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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010

FOR THE TRANSITION PERIOD FROM                          TO                        

COMMISSION FILE NUMBER: 1-8519

CINCINNATI BELL INC.

221 East Fourth Street, Cincinnati, Ohio 45202

Telephone: 513-397-9900

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the voting common shares owned by non-affiliates of the registrant was $0.6 billion, computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2010, the last trading day of the registrant’s most recently completed second fiscal quarter. The Company has no non-voting common shares.

At February 1, 2011, there were 198,771,550 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement relating to the Company’s 2011 Annual Meeting of Shareholders are incorporated by reference into Part III of this report to the extent described herein.

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This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc., as indicated.

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Part I

Item 1. Business

General

Cincinnati Bell Inc. and its consolidated subsidiaries (the “Company”) is a full-service regional provider of data and voice communications services over wireline and wireless networks, a full-service provider of data center colocation and related managed services, and a reseller of information technology (“IT”) and telephony equipment. The Company provides telecommunications service to businesses and consumers in the Greater Cincinnati and Dayton areas primarily on its owned wireline and wireless networks with a well-regarded brand name and reputation for service. The Company also provides business customers with outsourced data center colocation operations and related managed services in world class, state-of-the-art data center facilities, primarily located in Cincinnati, Houston, Dallas, and Austin.

The Company operates in four segments: Wireline, Wireless, Data Center Colocation, and IT Services and Hardware. In the fourth quarter of 2010, the Company realigned its reportable business segments to be consistent with changes to its management reporting. The segment formerly known as the Technology Solutions segment was separated into the Data Center Colocation segment and the IT Services and Hardware segment. The changes to the Company’s management reporting have been made primarily as a result of the June 2010 acquisition of Cyrus Networks, LLC (“CyrusOne”). Prior year amounts have been reclassified to conform to the current segment reporting.

The Company is an Ohio corporation, incorporated under the laws of Ohio in 1983. Its principal executive offices are at 221 East Fourth Street, Cincinnati, Ohio 45202 (telephone number (513) 397-9900 and website address http://www.cincinnatibell.com). The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) under the Exchange Act. These reports and other information filed by the Company may be read and copied at the Public Reference Room of the SEC, 100 F Street N.E., Washington, D.C. 20549. Information about the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy statements, and other information about issuers, like the Company, which file electronically with the SEC. The address of that site is http://www.sec.gov. The Company makes available its reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), proxy statements and other information, free of charge, at the Investor Relations section of its website.

Wireline

The Wireline segment provides local voice, data, long-distance, entertainment, voice over internet protocol (“VoIP”), security monitoring, and other services over its owned and other wireline networks. Local voice services include local telephone service, switched access, and value-added services such as caller identification, voicemail, call waiting, and call return. Data services include high-speed internet using digital subscriber line (“DSL”) technology, fiber to the home, dial-up internet access, dedicated network access, and Gigabit Ethernet (“Gig-E”) and Asynchronous Transfer Mode (“ATM”) data transport, which businesses principally utilize to transport large amounts of data over a private network. Cincinnati Bell Telephone Company LLC (“CBT”), a subsidiary of the Company, is the incumbent local exchange carrier (“ILEC”) for the approximate 25-mile radius around Cincinnati, Ohio which includes parts of northern Kentucky and southeastern Indiana. CBT has operated this ILEC franchise for approximately 135 years, and approximately 95% of Wireline voice and data revenue for 2010 was generated within this ILEC territory. Long distance and VoIP services include long distance voice, audio conferencing, VoIP and other broadband services including private line and multi-protocol label switching (“MPLS”), a technology that enables a business customer to privately interconnect voice and data services at its locations. Entertainment services are comprised of television over fiber optic cable and coaxial cable in limited areas, and DirecTV^© commissioning over the Company’s entire operating area. Other services primarily include security monitoring services, inside wire installation for business enterprises, rental revenue of space, public payphones and clearinghouse services.

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The Company has expanded its voice and data services beyond its ILEC territory, particularly in Dayton and Mason, Ohio, through the operations of Cincinnati Bell Extended Territories LLC (“CBET”), a competitive local exchange carrier (“CLEC”) subsidiary of CBT. CBET provides voice and data services on either its own network or through purchasing unbundled network elements (“UNE-L” or “loops”) from various incumbent local carriers. The ILEC and CLEC territories are linked through a Synchronous Optical Fiber Network (“SONET”), which provides route diversity between the two territories via two separate paths.

The Wireline segment produced revenue of $742.5 million, $763.1 million, and $795.8 million and after intersegment eliminations constituted approximately 52%, 55%, and 55% of consolidated revenue in 2010, 2009, and 2008, respectively. The Wireline segment produced operating income of $233.5 million, $255.6 million, and $258.4 million in 2010, 2009, and 2008, respectively.

Voice services

The Wireline segment provides voice services over a digital circuit switch-based network to end users via access lines. In recent years, the Company’s voice access lines have decreased as its customers have increasingly employed wireless technologies in lieu of wireline voice services (“wireless substitution”), have migrated to competitors, including cable companies that offer VoIP solutions, or have been disconnected due to credit problems. The Wireline segment had 674,100 voice access lines in service on December 31, 2010, which is a 6.8% and 13.5% reduction in comparison to 723,500 and 779,700 access lines in service at December 31, 2009 and 2008, respectively.

In order to minimize access line losses and to provide greater value to its customers, the Company provides bundled offerings that enable customers to bundle two or more of the Company’s services, such as wireless and a phone line, at a lower price than if the services were purchased individually. The Company believes its ability to provide voice, high-speed internet, wireless, and entertainment services to its customers allows it to compete effectively against national communications companies in Greater Cincinnati, most of which either are not able to provide or have not effectively provided these bundled offerings of products to consumers. The Company has approximately 460,000 residential customers in Greater Cincinnati and Dayton, 51% of which bundle two Company products and 17% of which bundle three or more Company products.

The Wireline segment has been able to partially offset the effect of access line losses on revenue in recent years by:

Data

Data revenue consists of data transport, DSL high-speed internet access, Fioptics high-speed internet access, dial-up internet access, and local area network (“LAN”) interconnection services. The Company’s wireline network includes the use of fiber optic cable, with SONET rings linking Cincinnati’s downtown with other area business centers. These SONET rings offer increased reliability and redundancy to CBT’s major business customers. CBT has an extensive business-oriented data network, offering high-speed and high capacity data transmission services over an interlaced ATM — Gig-E backbone network. Data transmission revenues represented 65% of Wireline data revenue in 2010.

The Company had 228,900, 233,800, and 233,200 DSL high-speed internet subscribers at December 31, 2010, 2009, and 2008, respectively. In addition, the Company also had 27,200 and 13,800 Fioptics high-speed internet customers at December 31, 2010 and 2009, respectively. The Company was able to provide DSL high-speed internet service to 96% of ILEC addressable lines as of the end of 2010. High-speed internet revenue represented 34% of Wireline data revenue in 2010. The remaining Wireline data revenue in 2010 consisted mainly of dial-up internet access.

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Long distance and VoIP services

The Company provides long distance and VoIP services primarily through its Cincinnati Bell Any Distance Inc. (“CBAD”) and eVolve Business Solutions LLC (“eVolve”) subsidiaries. These entities provide long distance and audio conferencing services to business and residential customers in the Greater Cincinnati and Dayton, Ohio areas as well as VoIP and other broadband services, including private line and MPLS, beyond its traditional territory to business customers. Residential customers can choose from a variety of long distance plans, which include unlimited long distance for a flat fee, purchase of minutes at a per-minute-of-use rate, or a fixed number of minutes for a flat fee. At December 31, 2010, CBAD had approximately 482,800 long distance subscribers, consisting of 309,600 residential and 173,200 business subscribers, compared to 508,300 and 531,600 long distance subscribers at December 31, 2009 and 2008, respectively. The decrease in long distance subscribers from 2009 was primarily driven by a 7% decline in residential subscribers, consistent with the CBT access line loss.

VoIP services are provided to business customers in the Company’s traditional Greater Cincinnati and Dayton operating territory and also to businesses outside of this area, primarily in Ohio, Indiana, Illinois, and Kentucky. The Company believes its VoIP operations will expand as business customers continue to look for alternatives to traditional ILEC-based operations and as the VoIP technology continues to improve. VoIP access line equivalents totaled 33,400 at December 31, 2010.

In 2010, long distance and VoIP services produced $104.4 million in revenue for the Wireline segment compared to $97.1 million in 2009 and $98.3 million in 2008.

Entertainment

The Company’s improvement of its wireline network over the last several years has included capital expenditures for fiber optic cable in limited areas. The large bandwidth of fiber optic cable allows the Company to provide customers with its Fioptics product suite of services, which include entertainment, high-speed internet and voice services, in areas that the fiber optic cable is laid. The Company has first focused its fiber network expenditures on high traffic areas, such as apartments and condominium complexes as well as business office parks, and, as of December 31, 2010, the Company now “passes” and is able to provide its Fioptics services to 79,000 homes. As of December 31, 2010, the Company had 28,100 Fioptics entertainment subscribers.

The success of the fiber investment is based in large part on the ability to attract a high percentage of customers that are passed with the fiber very quickly after fiber is made available to particular neighborhoods. The Company’s penetration rate of homes passed with Fioptics was about 30% within twelve months of deploying Fioptics in a particular area.

Fioptics offers the following as of December 31, 2010:

In addition to providing entertainment over fiber optic cable and coaxial cable in limited areas, the Company also is an authorized sales agent and offers DirecTV^© satellite programming to customers in substantially all of its operating territory through its retail distribution outlets. The Company does not deliver satellite television services. Instead, DirecTV^© pays the Company a commission for each subscriber and offers a bundle price discount directly to the Cincinnati Bell customers subscribing to its satellite television service. At December 31, 2010 and 2009, the Company had 36,900 and 30,000 customers, respectively, that were subscribers to DirecTV^©.

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Other

The Company provides building wiring installation services to businesses in Greater Cincinnati and Dayton on a project basis. Revenue from these projects totaled $7.2 million, $7.6 million, and $8.2 million, in 2010, 2009, and 2008, respectively.

