Vonage 2010 Annual Report Download - page 38

S
ummary of Results for the Years Ended December 31, 2010, 2009, and 200
8
Telephony Services Revenue and Direct Cost of Services
F
or t
h
e
Y
ears
E
n
d
e
dD
ecem
b
er
3
1
,
D
o
ll
a
r
C
hange
2
010` vs
.
2009
D
o
ll
ar
Chang
e
2009
vs.
2008
P
ercent
C
hange
20
1
0
vs
.
2009
P
ercent
Chang
e
2009
vs.
2008
(in thousands, except percentages
)
20
1
0 2009 2008
Telephon
y
services $872,934 $864,848 $865,765 $ 8,086 $ (917) 1% (0%)
Direct cost of telephony services (excluding depreciation and
amortization of
$
18,725,
$
18,958, and
$
20,254, respectively) 243,794 213,553 226,210 30,241 (12,657) 14% (6%)
20
1
0
compare
d
to
2009
T
e
l
ep
h
ony serv
i
ces revenue.
Th
e
i
ncrease
i
nte
l
ep
h
on
y
serv
-
i
ces revenue of
$
8,086, or 1%, was primaril
y
driven b
y
a
n
i
ncrease in re
g
ulatory fees that we collected from subscribers of
$
38,605, which included
$
8,457 of USF and related fees, wit
h
t
he remainin
g
increase the result of pricin
g
actions, a decreas
e
i
n credits we issued to subscribers of
$
15,153, and a decreas
e
of
$
16,076 in bad debt expense. These increases were offset b
y
a decrease in international revenue of
$
18,500 primarily due to
customers movin
g
, as expected, to our
f
ixed rate Vona
g
e World
p
lan, a decrease in
f
ees that we char
g
ed
f
or disconnectin
g
our
s
ervice of $11,797 due to fewer disconnections and elimination
of termination fees for new customers be
g
innin
g
in September
2010, and a decrease in additional
f
eatures, domestic overa
g
e
char
g
es, and other revenue of $5,460. Fewer subscriber lines
t
ranslated into a decrease in monthly subscription
f
ees o
f
$
15,329 and our discontinuation of collectin
g
activation fees
,
b
e
g
innin
g
in most cases in May 2009, contributed to a decreas
e
i
n activation fees of $10,661, which was partially offset by a
n
i
ncrease of $3,014 for the chan
g
e in our customer life from 44
months to 38 months in the
f
irst
q
uarter o
f
2010
.
D
irect cost o
f
telephon
y
services
.
Th
e
in
c
r
ease
in
d
ir
ec
t
cost of telephony services of $30,241, or 14%, was primarily
due to the increased costs of $33,408 from hi
g
her international
call volume associated with Vona
g
e World, an increase of USF
and related fees imposed by government agencies of $8,279
,
and an increase in other cost of $1,663 primaril
y
related to
l
icensing
f
ees. These increases were o
ff
set by a decrease i
n
domestic termination costs of $9
,
222
,
which are costs that we
p
ay other phone companies
f
or terminating phone calls, a
decrease in our network costs of $2
,
261
,
which includes cost
s
f
or co-locating equipment in other carriers’
f
acilities, leasin
g
p
hone numbers, routing calls on the Internet, transferring calls to
and from the Internet to the public switched telephone network
,
an
dE
-911 costs, an
d
a
d
ecrease
i
n
l
oca
l
num
b
er porta
bili
t
y
costs of
$
1
,
626 due to fewer customer additions
.
2009
compare
d
to
2008
T
e
l
ep
h
ony serv
i
ces revenue.
Th
e
d
ecrease
i
nte
l
ep
h
on
y
s
ervices revenue of
$
917, or 0%, was primaril
y
due to
a
decrease in the number of subscriber lines from 2
,
607
,
156 a
t
December 31, 2008 to 2,434,896 at December 31, 2009. The
decrease in subscriber lines and chan
g
es in plan mix translated
i
nto a decrease in monthly subscription fees of
$
14,379 and i
n
activation fees of
$
1,830, which included an offset of
$
3,664 fo
r
t
he chan
g
e in our customer li
f
e
f
rom 48 months to 44 months i
n
t
he first
q
uarter of 2009. There was also a decrease of
$
1,046 i
n
overa
g
e in domestic plan minutes usa
g
e, a decrease in
f
ees that
we char
g
ed for disconnectin
g
our service of $555 and
a
decrease of $934 in other revenue. The reduction in revenue
f
rom lower volume o
f
international per minute usa
g
e
f
ollowin
g
i
ntroduction o
f
our Vona
g
e World plan with
f
ree unlimited call
s
t
o more than 60 countries, as partially o
ff
set by an increase i
n
r
evenues from customers on international
p
lans, was $1,765
.
T
here was also an increase in additional
f
eatures we
p
rovided t
o
customers of $571, an increase in re
g
ulatory fees that we col
-
l
ected from subscribers of $14,850, which included $3,392 o
f
U
SF and related fees, and a decrease of $2,300 in bad debt
ex
p
ense and a decrease in credits we issued to subscribers o
f
$
1,869
.
D
irect cost o
f
telephon
y
services.
The dec
r
ease i
n
di
r
ec
t
c
ost of telephon
y
services of $12,657, or 6%, was primaril
y
du
e
to a decrease in our network costs of $13
,
685
,
which includes
c
osts
f
or co-locating in other carriers’
f
acilities,
f
or leasing
p
hone numbers, routing calls on the Internet, and trans
f
errin
g
c
alls to and
f
rom the Internet to the public switched telephone
networ
k
an
dE
-911 costs.
Th
ere was a
l
so a
d
ecrease
i
n term
i-
nation costs of $8,293, which are costs that we pa
y
other phone
c
ompanies
f
or terminating phone calls, a decrease o
f
taxes that
we pa
y
on our purchase of telecommunications services fro
m
o
ur suppliers of
$
1,369 and a decrease in other cost of
$
184
,
which was offset b
y
the increase of U
S
F and related fee
s
imposed by government agencies of
$
3,392 and in internationa
l
usage cost of
$
7,482, in part due to increased international call
volume following the introduction of our Vonage World plan
.
C
ustomer Equipment and
S
hipping Revenue and Direct
C
ost of
G
oods
S
old
F
or t
h
e
Y
ears
E
n
d
e
dD
ecem
b
er
3
1
,
D
o
ll
a
r
C
hange
20
1
0
vs
.
2009
D
o
ll
ar
Chang
e
2009
vs.
2008
P
ercent
C
hange
20
1
0
vs
.
2009
P
ercent
Chang
e
2009
vs.
2008
(in thousands, except percentages
)
20
1
0 2009 2008
C
ustomer equipment and shipping $ 12,108 $ 24,232 $ 34,355 $(12,124) $(10,123) (50%) (29%)
Direct cost of goods sold 55,965 71,488 79,382 (15,523) (7,894) (22%) (10%)
C
ustomer equipment and shippin
gg
ross loss
(
43,857
)(
47,256
)(
45,027
)
31