Frontier Communications 2006 Annual Report Download - page 36

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Data and Internet Services
Data and internet services revenue for the years ended December 31, 2006 and 2005 increased $58.6
million, or 16%, and $51.8 million, or 17%, respectively, as compared with the prior year primarily due to
growth in data and high-speed internet services. The number of the Company’s high-speed internet subscribers
has increased by more than 75,000 or 24% since December 31, 2005. Data & Internet services also includes
revenue from data transmission services to other carriers and high-volume commercial customers with dedicated
high-capacity circuits like DS-1’s and DS-3’s. Revenue from these dedicated high-capacity circuits increased
$9.1 million in 2006 and $15.0 million in 2005, primarily due to growth in those circuits.
Directory Services
Directory revenue for the years ended December 31, 2006 and 2005 increased $1.0 million, or 1%, and $2.5
million, or 2%, respectively, as compared with the prior year due to growth in yellow pages advertising.
Other
Other revenue for the year ended December 31, 2006 decreased $11.6 million or 11%, as compared with the
prior year primarily due to an increase in bad debt expense of $7.5 million and decreases of $2.3 million for
promotional credits, $1.8 million in sales of customer premise equipment (CPE) and $1.6 million in “bill and
collect” fee revenue. The decreases were partially offset by an increase of $2.5 million for cellular roaming
revenue of the Mohave Cellular Limited Partnership.
Other revenue for the year ended December 31, 2005 increased $11.2 million, or 12%, compared with the
prior year primarily due to a $4.8 million decrease in bad debt expense, a $4.1 million increase in cellular
revenue and a $1.8 million increase related to sales of television service.
Electric Revenue
We sold our Vermont electric division on April 1, 2004. Electric revenue for the year ended December 31,
2004 was $9.7 million. We have sold all of our electric operations and as a result will have no operating results in
future periods for these businesses.
COST OF SERVICES
2006 2005 2004
($ in thousands) Amount $ Change % Change Amount $ Change % Change Amount
Network access .............. $171,247 $14,425 9% $156,822 $ 1,431 1% $155,391
Electric energy and fuel oil
purchased ................. — — — (5,523) -100% 5,523
$171,247 $14,425 9% $156,822 $(4,092) -3% $160,914
Network access
Network access expenses for the years ended December 31, 2006 and 2005 increased $14.4 million and $1.4
million, or 9%, and 1%, respectively, as compared with the prior year period. In the fourth quarter of 2006, we
expensed $9.7 million of promotional costs associated with a fourth quarter high speed internet promotion that
subsidized the cost of a new personal computer for the customer in return for a multi-year contract. The
remaining increases in network costs for 2006 and 2005 are primarily due to increasing rates and usage. As we
continue to increase our sales of data products such as high-speed internet and expand the availability of our
unlimited long distance calling plans, our network access expense is likely to increase. Access line losses have
offset some of the increase.
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