FairPoint Communications 2006 Annual Report Download - page 41

classes of our capital stock, if any, capital expenditures, taxes and future reserves, if any, as regular quarterly dividend payments to the holders of our
common stock, rather than retained and used for other purposes.
We are subject to regulation primarily by federal and state governmental agencies. At the federal level, the Federal Communications Commission has
jurisdiction over interstate and international communications services. State telecommunications regulators exercise jurisdiction over intrastate communications
services.
On January 15, 2007, we entered into the Merger Agreement pursuant to which Spinco will merge with and into the Company with the Company
continuing as the surviving corporation. Following the Merger, our operations will be more focused on small urban markets and geographically concentrated in
the northeastern United States, we expect to face more competition in our business located in the northeastern United States, and we expect to be less dependent
on regulated revenue.
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We derive our revenues from:
· . We receive revenues from providing local exchange telephone services, including monthly recurring charges for basic service,
usage charges for local calls and service charges for special calling features.
·  . We receive payments from the Universal Service Fund, or USF, to support the high cost of our
operations in rural markets. This revenue stream fluctuates based upon our average cost per loop compared to the national average cost per loop. For
example, if the national average cost per loop increases and our operating costs (and average cost per loop) remain constant or decrease, the payments
we receive from the USF would decline. Conversely, if the national average cost per loop decreases and our operating costs (and average cost per loop)
remain constant or increase, the payments we receive from the USF would increase. The national average cost per loop in relation to our average cost
per loop has increased, and we believe that the national average cost per loop will likely continue to increase in relation to our average cost per loop. As
a result, the payments we receive from the USF have declined and will likely continue to decline.
· . These revenues are primarily based on a regulated return on rate base and recovery of allowable expenses associated with
the origination and termination of toll calls both to and from our customers. Interstate access charges to long distance carriers and other customers are
based on access rates filed with the Federal Communications Commission. These revenues also include USF payments for local switching support,
long term support and interstate common line support.
· . These revenues consist primarily of charges paid by long distance companies and other customers for access to our
networks in connection with the origination and termination of long distance telephone calls both to and from our customers. Intrastate access charges
to long distance carriers and other customers are based on access rates filed with the state regulatory agencies.
· . We receive revenues from long distance services we provide to our residential and business customers. In addition, Carrier
Services provides communications providers not affiliated with us with wholesale long distance services.
· . We receive revenues from monthly recurring charges for services, including high speed data, special access, private
lines, Internet and other services.
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