Cincinnati Bell Complete Protection Inc. (“CBCP”) provides surveillance hardware and monitoring services to residential and business customers in the Greater Cincinnati area. At December 31, 2010, CBCP had approximately 15,000 monitoring subscribers in comparison to 13,600 and 11,800 monitoring subscribers at December 31, 2009 and 2008, respectively. CBCP produced $5.5 million, $4.9 million, and $4.5 million in revenue in 2010, 2009, and 2008, respectively, for the Wireline segment.

The Company’s public payphone business (“Public”) provides public payphone services primarily within the ILEC operating territory. Public had approximately 1,650, 1,800, and 1,900 stations in service as of December 31, 2010, 2009, and 2008, respectively, and generated approximately $0.8 million, $1.0 million, and $1.3 million in revenue in 2010, 2009, and 2008, respectively, or less than 1% of consolidated revenue in each year. The revenue decrease results primarily from wireless substitution, as usage of payphones continues to decrease in favor of wireless products, and a targeted reduction in unprofitable lines.

CBT’s subsidiary, Cincinnati Bell Telecommunications Services LLC, operates the National Payphone Clearinghouse (“NPC”) in an agency function, facilitating payments from inter-exchange carriers to payphone service providers (“PSPs”) relating to the compensation due to PSPs for originating access code calls, subscriber 800 calls, and other toll free and qualifying calls pursuant to the rules of the Federal Communications Commission (“FCC”) and state regulatory agencies. As the NPC agent, the Company does not take title to any funds to be paid to the PSPs, nor does the Company accept liability for the payments owed to the PSPs.

Wireless

Cincinnati Bell Wireless LLC (“CBW”) provides advanced digital wireless voice and data communications services through the operation of a Global System for Mobile Communications/General Packet Radio Service (“GSM”) network with a 3G Universal Mobile Telecommunications System (“3G”) network overlay, which is able to provide high-speed data services such as streaming video. Wireless services are provided to customers in the Company’s licensed service territory, which includes Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky and southeastern Indiana. The Company’s customers are also able to place and receive wireless calls nationally and internationally due to roaming agreements that the Company has with national and international carriers. The Company’s digital wireless network utilizes approximately 455 cell sites in its operating territory. The Company’s digital wireless network also utilizes 50 MHz of licensed wireless spectrum in the Cincinnati Basic Trading Area and 40 MHz of licensed spectrum in the Dayton Basic Trading Area. The Company owns the licenses for the spectrum that it uses in its network operations. As of December 31, 2010, the Wireless segment served approximately 509,000 subscribers, of which 351,200 were postpaid subscribers who are billed monthly in arrears and 157,800 were prepaid i-wireless^SM subscribers who purchase service in advance.

The Company’s 3G network is the fastest in its market, as verified by Company tests conducted in March 2010. Similar to its national wireless competitors, the Company is upgrading its network to “4G” (fourth generation), which provides for even faster network speeds. The increased network speeds provide for a better user experience when a large quantity of data is passed through the wireless network, such as for streaming video applications and gaming applications. The Company intends to begin upgrading its wireless network to 4G in 2011 largely through software upgrades and additional fiber optic cable installations. The full implementation of this network will likely take several years, and the Company will likely lag behind the national competitors in construction of the 4G network and the speeds associated with this network.

The Wireless segment competes against all of the U.S. national wireless carriers by offering strong network quality, unique rate plans, which may be bundled with the Company’s wireline services, and extensive and conveniently located retail outlets. The Company’s unique rate plans and products include its “Unlimited Everyday Calling Plan” to any Cincinnati Bell local voice, wireless or business customer and Fusion WiFi, which utilizes Unlicensed Mobile Access technology for enhanced in-building wireless voice reception and faster rates

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of data transmission compared to alternative wireless data services. In addition, the Company also offers several family plans, which allows the first subscriber to get a wireless plan at the regular price and then each additional family member can be added at a lower price.

In December 2009, the Company sold 196 wireless towers, which represented substantially all of its owned towers, for $99.9 million in cash. CBW continues to use these towers in its operations under a 20-year lease agreement. See Note 7 to the Consolidated Financial Statements for further discussion regarding the sale of these wireless towers. Also during 2009, the Company sold almost all of its owned wireless licenses for areas outside of its Cincinnati and Dayton operating territories. These licenses, which were primarily for the Indianapolis, Indiana region, were sold for $6.0 million, resulting in a loss on sale of the spectrum assets of $4.8 million.

The Wireless segment contributed revenues of $289.2 million, $307.0 million, and $316.1 million and after intersegment eliminations constituted approximately 21%, 23%, and 22% of consolidated revenue in 2010, 2009, and 2008, respectively. The Wireless segment produced operating income of $56.3 million in 2010, $33.0 million in 2009, and $46.8 million in 2008.

Service revenue

Postpaid subscriber service revenue generated approximately 74% of 2010 segment revenue. A variety of monthly rate plans are available to postpaid subscribers, and these plans can include a fixed or unlimited number of national minutes, an unlimited number of Cincinnati Bell mobile-to-mobile (calls to and from the Company’s other Wireless subscribers), an unlimited number of calls to and from a CBT access line, and/or local minutes for a flat monthly rate. For plans with a fixed number of minutes, postpaid subscribers can purchase additional minutes at a per-minute-of-use rate. Postpaid subscribers are billed monthly in arrears.

Prepaid i-wireless^SM subscribers, which accounted for 19% of 2010 segment revenue, pay in advance for use with pay per minute, pay by day, pay by week, or pay by month rate plans. Weekly and monthly smartphone plans are also available for prepaid i-wireless^SM subscribers.

A variety of data plans are also available as bolt-ons to voice rate plans for both postpaid and prepaid subscribers. The Company has focused its efforts for the past several years on increasing its subscribers that use smartphones, which are able to browse the internet and use high-speed data services and high-level operating platforms. These smartphones require that subscribers purchase data plans, and, as a result, the Company’s 2010 data plan revenue per subscriber has increased by 17% for postpaid subscribers compared to 2009. Smartphone subscribers have increased from 85,000 at December 31, 2009 to 105,000 at December 31, 2010, and represent 21% of total subscribers at the end of 2010. Data offerings provided by the Company include text and picture messaging, mobile broadband, multi-media offerings, and location-based services.

Revenue from other wireless service providers for use of the Company’s wireless networks to satisfy the roaming requirements of the carrier’s own subscribers and reciprocal compensation for other carriers’ subscribers who terminate calls on CBW’s network, accounted for less than 1% of total 2010 segment revenue. Prior to the sale of wireless towers in December 2009, Wireless also recognized colocation revenue, which is rent received for the placement of other carriers’ radios on CBW towers.

Equipment revenue

Sales of handsets and accessories generated the remaining 7% of 2010 Wireless revenue. As is typical in the wireless communications industry, CBW sells wireless handset devices at or below cost to entice customers to use its wireless services, for which a recurring monthly fee is charged. The Company is increasingly using equipment contracts for its postpaid subscribers. These contracts require the customer to use the CBW monthly service for a minimum period of two years in exchange for a deeply discounted wireless handset. As of December 31, 2010, 46% of postpaid customers were under contract. Sales take place at Company retail stores, on the Company’s website, via business sales representatives, and in independent distributors’ retail stores pursuant to agency agreements. CBW purchases handsets and accessories from a variety of manufacturers and maintains an inventory to support sales.

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Data Center Colocation

The Data Center Colocation segment provides data center colocation services to businesses worldwide, with a particular focus on serving large global enterprises. At December 31, 2010, the Company serves 43 U.S. customers in the Fortune 1000, and an additional 20 international customers that are of a comparable size to the Fortune 1000. The Company operates 17 data centers with 639,000 square feet of total data center space in Texas, Ohio, Kentucky, Indiana, Michigan, and Illinois. At December 31, 2010, 563,000 square feet were under contract with customers, resulting in an 88% utilization rate of the available data center space.

Data Center Colocation services are offered through the Company’s Cincinnati Bell Data Center Inc., GramTel, Inc., and Cyrus Networks, LLC subsidiaries. On June 11, 2010, the Company purchased CyrusOne, a data center operator based in Texas, for approximately $526 million, net of cash acquired. CyrusOne is the largest data center colocation provider in Texas, serving primarily large global businesses. The Company’s data centers provide customers a secure and reliable environment, with sufficient available power to run almost any IT hardware product and application, and sufficient cooling capacity to maintain optimal temperature in the data center despite the heat produced by the IT equipment. Customers place their owned equipment in the data center environment provided by the Company and are able to interconnect data processed from the data center to other customer locations through the numerous carriers that connect to the Company’s data centers.

Data Center Colocation produced total revenue of $125.3 million, $71.8 million, and $55.8 million and after intersegment eliminations constituted approximately 9%, 5%, and 4% of consolidated revenue in 2010, 2009, and 2008, respectively. Data Center Colocation produced operating income of $34.2 million in 2010, $17.0 million in 2009, and $8.0 million in 2008.

Customers have several choices for colocating their network, service and storage IT equipment. Customers can place their owned equipment in a shared or private cage or customize their space. As customers’ colocation requirements increase, they can expand within their original cage or upgrade into a cage that meets their needs. Cabinets and cage space are typically priced with an initial installation fee and an ongoing recurring monthly charge.

All customers sign contracts, which typically range between 3-7 years. Though rare, some contracts are as short as one year, and some are as long as 15 years. The contracts typically define the space and power being provided, pricing for the recurring monthly colocation services, as well as pricing for non-recurring items such as power/data whips installation, smart hands or project managers. Generally, contracts contain service level agreements that require the Company to maintain the data center environment (e.g., temperature, humidity, and power service) at specified levels and contain penalties if these levels are not maintained. Payments made by the Company for breakage of service level agreements have been negligible.

Data Center Colocation offers power circuits at various amperages and phases customized to a customer’s power requirements. Power is typically priced with an initial installation fee and an ongoing recurring monthly charge that is fixed as long as the customer stays within the contractual limits for power consumption. In certain cases, large enterprise customers contract for metered power where the power component of their monthly bill is only for the power consumed by their environment, both to power and cool their infrastructure.

The Company intends to continue to pursue additional customers and growth specific to its data center colocation business and is prepared to commit additional resources, including resources for capital expenditures, acquisitions and working capital both within and outside its traditional operating territory, to support this growth.

