Frontier Communications 2012 Annual Report Download - page 17

markets. Our competitors include competitive local exchange carriers, 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 customers and that
competition will remain robust.
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, 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 flows.
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, marketing and financial
capabilities, 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.
We may be unable to grow our revenues and cash flows despite the initiatives we have implemented.
We must produce adequate revenues and cash flows that, when combined with cash on hand and funds
available under our revolving credit facility, will be sufficient to service our debt, fund our capital expenditures,
pay our taxes, fund our pension and other employee benefit obligations and pay dividends pursuant to our
dividend policy. We have identified some potential areas of opportunity and implemented several growth
initiatives, including increasing marketing promotions and related expenditures and launching new products and
services with a focus on areas that are growing such as commercial, wireless and satellite broadband, satellite
video products, and the Frontier Secure suite of products, which includes computer technical support. We
cannot assure you that these opportunities will be successful or that these initiatives will improve our financial
position or our results of operations.
Weak economic conditions may decrease demand for our services or necessitate increased discounts.
We could be adversely impacted if current economic conditions or their effects continue. Downturns in the
economy and competition in our markets could cause some of our customers to reduce or eliminate their
purchases of our basic and enhanced services, broadband and video services and make it difficult for us to
obtain new customers. In addition, if current economic conditions continue, our customers may delay or
discontinue payment for our services or seek more competitive pricing from other service providers, or we may
be required to offer increased discounts in order to retain our customers.
Disruption in our networks, infrastructure and information technology may cause us to lose customers
and incur additional expenses.
To attract and retain customers, we must provide reliable service. Some of the risks to our networks,
infrastructure and information technology include physical damage, security breaches, capacity limitations,
power surges or outages, software defects and other disruptions beyond our control, such as natural disasters
and acts of terrorism. From time to time in the ordinary course of business, we experience short disruptions in
our service due to factors such as cable damage, theft of our equipment, inclement weather and service failures
of our third-party service providers. We could experience more significant disruptions in the future. We could
also face disruptions due to capacity limitations if changes in our customers’ usage patterns for our broadband
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES