FairPoint Communications 2006 Annual Report Download - page 11

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 have and could continue to face increased competition from competitive local exchange carriers, particularly in offering services to Internet
service providers.
Voice Over Internet Protocol Competition
VoIP service is increasingly being embraced by all industry participants. VoIP service essentially involves the routing of voice calls, at least in part, over
the Internet through packets of data instead of transmitting the calls over the existing public switched telephone network. This routing mechanism may give
VoIP service providers a cost advantage and enable them to offer services to end users at a lower price. While current VoIP applications typically complete calls
using incumbent local exchange carrier infrastructure and networks, as VoIP services obtain acceptance and market penetration and technology advances
further, a greater quantity of communication may be placed without utilizing the public switched telephone network. The proliferation of VoIP, particularly to
the extent such communications do not utilize our rural local exchange carriers’ networks, may result in an erosion of our customer base and loss of access
fees and other funding.
Internet Competition
The Internet services market is also highly competitive, and we expect that competition will continue to intensify. Internet services, meaning both Internet
access (wired and wireless) and on-line content services, are provided by Internet service providers, satellite-based companies, long distance carriers and cable
television companies. Many of these companies provide direct access to the Internet and a variety of supporting services to businesses and individuals. In
addition, many of these companies, such as America Online, Inc., Microsoft Network and Yahoo, offer on-line content services consisting of access to closed,
proprietary information networks. Long distance companies and cable television operators, among others, are aggressively entering the Internet access markets.
Long distance carriers have substantial transmission capabilities, traditionally carry data to large numbers of customers and have an established billing
system infrastructure that permits them to add new services. Satellite companies are offering broadband access to the Internet from desktop personal
computers. Many of these competitors have substantially greater financial, technological, marketing, personnel, name-brand recognition and other resources
than those available to us.
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