IT Services and Hardware

IT Services and Hardware provides a full range of managed IT solutions, including managed infrastructure services, IT and telephony equipment sales, and professional IT staffing services. These services and products are provided in multiple states through the Company’s subsidiaries, Cincinnati Bell Technology Solutions Inc. (“CBTS”), CBTS Canada Inc. and CBTS Software LLC. By offering a full range of equipment and outsourced services in conjunction with the Company’s wireline network services, the IT Services and Hardware segment provides end-to-end IT and telecommunications infrastructure management designed to reduce cost and mitigate risk while optimizing performance for its customers.

In 2009, for a combined acquisition price of $2.5 million in two separate transactions, CBTS purchased the assets of Toronto, Canada-based Virtual Blocks Inc., a leading software developer in the area of data center virtualization, and Cincinnati, Ohio-based Cintech LLC, a hosted provider of an outbound notification service.

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The IT Services and Hardware segment produced total revenue of $254.7 million, $231.3 million, and $267.2 million and after intersegment eliminations constituted approximately 18%, 17%, and 19% of consolidated revenue in 2010, 2009, and 2008, respectively. The IT Services and Hardware segment produced operating income of $4.3 million in 2010, $10.7 million in 2009, and $13.4 million in 2008.

Telecom and IT equipment

The Company’s telecom and IT equipment distribution product line is a value-added equipment reseller operation. The Company maintains premium resale relationships with approximately ten branded technology vendors, which allow it to competitively sell and install a wide array of telecommunications and computer equipment to meet the needs of its customers. This unit also manages the maintenance of a large base of local customers with traditional voice systems as well as converged VoIP systems. Revenue from telecom and IT equipment distribution was $174.9 million in 2010, $161.1 million in 2009, and $201.2 million in 2008.

Managed services

Managed services include products and services that combine assets, either customer-owned or owned by the Company, with management and monitoring from its network operations center, and skilled technical resources to provide a suite of offerings around voice and data infrastructure management. Service offerings include but are not limited to network management, electronic data storage management, disaster recovery, data security management, and telephony management. These services can be bundled and contracted in several ways, either as separate services around a specific product such as storage backups, or by combining multiple products, services and assets into a utility or ‘as a service’ model for enterprise customers. Revenue from managed services was $55.1 million in 2010, $49.4 million in 2009, and $49.7 million in 2008.

Professional services

The professional services product line provides staff augmentation and professional IT consulting by highly technical, certified employees. These engagements can be short-term IT implementation and project-based work as well as longer term staffing and permanent placement assignments. The Company utilizes a team of experienced recruiting and hiring personnel to provide its customers a wide range of skilled IT professionals at competitive hourly rates. Professional services revenue was $24.7 million in 2010, $20.8 million in 2009, and $16.3 million in 2008.

Sales and Distribution Channels

The Company’s Wireline and Wireless segments utilize a number of distribution channels to acquire customers. The Company operates 20 retail stores in its operating territory. The retail stores are a core component of the Company’s distribution strategy, and the Company works to locate in high traffic but affordable areas, with a distance between each store that considers optimal returns per store and customer convenience. As stores are added or closed from time to time, certain stores may be transitioned to local agents for their marketing of our products and services.

Wireline and Wireless also utilize a business-to-business sales force and its call center organization to reach business customers in its operating territory. Larger business customers are often supported by sales account representatives, who may go to the customer premises to understand the business needs and recommend solutions that the Company offers. Smaller business customers are supported through a telemarketing sales force and store locations. The Company also offers fully-automated, end-to-end web-based sales of wireless phones, accessories and various other Company services.

Additionally, there are 140 third-party agent locations that sell Wireline and Wireless products and services at their retail locations. The Company supports these agents with discounted prices for wireless handsets and other equipment and commission structures. The Company also sells wireline and wireless capacity on a wholesale basis to independent companies, including competitors that resell these services to end-users.

The Company’s Data Center Colocation and IT Services and Hardware segments primarily sell to customers through its business-to-business sales force. Sales representatives develop customer leads through existing relationships with IT leaders of businesses, referrals from existing customers, and IT hardware vendors. To a lesser extent, leads are also developed from marketing sources, including web-based efforts.

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Suppliers and Product Supply Chain

Wireline’s primary materials purchases are for copper cable, fiber cable, and network electronics. Wireless primarily purchases handsets and accessories, and wireless cell site and network equipment. Wireless often partners with other regional carriers to build a larger request for handsets in order to provide appropriate volume for the handset manufacturers. The Company generally subjects these purchases to competitive bid involving at least three vendors, and selects its vendors based on price, service level, and quality of product.

The Company maintains facilities and operations for storing cable, handsets and other equipment, product distribution and customer fulfillment.

Data Center Colocation primarily purchases building materials and infrastructure components to construct data center facilities, such as generators, computer room air conditioner (CRAC) cooling units, power distribution units, wiring, and environment monitoring equipment. The Company has long-standing relationships with contractors and building suppliers and works closely with these suppliers as the data center facilities are being constructed.

IT Services and Hardware purchases are primarily for the IT and telephony equipment that is either being sold to a customer or used to provide service to the customer. The Company is a certified distributor of Cisco, EMC, Avaya, and Sun Microsystems equipment. For the most part, this equipment is shipped directly to the Company’s customer from the vendor manufacturing location, but the Company does maintain warehouse facilities for certain equipment that is inventoried for future sale.

Competition

The telecommunications industry is very competitive, and the Company competes against larger and better-funded national providers. The Company has lost, and will likely continue to lose, access lines as a part of its customer base utilizes the services of competitive wireline or wireless providers in lieu of the Company’s local wireline service.

The Wireline segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, and cable, broadband, and internet service providers. Wireless providers, particularly those that provide unlimited wireless service plans with no additional fees for long distance, offer customers a substitution service for the Company’s access lines. The Company believes this is the reason for the largest portion of the Company’s access line losses. Also, cable competitors that have existing service relationships with CBT’s customers also offer substitution services. Insight Cable, which provides cable service in the northern Kentucky portion of the Company’s operating territory, offers VoIP and long distance services. Time Warner Cable, AT&T, Verizon, and others offer VoIP and long distance services in Cincinnati and Dayton. Partially as a result of wireless substitution and increased competition, the Company’s access lines decreased by 7% and long distance subscribers decreased by 5% in 2010 compared to 2009. In addition, the high-speed internet market is saturated in the Company’s operating area, and competition will continue to be fierce for market share against competitors and alternative services.

Wireless competitors include national wireless service providers such as Verizon, AT&T, Sprint Nextel, T-Mobile and Leap. The Company anticipates that continued competition could compress its margins for wireless products and services as carriers continue to offer more voice minutes and data usage for equivalent or lower service fees. The Company also faces the challenge that the newest wireless handsets are often not available to the Company due to exclusivity agreements between the national carriers and handset vendors, such as for the iPhone™.

The Data Center Colocation and IT Services and Hardware segments compete against numerous other data center colocation, information technology consulting, web-hosting, and computer system integration companies, many of which are larger, national or international in scope, and well-financed. This highly competitive market is rapidly growing and evolving, and may be characterized in the future by over-capacity and industry consolidation. The Company believes that participants in this market must grow rapidly and achieve significant scale to compete effectively. Other competitors may consolidate with one another or acquire software application vendors or technology providers, enabling them to more effectively compete. This consolidation could affect prices and other competitive factors in ways that could impede the ability of these segments to compete successfully in the market.

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Customers

As the Company’s growth products and services, such as data center services and wireline entertainment, continue to grow, revenue from the Company’s legacy products, such as wireline residential voice service and wireless voice services, continues to decrease. The Company’s revenue portfolio is becoming more diversified than in the past, as the following comparison between 2010 revenue and 2005 revenue demonstrates.

While total Wireless revenue has remained a consistent percent of total Company revenue, the mix of customer demand for Wireless services is trending toward more data services and less voice services. For 2005, Wireless service revenues were comprised of 90% of voice services and 10% of data services. In 2010 data services increased 16 points to 26% of total Wireless service revenues.

Additionally, the Company’s mix of business and consumer customers is changing, as many of the Company’s growth products, such as data center services and data transport services, are geared primarily toward business customers. In 2010, the Company’s revenues were comprised of 63% to business customers and 37% to residential customers. By comparison, the Company’s 2005 revenues were comprised of 53% to business customers and 47% to residential customers.

The Company has receivables with one large customer that exceed 10% of the Company’s outstanding accounts receivable balance at December 31, 2010 and 2009.

As noted in the Data Center Colocation section above, the Company has focused its data center colocation marketing efforts toward large enterprise customers. At December 31, 2010, the Data Center Colocation segment has 43 U.S. customers that are included in the Fortune 1000 largest companies, and 20 international customers that are of a comparable size to the Fortune 1000.

Employees

At December 31, 2010, the Company had approximately 3,000 employees, and approximately 35% of its employees are covered under a collective bargaining agreement with the Communications Workers of America (“CWA”), which is affiliated with the AFL-CIO, that expires in May 2011.

Executive Officers

Refer to Part III, Item 10. “Directors, Executive Officers and Corporate Governance” of this Annual Report on Form 10-K for information regarding executive officers of the registrant.

Business Segment Information

The amounts of revenue, intersegment revenue, operating income, expenditures for long-lived assets, and depreciation and amortization attributable to each of the Company’s business segments for the years ended December 31, 2010, 2009, and 2008, and assets as of December 31, 2010 and 2009, are set forth in Note 14 to the Consolidated Financial Statements.

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Item 1A. Risk Factors

The Company’s substantial debt could limit its ability to fund operations, raise additional capital, and have a material adverse effect on its ability to fulfill its obligations and on its business and prospects generally.

The Company has a substantial amount of debt and has significant debt service obligations. As of December 31, 2010, the Company and its subsidiaries had outstanding indebtedness of $2.5 billion on which it incurred $185.2 million of interest expense in 2010, and had total shareowners’ deficit of $667.8 million. In addition, at December 31, 2010, the Company had the ability to borrow additional amounts under its revolving credit facility of $186.9 million and $100.0 million under its accounts receivable facility, subject to compliance with certain conditions. The Company may incur additional debt from time to time, subject to the restrictions contained in its credit facilities and other debt instruments.

The Company’s substantial debt could have important consequences, including the following:

The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders of Cincinnati Bell common stock. Accordingly, in the event of the Company’s dissolution, bankruptcy, liquidation, or reorganization, payment is first made on the claims of creditors of the Company and its subsidiaries, then preferred stockholders and finally, if amounts are available, to holders of Cincinnati Bell common stock.

