Frontier Communications 2011 Annual Report Download - page 18

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
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forward-looking statements are made in this report. The risks and uncertainties described below are not the only ones
facing our company. Additional risks and uncertainties that are not presently known to us or that we currently deem
immaterial or that are not specific to us, such as general economic conditions, may also adversely affect our business and
operations. The following risk factors should be read in conjunction with MD&A and the consolidated financial statements
and related notes included in this report.
Risks Related to Our Business
We will likely face further reductions in access lines, switched access minutes of use, long distance revenues
and federal and state subsidy revenues, which could adversely affect us.
We have experienced declining access lines, switched access minutes of use, long distance revenues, federal and
state subsidies and related revenues because of economic conditions, increasing competition, changing consumer behavior
(such as wireless displacement of wireline use, e-mail use, instant messaging and increasing use of VoIP), technology
changes and regulatory constraints. For example, Frontier’s access lines declined 8% in 2011 and 9% in 2010 on a full year
pro forma basis. In addition, Frontier’s switched access minutes of use declined 11% in 2011 and declined 14% in 2010 on
a full year pro forma basis. We will likely continue to experience reductions in the future. The factors referred to above,
among others, are likely to cause our local network service, switched network access, long distance and subsidy revenues to
continue to decline, and these factors may cause our cash generated by operations to decrease.
We face intense competition, which could adversely affect us.
The communications industry is extremely competitive and competition is increasing. The traditional dividing
lines between local, long distance, wireless, cable and Internet service providers are becoming increasingly blurred.
Through mergers and various service expansion strategies, service providers are striving to provide integrated solutions
both within and across geographic markets. Our competitors include competitive local exchange carriers and other
providers (or potential providers) of services, such as Internet service providers, wireless companies, VoIP providers and
cable companies that may provide services competitive with the services that we offer or intend to introduce. We also
believe that wireless and cable telephony providers have increased their penetration of various services in our markets. We
expect that we will continue to lose access lines and that competition with respect to all of our products and services will
increase.
We expect competition to intensify as a result of the entrance of new competitors, penetration of existing
competitors into new markets, changing consumer behavior and the development of new technologies, products and
services that can be used in substitution for our products and services. We cannot predict which of the many possible future
technologies, products or services will be important in order to maintain our competitive position or what expenditures will
be required to develop and provide these technologies, products or services. Our ability to compete successfully will
depend on the success of capital expenditure investments in our territories, in addition to our new marketing efforts, our
ability to anticipate and respond to various competitive factors affecting the industry, including a changing regulatory
environment that may affect our business and that of our competitors differently, new services that may be introduced
(including wireless broadband offerings), changes in consumer preferences, demographic trends, economic conditions and
pricing strategies by competitors. Increasing competition may reduce our revenues and increase our marketing and other
costs as well as require us to increase our capital expenditures and thereby decrease our cash flow.
Some of our competitors have superior resources, which may place us at a cost and price disadvantage.
Some of our competitors have market presence, engineering, technical and marketing capabilities and financial,
personnel and other resources substantially greater than ours. In addition, some of these competitors are able to raise
capital at a lower cost than we are able to. Consequently, some of these competitors may be able to develop and expand
their communications and network infrastructures more quickly, adapt more swiftly to new or emerging technologies and
changes in customer requirements, take advantage of acquisition and other opportunities more readily and devote greater
resources to the marketing and sale of their products and services than we will be able to. Additionally, the greater brand
name recognition of some competitors may require us to price our services at lower levels in order to retain or obtain
customers.
Finally, the cost advantages of some of these competitors may give them the ability to reduce their prices for an
extended period of time if they so choose.