Windstream 2015 Annual Report Download - page 148

F-18
Small Business - CLEC Segment - Results of Operations
The following table reflects the Small Business - CLEC segment results of operations as of December 31:
2015 to 2014 2014 to 2013
(Millions) 2015 2014 2013
Increase
(Decrease) %
Increase
(Decrease) %
Service revenues (a) $ 559.0 $ 658.3 $ 765.5 $ (99.3)(15) $ (107.2)(14)
Cost and expenses (b) 378.2 408.7 465.6 (30.5)(7)(56.9)(12)
Segment income $ 180.8 $ 249.6 $ 299.9 $ (68.8)(28) $ (50.3)(17)
(a) The decreases were primarily due to the decline in customers, discussed below. For 2016, we are focused on customer
retention and selling incremental services to existing customers to enhance profitable revenue opportunities.
(b) The decreases during 2015 and 2014 were primarily due to a decrease in network access costs directly related to the
decline in customers.
The following table reflects the Small Business - CLEC segment operating metrics as of December 31:
2015 to 2014 2014 to 2013
(Thousands) 2015 2014 2013
Increase
(Decrease) %
Increase
(Decrease) %
Small Business - CLEC Customers 91.2 107.5 123.2 (16.3)(15)(15.7)(13)
The decreases in small business customers in 2015 and 2014 were primarily due to business closures and competition from cable
companies.
Regulatory Matters
We are subject to regulatory oversight by the FCC for particular interstate matters and state public utility commissions (“PUCs”)
for certain intrastate matters. We are also subject to various federal and state statutes that direct such regulations. We actively
monitor and participate in proceedings at the FCC and PUCs and engage federal and state legislatures on matters of importance
to us.
From time to time federal and state legislation is introduced dealing with various matters that could affect our business. Most
proposed legislation of this type never becomes law. Accordingly, it is difficult to predict what kind of legislation, if any, may be
introduced and ultimately become law.
Federal Regulation and Legislation
Intercarrier Compensation and USF Reform
On November 18, 2011, the FCC released an order (“the Order”) that established a framework for reform of the intercarrier
compensation system and the federal USF. The Order included two primary provisions:
• the elimination of terminating switched access rates and other per-minute terminating charges between service providers
by 2018, through annual reductions in the rates, mitigated in some cases by two recovery mechanisms; and
• the provision of USF support for voice and broadband services.
In reforming the USF, the Order established the CAF, which included a short-term (“CAF Phase I”) and a longer-term (“CAF
Phase II”) framework. CAF Phase I provides for continued legacy USF funding frozen at 2011 levels as well as the opportunity
for incremental broadband funding to a number of unserved and underserved locations. In Round 2 of CAF Phase 1 incremental
support, we were authorized to receive an additional $86.7 million in support for upgrades and new deployments of broadband
service. Of the total amount of $86.7 million made available to us, we received $60.7 million in December 2013 and the remaining
$26.0 million in the first quarter of 2014. Pursuant to commitments we made while the FCC was considering the rules for Round
2, we will match, on at least a dollar-for-dollar basis, the total amount of Round 2 funding received. The portion of capital