Classmates.com 2004 Annual Report Download - page 59

such as the proposed VoIP service, we may have to comply with laws and regulations that currently are not applicable to us. If the regulatory
status of ISPs changes or if we offer new services that subject us to new laws and regulations, our business may be adversely affected.
Although the Internet Tax Freedom Act, which placed a moratorium on new state and local taxes on Internet commerce, has been extended
through November 2007, future laws imposing taxes or other regulations on the provision of goods and services over the Internet could make it
substantially more expensive to operate our business.
Our business is also subject to a variety of other U.S. and foreign laws and regulations that could subject us to liabilities, claims or other
remedies, such as laws relating to bulk email or "spam," access to various types of content by minors, anti-spyware initiatives, encryption, data
protection and consumer protection. Compliance with these laws and regulations is complex and may impose significant additional costs on us.
In addition, the regulatory framework relating to Internet services is evolving and both the federal government and states from time to time pass
legislation that impacts our business. It is likely that additional laws and regulations will be adopted that would affect our business. We cannot
predict the impact that future regulatory changes or developments may have on our business, financial condition, results of operations or cash
flows. The enactment of any additional laws or regulations, increased enforcement activity of existing laws and regulations, or claims by
individuals could significantly impact our costs or the manner in which we conduct business, all of which could adversely impact our results of
operations and cause our business to suffer.
Our business could be shut down or severely impacted by a catastrophic event.
Our computer equipment and the telecommunications infrastructure of our third-party network providers are vulnerable to damage from
fire, earthquakes, power loss, telecommunications failures, terrorism and similar events. We have experienced situations where power loss and
telecommunications failures have adversely impacted our services, although to date such failures have not been material to our operations. A
significant portion of our computer equipment, including critical equipment dedicated to our Internet access services, is located at our
headquarters in Woodland Hills, California and at facilities in Los Angeles, California; San Jose, California; Ashburn, Virginia; Renton,
Washington and New York, New York. In the past, areas in California have experienced repeated episodes of diminished electrical power
supply, or "rolling blackouts." A natural disaster, terrorism, power blackout or other unanticipated problem at our headquarters or at a network
hub, or within a third-party network provider's network, could cause interruptions in the services that we provide. Our systems are not fully
redundant. Any prolonged disruption of our services due to system failures could result in user turnover and decreased revenues.
Our business could be severely impacted due to political instability or other factors in India.
We have a significant number of employees located in our India office. Our operations in India primarily handle email customer support,
product development and quality assurance. A portion of our outsourced customer support is also based in India. Our product development,
customer support and quality assurance operations would be severely disrupted if telecommunications issues, political instability or other factors
adversely impacted these operations or our ability to communicate with these operations. Any disruption that continued for an extended period of
time would likely have a material adverse effect on our ability to service our customers and develop our products since it would take a
significant period of time to transition these operations internally or to an outside vendor. If we were to cease our operations in India and transfer
these operations to another geographic area, such change could result in increased overhead costs which could materially and adversely impact
our results of operations.
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