Earthlink 2014 Annual Report Download - page 23

Table of Contents
alter the manner in which all carriers, including carriers that use different service platforms such as wireless and VoIP, are compensated for the
termination of telecommunications traffic. These rules have generally reduced the rates that we pay for our access
services. Our operating
performance will suffer if we are not offered these access services at rates that are substantially equivalent to the costs of, and rates charged to,
our competitors and that permit profitable pricing of our long distance services.
We may experience reductions in switched access and reciprocal compensation revenue.
We may experience declines in revenues for switched access and reciprocal compensation as a result of lower volume of traditional long distance
voice minutes and FCC and state regulations compelling a reduction of switched access and reciprocal compensation rates. In late 2011, the FCC
adopted policy changes that over time are reducing carriers' terminating access rates. We have modified our applicable state access tariffs and
billing to implement the FCC's required reduction in intrastate access charges. These rules have resulted in a loss of revenues and an increase in
our volume of carrier disputes, and we expect this to continue and we are required to reduce our interstate access charges and reciprocal
compensation charges in coming years. Moreover, the FCC has pending an open proceeding that asks whether originating switched access
charges should also be reduced. Switched access and reciprocal compensation together have been declining over time. There can be no assurance
that we will be able to compensate for the reduction in intercarrier compensation revenue with other revenue sources or increased volume.
Failure to obtain and maintain necessary permits and rights-of-way could interfere with our network infrastructure and operations.
We must negotiate and manage agreements with state highway authorities, local governments, transit authorities, local telephone companies and
other utilities, railroads, long distance carriers and other parties to obtain and maintain rights-of-
way and similar franchises and licenses needed
to install, operate and maintain fiber optic cable and our other network elements. If any of these authorizations terminate or lapse, our operations
could be adversely affected.
We have substantial business relationships with several large telecommunications carriers, and some of our customer agreements may not
continue due to financial difficulty, acquisitions, non-
renewal or other factors, which could adversely affect our wholesale revenue and
results of operations.
We generate wholesale revenue from the sale of transmission capacity to other telecommunications carriers and have substantial business
relationships with several large telecommunications carriers for whom we provide services. Replacing this wholesale revenue may be difficult
because individual enterprise and small to medium business customers tend to place smaller service orders than our larger carrier customers. In
addition, pricing pressure on services that we sell to our carrier customers may challenge our ability to grow revenue from carrier customers. As
a result, if our larger carrier customers terminate the services they receive from us, our wholesale revenues and results of operations could be
adversely affected.
We obtain a majority of our network equipment and software from a limited number of third-party suppliers.
We obtain the majority of our network equipment and software from a limited number of third-
party suppliers. We also rely on these suppliers
for technical support and assistance. If any of these relationships is terminated or if the third-
party suppliers were to otherwise fail to provide
necessary equipment and software, our ability to efficiently maintain, upgrade or expand our network could be impaired. Although we believe
that we would be able to address our future equipment needs with equipment obtained from other suppliers, we cannot assure that such
equipment would be compatible with our network without significant modifications or cost, if at all. If we were unable to obtain the equipment
necessary to maintain our network, our ability to attract and retain customers and provide our services would be impaired.
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