Our current and prospective competitors include many large companies that have substantially greater market presence and financial, technical, operational, marketing and other resources and experience than ours. Our Internet access business competes or expects to compete directly or indirectly with the following categories of companies:
o other national and regional commercial Internet access providers;
o established on-line services companies that offer Internet access;
o software and technology companies;
o national long distance telecommunications carriers;
o RBOCs;
o cable television operators;
o nonprofit or educational Internet service providers; and
o newly licensed providers of spectrum-based wireless data services.
Many of the established on-line services companies and telecommunications companies are offering or planning to offer expanded Internet access services. We expect that all of the major on-line services companies will eventually compete fully in the Internet access market. In addition, we believe that new competitors, including large computer hardware and software, cable, media, wireless, and wireline
telecommunications companies such as the RBOCs, will enter the Internet access market, resulting in even greater competition. The ability of these competitors or others to bundle services and products not offered by us with Internet access services could place us at a significant competitive disadvantage. Also, certain of our telecommunications company competitors may be able to offer customers reduced
communications charges in connection with their Internet access services or other incentives, reducing the overall cost of their Internet access solution and increasing price pressures on us. This price competition could reduce the average selling price of our services. Additionally, increased competition for new subscribers could result in increased sales and marketing expenses and related subscriber acquisition costs, which could materially adversely affect our profitability. We may not be able to offset the effects of price reductions or incentives with increases in our number of customers, higher revenue from enhanced services, cost reductions or otherwise.
Competition is also expected to increase in overseas markets, where Internet access services are just being introduced. We might not be able to increase our presence in the overseas markets we presently serve, or enter new overseas markets. We may not be able to obtain the capital required to finance continued expansion. Additionally, we might not be able to obtain the permits and operating licenses required for operating, hiring and training employees or marketing, selling and delivering services in foreign countries. Further, entry into foreign markets will result in competition from local companies that may have long-standing relationships with or possess a better understanding of their local markets, regulatory authorities, customers and suppliers. We may not be able to obtain similar levels of local knowledge, which could place us at a serious competitive disadvantage. To the extent the ability to provide access to service overseas becomes a competitive advantage in the Internet access industry, failure to penetrate or increase our presence in overseas markets we presently serve may result in our being at a competitive disadvantage relative to other Internet access providers.
We believe that our ability to compete successfully in the Internet access market depends upon a number of factors, including:
o market presence;
o the adequacy of our customer support services;
o the capacity, reliability and security of our network infrastructure;
o the ease of access to and navigation of the Internet;
o the pricing policies of our competitors and suppliers;
o regulatory price requirements for interconnection to and use of existing local exchange networks by Internet services;
o the timing of introductions of new products and services by we and our competitors;
o our ability to support existing and emerging industry standards; and o trends within the industry as well as the general economy.
We may not have the financial resources, technical expertise or marketing and support capabilities to continue to compete successfully in the Internet access market.
LICENSES
In the United States, licenses must be obtained from the FCC or state regulatory authorities depending upon the type of license and/or services to be offered. In order to provide telecommunications services outside the United States, we must obtain appropriate licenses or enter into agreements with the foreign government or PTT.
In most foreign countries where we operate, telecommunications licenses must be held by a corporation organized under the laws of that country. In Panama, Venezuela, Mexico, El Salvador, Nicaragua and Costa Rica, we have:
o created a local corporation,
o obtained appropriate licenses with the assistance of local partners, and
o obtained a majority ownership position in exchange for the capital required to build out the system.
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EMPLOYEES
As of December 31, 1999, we had 241 full time employees, located in the US and various Latin American countries. None of our employees are represented by a labor union or covered by a collective bargaining agreement and we have never experienced a work stoppage. We believe that relations with our employees are good.
PROPERTY
Our corporate headquarters are located in Roswell, Georgia. We lease approximately 6,200 square feet of office space at 1325 Northmeadow Parkway, Roswell, Georgia 30076. The lease commenced on April 15, 1999, with a base rent of $5,385 per month and continues for 36 months, expiring on March 15, 2002.
We lease approximately 16,800 square feet of office space at 606 E. Huntington Drive, Monrovia, California 91016, which serves as our administrative headquarters for Competitive Local Exchange Carrier, or CLEC, operations. The lease commenced on September 15, 1999, with a base rate of $18,809 and is for an initial term of five years expiring on September 30, 2004.
TYPE OF
We own an office building with approximately 6,400 square feet in El Monte, California, which serves as our central office for Los Angeles CLEC operations.
We lease approximately 7,220 square feet of office space at 99 SE 5th Street, Miami, Florida, which serves as our central office for Miami CLEC operations. The lease commenced on December 1, 1999, with a base rate of $11,533.95 and is for an initial term of 10 years expiring on November 30, 2010.
We lease approximately 11,500 square feet of office space at 2839 Paces Ferry Road, Suites 500 and 250, Atlanta, Georgia 30339. The term of the lease commenced on October 1, 1995, with a base rent of $18,267 per month and continues for sixty months, expiring September 30, 2000.
We lease approximately 10,000 square feet of office space at 17100 El Camino Real, Houston, Texas 77058. The lease is for an initial term of five years and expires on June 30, 2001, unless we exercise our contractual right to renew the lease for two additional terms of five years each.
The monthly rental under the lease is currently $9,800.
We lease approximately 1,700 square feet of office space at 28 West Flagler Street, Miami, Florida 33130. The lease is for an initial term of three years and has been extended two years until January 1, 2001. The monthly rental under the lease is currently $2,054.
We lease additional office and equipment co-location space in the U.S. in Phoenix, Arizona; Ft. Lauderdale, Florida; Atlanta, Georgia;
Houston, Texas; New York, New York; Los Angeles, California; San Diego, California. The monthly rental under these leases is currently
$28,120.
We also lease office or equipment co-location space in the following countries with current monthly rental in the amount of $14,725:
o Panama City, Panama;
o Colon, Panama;
o Caracas, Venezuela;
o San Salvador, El Salvador;
o Managua, Nicaragua; and o San Jose, Costa Rica.
Our physical properties are in good condition.
LEGAL PROCEEDINGS
From time to time, we have been involved in certain legal proceedings. Currently, we are not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to our business.
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