Earthlink 2010 Annual Report Download - page 52

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Table of Contents
that operates a sophisticated VoIP platform that we plan to leverage on a nationwide basis as part of our Business Service offerings. Our
acquisition strategy may also include investment in additional network depth in geographic areas that complement our recently acquired fiber
network or acquiring customers within our network to create more scale.
The primary challenges we face in executing our business strategy for our Business Services segment are continuing to develop new
profitable managed services offerings that will be attractive to multi-
location customers, successfully integrating our acquisitions to achieve
expected synergies and cost savings, responding to competitive and economic pressures in the communications industry and adapting to
regulatory changes and initiatives. The primary challenges we face in executing our business strategy for our Consumer Services segment are
managing the rate of decline in our consumer revenues, implementing outsourcing and other cost-
saving initiatives, and operating our network
cost-effectively, including network services purchased from third-
party telecommunications service providers. The factors we believe are
instrumental to the achievement of our business strategy may be subject to competitive, regulatory and other events and circumstances that are
beyond our control. Further, we can provide no assurance that we will be successful in achieving any or all of the strategies identified above, that
the achievement or existence of such strategies will favorably impact profitability, or that other factors will not arise that would adversely affect
future profitability.
Revenue Sources
Consumer Services. Our Consumer Services segment earns revenue from narrowband access services (including traditional, fully-
featured narrowband access and value-priced narrowband access) and broadband access services (including high-
speed access via DSL and cable
and Voice-over-Internet Protocol ("VoIP")). Our Consumer Services segment also earns revenues from value-
added services, which include
revenues from ancillary services sold as add-
on features to our Internet access services, such as security products, premium email only, home
networking, email storage and Internet call waiting; search revenues; and advertising revenues. Revenues from access services generally consist
of recurring monthly charges for such services; usage fees; installation fees; termination fees; and fees for equipment. Value-
added services
revenues consist of fees charged for ancillary services; fees charged for paid placements for searches, powered by the Google™ search engine;
fees generated through revenue sharing arrangements with online partners whose products and services can be accessed through our web
properties; commissions received from partners for the sale of partners' services to our subscribers; and fees charged for advertising on our
various web properties.
Business Services. Our Business Services segment earns revenue by providing high-
speed or broadband data communications services,
which include managed IP-
based networks and Internet access; voice services, which include local exchange services, long distance and
conference calling services; mobile voice and data services; and the sale of transmission capacity to other telecommunications carriers. Revenues
from these services generally consist of recurring monthly charges for such services; usage fees; installation fees; and termination fees. Our
Business Services segment also earns revenue by providing web hosting services. Web hosting revenues consist of fees charged for leasing
server space and providing web services to enable customers to build and maintain an effective online presence.
Trends in our Business
Consumer services.
We operate in the Internet access services market, which is characterized by intense competition, changing
technology, changes in customer needs and new service and product introductions. Consumers continue to migrate from dial-
up to broadband
access service due to the faster connection and download speeds provided by broadband access, the ability to free up their phone lines and the
more reliable and "always on" connection. The pricing for broadband services has been declining, making it a more viable option for consumers
who continue to rely on dial-
up connections for Internet access. In addition, advanced applications such as online gaming, music downloads,
videos and social
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