The credit facilities and other indebtedness impose significant restrictions on the Company.

The Company’s debt instruments impose, and the terms of any future debt may impose, operating and other restrictions on the Company. These restrictions affect, and in many respects limit or prohibit, among other things, the Company’s ability to:

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In addition, the Company’s credit facilities and debt instruments include restrictive covenants that may materially limit the Company’s ability to prepay debt and preferred stock. The agreements governing the credit facilities also require the Company to achieve and maintain compliance with specified financial ratios.

The restrictions contained in the terms of the credit facilities and its other debt instruments could:

A breach of any of these restrictive covenants or the Company’s inability to comply with the required financial ratios would result in a default under some or all of the debt agreements. During the occurrence and continuance of a default, lenders may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. Additionally, under the credit facilities, the lenders may elect not to provide loans until such default is cured or waived. The Company’s debt instruments also contain cross-acceleration provisions, which generally cause each instrument to be subject to early repayment of outstanding principal and related interest upon a qualifying acceleration of any other debt instrument. Failure to comply with these covenants, if not cured or waived, could limit the cash required to fund operations and its general obligations and could result in the Company’s dissolution, bankruptcy, liquidation, or reorganization.

The Company depends on its revolving credit facility and accounts receivable facility to provide for its financing requirements in excess of amounts generated by operations.

The Company depends on its revolving credit facility and accounts receivable securitization facility (“Receivables Facility”) to provide for temporary financing requirements in excess of amounts generated by operations. As of December 31, 2010, the Company had no outstanding borrowings under its revolving credit facility and outstanding letters of credit totaling $23.1 million, leaving $186.9 million in additional borrowing availability under its $210 million revolving credit facility. The revolving credit facility is funded by 11 different financial institutions, with no financial institution having more than 15% of the total facility. If one or more of these banks is not able to fulfill its funding obligations, the Company’s financial condition could be adversely affected. As of December 31, 2010, the Company had no outstanding borrowings under its Receivables Facility with a borrowing capacity of $100 million. The available capacity is calculated monthly based on the quantity and quality of outstanding accounts receivable. If the quality of the Company’s accounts receivables deteriorates, this will negatively impact the available capacity under this facility.

In addition, the Company’s ability to borrow under the revolving credit facility and accounts receivable facility is subject to the Company’s compliance with covenants, including covenants requiring compliance with specified financial ratios. Failure to satisfy these covenants would constrain or prohibit its ability to borrow under these facilities.

The servicing of the Company’s indebtedness requires a significant amount of cash, and its ability to generate cash depends on many factors beyond its control.

The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond its control. The Company cannot provide assurance that its business will generate sufficient cash flow from operations, additional sources of debt financing will be

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available, or future borrowings will be available under its credit or receivables facilities, in each case, in amounts sufficient to enable the Company to service its indebtedness or to fund other liquidity needs. If the Company cannot service its indebtedness, it will have to take actions such as reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, or selling assets, restructuring or refinancing indebtedness, or seeking additional equity capital, which may adversely affect its shareholders, debt holders, and customers. The Company may not be able to negotiate remedies on commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict the Company from adopting any of these alternatives. The Company’s inability to generate the necessary cash flows could result in its dissolution, bankruptcy, liquidation, or reorganization.

The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries.

Certain of the Company’s material subsidiaries are subject to regulatory authority that may potentially limit the ability of a subsidiary to distribute funds or assets. If the Company’s subsidiaries were to be prohibited from paying dividends or making distributions to Cincinnati Bell Inc. (“CBI”), the parent company, CBI may not be able to make the scheduled interest and principal repayments on its $2.5 billion of debt. This would have a material adverse effect on the Company’s liquidity and the trading price of CBI’s common stock, preferred stock, and debt instruments, which could result in its dissolution, bankruptcy, liquidation, or reorganization.

The Company’s access lines, which generate a significant portion of its cash flows and profits, are decreasing. If the Company continues to experience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted.

The Company’s business generates a substantial portion of its revenues by delivering voice and data services over access lines. This part of the Company has experienced substantial access line losses over the past several years due to a number of factors, including increased competition and wireless and broadband substitution. The Company expects access line losses to continue for an unforeseen period of time. Failure to retain access lines could adversely impact the Company’s revenues, earnings and cash flow from operations.

The Company operates in highly competitive industries, and its customers may not continue to purchase services, which could result in reduced revenue and loss of market share.

The telecommunications industry is very competitive, and the Company competes against larger and better-funded national providers. Competitors may reduce pricing, create new bundled offerings, or develop new technologies, products, or services. If the Company cannot continue to offer reliable, competitively priced, value-added services, or if the Company does not keep pace with technological advances, competitive forces could adversely affect it through a loss of market share or a decrease in revenue and profit margins. The Company has lost, and will likely continue to lose, access lines as a part of its customer base utilizes the services of competitive wireline or wireless providers in lieu of the Company’s local wireline service.

The Wireline segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, and cable, broadband, and internet service providers. Wireless providers, particularly those that provide unlimited wireless service plans with no additional fees for long distance, offer customers a substitution service for the Company’s access lines. The Company believes this is the reason for the largest portion of the Company’s access line losses. Also, cable competitors that have existing service relationships with CBT’s customers also offer substitution services. Insight Cable, which provides cable service in the northern Kentucky portion of the Company’s operating territory, offers VoIP and long distance services. Time Warner Cable, AT&T, Verizon, and others offer VoIP and long distance services in Cincinnati and Dayton. Partially as a result of wireless substitution and increased competition, the Company’s access lines decreased by 7% and long distance subscribers decreased by 5% in 2010 compared to 2009. In addition, the high-speed internet market is saturated in the Company’s operating area, and competition will continue to be fierce for market share against competitors and alternative services. If the Company is unable to effectively implement strategies to retain access lines and long distance subscribers, or replace such access line loss with other sources of revenue, the Company’s Wireline business will be adversely affected.

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Wireless competitors include national wireless service providers such as Verizon, AT&T, Sprint Nextel, T-Mobile and Leap. The Company anticipates that continued competition could compress its margins for wireless products and services as carriers continue to offer more voice minutes and data usage for equivalent or lower service fees. The wireless industry continues to experience rapid and significant technological changes and a dramatic increase in usage, in particular demand for and usage of data and other non-voice services. Increased network capacity could be required to meet increased customer demand. Should the resources required to fund the necessary network enhancements not be available, and the Company is unable to maintain its network quality level, then the Company’s ability to attract and retain customers, and therefore maintain and improve our operating margins, could be materially adversely affected. The Company also faces the challenge that the newest wireless handsets are often not available to the Company due to exclusivity agreements between the national carriers and handset vendors, such as for the iPhone^™. CBW’s ability to compete will depend, in part, on its ability to anticipate and respond to various competitive factors affecting the telecommunications industry.

The Data Center Colocation and IT Services and Hardware segments compete against numerous other data center colocation, information technology consulting, web-hosting, and computer system integration companies, many of which are larger, national and/or international in scope, and better financed. This market is rapidly evolving, highly competitive, and may be characterized by over-capacity and industry consolidation. Other competitors may consolidate with one another or acquire software application vendors or technology providers, enabling them to more effectively compete with Data Center Colocation and IT Services and Hardware. The Company believes that many of the participants in this market must grow rapidly and achieve significant scale to compete effectively. This consolidation could affect prices and other competitive factors in ways that could impede the ability of these segments to compete successfully in the market.

The competitive forces described above could have a material adverse impact on the Company’s business, financial condition, results of operations, and cash flows.

The Company generates a substantial portion of its revenue by serving a limited geographic area.

The Company generates a substantial portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio areas. An economic downturn or natural disaster occurring in this limited operating territory could have a disproportionate effect on the Company’s business, financial condition, results of operations, and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas.

The regulation of the Company’s businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage, restrict its ability to price its products and services, and threaten its operating licenses.

Several of the Company’s subsidiaries are subject to regulatory oversight of varying degrees at both the state and federal levels, which may differ from the regulatory scrutiny faced by the Company’s competitors. A significant portion of CBT’s revenue is derived from pricing plans that require regulatory overview and approval. These regulated pricing plans limit the rates CBT charges for some services while its competition has typically been able to set rates for its services with limited restriction. In the future, regulatory initiatives that would put CBT at a competitive disadvantage or mandate lower rates for its services could result in lower profitability and cash flow for the Company. In addition, different regulatory interpretations of existing regulations or guidelines may affect the Company’s revenues and expenses in future periods.

At the federal level, CBT is subject to the Telecommunications Act of 1996, including the rules subsequently adopted by the FCC to implement the 1996 Act, which has impacted CBT’s in-territory local exchange operations in the form of greater competition. At the state level, CBT conducts local exchange operations in portions of Ohio, Kentucky, and Indiana, and, consequently, is subject to regulation by the Public Utilities Commissions in those states. Various regulatory decisions or initiatives at the federal or state level may from time to time have a negative impact on CBT’s ability to compete in its markets.

CBW’s FCC licenses to provide wireless services are subject to renewal and revocation. Although the FCC has routinely renewed wireless licenses in the past, the Company cannot be assured that challenges will not be brought against those licenses in the future. Revocation or non-renewal of CBW’s licenses could result in a cessation of CBW’s operations and consequently lower operating results and cash flows for the Company.

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From time to time, different regulatory agencies conduct audits to ensure that the Company is in compliance with the respective regulations. The Company could be subject to fines and penalties if found to be out of compliance with these regulations, and these fines and penalties could be material to the Company’s financial statements.

There are currently many regulatory actions under way and being contemplated by federal and state authorities regarding issues that could result in significant changes to the business conditions in the telecommunications industry. Assurances cannot be given that changes in current or future regulations adopted by the FCC or state regulators, or other legislative, administrative, or judicial initiatives relating to the telecommunications industry, will not have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

If the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire, or if its unionized employees were to engage in a strike or other work stoppage, the Company’s business and operating results could be materially harmed.

The Company is a party to collective bargaining agreements with its labor union, which represents a significant number of its employees, and these collective bargaining agreements are set to expire in May 2011. No assurance can be given that the Company will be able to successfully extend or renegotiate its collective bargaining agreements when they expire. If the Company fails to extend or renegotiate its collective bargaining agreements, if disputes with its union arise, or if its unionized workers engage in a strike or a work stoppage, the Company could experience a significant disruption of operations or incur higher ongoing labor costs, either of which could have a material adverse effect on the business.

Maintaining the Company’s networks and data centers requires significant capital expenditures, and its inability or failure to maintain its networks and data centers would have a material impact on its market share and ability to generate revenue.

Capital expenditures in 2010 totaled $149.7 million, and the Company expects to spend over $200 million in 2011.

The Company currently operates 17 data centers and any further data center expansion will involve significant capital expenditures for data center construction. In order to provide guaranteed levels of service to our data center customers, the network infrastructure must be protected against damage from human error, natural disasters, unexpected equipment failure, power loss or telecommunications failures, terrorism, sabotage, or other intentional acts of vandalism. The Company’s disaster recovery plan may not address all of the problems that may be encountered in the event of a disaster or other unanticipated problem, which may result in disruption of service to data center customers.

Verizon is currently in the process of constructing its 4G wireless network. AT&T plans to deploy its 4G wireless network starting in 2011. Other national and regional wireless carriers are continuously upgrading their networks with various technologies. The Company expects to begin construction of its 4G wireless network in 2011; however, the full implementation of this network will likely take several years, and the Company will likely lag behind the national competitors in construction of the 4G network and the speeds associated with this network.

The Company may also incur significant additional capital expenditures as a result of unanticipated developments, regulatory changes, and other events that impact the business.

If the Company is unable or fails to adequately maintain or expand its networks to meet customer needs, there could be a material adverse impact on the Company’s market share and its ability to generate revenue.

Maintenance of CBW’s wireless network, growth in the wireless business, or the addition of new wireless products and services may require CBW to obtain additional spectrum and transmitting sites which may not be available or be available only on less than favorable terms.

CBW uses spectrum licensed to the Company for its GSM network. Introduction of new wireless products and services, as well as maintenance of the existing wireless business, may require CBW to obtain additional spectrum either to supplement or to replace the existing spectrum. Furthermore, the Company’s network depends

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on the deployment of radio frequency equipment on towers and on buildings. The Company, after the sale of its owned towers in December 2009, now leases substantially all the towers used in its wireless network operations, and the use of the towers under these leases is more restrictive than if these towers were owned by the Company. There can be no assurance that spectrum or the appropriate transmitting locations will be available to CBW or will be available on commercially favorable terms. Failure to obtain or retain any needed spectrum or transmitting locations could have a materially adverse impact on the wireless business as a whole, the quality of the wireless networks, and the ability to offer new competitive products and services.

Failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise the Company’s success in the telecommunications industry.

The Company’s success depends, in part, on being able to anticipate the needs of current and future business, carrier, and consumer customers. The Company seeks to meet these needs through new product introductions, service quality, and technological superiority. New products are not always available to the Company, as other competitors may have exclusive agreements for those new products. New products and services are important to the Company’s success as its industry is technologically driven, such that new technologies can offer alternatives to the Company’s existing services. The development of new technologies and products could accelerate the Company’s loss of access lines and increase wireless customer churn, which could have a material adverse effect on the Company’s revenue, results of operations, and cash flows.

The Company may encounter difficulties implementing its expansion plan for the data center colocation business.

Potential challenges and difficulties in implementing the Company’s data center colocation expansion plan include: identifying and obtaining the use of locations in which the Company believes there is sufficient demand for its data center colocation services; generating sufficient cash flow from operations or through additional debt financings to support these expansion plans; recruiting and maintaining a motivated work force; and installing and implementing new financial and other systems, procedures and controls to support this expansion plan with minimal delays.

If the Company encounters greater than anticipated difficulties in implementing its expansion plan, it may be necessary to take additional actions, which could divert management’s attention and strain operational and financial resources. The Company may not successfully address any or all of these challenges, and failure to do so would adversely affect its strategy of becoming a global data center colocation business.

The Company’s data center colocation strategy includes international expansion, which has inherent risk not previously encountered by the Company.

The Company’s operations are primarily based in the United States with minimal presence in Canada and Europe. Expanding international operations includes inherent risks such as: regulatory, tax, legal, and other items specific to particular foreign jurisdictions not previously encountered by the Company and for which the Company has no or limited expertise; unexpected changes in regulatory, tax and political environments; the Company’s ability to secure and maintain the necessary physical and telecommunications infrastructure; challenges in staffing and managing foreign operations; fluctuations in foreign currency exchange rates; longer payment cycles and problems collecting accounts receivable; and laws and regulations on content distributed over the Internet that are more restrictive than those currently in place in the United States. Any one or more of the aforementioned risks could materially and adversely affect the Company’s business and strategy for becoming a global data center colocation provider.

If the markets for outsourced information technology services decline, there may be insufficient demand for the Company’s services and, as a result, the Company’s business strategy and objectives may fail.

The Company’s solutions are designed to enable a customer to focus on its core business while it manages and ensures the quality of its information technology infrastructure. Businesses may believe the risk of outsourcing is greater than the risk of managing their IT operations themselves. If businesses do not continue to recognize the high cost and inefficiency of managing IT themselves, including the difficulties of upgrading technology, training and retaining skilled personnel with domain expertise, and matching IT cost with actual

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benefits, they may not continue to outsource their IT infrastructure to companies within the Company’s industry. Additionally, outsourcing may be associated with larger companies than Cincinnati Bell, and the Company may not be as successful as these larger companies. As a result of these risks, the Company’s business may suffer and it could adversely affect its business strategy and objectives and its ability to generate revenues, profits and cash flows.

The long sales cycle for data center services may materially affect the data center business and results of its operations.

A customer’s decision to lease cabinet space in one of the Company’s data centers and to purchase additional services typically involves a significant commitment of resources, significant contract negotiations regarding the service level commitments, and significant due diligence on the part of the customer regarding the adequacy of the Company’s facilities, including the adequacy of carrier connections. As a result, the sale of data center space has a long sales cycle. Furthermore, the Company may expend significant time and resources in pursuing a particular sale or customer that may not result in revenue. Delays in the length of the data center sales cycle may have a material adverse effect on the Data Center Colocation segment and results of its operations.

The Company’s failure to meet performance standards under its agreements could result in customers terminating their relationships with the Company or customers being entitled to receive financial compensation, which could lead to reduced revenues and/or increased costs.

The Company’s agreements with its customers contain various requirements regarding performance and levels of service. If the Company fails to provide the levels of service or performance required by its agreements, customers may be able to receive service credits for their accounts and other financial compensation, and also may be able to terminate their relationship with the Company. In addition, any inability to meet service level commitments or other performance standards could reduce the confidence of customers and could consequently impair the Company’s ability to obtain and retain customers, which would adversely affect both the Company’s ability to generate revenues and operating results.

Data center business could be harmed by prolonged electrical power outages or shortages, increased costs of energy, or general lack of availability of electrical resources.

Data centers are susceptible to regional costs of power, planned or unplanned power outages and shortages, and limitations on the availability of adequate power resources. The Company attempts to limit exposure to system downtime by using backup generators and power supplies. As a result of these data center redundancies, the Company’s data center customers incurred only minimal downtime during the aftermath of the Hurricane Ike windstorm that caused severe disruption to power sources in the Cincinnati area for approximately two weeks in September 2008. However, the Company may not be able to limit the exposure entirely in future occurrences even with those protections in place. In addition, global fluctuations in the price of power can increase the cost of energy, and although contractual price increase clauses may exist and, in some cases, the data center customer pays directly for the cost of power, the Company may not be able to pass all of these increased costs on to customers, or the increase in power costs may impact additional sales of data center space.

The Company’s failure to effectively integrate its recently completed acquisition of CyrusOne could result in an inability to realize the anticipated benefits of the purchase and adversely affect the Company’s business and operating results.

The Company’s recent acquisition of CyrusOne will involve the integration of two companies that had previously operated independently, which is challenging and time-consuming. The process of integrating CyrusOne, a previously privately held company, into the Company, a publicly traded company, could result in the loss of key employees, the disruption of its ongoing businesses, or inconsistencies in the respective standards, controls, procedures, and policies of the two companies, any of which could adversely affect the Company’s ability to maintain relationships with customers, suppliers, and employees. In addition, the successful combination of the companies will require the Company to dedicate significant management resources and to potentially expend additional funds for additional staffing, resources and control procedures, all of which could temporarily divert attention from the day-to-day business of the combined company. If the Company fails to

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complete an effective integration of CyrusOne into the Company, anticipated growth in revenue, profitability, and cash flow resulting from the purchase of CyrusOne could be adversely affected.

The Company’s future cash flows could be adversely affected if it is unable to realize fully its deferred tax assets.

As of December 31, 2010, the Company had net deferred income taxes of $451.8 million, which are primarily composed of deferred tax assets associated with U.S. federal net operating loss carryforwards of $385.3 million and state and local net operating loss carryforwards of $60.5 million. The Company has recorded valuation allowances against deferred tax assets related to certain state and local net operating losses and other deferred tax assets due to the uncertainty of the Company’s ability to utilize the assets within the statutory expiration period. For more information concerning the Company’s net operating loss carryforwards, deferred tax assets, and valuation allowance, see Note 12 to the Consolidated Financial Statements. The use of the Company’s deferred tax assets enables it to satisfy current and future tax liabilities without the use of the Company’s cash resources. If the Company is unable for any reason to generate sufficient taxable income to fully realize its deferred tax assets, or if the use of its net operating loss carryforwards is limited by Internal Revenue Code Section 382 or similar state statute, the Company’s net income, shareowners’ equity, and future cash flows could be adversely affected.

A few large customers account for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction in business from one or more of these large customers could cause operating revenues to decline significantly and have a materially adverse long-term impact on the Company’s business.

The Company has receivables with one large customer that exceeds 10% of the Company’s outstanding accounts receivable balance. Contracts with customers may not sufficiently reduce the inherent risk that customers may terminate or fail to renew their relationships with the Company. As a result of customer concentration, the Company’s results of operations and financial condition could be materially affected if the Company lost one or more large customers or if services purchased were significantly reduced. If one or more of the Company’s larger customers were to default on its accounts receivable obligations the Company could be exposed to potentially significant losses in excess of the provisions established. This could also negatively impact the available capacity under the accounts receivable facility.

The Company depends on a number of third-party providers, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers.

