Earthlink 2008 Annual Report Download - page 16

Table of Contents
Consumer Services Segment
Internet access services.
We operate in the Internet access services market, which is extremely competitive. We compete directly or
indirectly with established online services companies, such as AOL and the Microsoft Network (MSN); national communications companies and
local exchange carriers, such as AT&T, Verizon and Qwest; cable companies providing broadband access, including Time Warner Cable,
Comcast, Charter Communications, Inc. and Cox Communications, Inc.; local and regional ISPs; free or value-
priced ISPs, such as United
Online which provides service under the brands NetZero and Juno; wireless Internet service providers; content companies, such as Yahoo! and
Google; and satellite and fixed wireless service providers. Competition in the market for Internet access services is likely to continue increasing,
and competition could impact the pricing of our services, sales and marketing costs to retain existing or acquire new subscribers and the number
of customers that discontinue using our services, or churn.
Prices for certain of our consumer access services, particularly our consumer broadband services, have been decreasing. We expect that we
may continue to experience pricing pressures due to competition, volume-
based pricing and other factors. Some providers have reduced and may
continue to reduce the retail price of their Internet access services to maintain or increase their market share, which could cause us to reduce, or
prevent us from raising, our prices. We may encounter further market pressures to: migrate existing customers to lower-
priced service offering
packages; restructure service offering packages to offer more value; reduce prices; and respond to particular short-term, market-
specific
situations, such as special introductory pricing or new product or service offerings. Any of the above could adversely affect our revenues and
profitability.
Current and prospective competitors include many large companies that have substantially greater market presence and greater financial,
technical, marketing and other resources than we have. In addition, some of our competitors are able to bundle other content, services and
products with Internet access services. These services include various forms of voice, data and video services and wireless communications. The
ability to bundle services, as well as the financial strength and the benefits of scale enjoyed by certain of these competitors, enable them to offer
services at prices that are below the prices at which we can offer comparable services.
We believe the primary competitive factors in the Internet access service industry are price, speed, features, coverage area and quality of
service. While we believe our Internet access services compete favorably based on these factors when compared to many Internet access
providers, we are at a competitive disadvantage relative to some or all of these factors with respect to some of our competitors. Our dial-
up
Internet access services do not compete favorably with broadband services with respect to speed, and dial-
up Internet access services no longer
have a significant, if any, price advantage over certain broadband services. Most of
the largest providers of broadband services, such as cable and
telecommunications companies, control their own networks and offer a wider variety of services than we offer, including voice, data and video
services. Their ability to bundle services and to offer broadband services at prices below the price that we can profitably offer comparable
services puts us at a competitive disadvantage.
Other services. The companies we compete with for Internet access services also compete with us for subscribers to value-
added
services, such as email storage and security products. We compete for advertising revenues with major ISPs, content providers, large web
publishers, web search engine and portal companies, Internet advertising providers, content aggregation companies, social-
networking web sites,
and various other companies that facilitate Internet advertising. Competition in the market for advertising services may impact the rates we
charge.
Competitors for our VoIP services include established telecommunications and cable companies; Internet access service companies; leading
Internet companies; and companies that offer VoIP services as their primary business, such as Vonage. The market for VoIP services is intensely
competitive and characterized by technological change.
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