Earthlink 2006 Annual Report Download - page 44

Narrowband access revenues
Narrowband access revenues primarily consist of monthly fees charged to customers for dial-up Internet access. Narrowband revenues
decreased 15% to $742.8 million during the year ended December 31, 2005 and decreased 17% to $618.0 million during the year ended
December 31, 2006, compared to the prior years. The decreases in narrowband revenues in both years were due to decreases in narrowband
ARPU and decreases in average narrowband subscribers. Revenues also decreased during the year ended December 31, 2005 due to the transfer
of wireless operations to HELIO effective March 24, 2005, which caused narrowband access revenues to decrease by $17.8 million and
contributed to the decrease in average narrowband subscribers compared to the year ended December 31, 2004.
ARPU. Narrowband ARPU decreased from $18.37 during the year ended December 31, 2004 to $16.61 during the year ended
December 31, 2005 and to $15.49 during the year ended December 31, 2006. These decreases were due to the shift in the mix of our
narrowband subscriber base from premium narrowband access services, which are typically priced at $21.95 per month, to our PeoplePC value-
priced narrowband access services, which are generally priced at $10.95 per month. During the years ended December 31, 2004, 2005 and
2006, average PeoplePC access subscribers were 0.6 million, 1.1 million and 1.4 million, respectively, representing 16%, 29% and 42%,
respectively, of our average narrowband customer base. Also contributing to the decreases in narrowband service ARPU, although to a lesser
extent, was the increased use of promotional pricing for our service offerings.
Subscribers. The following table summarizes narrowband subscriber activity for the years ended December 31, 2004, 2005 and 2006:
(a)
Effective March 24, 2005, we transferred approximately 27,000 wireless subscribers to HELIO in connection with completing the
formation of HELIO.
Average narrowband subscribers were 4.0 million, 3.7 million and 3.4 million during the years ended December 31, 2004, 2005 and 2006,
respectively. In addition to the overall decrease in average narrowband subscribers over the past three years, the mix of customers shifted from
premium narrowband subscribers to PeoplePC narrowband subscribers because the growth in our average PeoplePC narrowband subscribers
was offset by a decline in our average premium narrowband customers, the combination of which resulted in a change in the composition of
our narrowband customer base. Average premium narrowband subscribers decreased by 0.7 million and 0.7 million during 2005 and 2006,
respectively, while average PeoplePC subscribers increased 0.4 million and 0.4 million, respectively. The decreases in premium narrowband
subscribers resulted from the migration of subscribers to broadband services and the continued maturing and ongoing competitiveness of the
market for narrowband Internet access. We expect the mix of our narrowband subscriber base to continue to shift from premium narrowband
access services to PeoplePC access services for the foreseeable future.
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Year Ended December 31,
2004
2005
2006
Subscribers at beginning of year
3,984,000
3,880,000
3,580,000
Gross organic subscriber additions
2,450,000
2,131,000
1,978,000
Acquired subscribers
12,000
147,000
104,000
Narrowband subscribers converted to our broadband
services, net
(15,000
)
(88,000
)
(44,000
)
Adjustment (a)
—
(
27,000
)
—
Churn
(2,551,000
)
(2,463,000
)
(2,317,000
)
Subscribers at end of year
3,880,000
3,580,000
3,301,000