Juno 2013 Annual Report Download - page 29

Table of Contents
failures from time to time. For example, a large-scale security breach at a retailer may result in the cancelation and re-issuance of the affected credit cards
by the issuing banks, which would impact our ability to charge our members on their old credit cards and if our members do not update their credit card
information with us, their accounts will terminate. Any change in the degree of credit card failures could have a material impact on our churn rate. If we
experience a higher than expected level of churn, it will make it more difficult for us to increase or maintain the number of pay accounts, which could
adversely affect our business, financial condition, results of operations, and cash flows.
We expect our dial-up and DSL Internet access pay accounts to continue to decline, potentially at an increasing rate. Any growth in the number of
mobile broadband pay accounts may not be sufficient to offset such decline, at least in the near term. As a result, Communications services revenues and
the profitability of this segment may continue to decline. 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 connection with the launch of
the 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.
Our mobile broadband service may not be commercially successful.
We started offering a mobile broadband service under the NetZero brand in 2012. However, this service may not be accepted by consumers or
commercially successful. 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. The free version of the service is limited to a one-year term and these accounts are
automatically terminated upon the expiration of the one-year service term if they do not upgrade to one of the paid subscription plans. There are no
assurances that we will be successful in upgrading these accounts before they terminate. Some of our 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. If the mobile broadband service fails to be commercially successful, such failure could materially and adversely impact our business,
financial condition, results of operations, and cash flows.
Our Internet access business is dependent on the availability of telecommunications services and compatibility with third-party systems and
products.
Our Internet access business substantially depends on the availability, capacity, affordability, reliability, and security of our telecommunications
networks. Only a limited number of telecommunications providers offer the network and data services we currently require, and we purchase most of
our telecommunications services from a few providers. Some of our telecommunications services are provided pursuant to short-term agreements that
the providers can terminate or elect not to renew. In addition, some telecommunications providers may cease to offer network services for certain less
populated areas, which would reduce the number of providers from which we may purchase services and may entirely eliminate our ability to purchase
services for certain areas. Currently, our mobile broadband service is entirely dependent upon services acquired from two service providers, and the
devices required by each provider can be used for only such provider's service. If we are unable to maintain, renew or obtain new agreements with
telecommunications providers, or our providers discontinue their services, our business, financial condition, results of operations, and cash flows could
be materially and adversely affected.
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