FairPoint Communications 2004 Annual Report Download - page 14

In addition, we could face increased competition from competitive local exchange carriers, particularly in offering services to Internet
service providers.
Voice Over Internet Protocol Competition
Voice over internet protocol service is increasingly being embraced by all industry participants. Voice over internet protocol service
essentially involves the routing of voice calls, at least in part, over the Internet through packets of data instead of transmitting the calls over
the existing public switched telephone network. While current voice over internet protocol applications typically complete calls using
incumbent local exchange carrier infrastructure and networks, as voice over internet protocol services obtain acceptance and market
penetration and technology advances further, a greater quantity of communication may be placed without utilizing the public switched
telephone network. On March 10, 2004, the Federal Communications Commission issued a Notice of Proposed Rulemaking with respect to
internet protocol-enabled services. Among other things, the Federal Communications Commission is considering whether voice over
internet protocol services are regulated communications services or unregulated information services. We cannot predict the outcome of the
Federal Communications Commission's rulemaking on this subject or the impact on the revenues of our rural local exchange carriers. The
proliferation of voice over internet protocol, particularly to the extent such communications do not utilize our rural local exchange carriers'
networks, may result in an erosion of our customer base and loss of access fees and other funding.
Internet Competition
The Internet services market is also highly competitive, and we expect that competition will continue to intensify. Internet services,
meaning both Internet access (wired and wireless) and on-line content services, are provided by Internet service providers, satellite-based
companies, long distance carriers and cable television companies. Many of these companies provide direct access to the Internet and a
variety of supporting services to businesses and individuals. In addition, many of these companies, such as America Online, Inc., Microsoft
Network and Yahoo, offer on-line content services consisting of access to closed, proprietary information networks. Long distance companies
and cable television operators, among others, are aggressively entering the Internet access markets. Long distance carriers have substantial
transmission capabilities, traditionally carry data to large numbers of customers and have an established billing system infrastructure that
permits them to add new services. Satellite companies are offering broadband access to the Internet from desktop personal computers. Many
of these competitors have substantially greater financial, technological, marketing, personnel, name-brand recognition and other resources
than those available to us.
Long Distance Competition
The long distance communications market is highly competitive. Competition in the long distance business is based primarily on price,
although service bundling, branding, customer service, billing service and quality play a role in customers' choices.
Other Competition
Although we believe we offer the only comprehensive suite of communications services in our markets, existing service providers such
as wireless, cable and utility companies could form strategic alliances to offer bundled services in our markets. We cannot guarantee that we
will not face increased competition from such bundled service providers.
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