Windstream 2011 Annual Report Download - page 75

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advancing our strategy to drive top-line revenue growth by expanding our focus on business and fiber transport services.
PAETEC adds an attractive base of medium to large-sized business customers, approximately 36,700 fiber route miles and
seven data centers and provides opportunities for significant operating and capital synergies.
As a result of these strategic activities, our revenue mix has shifted significantly toward our growth areas. Revenues from
businesses and consumer broadband were approximately 61 percent of total revenue for the year ended December 31, 2011, as
compared to 42 percent in 2008. With the addition of PAETEC, we expect approximately 69 percent our 2012 revenues to be
generated by business and consumer broadband.
Investing for growth
In conjunction with our targeted acquisition strategy, we are
making significant investments in our network to expand our
business service offerings and increase broadband speeds and
capacity in our consumer markets. See "Products and Services"
for additional information and other service offerings.
The expansion of our fiber transport network, through
acquisitions and organic growth, enhances our ability to provide
wireless transport, or backhaul, services. As cellular customers
consume more wireless data, wireless carriers need more
bandwidth on the wireline transport network. Many wireless
towers are still served by copper cables, but we are rapidly rolling
out fiber to accommodate the wireless carriers' additional
bandwidth needs. We expect wireless data usage to continue to
increase, which will drive the need for additional wireless
backhaul capacity.
While providing these services requires an initial capital
investment, we make these investments only after securing long-
term contracts with wireless carriers, typically for a period of five
years, and believe these contracts and the expected growth in
wireless bandwidth needs will provide an attractive return on our
capital outlay. These capital investments are made up front, and
there is a short lag period between the initial capital spend and the
realization of associated revenues.
We are also making significant investments in data centers to
broaden the technology-based services we offer, including cloud
computing and managed services. As of December 31, 2011, we
operated 21 data centers and are constructing two others.
On the consumer front, we are making investments to increase broadband speeds and capacity throughout our territories.
Although new customer growth is slowing as the market becomes more heavily penetrated, we expect increases in real-time
streaming video and traditional Internet usage to motivate customers to upgrade to faster broadband speeds with a higher price.
We also actively promote value-added Internet services, such as security and online back-up, to take advantage of the
broadband speeds we offer.
We are also expanding broadband services to unserved and underserved areas through a combination of our own investment
and grant funds received as a result of the American Recovery and Reinvestment Act of 2009 ("broadband stimulus"). We
received Rural Utilities Service ("RUS") approval for broadband stimulus projects with a total cost of $241.7 million, of which
the RUS will fund 75 percent, or $181.3 million, and we will fund 25 percent, or $60.4 million. We began these projects in the
first quarter of 2011, and we expect to substantially complete the RUS projects by the end of 2013 and complete the projects
well before June 30, 2015, the completion date to which we have agreed.
Declines in consumer voice customers
In spite of our ongoing efforts to gain market share, our consumer business remains under pressure due to competition from
wireless carriers, cable television companies and other companies using emerging technologies. For the year ended December
31, 2011, our consumer access lines decreased by 81,000 lines, or 4.0 percent, as compared to the prior year.
Given these realities, it is vital that we remain squarely focused on expanding business and broadband services to drive top-line
growth. By doing so, we expect to continue to create significant value for both our customers and our shareholders.