The Company depends on third-party providers to supply products and services. For example, many of the Company’s information technology functions and call center functions are performed by third-party providers, network equipment is purchased from and maintained by vendors, and data center space is leased from landlords. In addition, with the recent sale of the Company-owned wireless towers, almost half of the towers are managed by a single independent service provider. Any failure on the part of suppliers to provide the contracted services, additional required services, additional products, or additional leased space could impede the growth of the Company’s business and cause financial results to suffer.

A failure of back-office information technology systems could adversely affect the Company’s results of operations and financial condition.

The efficient operation of the Company’s business depends on back-office information technology systems. The Company relies on back-office information technology systems to effectively manage customer billing, business data, communications, supply chain, order entry and fulfillment and other business processes. A failure of the Company’s information technology systems to perform as anticipated could disrupt the Company’s business and result in a failure to collect accounts receivable, transaction errors, processing inefficiencies, and the loss of sales and customers, causing the Company’s reputation and results of operations to suffer. In addition, information technology systems may be vulnerable to damage or interruption from circumstances beyond the Company’s control, including fire, natural disasters, systems failures, security breaches and viruses. Any such damage or interruption could have a material adverse effect on the Company’s business.

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The Company could be subject to increased operating costs, as well as claims, litigation or other potential liability, in connection with risks associated with internet security and system security.

A significant barrier to the growth of e-commerce and communications over the internet has been the need for secure transmission of confidential information. Several of the Company’s infrastructure systems and application services use encryption and authentication technology licensed from third parties to provide the protections necessary for secure transmission of confidential information, including credit card information from customers. We also rely on personnel in our network operations centers, data centers, and retail stores to follow Company policies when handling sensitive information. Any unauthorized access, computer viruses, accidental or intentional actions and other disruptions could result in increased operating costs.

The loss of any of the senior management team or attrition among key sales associates could adversely affect the Company’s business, financial condition, results of operations, and cash flows.

The Company’s success will continue to depend to a significant extent on its senior management team and key sales associates. Senior management has specific knowledge relating to the Company and the industry that would be difficult to replace. The loss of key sales associates could hinder the Company’s ability to continue to benefit from long-standing relationships with customers. The Company cannot provide any assurance that it will be able to retain the current senior management team or key sales associates. The loss of any of these individuals could adversely affect the Company’s business, financial condition, results of operations, and cash flows.

Future declines in the fair value of the Company’s wireless licenses could result in future impairment charges.

The market values of wireless licenses have varied dramatically over the last several years and may vary significantly in the future. In 2009, the Company incurred a loss of $4.8 million on the sale of spectrum it was not using in Indianapolis, Indiana. Further valuation swings could occur if:

In addition, the price of wireless licenses could decline as a result of the FCC’s pursuit of policies designed to increase the number of wireless licenses available in each of the Company’s markets. For example, the FCC auctioned an additional 90 MHz of spectrum in the 1700 MHz to 2100 MHz band in the Advanced Wireless Services (“AWS”) spectrum auction in 2006. In 2008, the FCC auctioned 62 MHz of 700 MHz wireless spectrum, another 70 MHz of spectrum in the 1710 MHz to 2155 MHz AWS band, and certain broadband PCS bands. If the market value of wireless licenses were to decline significantly, the value of the Company’s wireless licenses could be subject to non-cash impairment charges.

The Company reviews for potential impairments to indefinite-lived intangible assets, including wireless licenses and trademarks, annually and when there is evidence that events or changes in circumstances indicate that an impairment condition may exist. A significant impairment loss, most likely resulting from reduced cash flow, could have a material adverse effect on the Company’s operating income and on the carrying value of the wireless licenses on the balance sheet.

Uncertainty in the U.S. and world securities markets and adverse medical cost trends could cause the Company’s pension and postretirement costs to increase.

Investment returns of the Company’s pension funds depend largely on trends in the U.S. and world securities markets and the U.S. and world economies in general. For example, during the credit and financial crisis experienced in 2008, pension investment losses equaled 23%, which resulted in an $11 million increase to 2009 pension expense compared to 2008 and has continued to result in higher levels of pension expense in 2010 since investment balances have not returned to levels prior to the 2008 financial crisis. Future investment losses could cause a further decline in the value of plan assets, which the Company would be required to recognize over

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the next several years under generally accepted accounting principles. Additionally, the Company’s postretirement costs are adversely affected by increases in medical and prescription drug costs. If the Company incurs future investment losses or future investment gains that are less than expected, or if medical and prescription drug costs increase significantly, the Company would expect to face even higher annual net pension and postretirement costs. Refer to Note 10 to the Consolidated Financial Statements for further information.

Adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans could negatively impact shareowners’ deficit and liquidity.

The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain senior executives. The Company’s consolidated balance sheets indirectly reflect the value of all plan assets and benefit obligations under these plans. The accounting for employee benefit plans is complex, as is the process of calculating the benefit obligations under the plans. Further adverse changes in interest rates or market conditions, among other assumptions and factors, could cause a significant increase in the Company’s benefit obligations or a significant decrease of the asset values, without necessarily impacting the Company’s net income. In addition, the Company’s benefit obligations could increase significantly if it needs to unfavorably revise the assumptions used to calculate the obligations. These adverse changes could have a further significant negative impact on the Company’s shareowners’ deficit. In addition, with respect to the Company’s pension plans, the Company expects to make approximately $246 million of estimated cash contributions to fully fund its qualified pension plans for the years 2011 to 2017, of which $23.4 million is currently expected to be paid in 2011. Further, adverse changes to plan assets could require the Company to contribute additional material amounts of cash to the plan or could accelerate the timing of required payments.

Third parties may claim that the Company is infringing upon their intellectual property, and the Company could suffer significant litigation or licensing expenses or be prevented from selling products.

Although the Company does not believe that any of its products or services infringe upon the valid intellectual property rights of third parties, the Company may be unaware of intellectual property rights of others that may cover some of its technology, products, or services. Any litigation growing out of third-party patents or other intellectual property claims could be costly and time-consuming and could divert the Company’s management and key personnel from its business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Resolution of claims of intellectual property infringement might also require the Company to enter into costly license agreements. Likewise, the Company may not be able to obtain license agreements on acceptable terms. The Company also may be subject to significant damages or injunctions against development and sale of certain of its products. Further, the Company often relies on licenses of third-party intellectual property for its businesses. The Company cannot ensure these licenses will be available in the future on favorable terms or at all.

Third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffer competitive injury.

The Company’s success depends in significant part on the competitive advantage it gains from its proprietary technology and other valuable intellectual property assets. The Company relies on a combination of patents, copyrights, trademarks and trade secrets protections, confidentiality provisions, and licensing arrangements to establish and protect its intellectual property rights. If the Company fails to successfully enforce its intellectual property rights, its competitive position could suffer, which could harm its operating results.

The Company may also be required to spend significant resources to monitor and police its intellectual property rights. The Company may not be able to detect third-party infringements and its competitive position may be harmed before the Company does so. In addition, competitors may design around the Company’s technology or develop competing technologies. Furthermore, some intellectual property rights are licensed to other companies, allowing them to compete with the Company using that intellectual property.

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The Company could incur significant costs resulting from complying with, or potential violations of, environmental, health, and human safety laws.

The Company’s operations are subject to laws and regulations relating to the protection of the environment, health, and human safety, including those governing the management and disposal of, and exposure to, hazardous materials and the cleanup of contamination, and the emission of radio frequency. While the Company believes its operations are in substantial compliance with environmental, health, and human safety laws and regulations, as an owner or operator of property, and in connection with the current and historical use of hazardous materials and other operations at our sites, the Company could incur significant costs resulting from complying with or violations of such laws, the imposition of cleanup obligations, and third-party suits. For instance, a number of the Company’s sites formerly contained underground storage tanks for the storage of used oil and fuel for back-up generators and vehicles. In addition, a few sites currently contain underground fuel tanks for back-up generator use, and many of the Company’s sites have aboveground fuel tanks for similar purposes.

Terrorist attacks and other acts of violence or war may affect the financial markets and the Company’s business, financial condition, results of operations, and cash flows.

Terrorist attacks may negatively affect the Company’s operations and financial condition. There can be no assurance that there will not be further terrorist attacks against the U.S. and U.S. businesses, or armed conflict involving the U.S. Further terrorist attacks or other acts of violence or war may directly impact the Company’s physical facilities or those of its customers and vendors. These events could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and world financial markets and economy. They could result in an economic recession in the U.S. or abroad. Any of these occurrences could have a material adverse impact on the Company’s business, financial condition, results of operations, and cash flows.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Cincinnati Bell Inc. and its subsidiaries own or maintain facilities in Ohio, Texas, Kentucky, Indiana, Michigan, and Illinois. Principal office locations are in Cincinnati, Ohio and Houston, Texas.

The property of the Company comprises telephone plant and equipment in its local telephone franchise area (i.e., Greater Cincinnati), the infrastructure associated with its wireless business in the Greater Cincinnati and Dayton, Ohio operating areas, and 17 data center facilities. Each of the Company’s subsidiaries maintains some investment in furniture and office equipment, computer equipment and associated operating system software, application system software, leasehold improvements, and other assets.

With regard to its local telephone operations, the Company owns substantially all of the central office switching stations and the land upon which they are situated. Some business and administrative offices are located in rented facilities, some of which are recorded as capital leases. The Company’s out of territory Wireline network assets include a fiber network plant, internet protocol and circuit switches and integrated access terminal equipment.

In its wireless operations, CBW both owns and leases the locations that house its switching and messaging equipment. With the sale of 196 wireless towers in December 2009, CBW now leases substantially all of its tower sites, primarily from tower companies and other wireless carriers. CBW’s tower leases are typically either for a fixed 20-year term ending in December 2029 or renewable on a long-term basis at CBW’s option, both with predetermined rate escalations. In addition, CBW leases 20 Company-run retail locations.

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The Data Center Colocation segment operates 17 data centers — 6 owned and 11 leased — in Texas, Ohio, Kentucky, Indiana, Michigan, and Illinois, as noted in the table below:

The data centers provide 24-hour monitoring of the customer’s computer equipment in the data center, power, environmental controls, and high-speed, high-bandwidth point-to-point optical network connections. The Company’s lease of data center facilities represents the “lease of the building shell.” The Company’s capital expenditures to transform the leased building shells into Tier III data centers represents amounts that are several times the value of the leased building shells. The Data Center Colocation segment also has leased office space in Ohio, Texas, and Kentucky as of December 31, 2010.

