Earthlink 2004 Annual Report Download - page 36

our initial estimates of costs associated with the 2003 and 2004 contact center restructurings resulted in a decrease of facility exit costs of $1.8 million.
(3) We have made investments in other companies. The loss on investments in other companies represents losses incurred to write our investments down to their estimated
realizable value. Our investments include an investment in eCompanies Venture Group, L.P., (“EVG”), a limited partnership formed to invest in domestic emerging Internet-
related companies. Sky Dayton, a member of EarthLink’s Board of Directors, is a founding partner in EVG. EVG also has an affiliation with eCompanies, LLC
(“eCompanies”). Sky Dayton is a founder and director of eCompanies. The loss on investments for the years ended December 31, 2002 and 2003 reflected a write-down of
EarthLink’s investment in EVG to its estimated realizable value.
(4) Represents full-time equivalents.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Narrowband access revenues
Narrowband access revenues primarily consist of monthly fees charged to customers for dial-up and wireless Internet access; installation
fees; early termination fees; equipment revenues associated with selling handheld devices and other Internet access devices; and fees charged
for the shipping and handling of the devices and other equipment. The following table identifies the components of our narrowband access
revenues for the years ended December 31, 2003 and 2004:
Narrowband revenues decreased 9% to $874.0 million.
The decrease in narrowband revenues was due to a decrease in narrowband service
ARPU, a decrease in equipment and related revenues and a decrease in revenues associated with the PeoplePC deferred service liability for
acquired Membership Customers.
Narrowband service ARPU decreased from $19.70 during the year ended December 31, 2003 to $18.21 during the year ended
December 31, 2004, due to the shift in the mix of our narrowband subscriber base from premium-priced narrowband access services, which are
typically priced at $21.95 per month, to value-priced access services, which are generally priced at $10.95 per month. During the years ended
December 31, 2003 and 2004, average value-priced access subscribers were 216,000 and 637,000, respectively, representing 5% and 16%,
respectively, of our average narrowband customer base. Also contributing to the decrease in narrowband service ARPU, although to a lesser
extent, was the increased use of promotional pricing for our service offerings.
Equipment and related revenues decreased due to EarthLink’s decisions in 2003 to discontinue the sale of personal computers bundled
with prepaid, value-priced narrowband Internet access services and to discontinue the sale of MailStation hardware.
Revenues associated with the PeoplePC deferred service liability declined due to the expiration of acquired customers’ prepay terms.
EarthLink expects to record approximately $0.5 million of revenues during the year ending December 31, 2005 associated with the acquired
Membership Customers, and this amount will continue to decline as acquired Membership Customers reach the end of their prepay terms.
Average narrowband subscribers increased slightly from 3.9 million during the year ended December 31, 2003 to 4.0 million during the
year ended December 31, 2004.
However, t he mix of
33
Year Ended December 31,
2003
2004
$ Change
% Change
(in thousands)
Service revenues
$
928,738
$
866,498
$
(62,240
)
-
7
%
Equipment and related revenues
22,336
5,727
(16,609
)
-
74
%
Revenues associated with acquired Membership
Customers (deferred service liability)
13,951
1,785
(12,166
)
-
87
%
Narrowband access revenues
$
965,025
$
874,010
$
(91,015
)
-
9
%