Earthlink 2014 Annual Report Download - page 28

Table of Contents
Unfavorable general economic conditions could harm our business.
Unfavorable general economic conditions, including recession and disruptions to the credit and financial markets, could negatively affect our
business. These conditions could adversely affect the affordability of, and customer demand for, some of our products and services and could
cause customers to delay or forego purchases of our products and services. Many of our existing and target customers are small and medium-
sized businesses, and a significant number of our customers are in the retail industry. We believe these businesses are likely to be affected by
economic downturns. Unfavorable general economic conditions could cause business customers to reduce technology spending, which could
negatively impact sales of our growth services. In addition, our business customers may not be able to obtain adequate access to credit, which
could affect their ability to make timely payments to us. One or more of these circumstances could cause our revenues to decline, churn to
increase, allowance for doubtful accounts and write-
offs of accounts receivable to increase or otherwise adversely affect our business, financial
position, results of operations and cash flows.
Unfavorable general economic conditions could also negatively impact third-
party vendors we rely on for services and network equipment
integral to our business. If these vendors encounter financial difficulties, their ability to supply services and network equipment to us may be
curtailed. If such vendors were to fail, we may not be able to replace them without disruption to, or deterioration of, our service and we may
incur higher costs associated with new vendors. If we were required to purchase another manufacturer's equipment, we could incur significant
initial costs to integrate the equipment into our network and to train personnel to use the new equipment. Any interruption in the services
provided by our third-party vendors could adversely affect our business, financial position, results of operations and cash flows.
Government regulations could adversely affect our business or force us to change our business practices.
Our services are subject to varying degrees of federal, state and local regulation. Federal, state and local regulations governing our services are
the subject of ongoing judicial proceedings, rulemakings and legislative initiatives that could change the manner in which our industry operates
and affect our business. Changes in regulations or in governing legislation, such as the Telecommunications Act of 1996, could have a
significant effect on our business, particularly if the change impairs our ability to interconnect with incumbent carrier networks, lease portions of
other carriers' networks or resell their services at reasonable prices, or lease elements of networks of the ILECs under acceptable rates, terms and
conditions. We cannot predict the outcome of any ongoing legislative initiatives or administrative or judicial proceedings or their potential
impact upon the communications and information technology industries generally or upon us specifically.
Failure to make proper payments for federal USF assessments, FCC regulatory fees or other amounts mandated by federal and state regulations;
failure to maintain proper state tariffs and certifications; failure to comply with federal, state or local laws and regulations; failure to obtain and
maintain required licenses, franchises and permits; imposition of burdensome license, franchise or permit requirements for us to operate in public
rights-of-
way; and imposition of new burdensome or adverse regulatory requirements could limit the types of services we provide or the terms
on which we provide these services.
We are subject to regulatory audits in the ordinary course of business with respect to various matters, including audits by the Universal Service
Administrative Company on USF assessments and payments and audits by local municipalities for E911 charges. These audits can cover periods
for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest and penalties if our positions are
not accepted by the auditing entity. Our financial statements contain reserves for certain of such potential liabilities which we consider
reasonable. Calculation of payments due with respect to these matters can be complex and subject to differences in interpretation. As a result,
these audits could result in liabilities in excess of such reserves which could adversely affect our results of operations.
Our business also is subject to a variety of other U.S. laws and regulations from various entities, including the Federal Trade Commission, the
Environmental Protection Agency and the Occupational Safety and Health Administration, as well as by state and local regulatory agencies, that
could subject us to liabilities, claims or other remedies. Compliance with these laws and regulations is complex and may require significant
costs. In addition, the regulatory framework relating to Internet and communications 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 future laws, 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 affect our results of operations and cause our business to suffer.
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