MANAGEMENT’S DISCUSSION AND ANALYSIS RISKS AND UNCERTAINTIES AFFECTING OUR BUSINESS TECHNOLOGY RISKS GENERAL RISKS Economic Conditions Information S ecurity Risk 74 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT Competing Technologies This section describes the principal risks and uncertainties that could have a material adverse effect on our business and financial results. Our businesses are affected by general economic conditions and consumer confidence and spending. Recessions, declines in economic activity and economic uncertainty can erode consumer and business confidence and reduce discretionary spending. Any of these factors can negatively affect us through reduced advertising, lower demand for our products and services, decreased revenue and profitability, higher churn and bad debt expense. A significant portion of our broadcasting, publishing and digital revenues come from the sale of advertising. Poor economic conditions can also have an impact on our pension plans because there is no assurance that the plans will be able to earn the assumed rate of return. Capital market volatility may result in changes in the discount rates and other variables, requiring us to make contributions in the future that differ significantly from current contributions and assumptions being used in the actuarial valuation process. S ubstantial Competition There is no assurance that our current or future competitors will not provide services that are superior to ours or at lower prices, adapt more quickly to evolving industry trends or changing market requirements, enter markets we operate in, or introduce competing services. Any of these factors could reduce our business market share or revenues, or increase churn. We expect to have ongoing re-pricing of products and services with our existing subscribers as we extend lower wireless pricing offers to attract and retain customers. As such, wireless penetration of the population deepens, new wireless customers may generate lower average monthly revenue and this could slow revenue growth. Wireless could face increased competition due to recent changes to foreign ownership and control of wireless licences. In addition, the CRTC Broadcasting Distribution Regulations do not allow cable operators to obtain exclusive contracts in buildings where it is technically feasible to install two or more systems. Security is essential to maintaining efficient, reliable business processes and to enabling sustained business growth. Technology advancements and the people using these technologies introduce new information security risks. Cyber threats are maturing with time and their sophistication and effectiveness are increasing. A security breach could result in loss of revenue, reputation, and resources, or handing Our businesses depend on information technology systems for day-to- day operations. If we are unable to operate our systems or make enhancements to accommodate customer growth and new products and services or our systems go down, it could have an adverse effect on our ability to acquire new subscribers, service customers, manage subscriber churn, produce accurate and timely subscriber invoices, generate revenue growth and manage operating expenses. This could have an adverse impact on our results and financial position. The growing use of PVRs could affect our ability to generate television advertising revenues because viewers can skip advertising aired on the television networks. The emergence of subscriber-based satellite and digital radio products could change radio audience listening habits and have a negative effect on the results of our radio stations. Certain audiences are also migrating to the Internet as more video and audio content becomes available. Improvements in the quality of streaming video over the Internet, coupled with the increasing availability of television shows and movies online are anticipated to increase competition for Canadian cable television systems. If changes in technology are made to any alternative Canadian multi-channel broadcasting distribution system, our cable services may face increased competition. In addition, wireless Internet is, in some instances, replacing traditional wireline Internet as the technology for wireless Internet continues to develop. Several technologies may affect the way our services are delivered, including: GLYPH<129> Foreign telecommunication companies could enter the Canadian market by acquiring wireless licences or a holder of wireless licences. If companies with significantly greater capital resources enter the Canadian market, it could reduce our wireless market share. See “Foreign ownership and control” in “Regulation in Our Industry” for details. GLYPH<129> Industry Canada’s new policy regarding the transfer of spectrum licenses, combined with 2012 legislation that allows foreign ownership of wireless providers with less than 10 % market share, could make it harder for incumbent wireless carriers to acquire additional spectrum, including the completion of our previously announced arrangements with Shaw and Videotron, while making it less expensive for foreign wireless carriers to enter the Canadian wireless market. This could increase the intensity of competition in the Canadian wireless sector. GLYPH<129> broadband GLYPH<129> IP-based voice, data and video delivery services GLYPH<129> increased use of optical fibre technologies to businesses and, or residences GLYPH<129> broadband wireless access and wireless services using a radio frequency spectrum that we may have limited access to. These technologies may also lead to significantly different cost structures for users and therefore affect the long-term viability of some of our current technologies. Some of the new technologies may allow competitors to enter our markets with similar products or services at lower costs, and they may be larger and have greater access to financial resources than we have. Most of our employees and critical elements of our network infrastructure and information technology systems are concentrated in various physical facilities. If we cannot access one or more of these facilities because of a natural or manmade disaster or otherwise, our operations may be significantly affected to the extent that it may be difficult for us to recover without a significant interruption in service or negative impact to our revenue or customer base. Dependence on Information Technology S ystems