Frontier Communications 2012 Annual Report Download - page 7

universities are billed on a monthly recurring basis for a fixed number of users. Hourly, daily and weekly
casual end-users are billed by credit card at the time of use.
Local and long distance voice services. We provide basic telephone wireline services to business and
residential customers in our service areas. Our service areas are largely residential and generally less densely
populated than the primary service areas of the largest ILECs. We also provide enhanced services to our
customers by offering a number of calling features, including call forwarding, conference calling, caller
identification, voicemail and call waiting. All of these local services are billed monthly in advance. Long
distance network service to and from points outside our operating territories are provided by interconnection
with the facilities of interexchange carriers. Our long distance services are billed either as unlimited/fixed
number of minutes in advance or on a per minute-of-use basis.
We also offer packages of communications services. These packages permit customers to bundle their
basic telephone line service with their choice of enhanced, long distance, video and Internet services for a
monthly fee or usage fee depending on the plan.
We are continuing our efforts to increase the penetration of our enhanced services which produce revenue
with higher operating margins due to the relatively low marginal operating costs necessary to offer such
services. Integrating these services with other services may provide the opportunity to capture an increased
percentage of our customers’ communications expenditures.
Access services. Our switched access services allow other carriers to use our facilities to originate and
terminate their local and long distance voice traffic. These services are generally offered on a month-to-month
basis and the service billed primarily on a minutes-of-use basis. Switched access charges have been based on
access rates filed with the FCC for interstate services and with the respective state regulatory agency for
intrastate services. On November 18, 2011, the FCC released the USF/ICC Report & Order (the Order) that,
beginning in July 2012, requested us to transition terminating switched access rates over time to near zero by
July 2017. The Order enables companies to recover part of the decline through increases in subscriber line fees
charged to some residential and business wireline voice customers. While the FCC has asserted jurisdiction
over these terminating access rates, during the transition the charges will continue to be based on tariffs filed
with both the FCC and state regulatory agencies. Monthly recurring access service fees are billed in advance. In
addition, subsidies that are received from state and federal authorities based on the higher cost of providing
telephone service to certain rural areas are a part of our access services revenue. Beginning in July 2012, the
Company began receiving federal subsidies for the deployment of broadband in unserved and high cost areas.
Video services. We offer video services under an agency relationship with DISH, which we selected as the
only satellite provider for Frontier in August 2011. During the third quarter of 2012, we unbundled over
203,100 DirecTV customers from our bills and no longer sell, manage or earn revenues from DirecTV. We
receive from the applicable satellite provider and recognize as revenue activation fees, other residual fees and
nominal management, billing and collection fees. Additionally, we offer fiber optic video services on a limited
basis in the states of Indiana, Oregon and Washington pursuant to franchises, permits and similar authorizations
issued by local franchising authorities utilizing fiber optic delivery transport to the home.
Customer Premise Equipment. We offer our small, medium and enterprise business customers a wide
range of third-party telecommunications equipment tailored to their specific business needs. Equipment sales
are most often sold in conjunction with a variety of voice, data and Internet services; however, equipment may
also be sold on a stand-alone basis. We recognize revenue for these equipment sales as specified in the
contracts, typically at time of installation and acceptance by our customers.
Our Company, like others in the industry, utilizes reporting metrics focused on units. Consistent with our
strategy to focus on the customer, we also utilize total, business and residential customer metrics that, when
combined with unit counts, provides additional insight into the results of our strategic initiatives described
above.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES