Earthlink 2005 Annual Report Download - page 25

able to expand or improve our network infrastructure, including acquiring additional capacity from our third-
party providers, to meet additional
demand or changing subscriber requirements on a timely basis and at a commercially reasonable cost, or at all.
We may experience increases in our telecommunications usage that exceed our available telecommunications capacity. As a result, users
may be unable to register or log on to use our services, may experience a general slow-down in their Internet connection or may be
disconnected from their sessions. Inaccessibility, interruptions or other limitations on the ability of customers to access our services due to
excessive user demand, or any failure of our network to handle user traffic, could have a material adverse effect on our reputation which could
cause an increase in churn and would adversely impact our revenues. While our objective is to maintain excess capacity, our failure to expand
or enhance our network infrastructure, including our ability to procure excess capacity from third-party telecommunications providers, on a
timely basis or to adapt to an expanding subscriber base or changing subscriber requirements could materially adversely affect our business,
financial condition and results of operations.
Business failures and mergers in the telecommunications industry may inhibit our ability to manage our telecommunications costs, which
would adversely affect our profitability.
The intensity of competition in the telecommunications industry has resulted in significant declines in pricing for telecommunications
services that we purchase, and such declines have had a favorable effect on our operating performance. However, the intensity of competition
and its impact on wholesale telecommunications pricing have benefited us, but they have caused some telecommunications companies to
experience financial difficulty. Our prospects for maintaining or further improving telecommunications costs could be negatively affected if
one or more key telecommunications providers were to experience serious enough difficulties to impact service availability, if
telecommunications companies continue to merge reducing the number of companies from which we purchase wholesale services, or if
telecommunications bankruptcies and mergers reduce the level of competition among telecommunications providers.
Government regulations could force us to change our business practices.
ISPs. Changes in the regulatory environment regarding the Internet could cause our revenues to decrease and/or our costs to increase.
Currently, ISPs as “information service” providers, are largely unregulated, other than with respect to regulations that govern businesses
generally, such as regulations related to consumer protection. As information services and telecommunications services converge, however, the
FCC may seek to impose additional regulations, including the imposition of regulatory fees such as Universal Service Fund payments, on
information service providers that could adversely affect our business.
VoIP. The current regulatory environment for VoIP services remains unclear. Our VoIP services are not currently subject to all of the
same regulations that apply to traditional telephony. It is possible that Congress and some state legislatures may seek to impose increased fees
and administrative burdens on VoIP providers. The FCC has already required us to meet various emergency service requirements (such as
“E911”) and interception or wiretapping requirements, such as the Communications Assistance for Law Enforcement Act (“CALEA”). In
addition the FCC may seek to impose other traditional telephony requirements such as disability access requirements, consumer protection
requirements, number assignment and portability requirements, and other obligations, including additional obligations regarding E911 and
CALEA. Such regulations could result in substantial costs depending on the technical changes required to accommodate the requirements, and
any increased costs could erode our pricing advantage over competing forms of communication and may adversely affect our business.
Tax. The tax treatment of activities on or relating to the Internet is currently unsettled. A number of proposals have been made at the
federal, state and local levels and by foreign governments that could
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