XO Communications 2010 Annual Report Download - page 25

business operations or terminate their agreements with us, our own processing could be materially and
adversely affected for an indefinite period of time. There can be no assurance that we would be able to locate
alternative providers of such services or that we could do so at economical rates.
The failure of one or more of our operations support centers could impair our ability to retain customers,
provision their services, or result in increased capital expenditures.
In the event of a substantial failure of one or more of our operations support centers, our disaster
recovery framework is not fully redundant and may not permit the timely recovery of our complete systems
operations and/or performance of critical aspects of our services for an extended period. We may incur and/or
suffer the costs, delays and customer complaints associated with system failures and may not be able to
efficiently and accurately provision new orders for services on a timely basis to begin to generate revenue
related to those services.
We may not be able to continue to connect our network to ILEC networks or to maintain Internet peering
arrangements on favorable terms, which could impair our growth and performance.
We need interconnection agreements with ILECs in order to connect our customers to the Public
Switched Telephone Network. If we are unable to renegotiate or maintain interconnection agreements in all of
our markets on economically viable terms, it could adversely affect our ability to provide services in the
affected markets or our ability to provide services on a price-competitive basis. We maintain peering
agreements with various ISPs that allow us to exchange internet traffic with these providers. These exchanges
are made under short-term contracts and may be made without the payment of settlement charges by either
party (‘‘settlement-free peering’’) or may specify the payment of fees by one party to the other (‘‘paid
peering’’). In the future, ISPs may change the terms of these peering relationships; including reducing or
eliminating peering relationships, establishing more restrictive criteria for settlement-free peering, or imposing
new or larger fees. Increases in costs associated with the exchange of internet traffic could adversely affect our
margins for internet based services. We may not be able to renegotiate or maintain peering arrangements on
economically viable terms, which could impair our growth and performance.
We may not be able to adequately protect our intellectual property or rights to licenses for use of
third-party intellectual property, and may be subject to claims that we infringe the intellectual property of
others, which could substantially harm our business.
We rely on a combination of patents, copyrights, and other proprietary technology that we license from
third parties. We have been issued several United States and foreign trademarks and may consider filing for
additional trademarks in the future. We have also been issued one United States patent, with a second
United States application pending, and may consider filing for additional patents in the future. However, we
cannot assure that any additional patents or trademarks will be issued or that our issued patent or trademarks
will be upheld in all cases. We cannot guarantee that these and other intellectual property protection measures
will be sufficient to prevent misappropriation of our trademarks or technology or that our competitors or
licensors will not independently develop technologies that are substantially equivalent to or superior to ours.
In addition, the legal systems in many other countries do not protect intellectual property rights to the same
extent as the legal system of the United States. If we are unable to adequately protect our proprietary interests
and business information or our present license arrangements, our business, financial condition and results of
operations could be adversely affected. Furthermore, the dependence of the telecommunications industry on
proprietary technology has resulted in frequent litigation based on allegations of the infringement of patents
and other intellectual property. In the future, we may be subject to litigation to defend against claimed
infringement of the rights of others or to determine the scope and validity of the proprietary rights of others.
Future litigation also may be necessary to enforce and protect our trade secrets and other intellectual
property rights. Any intellectual property litigation could be costly and cause diversion of management’s
attention from the operation of our business. Adverse determinations in any litigation could result in the loss
of proprietary rights, subject us to significant liabilities or require us to seek licenses from third parties that
may not be available on commercially reasonable terms, if at all. We could also be subject to court orders
preventing us from providing certain services in connection with the delivery of services to our customers.
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