Earthlink 2010 Annual Report Download - page 32

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Table of Contents
Risks Related to Our Business Services Segment
We face significant competition in the communications industry that could reduce our profitability.
Integrated Communications.
The communications industry is highly competitive, and we expect this competition to intensify. These
markets are rapidly changing due to industry consolidation, an evolving regulatory environment and the emergence of new technologies. We
compete directly or indirectly with incumbent local exchange carriers, such as AT&T, Qwest, Windstream and Verizon; other competitive
telecommunications companies, such as Covad, Level 3, PAETEC and XO; interexchange carriers, such as Global Crossing and Sprint Nextel;
wireless and satellite service providers; cable service providers, such as Charter Communications, Inc., Comcast, Cox Communications, Inc. and
Time Warner Cable; and stand-
alone VoIP providers. Competition could adversely impact us in several ways, including (i) the loss of customers
and resulting revenue, (ii) the possibility of customers reducing their usage of our services or shifting to less profitable services, (iii) reduced
traffic on our networks, (iv) our need to expend substantial time or money on new capital improvement projects, (v) our need to lower prices or
increase marketing expenses to remain competitive and (vi) our inability to diversify by successfully offering new products or services.
We believe the primary competitive factors in the communications industry include price, availability, reliability of service, network
security, variety of service offerings, quality of service and reputation of the service provider. While we believe our business services compete
favorably based on some of these factors, we are at a competitive disadvantage relative to some or all of these factors with respect to some of our
competitors. Many of our current and potential competitors have greater market presence, engineering, technical and marketing capabilities and
financial, personnel and other resources substantially greater than ours; own larger and more diverse networks; are subject to less regulation; or
have substantially stronger brand names. In addition, industry consolidation has resulted in larger competitors that have greater economies of
scale. Consequently, these competitors may be better equipped to charge lower prices for their products and services, to provide more attractive
offerings, to develop and expand their communications and network infrastructures more quickly, to adapt more swiftly to new or emerging
technologies and changes in customer requirements, to increase prices that we pay for wholesale inputs to our services and to devote greater
resources to the marketing and sale of their products and services.
We expect to continue to face significant pricing and product competition from AT&T and other incumbents that are or become the
dominant providers of telecommunications services in our markets. We may be required to reduce further some or all of the prices we charge for
our retail local, long distance and data services as a result of the mergers of BellSouth, SBC and AT&T and of MCI and Verizon
Communications which have increased substantially their respective market power; the increase of cable companies, wireless carriers and
providers of alternative forms of communication that rely on VoIP or similar applications; recent regulatory decisions that have decreased
regulatory oversight of incumbent local telephone companies; and new broadband providers with cost structures lower than ours due to
governmental subsidies. As a result, we may be required to reduce further some or all of the prices we charge for our retail local, long distance
and data services which could adversely affect our revenues, cash flows and results of operations.
Web Hosting.
The web hosting market is highly fragmented, has low barriers to entry and is characterized by considerable competition on
price and features. We compete directly or indirectly with a number of companies, such as GoDaddy.com, Rackspace Hosting, Inc., Web.com
and Yahoo!. Some of these companies have substantially greater market presence and greater financial, technical, marketing and other resources
than we have. Competition could cause us to decrease the pricing of our services, increase churn of our existing customers, increase operating
costs or decrease the number of subscribers we are able to add, which would result in lower revenues and profits.
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