The Company’s gross investment in property, plant, and equipment was $3,399.8 million and $3,145.1 million at December 31, 2010 and 2009, respectively, and was divided among the operating segments as follows:

For additional information about the Company’s properties, see Note 4 to the Consolidated Financial Statements.

Item 3. Legal Proceedings

The information required by this Item is included in Note 1 to the Consolidated Financial Statements contained in Item 8 of this Report.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information

The Company’s common shares (symbol: CBB) are listed on the New York Stock Exchange. The high and low closing sale prices during each quarter for the last two fiscal years are listed below:

(b) Holders

As of February 1, 2011, the Company had 13,171 holders of record of the 198,771,550 outstanding common shares and the 155,250 outstanding shares of the 6³/₄% cumulative convertible preferred stock.

(c) Dividends

The Company paid dividends on the 6³/₄% cumulative preferred stock on a quarterly basis for each of 2010 and 2009. The Company did not pay any common stock dividends for the years ended December 31, 2010 and 2009 and does not currently intend to pay dividends in the future on its common stock.

(d) Securities Authorized For Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2010 regarding securities of the Company to be issued and remaining available for issuance under the equity compensation plans of the Company:

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(e) Stock Performance

The graph below shows the cumulative total shareholder return assuming the investment of $100 on December 31, 2005 (and the reinvestment of dividends thereafter) in each of (i) the Company’s common shares, (ii) the S&P 500 ^® Stock Index, and (iii) the S&P^© Integrated Telecommunications Services Index.

(f) Issuer Purchases of Equity Securities

The following table provides information regarding the Company’s purchases of its common stock during the quarter ended December 31, 2010:

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Item 6. Selected Financial Data

The Selected Financial Data should be read in conjunction with the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this document.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the “Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement,” “Risk Factors,” and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements.

In the fourth quarter of 2010, the Company realigned its reportable business segments to be consistent with changes to its management reporting. The segment formerly known as the Technology Solutions segment was separated into the Data Center Colocation segment and the IT Services and Hardware segment. The changes to the Company’s management reporting have been made primarily as a result of the June 2010 acquisition of CyrusOne. Prior year amounts have been reclassified to conform to the current segment reporting.

Executive Summary

The Company’s strategy to become the preferred global colocation provider to the Fortune 1000 led to the acquisition of CyrusOne in June 2010. Since its acquisition, CyrusOne generated revenue of $45.0 million and operating income of $11.1 million. The Company’s revenue increase of $41.0 million from 2009 resulted primarily from the CyrusOne acquisition and higher revenues from IT Services and Hardware, offset by revenue decreases due to continued access line loss in the Wireline segment and fewer subscribers in the Wireless segment.

Operating income increased $3.8 million to $299.3 million in 2010 compared to $295.5 million in 2009 primarily as a result of the CyrusOne acquisition and Wireless cost savings initiatives, offset by decreased operating income in the Wireline segment due to access line loss.

Net income of $28.3 million decreased by $61.3 million and diluted earnings per share of $0.09 decreased by $0.28 versus 2009 as a result of increased interest expense associated with the CyrusOne acquisition and debt refinancings, losses on extinguishment of debt and acquisition-related expenses.

With the debt refinancings completed in 2009 and 2010, the Company now has no bond or bank debt maturities until 2015, and approximately 90% of its debt maturities are due in 2017 and after. Given that the Company has no debt maturities to repay in the next several years, the Company plans to use a large portion of its cash flow from operations to invest further in its data center colocation operations, including capital expenditures, acquisitions, and working capital, both within and outside its traditional operating territory as it executes its strategic plan of becoming a global data center colocation provider.

Highlights for 2010 were as follows:

Data Center Colocation

Data Center Colocation revenue increased by 75% in 2010 to $125.3 million, primarily due to $45.0 million of revenue generated by CyrusOne. Operating income for the year totaled $34.2 million, an increase of $17.2 million over 2009, which was also primarily due to the operating income of $11.1 million generated by CyrusOne. The Cincinnati-based data center operations grew revenue by $8.5 million and operating income by $6.1 million as a result of the utilization of more data center space in 2010. Total data center capacity increased by 43% from the prior year to 639,000 square feet available as of December 31, 2010. The acquisition of CyrusOne added 187,000 square feet as compared to the prior year total of 446,000 square feet of available space. Utilization was 88% for 2010 compared with 87% in 2009.

Data Center Colocation spent $31.1 million on capital expenditures in 2010, primarily to support the continued growth of CyrusOne, which signed new contracts with customers for 41,000 additional square feet in the fourth quarter of 2010. These contracts, which had a negligible impact on 2010 results, will continue the significant growth trend of CyrusOne into 2011.

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Wireline

Wireline revenue decreased 3% to $742.5 million due to reductions in voice revenue caused by continued ILEC access line losses. The Company was able to partially offset the access line losses through increased long distance and VoIP revenue and increased entertainment revenue. The Company ended the year with 674,100 total access lines, a loss of 7% compared to 723,500 access lines at December 31, 2009 and consistent with the 2009 losses.

In 2009, the Company launched its Fioptics fiber-to-the-home product suite of services that includes entertainment, high-speed internet and voice services. Fioptics continued to show strong growth during 2010, and, as of December 31, 2010, the Company now “passes” and is able to provide its Fioptics services to 79,000 homes. The Company had 28,100 entertainment customers as of December 31, 2010, an increase of 85% compared to the end of 2009. The Company also provided and bundled internet and voice service with Fioptics, resulting in 27,200 high-speed internet customers and 16,800 voice customers on Fioptics at the end of 2010. Importantly, the Company’s penetration rate of homes passed with Fioptics was about 30% within twelve months of deploying Fioptics in a particular area.

The decreases in access lines and the Company’s desire to maintain its high operating margin percentage in the face of declining revenue required additional cost reduction programs, resulting in restructuring charges of $8.2 million in 2010. These restructuring charges include future lease costs on abandoned office space and workforce reductions to address decreasing Wireline revenue and the integration of certain functions of the Wireline and IT Services and Hardware segments.

Wireline operating income of $233.5 million declined by $22.1 million compared to 2009 as the revenue decrease from access line losses more than offset the cost reduction initiatives.

Wireless

Wireless 2010 service revenue of $269.4 million decreased by 5% compared to 2009, primarily due to 24,000 fewer subscribers. The Company believes it continued to lose subscribers in 2010 due, in part, to handset exclusivity contracts obtained by the national carriers on premium handsets, which keeps the Company from being able to sell these popular handsets to its customers. During 2010, the Company continued to focus its marketing and other resources on acquiring new subscribers who use “smartphones.” Wireless improved its handset line-up during the second half of 2010 which, in combination with aggressive marketing strategies in the fourth quarter, helped increase smartphone postpaid subscribers by 16% to 96,000 subscribers at December 31, 2010 compared to 83,000 subscribers at December 31, 2009. Smartphone subscribers now represent 27% of the Company’s postpaid subscribers and have contributed to increased data revenue per subscriber (e.g., text messaging, emails, and internet service), which partly offset a decline in voice revenue. The Company earned $11.69 per month on average from postpaid subscribers for data service in 2010 compared to $10.00 in 2009.

The Company successfully implemented sustainable cost reduction initiatives during the year to offset the decline in its subscriber base by renegotiating roaming contracts to reduce roaming costs, implementing new credit policies aimed at reducing bad debt expense, and lowering call center and IT costs through outsourcing arrangements. The cost reductions more than offset the lower postpaid service revenue resulting in a $23.3 million increase of Wireless segment operating income over 2009.

IT Services and Hardware

Sales of telecom and IT equipment, a portion of which are generated from data center customers, totaled $174.9 million during 2010, a 9% increase from 2009. This increase was primarily due to increased capital spending by business customers as the economy continued to improve in 2010 versus 2009. Professional and managed service revenues increased by $9.6 million in 2010 as the Company continued to expand upon IT outsourcing and consulting projects.

Despite the increased revenue, operating income decreased $6.4 million in 2010, due to lower margins on equipment sales and additional labor costs required to support these operations. During 2010, the IT Services and Hardware segment incurred employee separation charges of $2.8 million associated with the headcount reductions in 2010 and planned integration in 2011 of certain functions with the Wireline segment.

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Results of Operations

Consolidated Overview

The financial results for 2010, 2009, and 2008 referred to in this discussion should be read in conjunction with the Consolidated Statements of Operations and Note 14 to the Consolidated Financial Statements.

2010 Compared to 2009

Consolidated revenue totaled $1,377.0 million in 2010, an increase of $41.0 million compared to $1,336.0 million in 2009. The increase was primarily due to the following:

Operating income for 2010 was $299.3 million, an increase of $3.8 million compared to 2009. The increase was primarily due to the following:

Interest expense increased to $185.2 million for 2010 compared to $130.7 million in 2009. The increase compared to last year is primarily attributable to higher debt balances to fund the acquisition of CyrusOne and to higher interest rates on recently refinanced debt.

The loss on extinguishment of debt of $46.5 million for 2010 was due to the redemption of the Company’s 8 ³/8% Senior Subordinated Notes due 2014 and the repayment of the Tranche B Term Loan. The loss on extinguishment of debt of $10.3 million for 2009 was primarily due to the redemption of the Company’s 7¹/₄% Senior Notes due 2013 and was partially offset by a gain on extinguishment of a portion of the Company’s 7¹/₄% Senior Notes due 2023 and Cincinnati Bell Telephone Notes at an average discount of 24%. See Note 6 to the Consolidated Financial Statements for further details.

Income tax expense decreased from $64.7 million in 2009 to $38.9 million in 2010 primarily due to lower pretax income and a $7.0 million tax benefit associated with a change in valuation allowance on state deferred tax assets that are expected to be utilized as a result of the CyrusOne acquisition. These decreases were partially offset by a $6.5 million charge related to tax matters associated with the refinancing of the 8³/ ₈% Subordinated Notes and an approximate $4 million charge related to a tax law change that now requires the application of federal income taxes against the retiree Medicare drug subsidy received by the Company.

