Frontier Communications 2010 Annual Report Download - page 42

and subsidy revenue, partially offset by a $33.2 million, or 5%, increase in data and internet services revenue,
each as described in more detail below.
Change in the number of our access lines is one metric that is important to our revenue and profitability.
Our Frontier legacy operations lost access lines primarily because of changing consumer behavior (including
wireless substitution), economic conditions, changing technology, competition, and by the loss of second lines
upon the addition of HSI or cable modem service. Our Frontier legacy operations lost approximately 128,000
access lines (net) during 2010, or 6% on an annual basis, comparable to the 136,800 access lines (net), or 6%
on an annual basis, lost during 2009. The Acquired Business lost approximately 201,000 access lines (net)
during the six months ended December 31, 2010. Economic conditions and/or increasing competition could
make it more difficult to sell our bundles, and cause us to increase our promotions and/or lower our prices for
our products and services, which would adversely affect our revenue, profitability and cash flow.
During 2010, our Frontier legacy operations added approximately 16,200 HSI subscribers. During 2009,
we added approximately 56,000 HSI subscribers, primarily due to our “Rolling Thunder” promotion. The
Acquired Business experienced a loss of approximately 4,100 HSI subscribers during the six months ended
December 31, 2010. We expect to continue to increase HSI subscribers in our Frontier legacy operations in
2011 and expect to increase the number of HSI subscribers in the Acquired Business during 2011.
While the number of access lines is an important metric to gauge certain revenue trends, it is not
necessarily the best or only measure to evaluate our business. Management believes that customer counts and
understanding different components of revenue is most important. For this reason, presented in the table titled
“Other Financial and Operating Data” below is a breakdown that presents customer counts, average monthly
revenue, products per customer, percentage of customers on price protection plans and churn. It also categorizes
revenue into customer revenue (residential and business) and regulatory revenue (switched access and subsidy
revenue). Despite the 7% decline in residential customers and the 6% decline in total access lines, customer
revenue, which is all revenue except switched access and subsidy revenue, for our Frontier legacy operations
declined in 2010 by only 2 percent as compared to the prior year period. The decline in customers and access
lines for our Frontier legacy operations was partially offset by increased penetration of additional products sold
to both residential and business customers, which has increased our average monthly revenue per customer. A
substantial further loss of customers and access lines, combined with increased competition and the other
factors discussed herein may cause our revenue, profitability and cash flows to decrease in 2011.
As of
December 31, 2010
% Increase
(Decrease)
As of
July 1, 2010
As of
December 31, 2009
% Increase
(Decrease)
As of
December 31, 2008
OTHER FINANCIAL AND OPERATING DATA
Access lines:
Residential . . . . . . . 3,635,670 (6%) 3,855,141 1,349,510 (7%) 1,454,268
Business . . . . . . . . . 2,110,048 (2%) 2,154,109 768,002 (4%) 800,065
Total access lines . . . . . 5,745,718 (4%) 6,009,250 2,117,512 (6%) 2,254,333
HSI subscribers . . . . . . . 1,697,167 0% 1,696,576 635,947 10% 579,943
Video subscribers . . . . . 531,446 5% 504,544 172,961 44% 119,919
41
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES