Cincinnati Bell 2012 Annual Report Download - page 92

The competitive forces described above could have a material adverse impact on the Company’s business,
financial condition, results of operations, and cash flows.
The Company generates a substantial portion of its revenue by serving a limited geographic area.
The Company generates a substantial portion of its revenue by serving customers in the Greater Cincinnati
and Dayton, Ohio areas. An economic downturn or natural disaster occurring in this limited operating territory
could have a disproportionate effect on the Company’s business, financial condition, results of operations, and
cash flows compared to similar companies of a national scope and similar companies operating in different
geographic areas.
The regulation of the Company’s businesses by federal and state authorities may, among other things, place
the Company at a competitive disadvantage, restrict its ability to price its products and services, and threaten
its operating licenses.
Several of the Company’s subsidiaries are subject to regulatory oversight of varying degrees at both the
state and federal levels, which may differ from the regulatory scrutiny faced by the Company’s competitors. A
significant portion of CBT’s revenue is derived from pricing plans that require regulatory overview and approval.
These regulated pricing plans limit the rates CBT charges for some services while its competition has typically
been able to set rates for its services with limited restriction. In the future, regulatory initiatives that would put
CBT at a competitive disadvantage or mandate lower rates for its services could result in lower profitability and
cash flows for the Company. In addition, different regulatory interpretations of existing regulations or guidelines
may affect the Company’s revenues and expenses in future periods.
At the federal level, CBT is subject to the Telecommunications Act of 1996 (the “1996 Act”), including the
rules subsequently adopted by the FCC to implement the 1996 Act, which has impacted CBT’s in-territory local
exchange operations in the form of greater competition. At the state level, CBT conducts local exchange
operations in portions of Ohio, Kentucky, and Indiana, and, consequently, is subject to regulation by the Public
Utilities Commissions in those states. Various regulatory decisions or initiatives at the federal or state level may
from time to time have a negative impact on CBT’s ability to compete in its markets.
CBW’s FCC licenses to provide wireless services are subject to renewal and revocation. Although the FCC
has routinely renewed wireless licenses in the past, the Company cannot be assured that challenges will not be
brought against those licenses in the future. Revocation or non-renewal of CBW’s licenses could result in a
cessation of CBW’s operations and consequently lower operating results and cash flows for the Company.
Further, if CBW ceases offering wireless services, its wireless licenses could revert back to the FCC.
From time to time, different regulatory agencies conduct audits to ensure that the Company is in compliance
with the respective regulations. The Company could be subject to fines and penalties if found to be out of
compliance with these regulations, and these fines and penalties could be material to the Company’s financial
condition.
There are currently many regulatory actions under way and being contemplated by federal and state
authorities regarding issues that could result in significant changes to the business conditions in the
telecommunications industry. Assurances cannot be given that changes in current or future regulations adopted
by the FCC or state regulators, or other legislative, administrative, or judicial initiatives relating to the
telecommunications industry, will not have a material adverse effect on the Company’s business, financial
condition, results of operations, and cash flows.
Maintaining the Company’s telecommunications networks requires significant capital expenditures, and its
inability or failure to maintain its telecommunications networks would have a material impact on its market
share and ability to generate revenue.
The Company has improved its wireline network over the past several years through increased capital
expenditures for fiber optic cable in limited areas of its operating network. In 2011 and 2012, the Company also
upgraded a portion of its wireless network to 4G, using HSPA+ technologies.
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Form 10-K Part I Cincinnati Bell Inc.