Earthlink 2006 Annual Report Download - page 26

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municipalities, but there is no assurance that we will be successful in these efforts. The municipal network business is a largely untested
business model and we may not obtain the subscriber levels required to earn a return on our investment in this business. The success of our
municipal wireless service depends on growth in the number of municipal wireless broadband users, which in part depends on wider public
acceptance of this service. Our municipal wireless broadband services may not achieve consumer adoption or, even if these services do achieve
consumer adoption, we may not be able generate growth in subscribers or revenue. In addition, this initiative may result in significant capital
expenditures in future periods to develop, implement and build wireless broadband networks in various municipalities, and we may not
generate the returns anticipated on the capital expenditures and operating losses that may be incurred in this effort.
Municipal wireless networks may not perform as expected or may result in unanticipated costs, which could increase our churn and our
cost of providing services.
Municipal wireless networks may not perform as we expect, and therefore we may not be able to deliver the quality or types of service we
expect. We also may discover unanticipated costs associated with deploying and maintaining our network or delivering services we must offer
in order to remain competitive. These risks could reduce our subscriber growth, increase our costs of providing services or increase our
subscriber churn.
We may experience difficulties in constructing, upgrading and maintaining our municipal wireless network, which could adversely affect
customer satisfaction, increase subscriber churn and reduce our revenues.
The success of our municipal wireless broadband initiative depends on developing and providing services that give subscribers a high
quality experience. We expect to expend significant resources in constructing, maintaining and improving our network. Additionally, as the
number of subscribers using our network increases, as the usage habits of our subscribers change and as we increase our service offerings, we
may need to upgrade our network to maintain or improve the quality of our services. If we do not successfully implement upgrades to our
network, the quality of our services may decline and the rate of our subscriber churn may increase.
We may experience quality deficiencies, cost overruns and delays with our construction, maintenance and upgrade projects including the
portions of those projects not within our control. The construction of our network requires permits and approvals from numerous governmental
bodies, including municipalities and zoning boards. Such entities often limit the expansion of transmission towers and other construction
necessary for our network. Failure to receive approvals in a timely fashion can delay system rollouts and raise the cost of completing
construction projects. In addition, we typically are required to obtain rights from land, building and tower owners to install the antennas and
other equipment that provide our service to our subscribers. We may not be able to obtain, on terms acceptable to us or at all, the rights
necessary to construct our network and expand our services.
We also may face challenges in managing and operating our network. These challenges include ensuring the availability of subscriber
equipment that is compatible with our network and managing sales, advertising, customer support, billing and collection functions of our
business. We also must provide reliable network service that meets our subscribers’ expectations. There is no industry precedent for the
operation of a network of this type over a large municipal area and we may experience technological or other difficulties that we do not
currently expect. Our failure in any of these areas could adversely affect customer satisfaction, increase subscriber churn, increase our costs,
decrease our revenues and otherwise have a material adverse effect on our business, prospects, financial condition and results of operations.
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