Sprint - Nextel 2011 Annual Report Download - page 23

Table of Contents
Various states are considering regulations over terms and conditions of service, including certain billing practices and consumer-related issues that may not be
pre-empted by federal law. If imposed, these regulations could make it more difficult and expensive to implement national sales and marketing programs and could
increase the costs of our wireless operations.
Degradation in network performance caused by compliance with government regulation, such as "net neutrality," loss of spectrum or additional rules
associated with the use of spectrum in any market could result in an inability to attract new subscribers or higher subscriber churn in that market, which could adversely
affect our revenues and results of operations. In addition, additional costs or fees imposed by governmental regulation could adversely affect our revenues, future growth
and results of operations.
Proposed regulatory developments regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries could affect
the sourcing and availability of minerals used in the manufacture of certain products, including handsets. Although we do not buy raw materials, manufacture, or produce
any electronic equipment directly, the proposed regulation may affect some of our suppliers. As a result, there may only be a limited pool of suppliers who provide
conflict free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices. Also, because our supply chain is
complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins for all metals used in the
products that we sell.
Changes to the federal Lifeline Assistance Program could negatively impact the growth of the Assurance Wireless™ and wholesale subscriber base and the
p
ro
f
itabilit
y
o
f
the Assurance Wireless™ and wholesale business overall.
Virgin Mobile USA, L.P., our wholly owned subsidiary, offers service to low-income subscribers eligible for the federal Lifeline Assistance program under the
brand Assurance Wireless Brought to You By Virgin Mobile, which we refer to as Assurance Wireless. Assurance Wireless™ provides a monthly discount to eligible
subscribers in the form of a free block of minutes. Moreover, some of our wholesale customers also offer service to subscribers eligible for the federal Lifeline Assistance
program. This discount is subsidized by the Low-Cost Program of the federal USF and administered by the Universal Service Administrative Company. Lifeline service is
offered by both wireline and wireless companies, but more recent wireless entry, particularly by prepaid carriers with a focus on lower income consumers, has caused a
rapid increase in the amount of USF support directed toward the Lifeline program. The FCC recently adopted reforms to the Low Income program to increase program
effectiveness and efficiencies. More stringent eligibility and certification requirements will make it more difficult for all Lifeline service providers to sign up and retain
Lifeline subscribers. The growth in the Lifeline program has caused some regulators and legislators to question the structure of the current program and the FCC is
continuing to review the growth of the program. Changes in the Lifeline program as a result of the ongoing FCC proceeding or other legislation could negatively impact
growth in the Assurance Wireless™ and wholesale subscriber base and/or the profitability of the Assurance Wireless™ and wholesale business overall.
If
our business partners and subscribers
f
ail to meet their contractual obli
g
ations it could ne
g
ativel
y
a
ff
ect our results o
f
operations.
The current economic environment has made it difficult for businesses and consumers to obtain credit, which could cause our suppliers, distributors and
subscribers to have problems meeting their contractual obligations with us. If our suppliers are unable to fulfill our orders or meet their contractual obligations with us, we
may not have the services or devices available to meet the needs of our current and future subscribers, which could cause us to lose current and potential subscribers to
other carriers. In addition, if our distributors are unable to stay in business, we could lose distribution points, which could negatively affect our business and results of
operations. Finally, if our subscribers are unable to pay their bills or potential subscribers feel they are unable to take on additional financial obligations, they may be
forced to forgo our services, which could negatively affect our results of operations.
Our reputation and business may be harmed and we may be subject to legal claims if there is loss, disclosure or misappropriation of or access to our subscribers' or
our own information or other breaches of our information security.
We make extensive use of online services and centralized data processing, including through third-party
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