XO Communications 2010 Annual Report Download - page 13

have been granted an extension until June 1, 2012 by the FCC. While management expects that we will be
able to secure FCC approval of any substantial service filings in relation to the 48 LMDS licenses and ten
39 GHz licenses for which we received an extension, there is no assurance that we will receive such FCC
approval.
Our wireless services are provisioned through exclusively licensed LMDS fixed wireless spectrum or
common carrier spectrum. The properties of XOH’s LMDS spectrum allow it to deliver voice and data
connectivity to customers at rates of up to 1 Gbps, providing them access to high bandwidth applications. In
addition, unlike the spectrum deployed by many other fixed wireless providers, XOH’s LMDS spectrum
allows point-to-multipoint applications, making its services useful in the deployment of aggregation networks.
However, unlike lower frequency transmissions, the signals transmitted through XOH’s LMDS spectrum
generally will not penetrate trees, walls, glass or other path-obstructing materials. We typically address these
Line-Of-Sight (LOS) challenges by installing intermediate sites to overcome transmission obstacles. This
solution is generally sufficient for services to telecommunications carriers, who sell directly to end users.
However, these LOS challenges, along with the complexities of installation, billing, and caring for end user
customers limit XOH’s plan to market wireless services directly to retail end users.
Competition
The telecommunications industry is an intensely competitive environment with numerous competitors
including ILECs, CLECs, ISPs, VoIP carriers, cable-based communications providers and fixed wireless
carriers. Our differentiators are our nationwide high-capacity network; advanced IP and converged
communications services; broadband wireless capabilities; consistent, competitive pricing strategy; and a
responsive, customer-focused orientation. We offer customers a broad range of managed voice, data and
IP services in more than 85 metropolitan markets across the United States. While we, like other wireline
telecommunications services providers, continue to face short term challenges, we remain bullish on the long
term potential for the Company.
CLECs and other emerging network providers such as XOH have provided telecommunications services
for many years; nevertheless, the market for telecommunications services remains dominated by the ILECs,
each of which owns the majority of the local exchange network in its respective operating region of the
United States and extensive national and often international networks and operations. The ILECs are our
primary competitors for voice, data and internet services provided to business customers. We compete on the
basis of a superior value proposition composed of our ability to provide nationwide service, innovative
offerings, a competitive price and our commitment to customer service. While we believe that we have
competitive advantages over the ILECs, the ILECs have significantly more resources available to expand their
penetration into the business marketplace.
In addition to competing with ILECs, we also compete with many CLECs and other emerging providers
that are regionally focused. We believe that our national reach, breadth of services and competitive pricing
differentiate us from CLECs. Industry consolidation has resulted in fewer competitors with greater economies
of scale and more extensive service footprints, which is likely to intensify competition.
In addition, new competitors such as VoIP providers and cable companies have entered the market to
compete with traditional, facilities-based telecommunications services providers. Several companies provide
integrated telecommunications services exclusively by means of IP. Many hosted VoIP providers also
aggressively compete for business customers. To date, most of these providers operate on a local or regional
basis. Cable companies, such as Cox Communications, Comcast and Time Warner have begun aggressively
marketing their voice and broadband data connection services into the business telecommunications market.
Several regional fiber-based network providers have initiated operations by buying up and integrating smaller
local and regional fiber networks.
As a result of increasing competitive forces, including technological advances, service providers have
reduced the prices charged for telecommunication services in recent years. We expect to continue experiencing
downward price pressure with respect to our voice, data and IP service offerings. Our ability to reduce prices
in response to competitive pressures may be limited by our reliance on some of our principal competitors to
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