FairPoint Communications 2004 Annual Report Download - page 69


Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and
related regulations implemented by the Securities and Exchange Commission, the New York Stock Exchange and the Public Company
Accounting Oversight Board, are creating uncertainty for public companies, increasing legal and financial compliance costs and making
some activities more time consuming. We will be evaluating our internal controls systems to allow management to report on, and our
independent auditors to attest to, our internal controls. We will be performing the system and process evaluation and testing (and any
necessary remediation, including the conversion of our various billing systems into a single integrated billing platform) required to comply
with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. While we anticipate being
able to fully implement the requirements relating to internal controls and all other aspects of Section 404 by our December 31, 2005
deadline, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on
our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance (including
due to our failure to successfully complete the conversion of our various billing systems into a single integrated billing platform), we might be
subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission, the New York Stock
Exchange or the Public Company Accounting Oversight Board. Any such action could adversely affect our financial results or investors'
confidence in us, and could cause our stock price to fall. In addition, the controls and procedures that we will implement may not comply with
all of the relevant rules and regulations of the Securities and Exchange Commission, the New York Stock Exchange and the Public
Company Accounting Oversight Board. If we fail to develop and maintain effective controls and procedures, we may be unable to provide
financial information in a timely and reliable manner.
Risks Related to our Regulatory Environment

We operate in a heavily regulated industry, and the majority of our revenues generally have been supported by regulations, including
access revenue and Universal Service Fund support for the provision of telephone services in rural areas. Laws and regulations applicable to
us and our competitors may be, and have been, challenged in the courts, and could be changed by Congress or regulators. In addition, any of
the following have the potential to have a significant impact on us:
 Almost 45% of our revenues come from network access charges,
which are paid to us by intrastate and interstate long distance carriers for originating and terminating calls in the regions served. This 45%
also includes Universal Service Fund payments for local switching support, long term support and interstate common line support. In recent
years, several of these long distance carriers have declared bankruptcy. Future declarations of bankruptcy by a carrier that utilizes our access
services could negatively impact our financial results. The amount of access charge revenues that we receive is based on rates set by federal
and state regulatory bodies, and such rates could change. Further, from time to time federal and state regulatory bodies conduct rate cases
and/or "earnings" reviews, which may result in rate changes. The Federal Communications Commission has reformed and continues to
reform the federal access charge system. States often mirror these federal rules in establishing intrastate access charges. In October 2001,
the Federal Communications Commission reformed the system to reduce interstate access charges and shift a portion of cost recovery,
which historically have been based on minutes-of-use, to flat-rate, monthly per line charges on end-user customers rather than long distance
carriers. As a result, the aggregate amount of access charges paid by long distance carriers to access providers, such as our rural local
exchange carriers, has decreased and may continue to decrease. Although these changes were
66