FairPoint Communications 2007 Annual Report Download - page 141

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ORANGE COUNTY — POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS — (Continued)
Capitalized network engineering costs of $72 and $545 were recorded during the years ended December 31, 2007 and 2006,
respectively. Construction-in-progress included in certain of the classifications shown above, principally wireless plant equipment,
amounted to $3,192 and $641 at December 31, 2007 and 2006, respectively. Depreciation and amortization expense for the years ended
December 31, 2007, 2006 and 2005 was $6,069, $6,720 and $6,347, respectively.
4. TRANSACTIONS WITH AFFILIATES
Significant transactions with affiliates (Cellco and its related entities), including allocations and direct charges, are summarized as
follows for the years ended December 31, 2007, 2006 and 2005:
2007 2006 2005
Revenue:
Operating revenues(b) $147,397 $153,176 $176,310
Cellsite allocated revenues(c) 1,418 1,336 1,377
Cost of Service:
Direct telecommunication charges(a) 6,704 7,194 6,355
Long distance charges 4,429 7,082 8,208
Allocation of cost of service(a) 4,207 3,812 3,364
Allocation of switch usage cost(a) 4,697 4,360 5,519
General and Administrative:
Allocation of certain general and administrative expenses(a) 2,867 1,911 1,672
(a) Expenses were allocated based on the Partnership’s percentage of total customers, customer gross additions or minutes-of-use where
applicable. The Partnership believes the allocations are reasonable.
(b) Affiliate operating revenues primarily represent revenues generated from transactions with Cellco, 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.
(c) Cellsite allocated revenues, based on the Partnership’s percentage of minutes of use, result from the Partnership sharing a cell site
with the Catskills RS A Limited Partnership, an affiliate entity.
All affiliate transactions captured above are based on actual amounts directly incurred by Cellco on behalf of the Partnership and/or
allocations from Cellco. Revenues and expenses were allocated based on the Partnership’s percentage of total customers, gross customer
additions or minutes of use where applicable. The General Partner believes the allocations are reasonable. The affiliate transactions are not
necessarily conducted at arm’s length.
The Partnership had net purchases of property, plant, and equipment with affiliates of $3,237, $4,691 and $4,738 in 2007, 2006
and 2005, respectively.
On March 14, 2007, the Partnership entered into lease agreements for the right to use additional spectrum owned by Cellco. The
initial term of these agreements is ten years. The annual lease commitment of $524 represents the costs of financing the spectrum, and
does not necessarily reflect the economic value of the services received. No additional spectrum purchases or lease commitments, other
than the $524, have been entered into by the Partnership as of December 31, 2007.
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