Covad Communications Group Announces Third Quarter 2004 Results; Company Reports 10,500 New Broadband Customers; VoIP Service Now Available in 57 Markets.SAN JOSE San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif. -- Covad Communications Group, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :COVD COVD College of Optometrists in Vision Development COVD Covad Communications Group (stock symbol) ), a leading national provider of integrated voice and data communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. , today reported revenue for the third quarter of 2004 of $105.7 million, a five percent increase over the $100.5 million reported in the third quarter of 2003, and a decrease of $1.6 million from the second quarter of 2004. The company reported net loss for the third quarter of 2004 of $13.8 million, or $0.05 per share, as compared to a net loss of $33.4 million, or $0.15 per share in the third quarter of 2003, and a net loss of $7.4 million, or $0.03 per share for the second quarter of 2004. Loss from operations for the third quarter of 2004 was $15.3 million, compared to $32.2 million in the third quarter of 2003 and $6.7 million for the second quarter of 2004. Cash, cash equivalent and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investment balances, including restricted cash and investments, decreased by $6.6 million to $165.8 million in the third quarter of 2004 compared to a balance of $172.3 million at the end of the second quarter of 2004. Third quarter cash was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by the recovery of a pre-bankruptcy claim and a legal settlement which resulted in $3.2 million of payments to the company. During the third quarter, line count from stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." broadband services See broadband and broadband service provider. increased by 10,500 lines ending the third quarter with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 524,900 lines in service. This is compared to a net decrease in lines of approximately 1,000 lines in the second quarter of 2004. Covad ended the third quarter with 373 business customers that have chosen the company's leading small business Covad VoIP solution, a 20 percent increase over the 311 customers at the end of the second quarter 2004. End user VoIP stations increased to 17,900 contributing $2.2 million in revenue in the third quarter, our first full quarter of reporting VoIP-related sales activity. During the third quarter 2004, Covad expanded the availability of Covad VoIP service to 46 markets with 11 more added in October October: see month. bringing total markets served to 57. By the end of the year, the company plans to complete the launch of Covad VoIP in all major metropolitan areas served by the company's national footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. . The growth in Covad VoIP services during the third quarter 2004 was captured in the existing three markets served at the time of the GoBeam acquisition at the end of the second quarter. As Covad expands its VoIP markets, the company expects to continue driving Covad VoIP revenue growth. "The third quarter was significant for Covad as we experienced positive momentum with a return to positive broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). line count growth as well as significant growth from Covad VoIP services. As we develop new markets, our aggressive nationwide rollout of Covad VoIP should continue to drive revenue growth," said Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by Hoffman, president and chief executive officer of Covad. "We will continue to fuel sales for Covad VoIP services through our new VoIP advertising campaign launched in September September: see month. . We have also expanded our national reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. base by adding 84 new Covad VoIP channel partners in the third quarter. "We also continue to improve our business to take advantage of the demand for the next generation of high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. access," Hoffman added. "We recently completed our network expansion initiative which grew our nationwide footprint by 11 percent and have built a national, direct sales force to focus on the $32 billion dollar small and medium business telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. market." Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure and other information. The company's wholesale subscribers contributed $75.3 million of revenue, or 71 percent, while direct subscribers contributed $30.4 million of revenue, or 29 percent. On September 30, 2004, Covad had approximately 448,700 wholesale and 76,200 direct lines in service, as compared to 419,700 wholesale and 71,200 direct lines in service reported at the end of the third quarter of 2003 and 440,800 wholesale and 73,600 direct lines in service on June June: see month. 30, 2004. For the third quarter of 2004, broadband and VoIP subscription billings Billings, city (1990 pop. 81,151), seat of Yellowstone co., S Mont., on the Yellowstone River, in a valley surrounded by seven mountain ranges; inc. as a city 1885. increased eight percent to $88.8 million from $82.4 million reported in the third quarter of 2003, and up from the $87.5 million reported in the second quarter of 2004. Management uses broadband and VoIP subscription billings to evaluate the performance of its business and believes these billings are a useful measure for investors as they represent a key indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the performance of the company's core business. Refer to the Selected Financial Data, including Note 3, for additional information, including a reconciliation of this non-GAAP financial performance measure to the most directly comparable GAAP measure. For the third quarter of 2004, gross margin was $39.7 million or 38 percent of revenue, as compared $23.3 million or 23 percent of revenue in the year-ago quarter, and $44.6 million or 42 percent of revenue for the second quarter of 2004. Selling, general and administrative (SG&A) expenses were $35.5 million for the third quarter of 2004, as compared to $37.6 million in the third quarter of 2003 and $31.9 million for the second quarter of 2004. This increase resulted from increased sales and marketing expenses associated with the launch of Covad VoIP service. Mark Richman Richman is a surname and may refer to:
Operating Statistics --Digital subscriber lines The line from the customer site to the local telephone company. See subscriber network. increased seven percent year-over-year, from 490,900 at the end of the third quarter of 2003 to 524,900 at the end of the third quarter of 2004, and increased by 10,500 lines from the second quarter of 2004. --At the end of the third quarter, Covad had approximately 302,500 consumer and 222,400 business lines in service, representing a 58 percent and 42 percent of total lines respectively. Business customers contributed $76.4 million, or 72 percent, of total revenue. --Weighted Average Revenue per User (ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. ) was approximately $56 during the third quarter of 2004, compared to $57 in the second quarter of 2004. --Net customer disconnections, or churn churn: see butter. , averaged approximately 3.6 percent in the third quarter of 2004, representing no change from the second quarter of 2004. Business Outlook Covad currently expects revenue for the fourth quarter of 2004 to be in the range of $104-108 million with subscriber line growth in the range of 5,000-10,000 lines. Broadband and VoIP subscription billings for the fourth quarter of 2004 are expected to be in the range of $87-91 million. With our aggressive nationwide rollout of VoIP services requiring investments in sales and marketing activities during the fourth quarter of 2004, Covad expects its net loss to be in the range of $23-28 million, and generate an EBITDA loss in the range of $3-7 million. Net change in cash, cash equivalents and short-term investments, including restricted cash and investments, in the fourth quarter of 2004 is expected to be in the range of negative $10-15 million. Conference Call Information Covad will conduct a conference call to discuss these financial results on Wednesday Wednesday: see week. , October 20, 2004 at 8:30 a.m. Eastern Time (ET)/ 5:30 a.m. Pacific Time (PT). The conference call will be webcast over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . To listen to the call, visit the Event Calendar section on the Covad web site at http://www.covad.com/companyinfo/investorrelations. Investors and press may also listen by telephone to the call by dialing 617-614-4908, pass code 17038418 and are advised to call in 5 minutes prior to the start time. The conference call will be recorded and available for replay listening until 11:59 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on November November: see month. 19, 2004 by dialing 617-801-6888, pass code 80630643. The webcast will be available through our website until October 19, 2005. About Covad Covad is a leading nationwide provider of integrated voice and data communications. The company offers DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary , voice over IP, T1, Web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. , managed security, IP and dial-up Refers to using the regular "dial-up" telephone network to send data from a computer to a remote network or to a remote device. The computer's digital data are converted to analog signals in the same frequency range as human voice by a modem. , and bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. voice and data services directly through its network and through Internet Service Providers Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. , value-added resellers A value-added reseller (VAR) is a company that adds some feature(s) to an existing product(s), then resells it (usually to end-users) as an integrated product or complete "turn-key" solution. , telecommunications carriers, and affinity groups A special interest group. This is a marketing term for a group of people with similar interests. to small and medium-sized Me´di`um-sized` a. 1. Having a medium size; as, a medium-sized man s>. Adj. 1. medium-sized - intermediate in size medium-size, moderate-size, moderate-sized businesses and home users. Covad broadband services are currently available across the nation in 44 states and 235 Metropolitan Statistical Areas (MSAs) and can be purchased by more than 57 million homes and businesses, which represent over 50 percent of all United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. homes and businesses. Its corporate headquarters are located at 110 Rio See RapidIO and MP3. Robles Robles is a common surname in the Spanish language meaning oaks, and may refer to:
Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: The foregoing contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " regarding expected financial and operating results, such as expectations regarding revenue, subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. counts, broadband and VoIP subscription billings, net loss, EBITDA losses and changes in cash, cash equivalents and short term investments, as well as other matters, which are based on management's current information and beliefs as well as on a number of assumptions concerning future events made by management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Covad's control, that could cause actual results to differ materially from such statements. These risk factors include the impact of increasing competition, pricing pressures, consolidation in the telecommunications industry, and uncertainty in telecommunications regulations and changes in technologies, among other risks. For a more detailed description of the risk factors that could cause such a difference, please see Covad's 10-K, 10-K/A, 10-Q, 8-K and other filings with the Securities and Exchange Commission. Covad disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results of Covad.
COVAD COMMUNICATIONS GROUP, INC.
SELECTED FINANCIAL DATA
(in thousands)
Selected Balance Sheet Data As of As of
Sep 30, 2004 Jun 30, 2004
------------ ------------
Cash, cash equivalents, and short term
investments $162,910 $169,392
Restricted cash and investments 2,842 2,942
Accounts receivable, net 30,094 29,956
All other current assets 15,329 15,240
Property, equipment, collocation fees, and
other intangible assets, net 158,240 166,610
Deferred costs of service activation 29,582 30,406
Deferred debt issuance costs 4,446 4,673
All other long-term assets 5,477 6,232
------------ ------------
Total assets $408,920 $425,451
============ ============
Total current liabilities $116,559 $114,943
Long-term debt 125,000 125,000
Collateralized customer deposit (less
current portion) 46,508 48,476
Deferred gain from deconsolidation of
subsidiary 53,963 53,963
Unearned revenues 51,714 53,305
Other long-term liabilities 2,357 2,397
Total stockholders' equity 12,819 27,367
------------ ------------
Total liabilities and stockholders' equity $408,920 $425,451
============ ============
COVAD COMMUNICATIONS GROUP, INC.
SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
Consolidated
Condensed Statements
of Operations Data Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2004 2004 2003 2004 2003
--------- --------- --------- --------- ---------
Revenues, net $105,687 $107,326 $100,507 $321,490 $283,812
Operating expenses:
Cost of sales
(exclusive of
depreciation and
amortization) 65,939 62,748 77,215 196,981 214,724
Selling, general
and administrative 35,488 31,878 37,627 100,668 106,347
Depreciation and
amortization of
property and
equipment 14,078 14,162 13,054 42,735 41,399
Amortization of
collocation fees
and other
intangible assets 5,328 5,042 4,775 15,121 12,795
Provision for
restructuring
expenses 145 223 - 915 1,235
--------- --------- --------- --------- ---------
120,978 114,053 132,671 356,420 376,500
--------- --------- --------- --------- ---------
Loss from operations (15,291) (6,727) (32,164) (34,930) (92,688)
Other income
(expense), net 1,487 (679) (1,267) 189 (2,752)
--------- --------- --------- --------- ---------
Net loss $(13,804) $(7,406) $(33,431) $(34,741) $(95,440)
========= ========= ========= ========= =========
Basic and diluted
net loss per share $(0.05) $(0.03) $(0.15) $(0.14) $(0.43)
========= ========= ========= ========= =========
Weighted average
number of common
shares used in
computing
basic and diluted
net loss per share 260,304 242,359 224,873 245,219 224,019
========= ========= ========= ========= =========
Gross Margin (Note 1) $39,748 $44,578 $23,292 $124,509 $69,088
% of revenue 37.6% 41.5% 23.2% 38.7% 24.3%
EBITDA Calculation
(Note 2) Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2004 2004 2003 2004 2003
--------- --------- --------- --------- ---------
Net Loss $(13,804) $(7,406) $(33,431) $(34,741) $(95,440)
Plus:
Other (income)
expense, net (1,487) 679 1,267 (189) 2,752
Depreciation and
amortization
of property
and equipment 14,078 14,162 13,054 42,735 41,399
Amortization of
collocation
fees and other
intangible
assets 5,328 5,042 4,775 15,121 12,795
--------- --------- --------- --------- ---------
EBITDA (Note 2) $4,115 $12,477 $(14,335) $22,926 $(38,494)
========= ========= ========= ========= =========
COVAD COMMUNICATIONS GROUP, INC.
