Frontier Communications 2004 Annual Report Download - page 30

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CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
28
of competitive communications companies (including wireless companies) receiving federal subsidies may lead to further
increases in the NACPL, thereby resulting in further decreases in our subsidy revenue in the future. The FCC and state
regulators are currently considering a number of proposals for changing the manner in which eligibility for federal subsidies
is determined as well as the amounts of such subsidies. The FCC is also reviewing the mechanism by which subsidies are
funded. We cannot predict when or how these matters will be decided nor the effect on our subsidy revenues. Our subsidy
and access revenues are very profitable so any reductions in those revenues will reduce our profitability.
Local Services
Local services revenue for the year ended December 31, 2004 decreased $7.8 million or 1% as compared with the prior year .
Local revenue decreased $17.9 million primarily due to $4.7 million related to continued losses of access lines, $2.2 million
as a result of refunds to customers because of state earnings limitations, the termination of an operator services contract of
$3.4 million, $3.5 million in decreased local measured service revenue and a decline of $2.0 million in certain business
services revenue. Enhanced services revenue increased $10.1 million, primarily due to sales of additional feature packages.
Economic conditions or increasing competition could make it more difficult to sell our packages and bundles and cause us to
lower our prices for those products and services, which would adversely affect our revenues.
Local services revenue for the year ended December 31, 2003 increased $8.7 million, or 1% as compared with the prior year.
Local revenue decreased $1.1 million primarily due to a $7.6 million decrease from continued losses of access lines and the
$4.0 million impact of the sale of our North Dakota exchanges in 2003, partially offset by an $10.4 million increase in
subscriber line charges due to rate changes. Enhanced services revenue increased $9.8 million primarily due to the sale of
additional feature packages.
Long Distance and Data Services
Long distance and data services revenue for the year ended December 31, 2004 increased $15.0 million or 5%, as compared
with the prior year. Data services (data includes high-speed internet) increased primarily due to growth of $30.7 million,
partially offset by decreased long distance revenue of $15.8 million primarily attributable to a 21% decline in the average rate
per minute. Our long distance minutes of use increased approximately 6.0% during 2004. Our long distance revenues could
decrease in the future due to lower long distance minutes of use because consumers are increasingly using their wireless
phones or calling cards to make long distance calls and lower average rates per minute because of unlimited and packages of
minutes for long distance plans. We expect these factors will continue to adversely affect our long distance revenues during
2005.
Long distance and data services revenue for the year ended December 31, 2003 increased $7.5 million or 3% as compared
with the prior year primarily due to growth of $17.6 million related to data services, partially offset by a decrease of $10.0
million in long distance revenue. Our long distance revenues decreased during 2003 due to lower average rates per minute
related to the introduction of new products including unlimited long distance and lower long distance minutes of use because
consumers are increasingly using their wireless phones or calling cards to make long distance calls.
Directory Services
Directory revenue for the year ended December 31, 2004 increased $3.7 million or 3%, as compared with the prior year due
to growth in yellow pages advertising.
Directory revenue for the year ended December 31, 2003 increased $2.6 million or 2%, as compared with the prior year
primarily due to growth in yellow pages advertising.
Other
Other revenue for the year ended December 31, 2004 increased $8.2 million or 8%, as compared with the prior year primarily
due to a $4.1 million carrier dispute settlement, $3.6 million in increased conferencing revenue, a decline in bad debt expense
of $3.2 million and an increase in service activation revenue of $2.5 million, partially offset by decreases of $3.6 million in
sales of customer premise equipment (CPE) and $1.5 million in call center services revenue.
Other revenue for the year ended December 31, 2003 decreased $15.9 million, or 14% compared with the prior year primarily
due to $7.8 million in increased dispute reserves, the termination in 2002 of $2.5 million in contract services provided to
Global Crossing and a decrease of $2.0 million in CPE sales. In addition, revenue from collocation/rents declined $1.1
million and conferencing revenue decreased $1.0 million.