Frontier Communications 2005 Annual Report Download - page 6

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CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Frontier
Frontier accounted for $2,003.3 million, or 93%, of our total revenues in 2005. Approximately 8% of our 2005
Frontier revenues came from federal and state subsidies and approximately 14% from regulated access charges.
Our Frontier business is primarily with residential customers and, to a lesser extent, non-residential customers.
Our Frontier segment principally provides:
• access services,
• local services,
• long distance services,
• data and internet services,
• directory services, and
• television services.
Access services
We provide both switched and non-switched network access services. Switched access services allow other
carriers the use of our facilities to originate and terminate their long distance voice and data traffic. These services
are generally offered on a month-to-month basis and the service is billed on a minutes-of-use basis and access
charges are based on access rates filed with the FCC for interstate services and with the respective state regulatory
agency for intrastate services. Non-switched network access services provide other carriers and high-volume
commercial customers with dedicated high-capacity circuits. Such services are generally offered on a contract basis
and the service is billed on a fixed monthly recurring charge basis. In addition, subsidies received from state and
federal universal service funds based on the high cost of providing telephone service to certain rural areas are a part
of our access services revenue.
Revenue is recognized when services are provided to customers or when products are delivered to customers.
Monthly recurring network access service revenue is billed in advance. The unearned portion of this revenue is
initially deferred on our balance sheet and recognized in revenue over the period that the services are provided. Non-
recurring network access service revenue is billed in arrears. The earned but unbilled portion of this revenue is
recognized in revenue in the period that the services are provided.
Local services
We provide basic telephone wireline access services to residential and non-residential customers in our service
areas. Our service areas are largely residential and are generally less densely populated than the primary service
areas of the largest incumbent local exchange carriers. We also provide enhanced services to our customers by
offering a number of calling features including call forwarding, conference calling, caller identification, voicemail
and call waiting. We offer packages of communications services. These packages permit customers to bundle their
basic telephone line with their choice of enhanced, long distance, television and internet services for a monthly fee
and/or usage fee depending on the plan.
We intend to continue to increase the penetration of enhanced services. We believe that increased sales of such
services will produce revenue with higher operating margins due to the relatively low marginal operating costs
necessary to offer such services. We believe that our ability to integrate these services with other services will
provide us with the opportunity to capture an increased percentage of our customers’ communications
expenditures.
Long distance services
We offer long distance services in our territories to our customers. We believe that many customers prefer the
convenience of obtaining their long distance service through their local telephone company and receiving a single
bill. Long distance network service to and from points outside of our operating territories is provided by interconnection
with the facilities of interexchange carriers, or IXCs.