NetZero 2011 Annual Report Download - page 38

Table of Contents
websites, our base of free members, or the failure to convince our free members to actively participate in our websites or services, could have a
material adverse effect on our business and our financial results.
Failure to maintain our standard pricing could have adverse effects on our financial results.
Due to economic conditions and for competitive and other reasons, we have been offering a large percentage of discounted pricing plans on
a promotional basis. In general, these discounted pricing plans offer a subscription term at a significant discount compared to the standard
pricing for such subscription term. Any increases in the percentage of pay accounts under a discounted pricing plan and any increases in the level
of the discounts will likely result in a decrease in subscription revenues and ARPU, in particular, if such increases continue. Although these
discounted pricing plans, by their terms, renew at the then-current standard pricing for such subscription term upon the expiration of the initial
term, there are no assurances as to the number of pay accounts that will renew at the standard pricing. We intend to continue offering discounted
pricing plans in the future, and there are no assurances that the volume or level of the discounts offered during a period will not be higher than
anticipated. Our continued use of discounted pricing plans has resulted in our becoming dependent on offering such plans in order to obtain new
pay accounts and retain existing pay accounts and may result in our having to reduce our standard pricing, which would adversely impact our
financial results.
ADDITIONAL RISKS RELATING TO OUR COMMUNICATIONS SEGMENT
Our business will suffer if we are unable to compete successfully.
We compete with numerous providers of broadband services as well as other dial-up Internet access providers. Our principal competitors
for broadband services include, among others, local exchange carriers such as AT&T and Verizon, wireless and satellite service providers, and
cable service providers. Our principal dial-up Internet access competitors include established online service and content providers, such as AOL
and MSN, and independent national Internet service providers, such as EarthLink and its PeoplePC subsidiary. Dial-up Internet access services
do not compete favorably with broadband services with respect to connection speed and do not have a significant, if any, price advantage over
certain broadband services. Many broadband providers, including cable companies and local exchange carriers, bundle their offerings with
telephone, entertainment or other services, which may result in lower prices than standalone services. Certain portions of the U.S., primarily
rural areas, currently have limited or no access to broadband services. However, the U.S. government has indicated its intention to provide
broadband services to such rural areas. Such expansion of the availability of broadband services will increase the competition for Internet access
subscribers in such areas and will likely adversely affect our business. In addition to competition from broadband providers, competition among
dial-up Internet access service providers is intense and neither our pricing nor our features provides us with a significant competitive advantage,
if any, over certain of our dial-up Internet access competitors. We expect that competition, particularly with respect to price, both for broadband
as well as dial-up Internet access services, will continue. We also expect that our dial-up Internet access subscriber base will continue to
decrease, potentially at an increasing rate, and that our broadband services will not experience significant growth.
In order to compete effectively against other dial-
up Internet access providers, we may have to make significant revisions to our pricing and
marketing strategies. For example, we may have to lower our introductory rates, offer additional free periods of service, or reduce the standard
pricing of our services. Measures such as these would decrease our average revenue per dial-up Internet access pay account and may decrease
our revenues. All of the foregoing risks would adversely affect the profitability of our dial-
up Internet access services which could materially and
adversely impact our business, financial condition, results of operations, and cash flows.
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