FairPoint Communications 2007 Annual Report Download - page 79

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Table of Contents


 

FairPoint Communications, Inc. (FairPoint) provides management services to its wholly owned subsidiaries: ST Enterprises, Ltd.
(STE); MJD Ventures, Inc. (Ventures); MJD Services Corp. (Services); FairPoint Carrier Services, Inc. (Carrier Services); FairPoint
Broadband, Inc. (Broadband); and MJD Capital Corp. STE, Ventures, and Services also provide management services to their wholly-
owned subsidiaries.
Collectively, the wholly-owned subsidiaries of STE, Ventures, and Services primarily provide telephone local exchange services in
various states. Operations also include resale of long distance services, internet services, cable services, equipment sales, and installation
and repair services. MJD Capital Corp. leases equipment to other subsidiaries of FairPoint. Carrier Services provides wholesale long
distance services. Broadband provides wireless broadband services and wholesale data products.
STE’s wholly-owned subsidiaries include Sunflower Telephone Company, Inc. (Sunflower); Northland Telephone Company of
Maine, Inc.; FairPoint Vermont, Inc.; ST Computer Resources, Inc.; and ST Long Distance, Inc. (ST Long Distance). Ventures’ wholly-
owned subsidiaries include Bentleyville Communications Corporation (Bentleyville), Berkshire Telephone Corporation (Berkshire),
Sidney Telephone Company (Sidney); C-R Communications, Inc. (C-R); Taconic Telephone Corp. (Taconic); Ellensburg Telephone
Company (Ellensburg); Chouteau Telephone Company (Chouteau); Utilities, Inc. (Utilities); Chautauqua and Erie Telephone
Corporation (C&E); The Columbus Grove Telephone Company (Columbus Grove); The Orwell Telephone Company (Orwell); GTC
Communications, Inc. (GT Com); Peoples Mutual Telephone Company (Peoples); Fremont Telcom Co. (Fremont); Fretel
Communications, LLC (Fretel); Comerco, Inc. (Comerco); Marianna and Scenery Hill Telephone Company (Marianna); Community
Service Telephone Co. (CST); Commtel Communications Inc. (Commtel); Telephone Service Company; and The Germantown
Independent Telephone Company (GITC). Services’ wholly owned subsidiaries include Bluestem Telephone Company (Bluestem); Big
Sandy Telecom, Inc. (Big Sandy); FairPoint Communications Missouri, Inc.; Columbine Telecom Company (Columbine); Odin
Telephone Exchange, Inc. (Odin); Ravenswood Communications, Inc. (Ravenswood); Unite Communications Systems, Inc.; and Yates
City Telephone Company (Yates).

The consolidated financial statements include the accounts of FairPoint and its subsidiaries (the Company). All intercompany
transactions and accounts have been eliminated in consolidation.
The Company’s telephone subsidiaries follow the accounting for regulated enterprises prescribed by Statement of Financial
Accounting Standards (SFAS) No. 71, . This accounting recognizes the
economic effects of rate regulation by recording costs and a return on investment; as such, amounts are recovered through rates authorized
by regulatory authorities. Accordingly, SFAS No. 71 requires the Company’s telephone subsidiaries to depreciate telephone plant over
useful lives that would otherwise be determined by management. SFAS No. 71 also requires deferral of certain costs and obligations
based upon approvals received from regulators to permit recovery of such amounts in future years. Criteria that would give rise to the
discontinuance of SFAS No. 71 include (1) increasing competition restricting the wireline subsidiaries’ ability to establish prices to
recover specific costs and (2) significant changes in the manner in which rates are set by regulators from cost-based regulation to another
form of regulation.
The Company’s telephone subsidiaries periodically review the applicability of SFAS No. 71 based on the developments in their
current regulatory and competitive environments.
77