FairPoint Communications 2005 Annual Report Download - page 28

owned properties or at third party waste disposal sites. In addition, we could be held responsible for third party property or personal injury claims relating to
any such contamination or relating to violations of environmental laws. Changes in existing laws or regulations or future acquisitions of businesses could
require us to incur substantial costs in the future relating to such matters.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and related
regulations implemented by the SEC, 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 as required by Section 404 of the Sarbanes-
Oxley Act. Our evaluation of our internal controls may result in our identifying material weaknesses in our internal controls. While we anticipate being able to
complete our initial controls assessment and remediation of any identified material weaknesses prior to the December 31, 2006 deadline applicable to us, we
cannot be certain as to the timing of such completion or the impact of the same on our operations. If we are not able to complete the assessment process required
by Section 404 in a timely manner, or are unable to remediate any identified material weaknesses prior to December 31, 2006, we might be subject to sanctions
or investigation by regulatory authorities, such as the SEC or the New York Stock Exchange. Any such action could adversely affect our financial results or
investors’ confidence in us, and could cause our stock price to fall. If we fail to 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
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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:
 For the year ended December 31, 2005, almost 44% of our revenues came 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 44% 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 has 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 implemented on a revenue neutral basis (with commensurate increases in
other charges and Universal
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