Frontier Communications 2009 Annual Report Download - page 49

telephony are resulting in a loss of customers, minutes of use and further declines in the rates we charge our
customers. We expect these factors will continue to adversely affect our long distance revenue in the future.
Directory Services
Directory services revenue for 2009 decreased $6.3 million, or 6%, to $107.1 million as compared with
2008, primarily due to lower revenues from yellow pages local advertising.
Directory services revenue for 2008 decreased $1.2 million, or 1%, to $113.3 million as compared to 2007.
Directory services revenue for 2008 increased $2.8 million as a result of the CTE and GVN acquisitions, and
our legacy Frontier operations decreased $4.0 million, or 4%, as compared to 2007 due to lower revenues from
yellow pages advertising, mainly in Rochester, New York.
Other
Other revenue for 2009 decreased $15.3 million, or 19%, to $67.1 million as compared with 2008,
primarily due to video promotional discounts of approximately $13.6 million.
Other revenue for 2008 decreased $11.5 million, or 12%, to $82.4 million as compared to 2007. Other
revenue was impacted by a decrease in equipment sales of $7.0 million, a decrease in service activation fee
revenue of $3.3 million and decreased “bill and collect” fee revenue of $3.2 million, partially offset by higher
DISH video revenue of $3.3 million.
OPERATING EXPENSES
NETWORK ACCESS EXPENSES
($ in thousands) Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
2009 2008 2007
Network access . . . ................... $225,907 $3,894 2% $222,013 $(6,229) (3%) $228,242
Network access
Network access expenses for 2009 increased $3.9 million, or 2%, to $225.9 million as compared to 2008
due to higher “aspirational gift” costs (e.g., personal computers), higher long distance carriage costs and
additional data backbone costs.
Network access expenses for 2008 decreased $6.2 million, or 3%, to $222.0 million as compared to 2007
primarily due to decreasing rates resulting from more efficient circuit routing for our long distance and data
products. Network access expenses for 2008 increased $8.9 million as a result of the CTE and GVN
acquisitions, and legacy Frontier operations decreased $15.1 million, or 8%, as compared to 2007.
During 2008, we expensed $4.2 million of promotional costs for Master Card gift cards issued to new HSI
customers entering into a two-year price protection plan and to existing customers who purchased additional
services under a two-year price protection plan and $3.0 million for a flat screen television promotion. In the
fourth quarter of 2007, we expensed $11.4 million of promotional costs associated with fourth quarter HSI
promotions that subsidized the cost of a new personal computer or a new digital camera provided to customers
entering into a multi-year commitment for certain bundled services.
As we continue to offer “aspirational gifts” as part of our promotions, increase our sales of data products
such as HSI and increase the penetration of our unlimited long distance calling plans, our network access
expense may increase in the future. A decline in expenses associated with access line losses may offset some of
the increase.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES