EarthLink (NASDAQ:ELNK) may have reversed its loss from the fourth quarter of last year, but the coming year should be a pivotal one. Despite the good news on subscriber growth and cost control efforts driving profitability, the stock lost about 8% in early morning trading.

The company -- the third-largest ISP, behind Time Warner's (NYSE:TWX) AOL and Microsoft's (NASDAQ:MSFT) MSN -- reported net income of $10.7 million, or $0.07 per share, as compared to a net loss of $36.9 million, or $0.24 per share, in the same quarter of last year. These numbers include a $19.4 million charge related to its recent closure of call centers, as well as acquisition-related amortization.

However, the good news was continued growth in subscribership. In the quarter, broadband customers increased by 36% (and this year, it surpassed the 1 million benchmark), while narrowband customers decreased by 11%.

Adding 248,000 subscribers in the last quarter, EarthLink boasts a total of 5.2 million subscribers, a 4.4% increase from the year before. However, the churn rate increased to 4.1% for the quarter, from its 3.6% rate during the same period last year.

What's to come? The price of broadband is approaching the old going rate for plodding dial-up, driving the latter to become a bargain commodity served by services such as United Online (NASDAQ:UNTD) and now even AOL's new discount deal under the Netscape name.

Meanwhile, the once-mighty AOL's "Internet for newbies" seems downright silly in an age where everyone and their grandpa Googles. Add to that, in its conference call (courtesy of CCBN StreetEvents), the company cited regions where SBC (NYSE:SBC) and Verizon (NYSE:VZ) offer DSL as regions of intense competition.

While EarthLink said it anticipates adding between 250,000 and 550,000 paying subscribers to the fold in 2004, it expects revenues will grow at a slower rate than subscribers during the year. The company gave guidance of 2004 revenues of $1.41 billion to $1.44 billion, shy of the previous estimate of $1.46 billion.

A Foolish reader recently brought up an interesting theory -- that EarthLink's recent move to shed workers might indicate to some cleaning up for an acquisition. A move of that nature still seems a bit far off, but the next year should be crucial in assessing the company's fortunes. Consolidation in the industry doesn't seem completely off-base, given the fierce competition from both telecom companies and cable concerns.

Offering high-speed on one hand and dial-up service on the other, EarthLink's got quite a balancing act, as it tries to increase its broadband customers before being too undercut by the bargain-bin ISPs. It should be an interesting year.

Do you love EarthLink? Hate it? Think it will become extinct due to the competition? Talk it all over with other Fools on the EarthLink discussion board.

Alyce Lomax does not own shares in any of the companies mentioned, though she is a former subscriber of both AOL and EarthLink, the latter of which recently lost her to Verizon. She welcomes your feedback via e-mail.