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Table of Contents
EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Purchase commitments
The Company has entered into agreements with vendors to purchase certain telecommunications services and equipment under non-cancelable agreements. The
Company also has minimum commitments under network access agreements with several carriers and obligations for certain advertising spending under non-
cancelable agreements. The following table summarizes commitments under these agreements as of December 31, 2015 :
Year Ending December 31, (in thousands)
2016 $ 63,873
2017 40,227
2018 25,272
2019 13,352
2020 7,109
Thereafter 6,355
Total $ 156,188
Legal proceedings and other disputes
General . The Company is party to various legal proceedings and other disputes arising in the normal course of business, including, but not limited to, regulatory
audits, E911 payments, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and tort. The Company accrues
for such matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a
liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the
low end of the range. The Company reviews its accruals each reporting period. The Company recorded a $2.2 million liability during the year ended December 31,
2014 for a loss contingency that became probable and estimable during the year. During the year ended December 31, 2015, a settlement was reached and payment
was made for the recorded amount.
The Company's management believes that there are no disputes, litigation or other legal proceedings, audits or disputes asserted or pending against the Company
that could have, individually or in the aggregate, a material adverse effect on its financial position, results of operations or cash flows, and believes that adequate
provision for any probable and estimable losses has been made in the Company's consolidated financial statements. However, the ultimate result of any current or
future litigation or other legal proceedings, audits or disputes is inherently unpredictable and could result in liabilities that are higher than currently predicted.
Regulatory audits . The Company is subject to regulatory audits in the ordinary course of business with respect to various matters, including audits by local
municipalities for E911 charges and audits by the Universal Service Administrative Company on universal service fund assessments and payments. These audits
can cover periods for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest and penalties if the Company's
positions are not accepted by the auditing entity. The Company's financial statements contain reserves for certain of such potential liabilities. During 2013, the
Company recorded a $7.2 million favorable adjustment to its reserves for regulatory audits due to final interpretation and resolution of certain regulatory audits,
primarily an audit that was conducted by the Universal Service Administrative Company on previous ITC^DeltaCom Universal Service Fund assessments and
payments.
Patents . From time to time, the Company receives notices of infringement of patent rights from parties claiming to own patents related to certain of the Company's
services and products. Certain of these claims are made by patent holding companies that are not operating companies. The alleging parties generally seek royalty
payments for prior use as well as future royalty streams. The Company intends to vigorously defend its position with respect to these matters.
Billing disputes . The Company is periodically involved in disputes related to its billings to other carriers for access to its network. The Company does not
recognize revenue related to such matters until the period that revenues are determinable and it is reasonably assured of the collection of the amounts billed. In the
event that a claim is made related to revenues previously recognized, the Company assesses the validity of the claim and adjusts the amount of revenue being
recognized to the extent that the claim adjustment is considered probable and estimable. The Company recognized $7.9 million and $5.2 million of net favorable
disputes related to its billings to other carriers during the years ended December 31, 2014 and 2015 , respectively, which are included in revenues in the
Consolidated Statements of Comprehensive Loss.
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