Earthlink 2004 Annual Report Download - page 6

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During 2003 and 2004, we implemented plans to close contact center facilities to reduce overall costs. We realized reduced costs in 2003
and 2004 as a result of completing these plans. We will continue to manage operating expenses, devoting resources to evaluate the cost
structure of our business, and we intend to leverage our infrastructure as we seek to grow our customer base and revenues.
Expand into new growth markets
A growing part of our strategy is to introduce new products and services to enhance our competitive position and generate additional
revenues and profits. Since the inception of our business, we have expanded from a traditional dial-up service provider to a provider of
broadband access services, value-priced access services and wireless access services.
During 2004, we became the first major ISP to offer a wireless voice and data solution, and we expanded our voice service offerings to
include EarthLink Unlimited Voice Service, a service delivered via Voice over Internet Protocol (“VoIP”). In January 2005, we entered into a
definitive agreement with SK Telecom Co., Ltd., Korea’s leading mobile communications company, to form a joint venture, called SK-
EarthLink, to market wireless voice and data services in the U.S. and enter the growing wireless data and voice market.
We expect to continue to evaluate the feasibility of new technologies and develop and launch new advanced service offerings, focusing
primarily on offerings associated with traditional wireline and wireless voice services. In order to be successful, we must adapt to the ever
changing competitive, legal and regulatory environments to deliver compelling, competitive and useful services to consumers and businesses.
Service Offerings
Our primary service offerings include narrowband Internet access, including premium and value-priced dial-up access over traditional
telephone lines and wireless access through a variety of handheld and laptop devices; high-speed or broadband access via DSL, cable modem,
satellite and dedicated circuits; web hosting; and advertising and other value-
added services. We derive substantially all revenues from services
and related fees, and such amounts represented 99% of total revenues for the year ended December 31, 2004. The remaining revenues relate to
sales of equipment and devices used by our customers to access our services.
Narrowband access
Narrowband access revenues 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. We had approximately 3.9 million narrowband subscribers as of December 31,
2004. Narrowband access revenues were $874.0 million, or 63% of total revenues, for the year ended December 31, 2004.
We anticipate growth in our value-priced narrowband subscriber base and revenues during 2005; and, we expect modest declines in our
premium-priced narrowband subscriber base and revenues. We also anticipate continued differentiation of narrowband access and related
services, particularly in the pricing of services and the types of applications and support included in the service offerings, each designed to meet
the unique needs of customers. In addition, we expect our narrowband subscribers and narrowband access revenues to decrease from 2004
levels as a result of the transfer of approximately 30,000 wireless subscribers to the SK-EarthLink joint venture.
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