SELECTED FINANCIAL DATA
(in thousands, except key operating data)
Consolidated Revenue Data
Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2004 2004 2003 2004 2003
--------- --------- --------- --------- ---------
Broadband
subscription
billings (Note 3) $86,514 $87,032 $82,420 $263,145 $229,469
VoIP subscription
billings (Note 3) 2,241 501 - 2,742 -
High-capacity
circuit billings 4,637 5,792 5,014 15,681 15,847
Dial-up billings 739 1,130 1,377 2,927 4,638
--------- --------- --------- --------- ---------
Total Billings,
net $94,131 $94,455 $88,811 $284,495 $249,954
Financially
distressed
partners (Note 4) (47) (146) (84) (433) (237)
Customer rebates
and incentives not
subject to
deferral (Note 5) (643) (302) (3,917) (1,367) (11,939)
Other revenues, net
(Note 6) 12,246 13,319 15,697 38,795 46,034
--------- --------- --------- --------- ---------
Revenues, net $105,687 $107,326 $100,507 $321,490 $283,812
========= ========= ========= ========= =========
Consolidated Network
& Product Costs Data
Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2004 2004 2003 2004 2003
--------- --------- --------- --------- ---------
Direct Cost of
Total Billings,
net (Note 8) $16,122 $15,967 $16,828 $49,765 $51,232
Other Network and
Product Costs
(Note 9) 49,817 46,781 60,387 147,216 163,492
--------- --------- --------- --------- ---------
Cost of Sales
(exclusive of
depreciation and
amortization) $65,939 $62,748 $77,215 $196,981 $214,724
========= ========= ========= ========= =========
Key Operating Data As of
-----------------------------
Sep 30, Jun 30, Sep 30,
2004 2004 2003
--------- --------- ---------
End of Period Lines
(EOP)
Company
Business 222,431 221,766 206,415
Consumer 302,464 292,579 284,510
--------- --------- ---------
Total
Company 524,895 514,345 490,925
Wholesale
Business 165,669 165,009 151,342
Consumer 283,020 275,785 268,382
--------- --------- ---------
Total
Wholesale 448,689 440,794 419,724
Direct
Business 56,762 56,757 55,073
Consumer 19,444 16,794 16,128
--------- --------- ---------
Total Direct 76,206 73,551 71,201
VoIP
Customers 373 311
Stations 17,898 15,833
Average Revenue per
User (ARPU)
Company
Business $95 $93 $92
Consumer $28 $29 $33
--------- --------- ---------
Total
Company $56 $57 $58
Wholesale
Business $76 $76 $79
Consumer $27 $28 $32
--------- --------- ---------
Total
Wholesale $45 $46 $49
Direct
Business $148 $140 $134
Consumer $39 $46 $49
--------- --------- ---------
Total Direct $122 $122 $112
VoIP
Customers $2,191 $2,059
Stations $44 $42
COVAD COMMUNICATIONS GROUP, INC.
SELECTED FINANCIAL DATA
(in thousands)
Three Months Ending December 31, 2004
-- Business Outlook
-------------------------------------
EBITDA Calculation (Note 2) Three Months Ending
Dec 31, 2004
----------------------
Projected Range of
Results
----------------------
Net Loss $(28,000) to $(23,000)
Plus:
Other (income) expense, net 500 to 500
Depreciation and amortization of property
and equipment 16,500 to 15,500
Amortization of collocation fees and other
intangible assets 4,000 to 4,000
--------- ---------
EBITDA (Note 2) $(7,000) to $(3,000)
========= =========
Consolidated Revenue Data Three Months Ending
Dec 31, 2004
----------------------
Projected Range of
Results
----------------------
Broadband subscription billings (Note 3) $85,000 to $88,000
VoIP subscription billings (Note 3) 2,000 to 3,000
High-capacity circuit billings 3,500 to 4,500
Dial-up billings - to 100
--------- ---------
Total Billings, net $90,500 to $95,600
Financially distressed partners (Note 4): (100) to (500)
Customer rebates and incentives not subject to
deferral (Note 5) (500) to (1,500)
Other revenues, net (Note 6) 14,100 to 14,400
--------- ---------
Revenues, net $104,000 to $108,000
========= =========
Notes to Unaudited Selected Financial Data
1. Gross margin is calculated by subtracting cost of sales
(exclusive of depreciation and amortization) from revenues,
net.
