Earthlink 2013 Annual Report Download - page 40

Table of Contents
Challenges and Risks
The primary challenge we face is executing on our business strategy to be the premier communications and IT services provider, and
more specifically to continue to grow revenues from our growth products and services. Contributing to this challenge are the following:
responding to competitive and economic pressures, reducing churn in our existing customer base, providing products and services that meet
changing customer needs on a timely and cost-
effective basis, and adapting to regulatory changes and initiatives. Another primary challenge is
managing the rate of decline in revenues for our traditional products. To address these challenges, we are targeting larger customers who have
lower churn profiles, focusing efforts on customer retention,
upselling additional growth products and services to existing customers,
implementing cost efficiencies in order to maximize cash flows and seeking to make costs more variable.
Our future success for growth depends
on the timing and market acceptance of our new products and services, our ability to market our services to new customers, our ability to
differentiate our services from those of our competitors, our ability to maintain and expand our sales to existing customers, our ability to
strengthen awareness of our brand, our ability to provide quality implementation and customer support for these products and the reliability and
quality of our services.
Revenue Sources
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 businesses; and (3) other services, which primarily consists of 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; termination fees; and
administrative fees.
Consumer Services . Our Consumer Services segment earns revenue by providing nationwide Internet access and related value-
added
services to residential customers. We present our Consumer Services in two categories: (1) access services, which includes narrowband access
services and broadband access services; and (2) value-added services, which includes revenues from ancillary services sold as add-
on features to
EarthLink’
s Internet access services, such as security products, premium email only, home networking and email storage; search revenues; and
advertising revenues. Revenues generally consist of recurring monthly charges for such services.
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Provide a superior customer experience.
We are committed to providing high-
quality customer service and continuing to monitor
customer satisfaction in all facets of our business. We believe exceeding customers’
expectations for service increases loyalty and
reduces churn. We also believe that our broad communications and IT services portfolio and blend of access technologies for
connectivity enable us to provide high-
quality customer service by solving a wide range of issues faced by our customers and
prospects. We are focused on creating a customer-
focused organization that will provide a quality approach to offering and supporting
EarthLink products and services.
• Optimize our cost structure.
We are currently focused on optimizing the cost structure of our business by reducing network costs,
streamlining our internal processes and operations and maximizing the cash flows generated from traditional voice and data products.
The success of our operating efficiency and cost reduction initiatives is necessary to align costs with declining revenues for some of our
products as non-variable costs place further pressure on margins.
• Opportunistically consider potential strategic acquisitions.
We continue to evaluate acquisition opportunities as we become aware of
them. We believe that targeted corporate acquisitions, when available at the right economics, can be an effective means to improve our
product, network, and data center capabilities or to accelerate revenue growth. Our acquisition strategy may include investments or
acquisitions of new product and services capabilities, network assets or business customers to achieve greater national scale.