Earthlink 2015 Annual Report Download - page 23

Table of Contents
Lack of regulation governing wholesale Internet service providers could adversely affect our operations.
We resell broadband Internet access services offered by cable companies and wireline LECs pursuant to wholesale agreements with those providers. In an order
released in March 2015, the FCC classified retail broadband Internet access services as telecommunications services subject to regulation under Title II of the
Communications Act. That ruling is subject to a pending appeal. The classification of retail broadband Internet access services as telecommunications services
means that providers of these services are subject to the general requirement that their charges, practices and classifications for telecommunications services be
“just and reasonable,” and that they refrain from engaging in any “unjust or unreasonable discrimination” with respect to their charges, practices or classifications.
However, the FCC has not determined what, if any, regulations will apply to wholesale broadband Internet access services and it is uncertain whether it will adopt
requirements that are favorable or unfavorable to us. In the absence of favorable regulation applicable to wholesale broadband Internet access services, we may not
be able to obtain those services on prices that enable us to compete effectively for retail customers. It is also possible that the classification of retail broadband
Internet access services will be overturned on appeal, that Congress will adopt legislation reversing that decision, or that a future FCC will reverse that decision.
Any of these outcomes would reduce the likelihood that favorable regulations governing wholesale broadband Internet access services will be adopted in the future.
It is too early to predict the outcome of the final FCC regulations and the resulting impact to our results of operations and cash flows, if any.
General Risks
Cyber security breaches could harm our business.
We maintain large repositories of personal and proprietary customer data and are a third-party provider of managed network and cloud services. Cyber security
breaches expose us to a risk of unauthorized access to this information. The risk that a security breach could seriously harm our business is likely to increase as we
expand our managed network, security and cloud services. We are regularly subject to cyber security attacks and are also subject to employee error or malfeasance
or other disruptions, although no attack or other disruption has had material consequences to date. Techniques used to obtain unauthorized access, disable or
degrade service, or sabotage systems change frequently and may be difficult to anticipate or detect for long periods of time. As a result of the ever-evolving threats,
we and our third-party service providers and vendors must continually evaluate and adapt our respective systems and processes, and there is no guarantee that they
will be adequate to safeguard against all data security breaches or misuses of data. We have been and will continue to be required to use significant capital and
other resources to remedy, protect against and alleviate these and related problems, and we may not be able to remedy these problems in a timely manner, or at all.
A material security breach could damage our reputation, increase our security costs, expose us to litigation and lead to the loss of existing or potential customers. If
our services are perceived as not being secure, our business, including our strategy to serve as a leading managed network, security and cloud services provider,
may be adversely affected.
Privacy concerns relating to our business could damage our reputation and deter current and potential users from using our services.
Concerns about our practices with regard to the collection, use, disclosure or security of personal information or other privacy-related matters, even if unfounded,
could damage our reputation and operating results. We strive to comply with all applicable data protection laws and regulations, as well as our own posted privacy
policies. However, any failure or perceived failure to comply with these laws, regulations or policies may result in proceedings or actions against us by government
entities or others, which could have an adverse effect on our business, results of operations and cash flows.
Federal and state governments have adopted consumer protection laws and undertaken enforcement actions to address advertising and user privacy. Our services
and business practices, or changes to our services and business practices could subject us to investigation or enforcement actions if we fail to adequately comply
with applicable consumer protection laws. Existing and future federal and state laws and regulations also may affect the manner in which we are required to protect
confidential customer data and other information, which could increase the cost of our operations and our potential liability if the security of our confidential
customer data is breached.
Interruption or failure of our network, information systems or other technologies could impair our ability to provide our services, which could damage our
reputation and harm our operating results.
Our success depends on our ability to provide reliable service. Many of our products are supported by our data centers. Our network, data centers, central offices,
corporate headquarters and those of our third-party service providers are vulnerable to damage or interruption from fires, earthquakes, hurricanes, tornados, floods
and other natural disasters, terrorist attacks, power loss, capacity limitations, telecommunications failures, software and hardware defects or malfunctions, break
ins, sabotage and vandalism, human error and other disruptions that are beyond our control. Some of our systems are not fully redundant, and our
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