Western Conference of Public
Service Commissioners
FairPoint Communications, Inc.
Gene Johnson
Chairman & CEO
June 21, 2005
Discussion Objectives
> FairPoint Overview
> Our Rural Marketplace
> Our Vision & Mission
> Our Broadband Initiative
> Our Community Commitment
> An ILEC Perspective
> Regulatory Concerns
> USF
> Intercarrier Compensation
FairPoint Overview
> Rural telecom consolidator
> Operate 27 ILECs in 17 states
> NYSE (FRP) as of February 4, 2005
Our Rural Marketplace
FairPoint Markets: Communities served by FairPoint
based on access lines by exchange
> 13 access lines per square mile
> 80% exchanges have less than 120
114
80% of our exchanges serve
2,500 access lines fewer than 2,500 access lines
100
> 79% residential
> 36% of our customers have cable 80
modem service available 60
> Very few numbers ported to wireless
during the last year 40
29
> wireless is secondary 20
> Example: Ellensburg is our 3 3
6
0
largest community with >10,000 >7,500 >5,000 >2,500 Deliver extraordinary customer experience
> Provide exceptional voice, data and video
services
> Provide a rewarding and challenging
environment for our employees
> Maximize returns for our shareholders
Our Broadband Penetration
Broadband HSD Penetration Growth
> $25.7 million invested in DSL
as of 12/31/04 18%
> 93% of exchanges are 16%
broadband capable
> 77% of customers DSL 14%
addressable 12%
> within 15,000 feet of a
10%
DSLAM port
> Estimated 60% of customers 8%
have home computers 6%
> 25% choose our
broadband offerings 4%
> Example: Yelm has HSD 2%
penetration of 28% 0%
1Q 02 1Q 03 1Q 04 1Q 05
Note: HSD includes DSL, Cable Modem and Wireless Broadband.
Our Community Commitment
Idaho
> Fremont
> FairPoint is a member of Syringa
Networks
> Developed a network to bring
broadband capabilities to rural Idaho
> Provides fiber connectivity
> Provides an alternate means of
transport for carriers and customers
> Vital to VoIP deployment
> Fremont County 4-H club sponsor
> Employees are active members in most
local Chambers of Commerce
Our Community Commitment
Washington
> Ellensburg
> FairPoint provides scholarships for local students to attend
Central Washington University
> Employees are heavily involved in “Destination Development”
committee for the Ellensburg Chamber of Commerce
> Yelm
> Employees received the School District’s “Business Partner
Award 2004-2005”
> Employees actively participate in Community Education
Advisory Councils
> Raised money to provide “back to school kits” for
approximately 1,000 kids
Our Community Commitment
Colorado
> Sheridan Lake
> $300,000 RUS grant
> Installed 17 miles of fiber to nearest
Internet backbone connection point
> Installed 10 state of the art workstations
and ancillary routers and servers to
establish a local school as a community-
wide communications center
Our Community Commitment
Community Success is
Key to our Survival
> FairPoint employees are
personally involved in their
communities
> FairPoint provides
scholarships and
internships to students in
our service areas
> FairPoint cares about the
little things that make a
place to live a community
An ILEC Perspective
> Without IP, there is no VOIP
> Limited cable modem coverage
> IP-based services rely on ILEC-provided broadband
network
> If we don’t serve, who will?
> Wireless and cable modem service not ubiquitous in
rural communities
> FairPoint must invest in and serve these communities
> FairPoint is the carrier of last resort
> FairPoint is rural America’s link to affordable
technology and services
> FairPoint has an information-age responsibility
An ILEC Perspective
> We must invest for rural
America to prosper
> FairPoint provides rural
businesses and residents with
access to the information economy
> No “Greenfield” opportunities
> Our network must support both
legacy and IP architectures
> Rural economies depend on
wireline companies
Regulatory Concerns
> Regulatory Uncertainty
> A threat to infrastructure investment
> Capital markets look for stability and certainty
> Revenue stream approach
> End user
> Access (network)
> USF
> Regulatory Parity
> Establish a benchmark local rate to stabilize
high cost funds and provide equality
> Revenues
> Predictable
> Sustainable
Regulatory Concerns
> USF
> The wobbling fund
> Designed to encourage network investment and
deployment of services in rural America
> Contribution
> Stabilize base by broadening
> Distribution
> More stringent ETC certification process
> Basis of support- own embedded costs
> Intended use of funds
> Maintain reasonable rates
> E911
> Equal access
Regulatory Concerns
Intercarrier Compensation
> VOIP, VNXX, and ISP providers should pay to use
our networks
> Eliminate regulatory arbitrage
> Establish rules to limit phantom traffic
FairPoint supports
> An elective capacity-based plan
> The Rural Alliance
> Benchmarks
> Unified access rates
FairPoint’s Commitment
We are committed to..
> Providing exceptional voice, data and
video services to rural America
> Deploying new, exciting technology
> Partnering with rural communities to foster
economic development
We need…
> Supportive public policy and financial
environments
Thank You