Earthlink 2006 Annual Report Download - page 28

experiences a broadband or power outage, or if a network failure were to occur, the customer will not be able to reach an emergency services
provider. In addition, we rely on customers of our trueVoice VoIP service to register their location with us so that emergency services can be
sent to the correct location. If they move their service without updating us and are unable to verbally communicate with an emergency operator,
then they will not receive necessary emergency services. Delays or failures in receiving emergency services can be catastrophic.
While traditional phone companies may also
experience problems in providing emergency calling services, they are covered by legislation
that significantly limits their liability for failures of emergency calling services and we are not. This liability could be substantial. In addition,
we have lost, and may in the future lose, existing and prospective customers because of the limitations inherent in our emergency calling
services. Any of these factors could cause us to lose revenues, incur greater expenses or cause our reputation or financial results to suffer.
Our ability to provide our VoIP service is dependent upon third-party facilities and equipment, the failure of which could cause delays or
interruptions of our service, damage our reputation, cause us to lose customers and limit our growth.
The success of our VoIP service depends on our ability to provide quality and reliable service, which is in part dependent upon the proper
functioning of facilities and equipment owned and operated by third parties and is, therefore, beyond our control. Unlike traditional wireline
telephone service or wireless service, our service requires our customers to have an operative broadband Internet connection and an electrical
power supply, which are provided by the customer’s Internet service provider, which may or may not be us, and electric utility company,
respectively. The quality of some broadband Internet connections may be too poor for customers to use our services properly. In addition, if
there is any interruption to a customer’s broadband Internet service or electrical power supply, that customer will be unable to make or receive
calls, including emergency calls, using our service. We also outsource several of our network functions to third-party providers. For example,
we outsource the maintenance of our regional data connection points, which are the facilities at which our network interconnects with the
public switched telephone network. If our third-party service providers fail to maintain these facilities properly, or fail to respond quickly to
problems, our customers may experience service interruptions. Our customers have experienced such interruptions in the past and will
experience interruptions in the future. In addition, our new E911 service is currently dependent upon several third-
party providers. Interruptions
in service from these vendors could cause failures in our customers’ access to E911 services. Interruptions in our service caused by third-party
facilities have in the past caused and may in the future cause us to lose customers, or cause us to offer substantial customer credits, which could
adversely affect our revenues and profitability. If interruptions adversely affect the perceived reliability of our service, we may have difficulty
attracting new customers and our brand, reputation and growth will be negatively impacted.
We may not realize the benefits we are seeking from our investments in the HELIO joint venture or other investment activities as a result of
lower than predicted revenues or subscriber levels of the companies in which we invest, larger funding requirements for those companies or
otherwise.
We have made equity investments in several companies, including HELIO, a joint venture with SK Telecom that offers wireless voice and
data services to consumers in the U.S. As of February 28, 2007, we have invested an aggregate of $214.0 million of cash and non-
cash assets in
HELIO. HELIO will require additional funding in the future and we expect we may invest additional cash amounts in HELIO. The financing of
HELIO’s operations has adversely affected our cash position. In addition, HELIO has incurred losses and we expect HELIO to continue to
incur losses due to the start-up nature of its operations, and we include our proportionate share of the losses of HELIO in our statements of
operations, which adversely affects our earnings and earnings per share. In addition, HELIO may not be successful in implementing and
marketing its wireless voice and data initiatives, and there can be no
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