FairPoint Communications 2010 Annual Report Download - page 18

Table of Contents
Our systems are supported by a combination of employees and contractors. Our internal IT group supports data center operations, data network
operations, systems analysis and custom software development. We use professional services firms for the majority of software maintenance and
enhancements. In the future, we expect to increase our IT staff to transition certain analysis, design and testing functions from third parties to our own internal
organization.

Rapid and significant changes in technology are underway in the communications industry. Our success depends, in part, on our ability to anticipate and
adapt to technological changes. With this in mind, we are in the process of building and expanding our advanced Next Generation Network in our Northern
New England operations. The Next Generation Network is an IP/MPLS network that is fully fiber optic based. We believe this network architecture will enable
us to efficiently respond to these technological changes.
Our LEC network consists of 95 host central offices and 417 remote central offices, all with advanced digital switches. 99.5% of our central offices are
served by fiber optic facilities which we own. The primary interconnection with other incumbent carriers is also fiber optic. Our outside plant consists of both
fiber optic and copper distribution networks.
Our fiber optic transport system is a combination of Synchronous Optical Network (“SONET”), Dense Wave Division Multiplexing (“DWDM”), and
Ethernet transport capable of satisfying customer demand for high bandwidth transport services. This system supports advanced services including Carrier
Ethernet Services (“CES”) and legacy data products such as Frame Relay and Asynchronous Transfer Mode (“ATM”), facilitating delivery of advanced
services as demand warrants.
In our LEC markets, DSL-enabled access technology has been deployed to provide significant broadband capacity to our customers. As of December 31,
2010, nearly all of our central offices are capable of providing broadband services through DSL technology, cable modem and wireless broadband.

We face intense competition from a variety of sources for our voice and Internet services in most of the areas we now serve, and expect that such
competition will continue to intensify in the future. Regulations and technology change quickly in the communications industry, and changes in these factors
historically have had, and may in the future have, a significant impact on competitive dynamics. In particular, the 1996 Act and other actions taken by the
FCC and state regulatory authorities have promoted competition in the provision of communications services. In addition, many of our competitors have
access to a larger workforce and have substantially greater name-brand recognition and financial, technological and other resources than we do. Although
many of the competitive challenges now confronting larger regulated telephone companies are limited in the rural areas we serve, these challenges are more
prevalent in the small urban areas we serve. Sources of competition include, but are not limited to, the following:

In most of our service areas, we face competition from wireless carriers for voice services. As technology and economies of scale improve, competition from
wireless carriers is expected to continue to increase. In addition, the FCC’s requirement that telephone companies offer wireline-to-wireless number portability
has increased the competition we face from wireless carriers. Our Northern New England operations service areas represent both rural and small urban
markets and tend to have better wireless coverage compared to Legacy FairPoint’s predominantly rural service areas. Wireless competition is more robust in
these NNE service areas. However, if and to the extent wireless service improves in the areas we serve, and specifically in the Legacy FairPoint service areas,
we expect to face further competition from wireless providers.

We also face competition from wireline and cable competitors, such as competitive local exchange carriers (“CLECs”) and cable television providers.
CLECs either maintain their own facilities or lease services at wholesale rates.
17