FairPoint Communications 2007 Annual Report Download - page 138

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ORANGE COUNTY — POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS — (Continued)
revenue are recognized when service is rendered and included in unbilled revenue until billed. The roaming rates charged by the
Partnership to Cellco do not necessarily reflect current market rates. The Partnership will continue to re-evaluate the rates on a periodic
basis (see Note 4). The Partnership’s revenue recognition policies are in accordance with the Securities and Exchange Commission’s
(“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements and SAB No. 104, Revenue
Recognition.
Approximately 98% of the Partnership’s 2007, 2006 and 2005 revenue is affiliate revenue due to the fact that Cellco is the
Partnership’s primary reseller. The wholesale rates charged to Cellco do not necessarily reflect current market rates. The Partnership
continues to re-evaluate the rates and expects these rates to be reduced in the future consistent with market trends and the terms of the
limited partnership agreement (See Note 4).
Cellular service revenues resulting from a cellsite agreement with Cellco are recognized based upon an allocation of airtime minutes
(See Note 4).
Operating Costs and Expenses — Operating costs and expenses include costs and expenses incurred directly by the Partnership,
as well as an allocation of certain administrative and operating costs incurred by the General Partner or its affiliates on behalf of the
Partnership. Services performed on behalf of the Partnership are provided by employees of Cellco. These employees are not employees of
the Partnership and therefore, operating expenses include direct and allocated charges of salary and employee benefit costs for the services
provided to the Partnership. The Partnership believes such allocations, principally based on the Partnership’s percentage of total
customers, customer gross additions, or minutes-of-use, are reasonable.
Property, Plant and Equipment — Property, plant and equipment primarily represents costs incurred to construct and expand
capacity and network coverage on Mobile Telephone Switching Offices (“MTSOs”) and cell sites. The cost of property, plant and
equipment is depreciated over its estimated useful life using the straight-line method of accounting. Leasehold improvements are amortized
over the shorter of their estimated useful lives or the term of the related lease. Major improvements to existing plant and equipment are
capitalized. Routine maintenance and repairs that do not extend the life of the plant and equipment are charged to expense as incurred.
Upon the sale or retirement of property, plant and equipment, the cost and related accumulated depreciation or amortization is
eliminated from the accounts and any related gain or loss is reflected in the Statements of Operations.
Network engineering costs incurred during the construction phase of the Partnership’s network and real estate properties under
development are capitalized as part of property, plant and equipment and recorded as construction in progress until the projects are
completed and placed into service. FCC Licenses — The Federal Communications Commission (“FCC”) issues licenses that authorize
cellular carriers to provide service in specific cellular geographic service areas. The FCC grants licenses for terms of up to ten years. In
1993 the FCC adopted specific standards to apply to cellular renewals, concluding it will reward a license renewal to a cellular licensee
that meets certain standards of past performance. Historically, the FCC has granted license renewals routinely. All wireless licenses issued
by the FCC that authorize the Partnership to provide cellular services are recorded on the books of Cellco. The current term of the
Partnership’s FCC licenses expire in January 2018 and June 2017. Cellco believes it will be able to meet all requirements necessary to
secure renewal of the Partnership’s wireless licenses.
Valuation of Assets — Long-lived assets, including property, plant and equipment, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset
is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.
The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the asset exceeds
the fair value of the asset.
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