FairPoint Communications 2011 Annual Report Download - page 33

Table of Contents



As of December 31, 2011, we operate in 18 states with approximately 1.3 million access line equivalents, of which approximately 85% are located in
Maine, New Hampshire and Vermont. As a result of this geographic concentration, our financial results will depend significantly upon economic conditions
and consumer trends in these markets. From January 1, 2011 through December 31, 2011, our Northern New England operations experienced a 5.3% decline
in total access line equivalents in service, compared to a decline of 3.5% for the Telecom Group during the same period. A deterioration in economic conditions
in any of these markets could result in a further decrease in demand for our services and resulting loss of access line equivalents which could have a material
adverse effect on our business, financial condition, results of operations, liquidity and/or the market price of our Common Stock.
In addition, if state regulators in Maine, New Hampshire or Vermont were to take an action that is adverse to our operations in those states, we could
suffer greater harm from that action by state regulators than we would from action in other states because of the concentration of our operations in those states.


We have agreements with outside service providers to perform a portion of our billing functions and for our provision of long-distance and bandwidth
services. We also rely on certain third parties for information technology services, including network support and improvements.
If these service providers are unable to adequately perform such services or if one of them experiences a significant degradation or failure with respect to
such services, it could result in disruptions in our billing, information technology systems and/or our long-distance and bandwidth services. Furthermore, if
these agreements are terminated for any reason, we may be unable to find an alternative service provider in a timely manner or on terms acceptable to us, and
may be unable ourselves to perform the services they provide.
With respect to the agreements governing our long-distance and bandwidth services, these agreements are based, in part, on our estimate of future supply
and demand and may contain minimum volume commitments. If we overestimate demand, we may be forced to pay for services we do not need. If we
underestimate demand, we may need to acquire additional capacity on a short-term basis at unfavorable prices, assuming additional capacity is available. If
additional capacity is not available, we will not be able to meet this demand. In addition, if we cannot meet any minimum volume commitments, we may be
subject to underutilization charges, termination charges, or rate increases.
If any of the foregoing events occurs with respect to our third-party providers, our business, financial condition, results of operations, liquidity and/or
the market price of our Common Stock could be materially adversely affected.

To be successful, we will need to continue to provide our customers reliable service over our expanded network. Some of the risks to our network and
infrastructure include:
• physical damage to access lines;
• widespread power surges or outages;
• software defects in critical systems;
32