Windstream 2006 Annual Report Download - page 80

Windstream Corporation
Form 10-K, Part I
Item 1A. Risk Factors
Risks Relating to Windstream’s Business
We face intense competition in our businesses from many sources that could reduce our market share or adversely
affect our financial performance.
Substantial and increasing competition exists in the wireline communications industry. Our ILEC operations have
experienced, and will continue to experience, competition in their local service areas. Sources of competition to our
local service business include, but are not limited to, wireless communications providers, resellers of local exchange
services, interexchange carriers, satellite transmission service providers, cable television companies, competitive
access service providers, including, without limitation, those utilizing Unbundled Network Elements- Platform or
UNE-P, and voice-over-Internet-protocol, or VoIP, and providers using other emerging technologies.
Competition could adversely affect us in several ways, including (1) the loss of customers and market share, (2) the
possibility of customers reducing their usage of our services or shifting to less profitable services, (3) our need to lower
prices or increase marketing expenses to remain competitive and (4) our inability to diversify by successfully offering
new products or services.
We may not be able to compete successfully with cable operators which are subject to less stringent industry
regulations.
Cable television companies deploying a cable modem service represent our principal competitors for broadband
Internet access. Broadband offerings by cable television companies are mostly unregulated by state public service
commissions who regulate us and are not subject to tariffs, therefore providing such companies much greater pricing
flexibility. As of December 31, 2006 the majority of our broadband DSL offerings were federally regulated and are
required to comply with federal tariffs.
We also face competition from cable television companies providing voice service offerings. Voice offerings of cable
operators are offered mainly under Competitive Local Exchange Carrier certificates obtained in states where they offer
services and therefore are subject to fewer service quality or service reporting requirements. In addition, the rates or
prices of the voice service offerings of cable companies are not subject to regulation. In contrast, our voice service
rates or prices, in our capacity as an Incumbent Local Exchange Carrier, are subject to regulation by various state
public service commissions and, unlike cable operators, are also subject to “carrier of last resort” obligations which
generally obligates us to provide basic voice services to any person regardless of the profitability of such customer. We
may not be able to compete successfully with cable companies in either the offering of broadband or voice services.
Competition from wireless carriers is likely to continue to cause access line losses which could adversely affect our
operating results and financial performance.
Competition, mainly from wireless and broadband substitution, has caused in recent years a reduction in the number of
Windstream access lines and generally has caused pricing pressure in the industry. As wireless carriers continue to
expand and improve their network coverage while lowering their prices, some customers choose to stop using
traditional wireline phone service and instead rely solely on wireless service. We anticipate that this trend toward
solely using wireless services will continue, particularly if wireless prices continue to decline and the quality of
wireless services improves. Many wireless carriers are substantially larger than we are and will have greater financial
resources and superior brand recognition than we have. In the future, it is expected that the number of access lines
served by us will continue to be adversely affected by wireless and broadband substitution and that industry-wide
pricing pressure will continue. We may not be able to compete successfully with these wireless carriers.
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