FairPoint Communications 2004 Annual Report Download - page 42

 Universal Service Fund high cost loop payments increased $3.3 million to
$22.2 million in 2004 from $18.9 million in 2003. Our existing operations accounted for all of this increase. A reclassification of plant has
increased our Universal Service Fund payments in our Maine and Idaho companies that has more than offset a drop in payments from the
Universal Service Fund related to increases in the national average cost per loop.
 Interstate access revenues increased $3.7 million from $66.6 million in 2003 to $70.3 million in 2004. Of the
increase, $3.1 million was attributable to the Maine acquisition. Our existing operations accounted for the remaining $0.6 million increase.
This increase was due to expense increases from our regulated operations that resulted in higher interstate revenue requirements.
 Intrastate access revenues decreased from $44.0 million in 2003 to $42.4 million in 2004. The decrease from our
existing operations was $2.6 million before being offset by $1.0 million in revenues contributed by the Maine acquisition. The decrease was
mainly attributable to the Basic Service Calling Areas plan implemented in Maine as discussed above in local calling services.
 Long distance services revenues increased $2.3 million from $15.4 million in 2003 to $17.7 million in
2004. This increase was all attributable to our existing operations as a result of promotional efforts and bundles with unlimited long distance
designed to generate more revenue.
 Data and internet services revenues increased $5.7 million from $13.4 million in 2003 to $19.1 million
in 2004. The increase is due primarily to increases in digital subscriber line customers as we continue to aggressively market our broadband
services. Our digital subscriber line customer base increased from 17,937 customers as of December 31, 2003 to 31,876 customers as of
December 31, 2004, a 78% increase during this period. The Maine acquisition contributed the remaining revenue increase of $0.6 million.
 Other revenues increased from $17.0 million in 2003 to $17.8 million in 2004. Of the increase, $0.6 million was
attributed to the Maine acquisition. An increase of $0.2 million from existing operations was due to a $1.2 million one-time sale and
installation of E911 system equipment. This was offset by approximately $1.0 million of reductions in billing and collections revenues, as
inter-exchange carriers continue to take back the billing function for their more significant long distance customers. We expect the billing and
collection trend to continue.
Operating Expenses
 . Operating expenses increased $17.6 million
to $128.8 million in 2004 from $111.2 million in 2003. Of the increase, $13.5 million is related to our existing operations and $4.1 million is
related to expenses of the companies we acquired in 2003 in the Maine acquisition. Wages and benefits increased $4.4 million due to merit
salary increases, an increase in our bonus compensation and an increase in the number of our employees compared to a year ago. Network
operations expense, wholesale digital subscriber line charges and transport and network costs associated with our broadband initiatives
increased $4.0 million. Cost of goods sold associated with the one-time sale and installation of E911 system equipment was $1.0 million in
2004. Bad debt expense was $1.6 million higher in 2004 than 2003 due primarily to a $0.9 million recovery received in 2003. Marketing and
promotion expenses increased $0.6 million due to higher levels of activity related to the promotion of custom calling features, data services
and other products. Billing costs have increased $1.0 million as we incurred costs associated with the conversion of our billing systems into
an integrated platform. The balance of the increase is attributable to smaller miscellaneous items.
 Depreciation and amortization from continuing operations increased $2.2 million to $50.3 million in
2004 from $48.1 million in 2003. The Maine acquisition
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