2. Management believes that Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA"), defined as net loss
prior to (i) depreciation and amortization of property and
equipment, (ii) amortization of intangible assets and (iii)
other income (expense), net, is a useful measure because it
provides additional information about the company's ability to
meet future capital expenditures and working capital
requirements and fund continued growth. Management also uses
EBITDA to evaluate the performance of its business segments
and as a factor in its employee bonus program. EBITDA may be
defined differently by other companies and should not be used
as an alternative to our operating and other financial
information as determined under accounting principles
generally accepted in the United States. EBITDA is not a
prescribed term under accounting principles generally accepted
in the United States, does not directly correlate to cash
provided by or used in operating activities and should not be
considered in isolation, nor as an alternative to more
meaningful measures of performance determined in accordance
with accounting principles generally accepted in the United
States. EBITDA generally excludes the effect of capital costs.
3. Broadband and VoIP subscription billings is defined as
customer bills issued within the period for services provided
during such period. Broadband and VoIP subscription billings
exclude charges for Federal Universal Service Fund ("FUSF")
assessments, dial-up services, and high-capacity circuits.
Broadband and VoIP subscription billings include bills issued
to customers that are classified as financially distressed and
whose revenue is only recognized if cash is received (refer to
Note 4 below for a more detailed discussion on accounting for
financially distressed partners). Management believes
broadband and VoIP subscription billings is a useful measure
for investors as it represents a key indicator of the growth
of the company's core business. Management uses broadband and
VoIP subscription billings to evaluate the performance of its
business segments.
4. When the company determines that (i) the collectibility of a
bill issued to a customer is not reasonably assured or (ii)
its ability to retain some or all of the payments received
from a customer that has filed for bankruptcy protection is
not reasonably assured, the customer is classified as
"financially distressed" for revenue recognition purposes. A
bill issued to a financially distressed customer is recognized
as revenue when services are rendered and cash for those
services is received, assuming all other criteria for revenue
recognition have been met, and only after the collection of
all previous outstanding accounts receivable balances.
Consequently, significant timing differences may occur from
the time a bill is issued, the time the services are provided
and the time that cash is received and revenue is recognized.
5. Customer rebates and incentives not subject to deferral
consist of amounts paid or accrued under marketing, promotion
and rebate incentive programs with certain customers. Rebates
and incentives paid or accrued under these programs are not
accompanied by any up-front charges billed to customers.
Therefore, these charges are accounted for as reductions of
revenue as incurred.
6. Other revenues consist primarily of revenue recognized from
amortization of prior period SAB 104 deferrals (refer to Note
7 below for a discussion of SAB 104) and FUSF billed to our
customers and other revenues not subject to SAB 104 deferral
because they do not relate to an on-going customer
relationship or performance of future services.
7. In accordance with SAB 104, the company recognizes up-front
fees associated with service activation, net of any amounts
concurrently paid or accrued under certain marketing,
promotion and rebate incentive programs, over the expected
term of the customer relationship, which is presently
estimated to be 24 months, using the straight-line method. The
company also treats the incremental direct costs of service
activation (which consist principally of customer premises
equipment, service activation fees paid to other
telecommunications companies and sales commissions) as
deferred charges in amounts that are no greater than the
up-front fees that are deferred, and such deferred incremental
direct costs are amortized to expense using the straight-line
method over 24 to 48 months.
8. Direct costs of total billings, net consists of monthly
charges we receive from telecommunications carriers to support
the delivery of broadband and VoIP services to our customers.
Direct costs of total billings, net includes the on-going
costs associated with high-capacity circuits provisioned for
our wholesalers and the costs associated with local loops
provisioned for our broadband and dial-up end-users.
9. Other network and product costs consist of all other costs,
excluding depreciation and amortization, associated with
operating, maintaining and monitoring our networks and
delivering service to our customers.
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