Earthlink 2008 Annual Report Download - page 22

Table of Contents
will raise the effective cost of our broadband services to our customers, and could affect customer satisfaction or our revenues and profitability.
CLEC regulation.
New Edge is a competitive local exchange carrier (or CLEC) that is licensed in most states and subject to both state
and federal telecommunications regulation. CLECs, like New Edge, are dependent on certain provisions of the 1996 Telecommunications Act to
procure facilities and services from incumbent local exchange carriers (or ILECs) that are necessary to provide their services. The business of
New Edge is highly dependent on rules and rulings from the FCC, legislative actions at both the state and federal level, and rulings from the state
public utility commissions. New Edge also must contribute to state and federal universal service funds. In addition, New Edge makes use of the
special access services and DSL services of ILECs and other CLECs in order to provide New Edge services to its customers.
VoIP.
The current regulatory environment for VoIP services remains unclear, as the decision whether VoIP is an "information service" or
"telecommunications service" is still pending. Classifying VoIP as a telecommunications service could require us to obtain a telecommunications
license, comply with numerous legacy telephone regulations, and possibly subject the VoIP traffic to inter-
carrier access charges, which could
result in increased costs. In addition, several state regulatory agencies are seeking jurisdiction over VoIP services. If courts determine that states
have jurisdiction, several states are expected to levy state universal service fees and other regulatory fees on the intrastate portion of VoIP
revenue. This would increase the cost of our services and adversely affect our VoIP business. In addition, if courts determine that states can
regulate fixed line VoIP as a telephone service and, among other requirements, subject these services to the carrier access charge regime, our
costs of providing this service would increase and our VoIP business would be adversely affected.
Other laws and regulations.
Our business also is subject to a variety of other U.S. laws and regulations that could subject us to liabilities,
claims or other remedies, such as laws relating to bulk email or "spam," access to various types of content by minors, anti-
spyware initiatives,
encryption, data protection, data retention and security breaches. Compliance with these laws and regulations is complex and may require
significant costs. In addition, the regulatory framework relating to Internet services is evolving and both the federal government and states from
time to time pass legislation that impacts our business. It is likely that additional laws and regulations will be adopted that would affect our
business. We cannot predict the impact future laws, regulatory changes or developments may have on our business, financial condition, results of
operations or cash flows. The enactment of any additional laws or regulations, increased enforcement activity of existing laws and regulations, or
claims by individuals could significantly impact our costs or the manner in which we conduct business, all of which could adversely impact our
results of operations and cause our business to suffer.
Privacy concerns relating to our business could damage our reputation and deter current and potential users from using our services.
Concerns about our practices with regard to the collection, use, disclosure or security of personal information or other privacy-
related
matters, even if unfounded, could damage our reputation and operating results. We strive to comply with all applicable data protection laws and
regulations, as well as our own posted privacy policies. However, any failure or perceived failure to comply with these laws, regulations or
policies may result in proceedings or actions against us by government entities or others, which could potentially have an adverse effect on our
business.
In addition, as our services are web-
based, we store a substantial amount of data on our servers for customers (including personal
information). Any systems failure or compromise of our security that results in the release of our users' data could seriously limit the adoption of
our products and services as well as harm our reputation and brand and, therefore, our business. We may also need to expend significant
resources to protect against security breaches.
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