XO Communications 2010 Annual Report Download - page 14

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provide key network elements that we need to provide network services, our ability to successfully deploy
technologies that improve our network operating efficiencies and our ability to continue to drive other cost
structure improvements.
Regulatory environments at both the state and federal levels have considerable influence on our industry.
We continually monitor regulatory developments and remain active in our participation in regulatory issues.
See ‘‘Description of Business — Regulatory’’ and ‘‘Risk Factors’’ for further discussion of the regulatory
environment and its impact on us.
Several new technologies are being adopted by telecommunications carriers that could cause significant
changes and opportunities in the competitive landscape for telecommunications services. Such technologies
include (but are not limited to):
• IP Communications — IP technology enables delivery of voice and data telecommunications services
over a single IP network which is less costly to operate than the existing PSTN.
• Mobile Wireless Technologies — New high bandwidth applications, commonly referred to as
3G broadband wireless networks, allow the delivery of voice and data (including video) via wireless
connection. We believe 3G wireless networks together with the development of next generation, or
4G wireless networks, will accelerate the adoption of wireless data services by both consumers and
enterprises.
We are continuing to experience revenue growth from customers using our IP-based network
infrastructure. This revenue growth is partially offset by the continued and expected decline in our traditional
legacy services. We have deployed our own suite of IP data and VoIP solutions and anticipate adding new
services with more IP-enabled features to target larger customers. Within IP, we are seeing Ethernet become
the accepted standard for high-speed connections. The continued rapid growth of the internet, including the
acceptance of video delivered over the internet, has led to various customers requiring faster connections.
We believe the continued market growth for mobile wireless telecommunications services, including the
rapid adoption of data and internet enabled mobile devices and increased demand for high-speed broadband
services will require wireless telecommunications carriers and our business customers to need significantly
greater bandwidth. Upgrades to our IP-based network infrastructure in recent years and anticipated continued
enhancements should position us well to meet this demand.
Regulatory
Overview. We offer wireline and fixed wireless communications services to small and medium sized
businesses, large enterprises, government agencies and wireline and wireless telecommunications providers.
We are therefore subject to regulation by federal, state and local government agencies.
With a few limited exceptions, the FCC has exclusive jurisdiction over our provision of interstate and
international telecommunications services. The state regulatory commissions regulate our provision of
intrastate telecommunications services. Additionally, municipalities and other local government agencies may
regulate limited aspects of our business, such as use of government-owned rights-of-way, and may require
permits such as zoning approvals and building permits.
Federal Regulation. XOH has authority from the FCC for the installation, acquisition and operation of
its wireline network facilities to provide facilities-based interstate and international telecommunications
services. In addition, XOH is authorized by the FCC to operate its 28 to 31 GHz LMDS and 39 GHz
broadband wireless facilities. Because we are not dominant in any of our markets, unlike ILECs, our
telecommunications services are not subject to price cap or rate of return regulation. Thus, our pricing policies
for interstate and international end user telecommunications services are only subject to the federal
requirements that charges for such services be just, reasonable and non-discriminatory. The FCC allows us to
file interstate tariffs for our interstate access services (rates charged by us to other carriers for access to our
network). As for interstate and international long distance telecommunications services, the FCC requires us to
make the terms, conditions and rates of the detariffed services available to the public on our web site.
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