FairPoint Communications 2005 Annual Report Download - page 10

which has been deployed throughout our current network and is the primary transport technology between our host and remote central offices and
interconnection points with other incumbent carriers.
Our fiber optic transport system is primarily a synchronous optical network capable of supporting increasing customer demand for high bandwidth
transport services. This system supports advanced services including Asynchronous Transfer Mode, Frame Relay and/or Internet Protocol Transport,
facilitating delivery of advanced services as demand warrants.
In our rural local exchange carrier markets, DSL-enabled integrated access technology is being deployed to provide significant broadband capacity to our
customers. As of December 31, 2005, we had invested approximately $32.0 million in digital subscriber line technology and had deployed this technology in
145 of our 148 exchanges. Approximately 98% of our exchanges are capable of providing broadband services through cable modem, wireless broadband
and/or DSL technology.
Rapid and significant changes in technology are expected in the communications industry. Our future success will depend, in part, on our ability to
anticipate and adapt to technological changes. We believe that our network architecture will enable us to efficiently respond to these technological changes.
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We believe that the Telecommunications Act and other recent actions taken by the Federal Communications Commission and state regulatory authorities
promote competition in the provision of communications services; however, many of the competitive threats now confronting larger regulated telephone
companies do not currently exist in the rural local exchange carrier marketplace. Our rural local exchange carriers historically have experienced little wireline
competition as the incumbent carrier in their markets because the demographic characteristics of rural communications markets generally will not support the
high cost of operations and significant capital investment required for new wireline entrants to offer competitive services. For instance, the per minute cost of
operating both telephone switches and interoffice facilities is higher in rural areas, as rural local exchange carriers typically have fewer, more geographically
dispersed customers and lower calling volumes. Also, the distance from the telephone switch to the customer is typically longer in rural areas, which results in
increased distribution facilities costs. These relatively high costs tend to discourage other wireline competitors from entering territories serviced by our rural
local exchange carriers.
Wireless Competition
In most of our rural markets, we face competition from wireless technology and as technology and economies of scale improve competition from wireless
carriers may increase. In addition, the Federal Communications Commission’s requirement that telephone companies offer wireline-to-wireless number
portability may increase the competition we face from wireless carriers.
Wireline Competition
We also face competition from new market entrants that provide close substitutes for the traditional telephone services we provide, such as cable
television, satellite communications and electric utility companies. Cable television companies are entering the communications market by upgrading their
networks with fiber optics and installing facilities to provide fully interactive transmission of broadband, voice, video and data communications. Electric
utilities have existing assets and access to low cost capital that could allow them to enter a market rapidly and accelerate network development. While we
currently have limited competition for voice services from cable providers and electric utilities for basic voice services, we may face increased competition
from such providers in the future.
In addition, we could face increased competition from competitive local exchange carriers, particularly in offering services to Internet service providers.
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