FairPoint Communications 2011 Annual Report Download - page 32

Table of Contents



We originate and terminate calls on behalf of long-distance carriers and other interexchange carriers over our network in exchange for access charges.
Interstate and intrastate access charges represented approximately 35.9% of our total revenues in 2011. Should one or more of these carriers find alternative
means of providing services, loss of revenues from these carriers could have a material adverse impact on our business, financial condition, results of
operations, liquidity and/or the market price of our Common Stock. In addition, should one or more of the carriers that we do business with become insolvent
or experience substantial financial difficulties, our inability to timely collect access charges from them could have a material adverse impact on our business,
financial condition, results of operations, liquidity and/or the market price of our Common Stock.

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We face intense competition from a variety of sources for our voice and Internet services in most of the areas we now serve. 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 most of our services areas, we face competition from wireless carriers for voice services. As technology and economies of scale have
improved, competition from wireless carriers has increased and is expected to further increase. We also face increasing competition from wireline and cable
television companies for our voice and Internet services. We estimate that as of December 31, 2011, most of the customers that we serve had access to voice
and Internet services through a cable television company. Wireline and cable television companies have the ability to bundle their services, which has and is
expected to continue to intensify the competition we face from these providers. VoIP providers, Internet service providers and satellite companies also compete
with our services, and such competition has increased and is expected to continue to increase in the future. 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.
In addition, consolidation and strategic alliances within the communications industry or the development of new technologies have had and may
continue to have an effect on our competitive position. We cannot predict the number of competitors that will emerge, particularly in light of possible regulatory
or legislative actions that could facilitate or impede market entry, but increased competition from existing and new entities could have a material adverse effect
on our business, financial condition, results of operations, liquidity and/or the market price of our Common Stock.
Competition may lead to loss of revenues and profitability as a result of numerous factors, including:
• loss of customers (given the likelihood that when we lose customers for local service, we will also lose them for all related services);
• reduced network usage by existing customers who may use alternative providers for voice and data services;
• reductions in the service prices that may be necessary to meet competition; and
• increases in marketing expenditures and discount and promotional campaigns.

Rapid and significant changes in technology and new service introductions occur frequently in the communications industry and industry standards
evolve continually, including but not limited to a transition in the industry from primarily voice products to data services. We cannot predict the effect of these
changes on our competitive position, profitability or industry. Technological developments may reduce the competitiveness of our networks and require
unbudgeted upgrades or the procurement of additional products that could be expensive and time consuming. In addition, new products and services arising
out of technological developments may reduce the attractiveness of our services. If we fail to adapt successfully to technological changes or obsolescence or fail
to obtain access to important new technologies, we could lose customers and be limited in our ability to attract new customers and sell new services to our
existing customers, which could have a material adverse impact on our business, financial condition, results of operations, liquidity and/or the market price
of our Common Stock.
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