Windstream 2014 Annual Report Download - page 94

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Competition in our consumer markets could affect our revenues and profitability in several ways, including accelerated consumer
voice line loss, reductions by customers in usage-based services or shifts to less profitable services and a need to lower our prices
or increase marketing expenses to stay competitive.
If we are prohibited from participating in government programs, our results of operations could be materially and adversely
affected.
We are the recipient of a material amount of end user revenue and government funding under various government programs and
also serve as a government contractor for services for various state, local and federal agencies. Our failure to comply with the
complex government regulations and statutes applicable to the programs, or the terms of one or more of our government contracts,
could result in our being suspended or disbarred from future government programs for a significant period of time or result in
harm to our reputation with the government and possible restriction from future government activities. While we have implemented
compliance programs and internal controls that are reasonably designed to prevent misconduct and non-compliance relating to
the government programs and contracting, we cannot eliminate the risk that our employees, partners or subcontractors may
independently engage in such activities.
If we are suspended or debarred from government programs, or if our government contracts are terminated for any reason, we
could suffer a significant reduction in expected revenue which could have a material and adverse effect on our operating results.
New technologies may affect our ability to compete in our consumer markets.
Wireless companies are aggressively developing networks using next-generation data technologies, which are capable of delivering
high-speed Internet service via wireless technology to a larger geographic footprint. If these technologies continue to expand in
availability and reliability, they could become an effective alternative to our high-speed Internet services. In addition, cable operators
may be able to take advantage of certain technology to deploy faster broadband speeds more rapidly than Windstream.
In addition to broadband technology, evolving voice technologies, such as over-the-top Voice over Internet Protocol (“VoIP”),
may effectively compete with voice and long-distance services in our consumer markets.
These and other new and evolving technologies could result in greater competition for our voice and high-speed Internet services.
If we cannot develop new services and products to keep pace with technological advances, or if such services and products are
not widely embraced by our customers, our results of operations could be adversely affected.
Competitors, especially cable television companies, in our consumer markets are subject to less stringent industry regulations,
which could result in voice line and revenues losses in the future.
Cable television companies are generally subject to less stringent regulations than our consumer operations. Cable voice offerings
and others are subject to fewer service quality and reporting requirements than our consumer operations, and their rates are generally
not subject to regulation, unlike our consumer voice services. Our consumer areas also may be subject to “carrier of last resort”
obligations, which generally obligate us to provide basic voice services to any person within our service area regardless of the
profitability of the customer. Our competitors in these areas are not subject to such requirements.
Because of these regulatory disparities, we have less flexibility in our consumer markets than our competitors. This could result
in accelerated voice line and revenue losses in the future.
Different interpretation and/or implementation of certain sections contained in the FCC’s Intercarrier Compensation and
Universal Service reform order could result in additional access revenue reductions.
The FCC’s reform order adopted in 2011 provides that intrastate traffic that originates in VoIP format and is delivered by long
distance carriers to us for termination will be assessed interstate access charges. During 2012, we coordinated with long distance
carriers to transition to these reduced interstate access rates, and this transition resulted in further reductions on July 2, 2013.
In a subsequent order, the FCC determined that intrastate traffic we originate through the traditional telephone network and deliver
to a customer served under a VoIP platform would be subject to interstate access charges beginning on July 1, 2014. As a result,
we incurred additional access revenue reductions beginning on July 1, 2014. While we have petitioned the FCC to create a recovery
mechanism, it has not yet done so. We expect additional reductions in intrastate originating access revenue as carriers report higher