FairPoint Communications 2006 Annual Report Download - page 47

 Local calling service revenues increased $2.0 million to $65.1 million in 2005. Of this increase, $1.2 million was attributable
to the Berkshire and Bentleyville acquisitions in 2005 and $0.8 million was attributable to our existing operations. The increase in local revenues from existing
operations is primarily due to increases in local calling features and local interconnection revenues, despite a 2.5% decline in net voice access lines.
 Universal Service Fund high cost loop payments decreased $2.4 million to $19.7 million in 2005.
Our existing operations accounted for all of this decrease. The national average cost per loop in relation to our average cost per loop has increased and, as a
result, our receipts from the Universal Service Fund have declined.
Interstate access revenues increased $5.0 million to $75.3 million in 2005 from $70.3 million in 2004. Of the increase, $1.6 million
was attributable to the Bentleyville and Berkshire acquisitions. Our existing operations accounted for the remaining $3.4 million increase. In 2005, we
recognized certain positive interstate revenue settlement adjustments related to prior years which accounted for approximately $4.3 million of interstate access
revenue. Excluding these unusual items and acquired operations, interstate access revenue would have declined $0.9 million in 2005.
 Intrastate access revenues decreased to $40.0 million in 2005 from $42.4 million in 2004. The decrease from our existing operations
was $3.3 million. The decrease was mainly attributable to rate reductions as provided for under a rate re-balancing agreement in Maine.
 Long distance services revenues increased $3.1 million to $20.9 million in 2005 compared to 2004. This increase was
attributable primarily to our existing operations as a result of promotional efforts and bundles with unlimited long distance designed to generate more revenue.
 Data and Internet services revenues increased $5.1 million to $24.2 million in 2005 from $19.1 million in 2004. The
increase is due primarily to increases in DSL customers as we continue to aggressively market our HSD services. Our HSD subscriber customer base as of
December 31, 2005, increased to 45,365 subscribers compared to 34,824 subscribers as of December 31, 2004, a 30% increase during this period. The
Bentleyville and Berkshire acquisitions contributed the remaining revenue increase of $0.5 million.
 Other services revenues decreased to $17.7 million in 2005 from 2004. The Berkshire and Bentleyville acquisitions increased other
services revenues by $1.3 million. Excluding the impact of the Berkshire and Bentleyville acquisitions, other services revenue decreased $1.5 million. A
portion of this decrease from existing operations was due to a $1.2 million one-time sale and installation of E911 system equipment in 2004. The remaining
decrease was due to reductions in billing and collections revenues, as interexchange carriers continue to take back the billing function for their more significant
long distance customers. We expect this billing and collections trend to continue.
Operating Expenses
 Operating expenses increased $14.6 million to $143.4 million
in 2005 compared to 2004. Of the increase, $9.3 million is related to our existing operations and $5.3 million is related to expenses of the acquired operations
in 2005. Consulting fees increased $1.8 million primarily related to preparation for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Expenses
related to data and long distance services increased $2.3 million principally due to the increase in HSD and long distance subscribers. Bad debt expense was
$1.4 million higher in 2005 than 2004 due primarily to difficulties experienced in our billing conversion related to the delay of non-pay disconnect notices.
Billing costs have increased $2.0 million as we incurred costs associated with the conversion of our billing systems into an integrated platform and recurring
expenses from our outsourced billing service provider.
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