XO Communications 2009 Annual Report Download - page 24

aggregate liquidation preference of up to $217.4 million at a date no later than April 15, 2010. Any future
reductions in our cash balance following the redemption of the Class A Preferred Stock and recent market
volatility in the corporate debt markets may adversely impact our ability to raise additional capital on
financially favorable terms.
The continuing effects of recent economic conditions could negatively impact our operating results and
financial condition.
Unfavorable general economic conditions, including the recent recession in the United States and the ongoing
financial crisis affecting the banking system and financial markets, could negatively affect our business.
Although it is difficult to predict the impact of general economic conditions on our business, these conditions
could adversely affect the affordability of, and customer demand for, some of our products and services and
could cause customers to delay or forgo purchases of our products and services. One or more of these
circumstances could cause our revenue to decline. Also, our customers may not be able to obtain adequate
access to credit, which could affect their ability to make timely payments to us. Additionally, our business is
dependent on third-party suppliers for hardware, software and services integral to our business. If these
suppliers encounter financial difficulties, their ability to supply hardware, software and services to us may be
curtailed. If we are unable to quickly identify suitable alternatives, we may incur significant additional costs or
may not be able to provide certain products or services to customers. For these reasons, among others, if the
current economic conditions persist or worsen, this could adversely affect our operating results and financial
condition.
Risks Related to our Operations
Our rights to use the fiber that makes up our network may be affected by the financial health of, or
disputes with, our fiber providers.
We possess rights to the fiber that is included in our networks, particularly in our inter-city network, through
long-term leases or IRU agreements. A bankruptcy or financial collapse of one of these fiber providers could
result in a loss of our rights under such leases and IRUs. If this were to occur, it could have a negative impact
on the integrity and quality of our network, on our ability to expand the capacity of our network, and
ultimately on our results of operations. If one or more of our fiber providers, as a result of a dispute with us,
were to prevent us from lighting more fiber, such actions could have similar negative impacts on our
operations and results.
We depend on third-parties for the performance of certain network services and business operations.
We depend on various third parties, including ILECs, CLECs, and regional fiber providers, to provide us with
high-quality, reliable service for portions of our wireline network through long-term leases or IRU agreements.
Furthermore, our network is made up of hardware and software provided by various third parties, including
Cisco, Juniper, Nortel, Sonus, and Broadsoft. We are continually adding new hardware and software into our
network as we expand or replace older equipment. In addition, we receive periodic hardware and software
updates from our vendors. To operate effectively, all the various network elements must operate smoothly.
Although we test new equipment before we add it to our network, there can be no assurance testing will
identify all potential problems. To the extent that problems arise from third party hardware or software
including interoperability with other network elements, the performance of our network may diminish.
We use third parties to perform certain aspects associated with operating our network, including the signaling
associated with completing voice calls. Additionally, we rely on third parties, including other carriers and
equipment vendors, to perform certain maintenance and repair network services for us, including routine
maintenance and repair work to correct network outages that may occur from time to time. If these third
parties do not perform the specified services required under the terms of our contracts with them, or in a
timely manner, the performance of our network could be adversely impacted.
If any of the above referenced third parties fail to fully perform their obligations, were to experience
significant reduction in quality, or terminate their agreements with us, such actions could result in a negative
20