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The Company has certain non-deductible expenses, including interest on securities originally issued to acquire its broadband business (the “Broadband Securities”) or securities that the Company has subsequently issued to refinance the Broadband Securities. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates primarily due to the non-deductible expenses associated with the Broadband Securities. The Company used approximately $7 million of federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities. As a result, the Company had cash income tax payments of only $3.5 million in 2010.

2009 Compared to 2008

Consolidated revenue totaled $1,336.0 million in 2009, a decrease of $67.0 million compared to $1,403.0 million in 2008. The decrease was primarily due to the following:

Operating income for 2009 was $295.5 million, a decrease of $9.7 million compared to 2008. The decrease was primarily due to the following:

Interest expense decreased to $130.7 million for 2009 compared to $139.7 million in 2008. The decrease was primarily attributable to lower interest rates.

The loss on extinguishment of debt of $10.3 million for 2009 was primarily due to the redemption of the Company’s 7¹/₄% Senior Notes due 2013 and was partially offset by a gain on extinguishment of a portion of the Company’s 7¹/ ₄% Senior Notes due 2023 and Cincinnati Bell Telephone Notes at an average discount of 24%. The gain on extinguishment of debt of $14.1 million for 2008 was due to the Company’s purchase and retirement of $108.1 million of the Company’s corporate bonds at an average discount of 14%. See Note 6 to the Consolidated Financial Statements for further details.

Other expense, net for 2008 of $3.4 million primarily resulted from unrealized losses on short-term interest rate swap contracts. The Company did not designate these swaps as hedging instruments, which resulted in the fair value loss on these instruments being recognized in earnings during each period that these instruments were outstanding.

Income tax expense decreased from $73.6 million in 2008 to $64.7 million in 2009 primarily due to lower pretax income. The Company used approximately $45 million of its federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities. As a result, the Company had cash income tax payments of only $6.0 million in 2009.

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Discussion of Operating Segment Results

At December 31, 2010, the Company realigned its business segments to be consistent with changes to its management reporting system. These changes have been made primarily as a result of the acquisition of CyrusOne. All prior year periods have been recast for the revised business segment presentation. See Note 14 to the Consolidated Financial Statements for more information on Business Segments.

Wireline

The Wireline segment provides local voice telephone service and custom calling features, and data services, including high-speed internet access, dedicated network access, ATM — Gig-E based data transport, and dial-up internet access to customers in southwestern Ohio, northern Kentucky, and southeastern Indiana through the operations of CBT, an ILEC in its operating territory of an approximate 25-mile radius of Cincinnati, Ohio. CBT’s network has full digital switching capability and can provide data transmission services to over approximately 96% of its in-territory access lines via DSL.

Outside of the ILEC territory, the Wireline segment provides these services through CBET, which operates as a CLEC in the communities north of CBT’s operating territory including the greater Dayton market. CBET provides voice and data services for residential and business customers on its own network and by purchasing unbundled network elements from the ILEC. CBET provides service through UNE-L to its customer base in the Dayton, Ohio market. The Wireline segment links the Cincinnati and Dayton geographies through its SONET, which provides route diversity via two separate paths.

In 2010, the Company continued to expand its Fioptics product suite of services, which are fiber-to-the-home products that include entertainment, high-speed internet and voice services, to limited areas in Greater Cincinnati. Since the launch of Fioptics in 2009, the Company has passed 79,000 homes, or approximately 10% of Greater Cincinnati, and has 28,100 Fioptics entertainment customers. The components of Wireline revenue were revised in 2010 to reclassify Fioptics revenue from Wireline “Other” to more descriptive Wireline revenue captions, with no impact on total Wireline revenue. All financial information presented has been revised for the revenue classification change.

The Wireline segment also includes long distance, audio conferencing, other broadband services including private line and MPLS, VoIP services, security monitoring services, and payphone services.

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Wireline, continued

2010 Compared to 2009

Revenue

Voice local service revenue includes local service, value added services, digital trunking, switched access, and information services. Voice revenue decreased in 2010 compared to 2009 primarily as a result of a 7% decrease in access lines. Access lines within the segment’s ILEC territory decreased by 49,700, or 8%, from 650,200 at December 31, 2009 to 600,500 at December 31, 2010. The Company believes the access line loss resulted from several factors including customers electing to use wireless communication in lieu of the traditional local service, Company-initiated disconnections of customers with credit problems, and customers electing to use service from other providers. The Company had approximately 73,600 CLEC access lines at December 31, 2010, which is substantially equivalent to the prior year.

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Data revenue consists of Fioptics high-speed internet access, DSL high-speed internet access, dial-up internet access, data transport, and local area network (“LAN”) interconnection services. Revenue from Fioptics high-speed internet services increased $4.8 million in 2010 as compared to 2009 due to an increase in the subscriber base. As of December 31, 2010, the Company had 27,200 high-speed internet Fioptics customers, which is a 13,400, or 97%, increase from the December 31, 2009 total of 13,800 subscribers. These increases were primarily offset by lower DSL revenue resulting from a decline in average revenue per subscriber.

Long distance and VoIP revenue increased $7.3 million in 2010 compared to 2009. The increase was primarily attributable to an increase in VoIP and audio conferencing services provided to additional subscribers, as during 2010 the Company expanded VoIP services to Columbus, Ohio and Louisville, Kentucky. This increase was partially offset by a 7% decrease in long distance residential subscribers, which is consistent with the local voice access line loss.

Entertainment revenue increased $9.0 million in 2010 compared to 2009 primarily due to an increase in Fioptics entertainment services of $7.5 million. Fioptics entertainment subscribers increased 12,900, or 85% from 15,200 at December 31, 2009 to 28,100 at December 31, 2010. The remaining revenue increase is primarily from higher DirecTV^® commissions compared to 2009.

Costs and Expenses

Cost of services and products increased $5.2 million in 2010 compared to 2009. The increase was primarily driven by higher network costs to support growth in VoIP and Fioptics revenues, $2.5 million in higher operating taxes and higher costs associated with employee health care benefits. These expenses were offset by a decrease in costs from lower wages and less pension and postretirement costs.

Selling, general and administrative expenses decreased $6.9 million in 2010 versus the prior year. The decrease for 2010 was primarily due to a $4.1 million decrease in bad debt expense, decreased costs from third party service providers and lower advertising expenses.

Restructuring charges in 2010 of $8.2 million represent $4.9 million of employee separation obligations and $3.3 million of charges for future lease costs on abandoned office space.

Restructuring expenses for 2009 primarily resulted from $10.5 million for employee separation obligations and amortization of pension and postretirement special termination benefits of $2.1 million related to the 2007 and 2008 early retirement offers, offset by a curtailment gain of $7.6 million due to changes in the pension and postretirement plans announced in February 2009. See Notes 9 and 10 to the Consolidated Financial Statements for further information.

2009 Compared to 2008

Revenue

Voice revenue decreased in 2009 compared to 2008 primarily as a result of a 7% decrease in access lines. Access lines within the segment’s ILEC territory decreased by 58,300, or 8%, from 708,500 at December 31, 2008 to 650,200 at December 31, 2009. The Company partially offset its access line loss in its ILEC territory by continuing to target voice services to residential and business customers in its CLEC territory. The Company had approximately 73,300 CLEC access lines at December 31, 2009, which was a 3% increase from December 31, 2008.

Data revenue increased $9.5 million in 2009 compared to 2008 primarily from higher data transport revenue, which increased primarily due to increased usage by third party users, and higher revenue from Fioptics high-speed internet services. The Company’s Fioptics high-speed internet subscriber base increased from 4,500 at December 31, 2008 to 13,800 at December 31, 2009.

Long distance and VoIP revenue decreased $1.2 million in 2009 compared to 2008. Lower minutes of use for long distance and audio conferencing equated to a $6.6 million decrease in revenue for 2009. The decrease in long distance subscribers was due to a 6% decline in residential lines, consistent with the access line loss. The revenue decrease from long distance and audio conferencing was partially offset by growth in revenue from VoIP and broadband services.

Entertainment revenue increased $3.2 million in 2009 versus the prior year. The increase in Fioptics entertainment subscribers from 5,300 at December 31, 2008 to 15,200 at December 31, 2009, contributed to a $3.7 million increase in revenue. This increase was partially offset by $0.5 million decrease in DirecTV^® commission revenue.

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Costs and Expenses

In light of the severe economic downturn that occurred in 2009, the Company implemented several cost reduction initiatives, which primarily affected the Wireline segment. These initiatives included significant changes to its management pension and postretirement plans, which froze pension benefits for certain management employees as well as phasing out the retiree healthcare plan for all management employees and certain retirees in 10 years, suspending matching contributions to the Company’s defined contribution plan for 2009, outsourcing certain IT functions and headcount reductions. These initiatives reduced costs by approximately $25 million in 2009, comprised of $14 million in cost of services and products and $11 million in selling, general and administrative expenses.

Cost of services and products decreased by $10.7 million in 2009 compared to 2008. The decrease in cost of services and products as a result of the initiatives described above, additional payroll cost decreases related to initiatives implemented in 2008 and lower operating taxes of $3.4 million were partially offset by an increase in network costs of $5.6 million, primarily to support the growth in VoIP, broadband and Fioptics services, and additional pension expense of $7.2 million associated with pension asset losses.

Selling, general and administrative expenses decreased $8.8 million in 2009 versus the prior year. The decrease resulting from the initiatives as discussed above and additional payroll cost decreases were partially offset by an increase in pension expense of $3.9 million associated with pension asset losses and a $1.7 million increase in bad debt expense.

Restructuring charges of $5.0 million for 2009 resulted primarily from the following:

Restructuring expenses for 2008 resulted from restructuring plans announced in 2007 and the first quarter of 2008 to reduce costs and increase operational efficiencies. See Notes 9 and 10 to the Consolidated Financial Statements for further information.

The operating tax settlement for 2008 of $10.2 million resulted from the Company’s resolution of a contingent liability from prior years related to exposures on past regulatory filing positions.

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Wireless

The Wireless segment provides advanced digital voice and data communications services through the operation of a regional wireless network in the Company’s licensed service territory, which surrounds Cincinnati and Dayton, Ohio and includes areas of northern Kentucky and southeastern Indiana. Although Wireless does not market to customers outside of its licensed service territory, it is able to provide service outside of this territory through roaming agreements with other wireless operators. The segment also sells wireless handset devices and related accessories to support its service business.