarily related
to reduction in workforce and changes in future retiree
benefits.
 •Trafficcompensationof$452.
 •Contractservicesof$314.
 •Baddebtexpenseof$178duetolowerbusinessrevenue
and improvements in cash collections.
The decreases were partially offset by increased cost of sales,
primarily related to U-verse related expenses of $369.
The 2009 decrease was primarily due to the following:
 •Employee-relatedcostsof$1,182,primarilyrelatedto
workforce reductions.
 •Trafficcompensation,includingportalfees,of$655.
 •Nonemployee-relatedexpenses,suchasbaddebt
expense, materials and supplies costs of $441.
 •Contractservicesof$134.
Depreciation and amortization expenses decreased $372,
or 2.9%, in 2010 and $43, or 0.3%, in 2009. Both decreases
were primarily related to lower amortization of intangibles
for customer lists associated with acquisitions.
 •Traditionalpacket-switcheddataservices,whichinclude
frame relay and asynchronous transfer mode services,
decreased $431, or 21.6%, in 2010 and $521, or 20.7%,
in 2009. This decrease is primarily due to lower demand
as customers continue to shift to IP-based technology
such as Virtual Private Networks (VPN), DSL and managed
Internet services, and the continuing weak economic
conditions. We expect these traditional, circuit-based
services to continue to decline as a percentage of our
overall data revenues.
Other operating revenues decreased $221, or 3.9%, in 2010
and $523, or 8.5%, in 2009. Major items included in other
operating revenues are integration services and customer
premises equipment, government-related services and
outsourcing, which account for more than 60% of total
other revenue for all periods.
Operations and support expenses decreased $1,344, or 3.2%,
in 2010 and $2,465, or 5.5%, in 2009. Operations and support
expenses consist of costs incurred to provide our products
and services, including costs of operating and maintaining
our networks and personnel costs, such as salary, wage and
bonus accruals. Costs in this category include our repair
technicians and repair services, certain network planning and
engineering expenses, information technology and property
taxes. Operations and support expenses also include bad debt
expense; advertising costs; sales and marketing functions,
including customer service centers; real estate costs, including
maintenance and utilities on all buildings; credit and collection
functions; and corporate support costs, such as finance, legal,
human resources and external affairs. Pension/OPEB
expenses, net of amounts capitalized as part of construction
labor, are also included to the extent that they are associated
with these employees.