Cincinnati Bell 2006 Annual Report Download - page 116

carriers’ radios on CBW towers), and reciprocal compensation for other carriers’ subscribers who terminate calls
on CBW’s carrier’s network accounted for approximately 3% of total 2006 segment revenue.
Sales of handsets and accessories generated the remaining 10% of 2006 segment revenue. CBW sells
handsets and accessories, often below its own purchase cost, to promote acquisition and retention of subscribers.
Sales take place at the Company’s retail stores, on the Company’s website and in the retail stores of major
electronic and other retailers pursuant to agency agreements. Equipment sales are seasonal in nature, as
customers often purchase handsets and accessories as gifts during the holiday season in the Company’s fourth
quarter. CBW purchases handsets and accessories from a variety of manufacturers and maintains an inventory to
support sales.
Technology Solutions
The Technology Solutions segment provides outsourced telecommunications and IT solutions through the
Company’s subsidiary, Cincinnati Bell Technology Solutions Inc. (“CBTS”), in multiple states. Technology
Solutions sells products to customers in three separate product lines: telecom and IT equipment distribution, data
center and managed services, and professional services. Technology Solutions provides a range of fully managed
and outsourced IT and telecommunications services. Technology Solutions offers business customers solutions
that combine data center collocation services along with the sale, installation and maintenance, and the on-going
network management of branded telecommunications and IT hardware from high quality manufacturers. The
Company believes that these services reduce cost and risk while optimizing performance for its customers.
The telecom and IT equipment distribution product line is the value-added reseller operation of Technology
Solutions. With years of experience and dominant local market penetration, it maintains relationships with over
ten branded technology vendors, which allows it to offer a wide array of telecommunications and computer
equipment and operating systems to meet the needs of small to large businesses. This unit also manages the
implementation and maintenance of traditional voice as well as converged Voice over Internet Protocol (“VoIP”)
services.
The data center and managed services product line currently operates five data centers, totaling
approximately 91,000 square feet of billable data center capacity, a network operations center that provides
off-site infrastructure monitoring, and a wide array of IT infrastructure management products including network
management, electronic data storage, disaster recovery, and data security management. Data center services
include 24-hour monitoring of the customer’s computer equipment in the data center, power, and environmental
controls. Its data centers are connected with one another through fully redundant facilities including both CBT’s
telecommunications network and CBTS’ dedicated Dense Wave Division Multiplexing optical network. This
connectivity and the geographical dispersion of the data centers provide enhanced data reliability and disaster
recovery.
The CBTS model combines data center collocation services with value-added IT managed services into a
fully managed and outsourced infrastructure service. Data center customer contracts typically range from three to
ten years in length and produce attractive returns on invested capital. The Company intends to continue to pursue
additional customers and growth specific to its data center business, for which the Company is prepared to
commit resources, including capital expenditures and working capital, to support this growth.
The professional services product line provides IT outsourcing through staff augmentation and professional
IT consulting by highly technical, certified employees. These engagements can be short-term IT implementation
and project-based work as well as longer term staffing and permanent placement assignments. CBTS utilizes a
team of experienced recruiting and hiring personnel to provide its customers a wide range of skilled IT
professionals at competitive hourly rates.
In May 2006, the Company purchased Automated Telecom Inc. (“ATI”) for a purchase price of $3.5 million
to expand its geographical presence in order to better serve its customers located outside of the greater Cincinnati
area. ATI is based in Louisville, Kentucky, with offices also located in Grand Rapids, Michigan, and St. Louis,
Missouri. ATI is a reseller of, and maintenance provider for, telephony equipment.
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