FairPoint Communications 2006 Annual Report Download - page 145

distance revenue are recognized when service is rendered and included in unbilled revenue until billed. The roaming rates charged by the Partnership to
Cellco do not necessarily reflect current market rates. The Partnership will continue to re-evaluate the rates on a periodic basis (see Note 4). The
Partnership’s revenue recognition policies are in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”)
No. 101, Revenue Recognition in Financial Statements and SAB No. 104, Revenue Recognition.
Approximately 98% of the Partnership’s 2006, 2005 and 2004 revenue is affiliate revenue due to the fact that Cellco is the Partnership’s primary reseller.
The wholesale rates charged to Cellco do not necessarily reflect current market rates. The Partnership continues to re-evaluate the rates and expects these
rates to be reduced in the future consistent with market trends and the terms of the limited partnership agreement (See Note 4).
Cellular service revenues resulting from a cellsite agreement with Cellco are recognized based upon an allocation of airtime minutes (See Note 4).
Operating Costs and Expenses—Operating costs and expenses include costs and expenses incurred directly by the Partnership, as well as an allocation
of certain administrative and operating costs incurred by the General Partner or its affiliates on behalf of the Partnership. Services performed on behalf of
the Partnership are provided by employees of Cellco. These employees are not employees of the Partnership and therefore, operating expenses include
direct and allocated charges of salary and employee benefit costs for the services provided to the Partnership. The Partnership believes such allocations,
principally based on the Partnership’s percentage of total customers, customer gross additions, or minutes-of-use, are reasonable.
Property, Plant and Equipment—Property, plant and equipment primarily represents costs incurred to construct and expand capacity and network
coverage on Mobile Telephone Switching Offices (“MTSOs”) and cell sites. The cost of property, plant and equipment is depreciated over its estimated
useful life using the straight-line method of accounting. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term
of the related lease. Major improvements to existing plant and equipment are capitalized. Routine maintenance and repairs that do not extend the life of the
plant and equipment are charged to expense as incurred.
Upon the sale or retirement of property, plant and equipment, the cost and related accumulated depreciation or amortization is eliminated from the
accounts and any related gain or loss is reflected in the Statements of Operations.
Network engineering costs incurred during the construction phase of the Partnership’s network and real estate properties under development are
capitalized as part of property, plant and equipment and recorded as construction in progress until the projects are completed and placed into service.
FCC Licenses—The Federal Communications Commission (“FCC”) issues licenses that authorize cellular carriers to provide service in specific cellular
geographic service areas. The FCC grants licenses for terms of up to ten years. In 1993 the FCC adopted specific standards to apply to cellular
renewals, concluding it will reward a license renewal to a cellular licensee that meets certain standards of past performance. Historically, the FCC has
granted license renewals routinely. All wireless licenses issued by the FCC that authorize the Partnership to provide cellular services are recorded on the
books of Cellco. The current term of the Partnership’s FCC licenses expire in June 2007 and January 2008. Cellco believes it will be able to meet all
requirements necessary to secure renewal of the Partnership’s wireless licenses.
7