Earthlink 2015 Annual Report Download - page 40

Table of Contents
services, usage and web hosting. Revenues for these voice and data products have been decreasing due to competition, migration to more advanced
integrated voice and data services, customer churn and continued rate reductions as a result of FCC rules regarding intercarrier compensation. In addition,
during 2015 we deemphasized and discontinued certain products that were low margin revenue streams or that were not in line with our more focused
business strategy. Partially offsetting the decline in revenues from 2014 to 2015 was price increases implemented during 2015.
Consumer Services
Consumer services revenues decreased during the years ended December 31, 2014 and 2015 compared to the prior years primarily due to the following:
•Decreases in average consumer access subscribers, which were 1.1 million , 0.9 million and 0.8 million during the years ended December 31, 2013, 2014
and 2015 , respectively. The decreases resulted from limited sales and marketing activities, the continued maturation of the market for Internet access and
competitive pressures in the industry. However, as we continue to focus on the retention of customers, our monthly consumer subscriber churn rates were
2.1% , 2.1% and 1.9% during the years ended December 31, 2013, 2014 and 2015 , respectively, which moderated the decline in average consumer
subscribers.
• Partially offset by increases in our average revenue per subscriber, which was $21.83 , $22.89 and $23.57 during the years ended December 31, 2013,
2014 and 2015 , respectively. The increases were due to targeted price increases and a change in mix of subscribers. In addition, we began billing certain
broadband subscribers for modem equipment rental in April 2014 which also contributed to the increase in average revenue per subscriber from 2013 to
2014.
• Partially offset by an increase in value-added services due to price increases in our premium email only subscription product.
Cost of revenues
Cost of revenues for our business services primarily consists of the cost of connecting customers to our networks via leased facilities; the costs of leasing
components of our network facilities; and costs paid to third-party providers for interconnect access and transport services.
Cost of revenues for our consumer services primarily consists of telecommunications fees and network operations costs incurred to provide our Internet access
services; fees paid to suppliers of our value-added services; and fees paid to content providers for information provided on our online properties.
The following table presents our cost of revenues for the years ended December 31, 2013, 2014 and 2015 :
Year Ended December 31,
2014 vs 2013
2015 vs 2014
2013
2014
2015
$ Change
% Change
$ Change
% Change
(dollars in thousands)
Business services $ 506,245
$ 469,523
$ 422,766
$ (36,722)
(7)%
$ (46,757)
(10)%
Consumer services 94,497
87,913
77,862
(6,584)
(7)%
(10,051)
(11)%
Total cost of revenues $ 600,742
$ 557,436
$ 500,628
$ (43,306)
(7)%
$ (56,808)
(10)%
Business Services
The following table presents the primary reasons for the changes in business services cost of revenues for the years ended December 31, 2014 and 2015 compared
to the prior years:
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