AT&T Wireless 2010 Annual Report Download - page 46

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
44 AT&T Inc.
of nationwide Internet networks (Internet backbone),
wireless carriers, Competitive Local Exchange Carriers,
regional phone ILECs, cable companies and systems
integrators. These services are subject to additional
competitive pressures from the development of new
technologies and the increased availability of domestic
and international transmission capacity. The introduction of
new products and service offerings and increasing satellite,
wireless, fiber-optic and cable transmission capacity for
services similar to those provided by us continues to provide
competitive pressures. We face a number of international
competitors, including Orange Business Service, British
Telecom, SingTel and Verizon Communications Inc., as well
as competition from a number of large systems integrators,
such as HP Enterprise Services.
Advertising Solutions
Our Advertising Solutions subsidiaries face competition
from approximately 100 publishers of printed directories in
their operating areas. Competition also exists from other
advertising media, including newspapers, radio, television and
direct-mail providers, as well as many forms of Internet-based
and mobile advertising. Through our wholly-owned subsidiary,
YELLOWPAGES.COM LLC, we compete with other providers of
Internet-based advertising and local search.
ACCOUNTING POLICIES AND STANDARDS
Critical Accounting Policies and Estimates Because of
the size of the financial statement line items they relate to,
some of our accounting policies and estimates have a more
significant impact on our financial statements than others.
The following policies are presented in the order in which
the topics appear in our consolidated statements of income.
Allowance for Doubtful Accounts We maintain an
allowance for doubtful accounts for estimated losses that
result from the failure of our customers to make required
payments. When determining the allowance, we consider
the probability of recoverability based on past experience,
taking into account current collection trends as well as
general economic factors, including bankruptcy rates.
Credit risks are assessed based on historical write-offs,
net of recoveries, and an analysis of the aged accounts
receivable balances with reserves generally increasing as
the receivable ages. Accounts receivable may be fully
reserved for when specific collection issues are known
to exist, such as pending bankruptcy or catastrophes.
The analysis of receivables is performed monthly, and the
allowances for doubtful accounts are adjusted accordingly.
A 10% change in the amounts estimated to be uncollectible
would result in a change in the provision for uncollectible
accounts of approximately $100.
Cox Communi cations Inc. and Time Warner Cable Inc., for
local, high-speed Internet and video services customers
and other smaller telecommunications companies for both
long-distance and local services customers.
Our wireline subsidiaries generally remain subject to
regulation by state regulatory commissions for intrastate
services and by the FCC for interstate services. In contrast,
our competitors are often subject to less or no regulation in
providing comparable voice and data services or the extent
of regulation is in dispute. Under the Telecom Act, companies
seeking to interconnect to our wireline subsidiaries’ networks
and exchange local calls enter into interconnection
agreements with us. Any unresolved issues in negotiating
those agreements are subject to arbitration before the
appropriate state commission. These agreements (whether
fully agreed-upon or arbitrated) are then subject to review
and approval by the appropriate state commission.
Our wireline subsidiaries (excluding rural carrier affiliates)
operate under state-specific elective alternative forms of
regulation for retail services (also referred to as “alternative
regulation”) that was either legislatively enacted or authorized
by the appropriate state regulatory commission. Under
alternative regulation, the state regulatory agency or the
legislature may deregulate the competitive services; impose
price caps for some services where the prices for these
services are not tied to the cost of providing the services or to
rate-of-return requirements; or adopt a regulatory framework
that incorporates deregulation and price caps. Some states
may impose minimum customer service standards with
required payments if we fail to meet the standards.
We continue to lose access lines due to competitors
(e.g., wireless, cable and VoIP providers) who can provide
comparable services at lower prices because they are
not subject to traditional telephone industry regulation
(or the extent of regulation is in dispute), utilize different
technologies, or promote a different business model (such
as advertising based) and consequently have lower cost
structures. In response to these competitive pressures, for
several years we have utilized a bundling strategy that
rewards customers who consolidate their services (e.g., local
and long-distance telephone, high-speed Internet, wireless
and video) with us. We continue to focus on bundling wireline
and wireless services, including combined packages of
minutes and video service through our U-verse service and
our relationships with satellite television providers. We will
continue to develop innovative products that capitalize on
our expanding fiber network.
Additionally, we provide local, domestic intrastate and
interstate, international wholesale networking capacity,
and switched services to other service providers, primarily
large Internet Service Providers using the largest class