FairPoint Communications 2009 Annual Report Download - page 57

Table of Contents
federal or state legislators or regulators might impose new network access, security, environmental, or other obligations on our business.
 Our local exchange companies that operate pursuant to intrastate rate of return regulation are subject to state
regulatory authority over their intrastate telecommunications service rates. State review of these rates could lead to rate reductions, which in turn could
have a material adverse effect on our business, financial condition, results of operations and liquidity.
For a more thorough discussion of the regulatory issues that may affect our business, see "Item 1. Business—Regulatory Environment."

Not applicable.
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We own or lease all of the properties material to our business. Our headquarters is located in Charlotte, North Carolina, in a leased facility. We also
have administrative offices, maintenance facilities, rolling stock, central office and remote switching platforms and transport and distribution network
facilities in each of the 18 states in which we operate our LEC business. Our administrative and maintenance facilities are generally located in or near the
communities served by our LECs and our central offices are often within the administrative building. Auxiliary battery or other non-utility power
sources are at each central office to provide uninterrupted service in the event of an electrical power failure. Transport and distribution network facilities
include fiber optic backbone and copper wire distribution facilities, which connect customers to remote switch locations or to the central office and to
points of presence or interconnection with the long distance carriers. These facilities are located on land pursuant to permits, easements or other
agreements. Our rolling stock includes service vehicles, construction equipment and other required maintenance equipment.
We believe each of our respective properties is suitable and adequate for the business conducted therein, is being appropriately used consistent with
past practice and has sufficient capacity for the present intended purposes.
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From time to time, we are involved in litigation and regulatory proceedings arising out of our operations. With the exception of the Chapter 11
Cases, management believes that we are not currently a party to any legal or regulatory proceedings, the adverse outcome of which, individually or in
the aggregate, would have a material adverse effect on our financial position or results of operations. To the extent we are currently involved in any
litigation, such proceedings have been generally stayed as a result of the filing of the Chapter 11 Cases. For a discussion of the Chapter 11 Cases, see
"Item. 1—Business—Chapter 11 Cases."
We are subject to certain service quality requirements in the states of Maine, New Hampshire and Vermont. Failure to meet these requirements in
any of these states may result in penalties being assessed by the appropriate state regulatory body. As of December 31, 2009, we have recognized an
estimated liability of $27.5 million for service quality penalties based on metrics defined by PUCs in Maine, New Hampshire and Vermont. However,
at this time, it is unclear what effect the filing of the Chapter 11 Cases will have on the requirements, including service quality penalties, imposed by the
PUCs in Maine, New Hampshire and Vermont as a condition to the approval of the Merger and whether such requirements will be enforceable against
us in the future.
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