Earthlink 2012 Annual Report Download - page 45

Table of Contents
Revenues
The following table presents our revenues for the years ended December 31, 2010, 2011 and 2012 :
Business Services
Our Business Services segment earns revenue by providing a broad range of data, voice and IT services to retail and wholesale business
customers. We present our Business Services revenue in the following three categories: (1) retail services, which includes data, voice and IT
services provided to business customers; (2) wholesale services, which includes the sale of transmission capacity to other telecommunications
carriers; and (3) other services, which includes the sale of customer premises equipment and web hosting. Our IT services, which are included
within our retail services, include data centers, virtualization, security, applications, premises-
based solutions, managed solutions and support
services. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; equipment fees; and
termination fees.
The following table presents the primary reasons for the changes in Business Services revenues for the years ended
December 31, 2011
and 2012 compared to the prior years:
______________
We expect continued declines in revenues from traditional voice services and other legacy products, including a decline as a result of
our decision to exit sales of legacy voice equipment after the first half of 2013, which will negatively impact Business Services revenues in 2013
by approximately $3.5 million. Business Services revenues will also be adversely impacted as a result of the rules adopted by the FCC regarding
intercarrier compensation. In addition, growth in our Business Services revenues may
38
Year Ended December 31, 2011 vs 2010 2012 vs 2011
2010 2011 2012 $ Change % Change $ Change % Change
(dollars in thousands)
Business Services
Retail services
$
88,739
$
760,158
$
845,664
$
671,419
757
%
$
85,506
11
%
Wholesale services
36,792
136,224
151,910
99,432
270
%
15,686
12
%
Other
35,233
41,877
33,693
6,644
19
%
(8,184
)
(20
)%
Total revenues
160,764
938,259
1,031,267
777,495
484
%
93,008
10
%
Consumer Services
Access services
403,174
323,998
269,533
(79,176
)
(20
)%
(54,465
)
(17
)%
Value-added services
58,274
51,847
48,177
(6,427
)
(11
)%
(3,670
)
(7
)%
Total revenues
461,448
375,845
317,710
(85,603
)
(19
)%
(58,135
)
(15
)%
Total revenues
$
622,212
$
1,314,104
$
1,348,977
$
691,892
111
%
$
34,873
3
%
2011 vs 2010 2012 vs 2011
(in millions)
Due to acquisitions (a)
$
785.4
$
114.7
Due to IT services transactions and product launches (b)
5.7
12.3
Due to net favorable settlement and reserve adjustments (c) —
9.4
Due to decline in legacy products (d)
(13.6
)
(43.4
)
Total change in Business Services revenues
$
777.5
$
93.0
(a)
Increases due to the inclusion of revenues from DeltaCom beginning in December 2010 and One Communications beginning in April
2011.
(b)
Increase in revenues from our newer products due to IT Services transactions entered into during 2011 and new product launches over
the past year to expand our IT services portfolio.
(c)
Increase due to $9.4 million in net favorable settlements and reserve adjustments during 2012.
(d) Decrease due to decline in revenues for certain legacy products, including traditional voice and lower-
end, single site broadband
services. Revenues for these legacy products have been decreasing due to competition in the industry, the migration of customers to
more advanced services and a decreased emphasis on selling these services. Partially offsetting this was an increase in MPLS and
hosted voice products, which we believe to be growth products.