AT&T Wireless 2014 Annual Report Download - page 39

AT&T INC. | 37
Changes in available technology could increase
competition and our capital costs.
The telecommunications industry has experienced rapid
changes in the past several years. The development of
wireless, cable and IP technologies has significantly
increased the commercial viability of alternatives to
traditional wireline telephone service and enhanced the
capabilities of wireless networks. In addition, our customers
continue to demand services that can be accessed on
mobile devices, especially video services. In order to remain
competitive, we continue to deploy sophisticated wireline
and wireless networks, as well as research other new
technologies. If the new technologies we have adopted or
on which we have focused our research efforts fail to be
cost-effective and accepted by customers, our ability to
remain competitive could be materially adversely affected.
Changes to federal, state and foreign government
regulations and decisions in regulatory proceedings
could further increase our operating costs and/or alter
customer perceptions of our operations, which could
materially adversely affect us.
Our wireline subsidiaries are subject to significant federal
and state regulation while many of our competitors are not.
In addition, our subsidiaries and affiliates operating outside
the United States are also subject to the jurisdiction of
national and supranational regulatory authorities in the
market where service is provided. Our wireless subsidiaries
are regulated to varying degrees by the FCC and some state
and local agencies. Adverse regulations and rulings by the
FCC relating to broadband issues could impede our ability
to manage our networks and recover costs and lessen
incentives to invest in our networks. The development of
new technologies, such as IP-based services, also has
created or potentially could create conflicting regulation
between the FCC and various state and local authorities,
which may involve lengthy litigation to resolve and may
result in outcomes unfavorable to us. In addition, increased
public focus on a variety of issues related to our operations,
such as privacy issues, government requests or orders for
customer data, and potential global climate changes, have
led to proposals at state, federal and foreign government
levels to change or increase regulation on our operations.
Should customers decide that our competitors operate in a
more customer-friendly environment, we could be materially
adversely affected.
the lower overall bond rates have led to higher benefit
obligations. In calculating the costs included on our
financial statements of providing benefits under our plans,
we have made certain assumptions regarding future
investment returns, medical costs and interest rates.
If actual investment returns, medical costs and interest
rates are worse than those previously assumed, our
costs will increase.
The Financial Accounting Standards Board requires
companies to recognize the funded status of defined
benefit pension and postretirement plans as an asset
or liability in our statement of financial position and
to recognize changes in that funded status in the year
in which the changes occur. We have elected to reflect
the annual adjustments to the funded status in our
consolidated statements of income. Therefore, an increase
in our costs or adverse market conditions will have a
negative effect on our operating results.
Adverse changes in global financial markets could
limit our ability and our larger customers’ ability to
access capital or increase the cost of capital needed
to fund business operations.
While the global financial markets were generally stable
during 2014, a continuing uncertainty surrounding global
growth rates has resulted in periodic volatility in the
credit, currency, equity and fixed income markets.
Volatility in some areas, such as in emerging markets,
may affect companies’ access to the credit markets, leading
to higher borrowing costs for companies or, in some cases,
the inability of these companies to fund their ongoing
operations. In addition, we contract with large financial
institutions to support our own treasury operations,
including contracts to hedge our exposure on interest rates
and foreign exchange and the funding of credit lines and
other short-term debt obligations, including commercial
paper. These financial institutions also face new capital-
related and other regulations in the United States and
Europe, as well as ongoing legal and financial issues
concerning their loan portfolios, which may hamper their
ability to provide credit or raise the cost of providing such
credit. A company’s cost of borrowing is also affected by
evaluations given by various credit rating agencies and
these agencies have been applying tighter credit standards
when evaluating a company’s debt levels and future growth
prospects. While we have been successful in continuing to
access the credit and fixed income markets when needed,
adverse changes in the financial markets could render us
either unable to access these markets or able to access
these markets only at higher interest costs and with
restrictive financial or other conditions, severely affecting
our business operations.