Juno 2012 Annual Report Download - page 43

Table of Contents
advantage, if any, over certain of our dial-up Internet access competitors. We expect that competition, particularly with respect to price, both for
broadband, as well as dial-up Internet access services, will continue. We also expect that our dial-up Internet access subscriber base will continue to
decrease, potentially at an increasing rate, and that our broadband services will not experience significant growth.
In order to compete effectively against other dial-up Internet access providers, we may have to make significant revisions to our pricing and
marketing strategies. For example, we may have to lower our introductory rates, offer additional free periods of service, or reduce the standard pricing
of our services. Measures such as these would decrease our average revenue per dial-up Internet access pay account and may decrease our revenues. All
of the foregoing risks would adversely affect the profitability of our dial-up Internet access services which could materially and adversely impact our
business, financial condition, results of operations, and cash flows.

Most of our Communications segment revenues and profits come from our dial-up Internet access services. Our dial-up Internet access pay
accounts and revenues have been declining and are expected to continue to decline due to the continued maturation of the market for dial-up Internet
access. Consumers continue to migrate to broadband access, primarily due to the faster connection and download speeds provided by broadband access.
Advanced applications such as online gaming, music downloads and videos require greater bandwidth for optimal performance, which adds to the
demand for broadband access. The pricing for basic broadband services has been declining as well, making it a more viable option for consumers. In
addition, the popularity of accessing the Internet through tablets and mobile devices has been growing and may accelerate the migration of consumers
away from dial-up Internet access. The number of dial-up Internet access pay accounts has been adversely impacted by both a decrease in the number of
new pay accounts signing up for our services, as well as the impact of subscribers canceling their accounts, which we refer to as "churn." Churn has
increased from time to time and may increase in the future.
We expect our dial-up Internet access pay accounts to continue to decline. As a result of expected continuing decreases in our dial-up Internet
access pay accounts and, potentially, ARPU, we expect that our Communications services revenues, advertising revenues and the profitability of this
segment will continue to decline over time. The rate of decline in Communications services revenues has accelerated in some periods and may continue
to accelerate. Although we have been reducing our expenses in order to manage the profitability of our Communications segment, we will not be able to
continue making the same level of expense reductions in the future. In addition, we increased our marketing expenses in 2012 in connection with the
launch of the NetZero 4G mobile broadband service, which is subject to a number of risks. Continued declines in Communications revenues,
particularly if such declines accelerate, will materially and adversely impact the profitability of this segment.

We started offering a mobile broadband service under the NetZero brand in 2012. However, the new service is subject to a number of
uncertainties, including unanticipated delays and expenses and technological or other problems on our part, as well as the third-party suppliers whose
products and services are integral to the service. The new service also may not be accepted by consumers or commercially successful, especially given
its dependence on Clearwire's limited coverage areas. We have been testing various marketing initiatives, including offering discounts on our devices,
but there are no assurances that such initiatives will increase the number of accounts. Some of our prospective competitors have longer operating
histories, greater name and brand recognition, larger user bases, wider coverage areas, and significantly greater financial, technical, sales, and marketing
resources than we do. We cannot assure you that we will be successful in growing the number of accounts in the
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