AT&T Wireless 2015 Annual Report Download - page 27

AT&T INC. | 25
competitive pressures, for a number of years we have
used a bundling strategy that rewards customers who
consolidate their services (e.g., telephone, high-speed
Internet, wireless and video) with us. We continue to
focus on bundling services, including combined packages
of wireless data and voice and video service. We will
continue to develop innovative and integrated services
that capitalize on our wireless and IP-based network
and satellites.
Additionally, we provide local and interstate telephone
and switched services to other service providers, primarily
large Internet Service Providers using the largest class
of nationwide Internet networks (Internet backbone),
wireless carriers, other telephone companies, cable
companies and systems integrators. These services
are subject to additional competitive pressures from
the development of new technologies, the introduction
of innovative offerings and increasing satellite, wireless,
fiber-optic and cable transmission capacity for services.
We face a number of international competitors, including
Orange Business Services, British Telecom, Singapore
Telecommunications Limited and Verizon Communications
Inc., as well as competition from a number of large systems
integrators, such as HP Enterprise Services.
ACCOUNTING POLICIES AND STANDARDS
Critical Accounting Policies and Estimates Because
of the size of the financial statement line items they relate
to or the extent of judgment required by our management,
some of our accounting policies and estimates have a more
significant impact on our consolidated financial statements
than others. The following policies are presented in the
order in which the topics appear in our consolidated
statements of income.
Allowance for Doubtful Accounts We record expense
to maintain an allowance for doubtful accounts for
estimated losses that result from the failure or inability
of our customers to make required payments. When
determining the allowance, we consider the probability
of recoverability based on past experience, taking into
account current collection trends as well as general
economic factors, including bankruptcy rates. Credit
risks are assessed based on historical write-offs, net
of recoveries, as well as an analysis of the aged
accounts and installment receivable balances with
reserves generally increasing as the receivable ages.
Accounts receivable may be fully reserved for when
specific collection issues are known to exist, such as
pending bankruptcy or catastrophes. The analysis of
receivables is performed monthly, and the allowances
for doubtful accounts are adjusted through expense
accordingly. A 10% change in the amounts estimated
to be uncollectible would result in a change in the
provision for uncollectible accounts of approximately $142.
and services are now operational, others are being developed
or may be developed. We compete for customers based
principally on service/device offerings, price, call quality,
coverage area and customer service.
Our subsidiaries providing communications and digital
entertainment services will face continued competitive
pressure in 2016 from multiple providers, including
wireless, satellite, cable and other VoIP providers, online
video providers, and interexchange carriers and resellers.
In addition, the desire for high-speed data on demand,
including video, and lingering economic sluggishness are
continuing to lead customers to terminate their traditional
wired services and use our or competitors’ wireless, satellite
and Internet-based services. In most markets, we compete
for customers, often on pricing of bundled services,
with large cable companies, such as ComcastCorporation,
CoxCommunications Inc. and Time Warner CableInc.,
for high-speed Internet, video and voice services and
other smaller telecommunications companies for both
long-distance and local services. In addition, in Latin
American countries served by our DIRECTV subsidiary,
we also face competition from other video providers,
including América Móvil and Telefónica.
Our Entertainment Group and Business Solutions segments
generally remain subject to regulation for certain legacy
wireline wholesale services by state regulatory commissions
for intrastate services and by the FCC for interstate services.
Under the Telecom Act, companies seeking to interconnect
to our networks and exchange local calls enter into
interconnection agreements with us. Any unresolved issues
in negotiating those agreements are subject to arbitration
before the appropriate state commission. These agreements
(whether fully agreed-upon or arbitrated) are then subject
to review and approval by the appropriate state commission.
Our Entertainment Group and Business Solutions
segments operate portions of their business under state-
specific forms of regulation for retail services that were
either legislatively enacted or authorized by the appropriate
state regulatory commission. Most states deregulate
the competitive services; impose price caps for some
services where the prices for these services are not tied
to the cost of providing the services or to rate-of-return
requirements; or adopt a regulatory framework that
incorporates deregulation and price caps. Some states
may impose minimum customer service standards with
required payments if we fail to meet the standards.
We continue to lose legacy voice and data subscribers
due to competitors (e.g., wireless, cable and VoIP providers)
who can provide comparable services at lower prices
because they are not subject to traditional telephone
industry regulation (or the extent of regulation is in dispute),
utilize different technologies, or promote a different business
model (such as advertising based). In response to these