Frontier Communications 2010 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2010 Frontier Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

Nonswitched access revenue for our Frontier legacy operations for 2010 increased $13.0 million to $294.6
million as compared to 2009, primarily due to growth in the number of those circuits.
Data and internet services revenue for 2009 increased $33.2 million, or 5%, to $638.8 million as compared
with 2008, primarily due to the overall growth in the number of HSI subscribers and high-capacity Internet and
ethernet circuits purchased by customers. As of December 31, 2009, the number of the Company’s HSI
subscribers had increased by approximately 56,000, or 10%, since December 31, 2008. We have used
“aspirational gifts” or promotional credits to drive growth in HSI subscribers. Revenue from dedicated high-
capacity circuits increased $7.3 million in 2009, as compared with 2008, primarily due to growth in the number
of those circuits.
On March 16, 2010, the FCC released, as required under the 2009 American Recovery and Reinvestment
Act (ARRA), its National Broadband Plan. The National Broadband Plan proposes a series of actions that could
result in additional regulatory requirements for broadband services as well as a series of other regulatory
reforms. As a follow-up to the National Broadband plan, on February 8, 2011, the FCC adopted a Notice of
Proposed Rulemaking seeking comment from the industry on both short- and long-term reforms to Intercarrier
Compensation and the Federal Universal Service High Cost Fund. The Notice asks for comment on a broad
range of possible outcomes and Frontier cannot predict whether or when the FCC will take additional actions or
the effect of any such actions on the Company’s subsidy revenues.
Switched Access and Subsidy
Switched access and subsidy revenue for 2010 increased $138.1 million, or 38%, to $497.8 million as
compared with 2009. For 2010, switched access and subsidy revenue represented 13% of our total revenue.
Switched access and subsidy revenue for 2010 increased $169.9 million as a result of the Acquired Business.
Switched access revenue was $285.5 million in 2010, or 8% of our revenues, up from $246.3 million in
2009, or 12% of our revenues. Federal and state subsidy revenue, including surcharges of $73.8 million billed
to customers which are remitted to the FCC, was $212.3 million in 2010, or 6% of our revenues, up from
$113.3 million in 2009, or 5% of our revenues. We expect a further decline in switched access and subsidy
revenue in 2011.
Switched access revenue for our Frontier legacy operations for 2010 of $213.9 million decreased $32.5
million, or 13%, as compared with 2009. This decrease was primarily due to the impact of a decline in minutes
of use related to access line losses and the displacement of minutes of use by wireless, email and other
communications services. Switched access and subsidy revenue includes subsidy payments we receive from
federal and state agencies, including surcharges billed to customers which are remitted to the FCC. Subsidy
revenue for our Frontier legacy operations, including surcharges billed to customers of $41.1 million, for 2010
of $114.0 million increased $0.7 million, or 1%, as compared with 2009.
Federal and state subsidy revenue including surcharges (which are billed to customers and remitted to the
FCC) for our Frontier legacy operations were $63.6 million, $9.3 million and $41.1 million, respectively, for
2010.
Switched access and subsidy revenue for 2009 decreased $45.1 million, or 11%, to $359.6 million as
compared with 2008. Switched access revenue in 2009 of $246.3 million decreased $38.6 million, or 14%, as
compared with 2008, primarily due to the impact of a decline in minutes of use related to access line losses and
the displacement of minutes of use by wireless, email and other communications services. Access services
revenue includes subsidy payments we receive from federal and state agencies, including surcharges billed to
customers that are remitted to the FCC. Subsidy revenue, including surcharges billed to customers of $35.5
million, for 2009 of $113.3 million decreased $6.5 million, or 5%, as compared with 2008, primarily due to
lower receipts under the Federal High Cost Fund (FHCF) program resulting from our reduced cost structure and
an increase in the program’s National Average Cost per Local Loop (NACPL) used by the FCC to allocate
funds among all recipients.
Federal and state subsidy revenue including surcharges (which are billed to customers and remitted to the
FCC) were $69.1 million, $8.7 million and $35.5 million, respectively, for 2009. The federal and state subsidy
revenue for 2009 represents 5% of our consolidated revenues.
44
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES