UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended September 30, 2007.           
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission File Number 333-56365

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FairPoint Communications, Inc.(Exact Name of Registrant as Specified in Its Charter)

|Delaware(State or Other Jurisdiction of
Incorporation or Organization)                                |  | 13-3725229(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|521 East Morehead Street, Suite 250
Charlotte, North Carolina(Address of Principal Executive Offices) |  | 28202(Zip Code)                               
|(704) 344-8150(Registrant's telephone number, including area code)                                   

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Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large
accelerated filer o                Accelerated filer ý                Non-accelerated
filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes o No ý

As of November 1, 2007, there were 35,228,122 shares of the Registrant's common stock, par value $0.01 per share, outstanding.

Documents
incorporated by reference:None



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INDEX

|                              |  |                                                                                                                                       |  | Page
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                      
|Item 1.                       |  | Financial Statements                                                                                                                  |  | 4   
|                              |  | Condensed Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006                                      |  | 4   
|                              |  | Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and 2006 (unaudited)           |  | 5   
|                              |  | Condensed Consolidated Statement of Stockholders' Equity for the nine months ended September 30, 2007 (unaudited)                     |  | 6   
|                              |  | Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2007 and 2006 (unaudited) |  | 7   
|                              |  | Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (unaudited)                     |  | 8   
|                              |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                      |  | 9   
|Item 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                 |  | 19  
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                            |  | 32  
|Item 4.                       |  | Controls and Procedures                                                                                                               |  | 33  
|PART II. OTHER INFORMATION    |  |                                                                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                                                                     |  | 34  
|Item 1A.                      |  | Risk Factors                                                                                                                          |  | 34  
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                           |  | 34  
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                                       |  | 36  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                                   |  | 36  
|Item 5.                       |  | Other Information                                                                                                                     |  | 36  
|Item 6.                       |  | Exhibits                                                                                                                              |  | 36  
|                              |  | Signatures                                                                                                                            |  | 37  

2

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PART IFINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements

Some statements in this Quarterly Report are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, or the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Forward-looking statements may relate to, among other things:



These
forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Quarterly
Report that are not historical facts. When used in this Quarterly Report, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally
intended to identify forward looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual
results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors
discussed in this Quarterly Report and in Exhibit 99.1 to this Quarterly Report. You should not place undue reliance on such
forward-looking statements, which are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities and Exchange
Commission, or the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your
attention is directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the SEC on Forms 10-K, 10-Q and 8-K
and Schedule 14A.

Except as otherwise required by the context, references in this Quarterly Report to "FairPoint," "our company," "we," "us," or "our" refer to the combined
business of FairPoint Communications, Inc. and all of its subsidiaries. Except as otherwise required by the context, all references to the "Company" refer to FairPoint
Communications, Inc. excluding its subsidiaries.

3

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Item 1.    Financial Statements.

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Balance Sheets

|                                                                                                                   |                                                    | September 30,
2007 |         | December 31,
2006 |  
|------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------- | ------------------ | ------- | ----------------- | -
|
|
|Assets                                                                                                             |                                                    |                    |         |                   |  
|Current assets:                                                                                                    |                                                    |                    |         |                   |  
|                                                                                                                   | Cash                                               |                    | $       | 8,842             |  
|                                                                                                                   | Current receivables, net                           |                    |         | 49,349            |  
|                                                                                                                   | Other current assets                               |                    |         | 11,965            |  
|                                                                                                                   | Deferred income tax, net                           |                    |         | 8,387             |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Total current assets                                                                                               |                                                    |                    | 78,543  |                   |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Property, plant, and equipment, net of accumulated depreciation of $621.6 million and $583.0 million, respectively |                                                    |                    | 248,365 |                   |  
|Investments                                                                                                        |                                                    |                    | 6,529   |                   |  
|Goodwill                                                                                                           |                                                    |                    | 498,913 |                   |  
|Deferred income tax, net                                                                                           |                                                    |                    | 38,162  |                   |  
|Deferred charges and other assets                                                                                  |                                                    |                    | 20,260  |                   |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Total assets                                                                                                       |                                                    | $                  | 890,772 |                   | $
|                                                                                                                   |                                                    |                    |         |                   |  
|Liabilities and Stockholders' Equity                                                                               |                                                    |                    |         |                   |  
|Current liabilities:                                                                                               |                                                    |                    |         |                   |  
|                                                                                                                   | Accounts payable                                   |                    | $       | 26,270            |  
|                                                                                                                   | Dividends payable                                  |                    |         | 13,953            |  
|                                                                                                                   | Current portion of long-term debt                  |                    |         | 743               |  
|                                                                                                                   | Demand notes payable                               |                    |         | 260               |  
|                                                                                                                   | Accrued interest payable                           |                    |         | 712               |  
|                                                                                                                   | Other accrued liabilities                          |                    |         | 21,234            |  
|                                                                                                                   | Liabilities of discontinued operations             |                    |         | 475               |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Total current liabilities                                                                                          |                                                    |                    | 63,647  |                   |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Long-term liabilities:                                                                                             |                                                    |                    |         |                   |  
|                                                                                                                   | Long-term debt, net of current portion             |                    |         | 607,294           |  
|                                                                                                                   | Deferred credits and other long-term liabilities   |                    |         | 16,176            |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Total long-term liabilities                                                                                        |                                                    |                    | 623,470 |                   |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Minority interest                                                                                                  |                                                    |                    | 7       |                   |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Stockholders' equity:                                                                                              |                                                    |                    |         |                   |  
|                                                                                                                   | Common stock                                       |                    |         | 353               |  
|                                                                                                                   | Additional paid-in capital                         |                    |         | 491,325           |  
|                                                                                                                   | Accumulated deficit                                |                    |         | (285,990          | )
|                                                                                                                   | Accumulated other comprehensive (loss) income, net |                    |         | (2,040            | )
|                                                                                                                   |                                                    |                    |         |                   |  
|Total stockholders' equity                                                                                         |                                                    |                    | 203,648 |                   |  
|                                                                                                                   |                                                    |                    |         |                   |  
|Total liabilities and stockholders' equity                                                                         |                                                    | $                  | 890,772 |                   | $
|                                                                                                                   |                                                    |                    |         |                   |  

See
accompanying notes to condensed consolidated financial statements (unaudited)

4

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statements of Operations        (Unaudited)

|                                     |                                                             | Three months ended
September 30, |         | Nine months ended
September 30, |  
|------------------------------------ | ----------------------------------------------------------- | -------------------------------- | ------- | ------------------------------- | -
|
|
|Revenues                             |                                                             | $                                | 75,707  |                                 | $
|                                     |                                                             |                                  |         |                                 |  
|Operating expenses:                  |                                                             |                                  |         |                                 |  
|                                     | Operating expenses, excluding depreciation and amortization |                                  |         | 54,846                          |  
|                                     | Depreciation and amortization                               |                                  |         | 12,624                          |  
|                                     | Gain on sale of operating assets                            |                                  |         | (2,164                          | )
|                                     |                                                             |                                  |         |                                 |  
|Total operating expenses             |                                                             |                                  | 65,306  |                                 |  
|                                     |                                                             |                                  |         |                                 |  
|Income from operations               |                                                             |                                  | 10,401  |                                 |  
|                                     |                                                             |                                  |         |                                 |  
|Other income (expense):              |                                                             |                                  |         |                                 |  
|                                     | Net gain on sale of investments and other assets            |                                  |         | 2,759                           |  
|                                     | Interest and dividend income                                |                                  |         | 294                             |  
|                                     | Interest expense                                            |                                  |         | (9,924                          | )
|                                     | Loss on derivative instruments                              |                                  |         | (5,669                          | )
|                                     | Equity in net earnings of investees                         |                                  |         | 320                             |  
|                                     |                                                             |                                  |         |                                 |  
|Total other (expense) income         |                                                             |                                  | (12,220 | )                               |  
|                                     |                                                             |                                  |         |                                 |  
|(Loss) income before income taxes    |                                                             |                                  | (1,819  | )                               |  
|Income tax expense                   |                                                             |                                  | (3,372  | )                               |  
|Minority interest                    |                                                             |                                  |        |                                 |  
|                                     |                                                             |                                  |         |                                 |  
|Net (loss) income                    |                                                             | $                                | (5,191  | )                               | $
|                                     |                                                             |                                  |         |                                 |  
|Weighted average shares outstanding: |                                                             |                                  |         |                                 |  
|                                     | Basic                                                       |                                  |         | 34,770                          |  
|                                     |                                                             |                                  |         |                                 |  
|                                     | Diluted                                                     |                                  |         | 34,770                          |  
|                                     |                                                             |                                  |         |                                 |  
|Earnings (loss) per share:           |                                                             |                                  |         |                                 |  
|                                     | Basic                                                       |                                  | $       | (0.15                           | )
|                                     |                                                             |                                  |         |                                 |  
|                                     | Diluted                                                     |                                  | $       | (0.15                           | )
|                                     |                                                             |                                  |         |                                 |  

See
accompanying notes to condensed consolidated financial statements (unaudited)

5

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statement of Stockholder's Equity (Unaudited)        Nine Months Ended September 30, 2007    
(in thousands)

|                                                  |  | Common Stock |   |   |     | Accumulated
other
comprehensive
income (loss) |   |         |   |   |       
|------------------------------------------------- |  | ------------ | - | - | --- | --------------------------------------------- | - | ------- | - | - | ------
|
|
|Balance at December 31, 2006                      |  | 35,218       |   | $ | 352 |                                               | $ | 530,536 |   | $ | 5,376 
|                                                  |  |              |   |   |     |                                               |   |         |   |   |       
|Net income                                        |  |             |   |   |    |                                               |   |        |   |   |      
|Issuance of restricted shares, net of forfeitures |  | 56           |   |   | 1   |                                               |   |        |   |   |      
|Restricted stock cancelled for withholding tax    |  | (50          | ) |   |    |                                               |   | (855    | ) |   |      
|Exercise of restricted units                      |  | 4            |   |   |    |                                               |   |        |   |   |      
|Stock based compensation expense                  |  |             |   |   |    |                                               |   | 3,012   |   |   |      
|Dividends declared                                |  |             |   |   |    |                                               |   | (41,809 | ) |   |      
|Tax benefit from stock based compensation expense |  |             |   |   |    |                                               |   | 441     |   |   |      
|Unrealized loss from cash flow hedges, net of tax |  |             |   |   |    |                                               |   |        |   |   | (7,416
|                                                  |  |              |   |   |     |                                               |   |         |   |   |       
|Balance at September 30, 2007                     |  | 35,228       |   | $ | 353 |                                               | $ | 491,325 |   | $ | (2,040
|                                                  |  |              |   |   |     |                                               |   |         |   |   |       

See
accompanying notes to condensed consolidated financial statements (unaudited)

6

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statements of Comprehensive Income        (Unaudited)

|                                   |                   | Three months ended
September 30,                                                                                                                                                                                                                                                                                         |        | Nine months ended
September 30,
|---------------------------------- | ----------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------ | -------------------------------
|
|
|Net (loss) income                  |                   | $                                                                                                                                                                                                                                                                                                                        | (5,191 | )                              
|                                   |                   |                                                                                                                                                                                                                                                                                                                          |        |                                
|Other comprehensive income (loss): |                   |                                                                                                                                                                                                                                                                                                                          |        |                                
|                                   | Cash flow hedges: |                                                                                                                                                                                                                                                                                                                          |        |                                
|                                   |                   | Change in net unrealized gain (loss), net of tax expense (benefit) of $5.1 million and $(3.4) million for the three months ended September 30, 2007 and 2006, respectively, and net of tax benefit of
$(4.5) million and tax expense of $0.1 million for the nine months ended September 30, 2007 and 2006, respectively |        |                                
|                                   |                   |                                                                                                                                                                                                                                                                                                                          |        |                                
|Comprehensive income               |                   | $                                                                                                                                                                                                                                                                                                                        | 3,199  |                                
|                                   |                   |                                                                                                                                                                                                                                                                                                                          |        |                                

See
accompanying notes to condensed consolidated financial statements (unaudited)

7

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statements of Cash Flows        (Unaudited)

|                                                                                                           |                                                            | Nine months ended
September 30,                                              |                                               
|---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------------
|
|
|Cash flows from operating activities:                                                                      |                                                            |                                                                              |                                               
|                                                                                                           | Net income                                                 |                                                                              | $                                             
|                                                                                                           |                                                            |                                                                              |                                               
|Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: |                                                            |                                                                              |                                               
|                                                                                                           |                                                            | Deferred income taxes                                                        |                                               
|                                                                                                           |                                                            | Amortization of debt issue costs                                             |                                               
|                                                                                                           |                                                            | Depreciation and amortization                                                |                                               
|                                                                                                           |                                                            | Minority interest in income of subsidiaries                                  |                                               
|                                                                                                           |                                                            | Income from equity method investments                                        |                                               
|                                                                                                           |                                                            | Net gain on sale of investments and other assets                             |                                               
|                                                                                                           |                                                            | Gain on sale of operating assets                                             |                                               
|                                                                                                           |                                                            | Loss on derivative instruments                                               |                                               
|                                                                                                           |                                                            | Other non cash items                                                         |                                               
|                                                                                                           |                                                            | Changes in assets and liabilities arising from operations:                   |                                               
|                                                                                                           |                                                            |                                                                              | Accounts receivable and other current assets  
|                                                                                                           |                                                            |                                                                              | Accounts payable and other accrued liabilities
|                                                                                                           |                                                            |                                                                              | Income taxes                                  
|                                                                                                           |                                                            |                                                                              | Other assets/liabilities                      
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|Cash flows from investing activities of continuing operations:                                             |                                                            |                                                                              |                                               
|                                                                                                           | Net capital additions                                      |                                                                              |                                               
|                                                                                                           | Distributions from investments                             |                                                                              |                                               
|                                                                                                           | Net proceeds from sales of investments and other assets    |                                                                              |                                               
|                                                                                                           | Acquisitions of telephone properties, net of cash acquired |                                                                              |                                               
|                                                                                                           | Other, net                                                 |                                                                              |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            | Net cash provided by (used in) investing activities of continuing operations |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|Cash flows from financing activities of continuing operations:                                             |                                                            |                                                                              |                                               
|                                                                                                           | Loan origination costs                                     |                                                                              |                                               
|                                                                                                           | Proceeds from issuance of long-term debt                   |                                                                              |                                               
|                                                                                                           | Repayments of long-term debt                               |                                                                              |                                               
|                                                                                                           | Proceeds from exercise of stock options                    |                                                                              |                                               
|                                                                                                           | Dividends paid to common stockholders                      |                                                                              |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            | Net cash used in financing activities of continuing operations               |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           | Cash flows of discontinued operations:                     |                                                                              |                                               
|                                                                                                           |                                                            | Operating cash flows, net used in                                            |                                               
|                                                                                                           |                                                            |                                                                              |                                               
|                                                                                                           |                                                            | Net increase (decrease) in cash                                              |                                               
|Cash, beginning of period                                                                                  |                                                            |                                                                              | 3,805                                         
|                                                                                                           |                                                            |                                                                              |                                               
|Cash, end of period                                                                                        |                                                            | $                                                                            | 8,842                                         
|                                                                                                           |                                                            |                                                                              |                                               

See accompanying notes to condensed consolidated financial statements (unaudited)

8

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(1) Organization and Basis of Financial Reporting

On February 8, 2005, the Company consummated an initial public offering, or the initial public offering, of 25,000,000 shares of its common stock, par
value $0.01 per share, or common stock, at a price to the public of $18.50 per share. In connection with the initial public offering, the Company entered into a new senior secured credit facility, or
the credit facility, with a syndicate of financial institutions, including Deutsche Bank Trust Company Americas, as administrative agent. The credit facility is comprised of a revolving facility in an
aggregate principal amount of $100 million (less amounts reserved for letters of credit) and a term facility in an aggregate principal amount of $588.5 million (including a
$22.5 million delayed draw facility). The revolving facility has a six year maturity and the term facility has a seven year maturity.

The
accompanying unaudited condensed consolidated financial statements of FairPoint Communications, Inc. and subsidiaries have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission for quarterly reports on Form 10-Q. Accordingly, certain information and disclosures normally included in annual financial statements
prepared in accordance with U.S. generally accepted accounting principles, or GAAP, have been omitted and condensed pursuant to such rules and regulations. In the opinion of the Company's management,
the unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of FairPoint's results of operations,
financial position, and cash flows. The results of operations for the interim periods are not necessarily indicative of the results of operations which might be expected for the entire year. The
unaudited condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2006.
Management views its business of providing video, data and voice communication services to residential and business customers as one business segment and currently aggregates these revenue streams
under the quantitative and qualitative thresholds defined in Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information."

(2) Certain Transactions

Our board of directors has adopted a dividend policy which reflects our judgment that our stockholders would be better served if we distributed a substantial
portion of our cash available for distribution to our stockholders instead of retaining it in our business. As a result of this dividend policy, we may not have significant cash available to meet any
unanticipated liquidity requirements, other than available borrowings, if any, under our credit facility. If we do not have sufficient cash to meet such unanticipated liquidity requirements, our
financial condition and our business will suffer. However, our board of directors may, in its discretion, amend or repeal the dividend policy to decrease the level of dividends provided for or
discontinue entirely the payment of dividends.

On
September 13, 2007, the Company declared a dividend totaling $13.9 million, or $0.39781 per share of common stock, which was paid on October 16, 2007 to holders
of record as of September 28, 2007. For the nine months ended September 30, 2007, the Company paid dividends totaling $41.8 million, or $1.19343 per share of common stock.

9

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On January 15, 2007, the Company entered into an Agreement and Plan of Merger with Verizon Communications Inc., or Verizon, and Northern New England
Spinco Inc., or Spinco, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of April 20, 2007, Amendment No. 2 to Agreement and Plan of Merger, dated as
of June 28, 2007, and Amendment No. 3 to Agreement and Plan of Merger, dated as of July 3, 2007, referred to herein as the Merger Agreement, pursuant to which Spinco will merge
with and into the Company with the Company continuing as the surviving corporation for legal purposes, which transaction is referred to herein as the Merger. Spinco is a newly formed wholly-owned
subsidiary of Verizon that will own or indirectly own Verizon's local exchange and related business activities in Maine, New Hampshire and Vermont. The Company expects to be the acquiree for
accounting purposes. Consequently, certain Merger related costs that are normally
capitalized will be expensed as incurred in connection with the transaction and FairPoint's assets and liabilities will be recorded at fair value upon acquisition. The Merger is subject to regulatory
approval.

As
of September 30, 2007, approximately $44.6 million of costs related to the Merger had been capitalized and $40.8 million had been expensed. These amounts were
partially offset by approximately $26.2 million and $12.3 million, respectively, for amounts that have or will be reimbursed to the Company by Verizon pursuant to the Merger Agreement.
Under the terms of the Merger Agreement, Verizon will reimburse the Company for up to $40.0 million of certain qualified transition costs (subject to the specific terms contained in the Merger
Agreement). As of September 30, 2007, approximately $20.2 million was recorded within current receivables.

On
January 15, 2007, the Company entered into a Master Services Agreement, or MSA, with Capgemini U.S. LLC. Through the MSA, the Company intends to replicate and/or replace
certain existing Verizon systems during a phased period lasting from January 2007 through the fourth quarter of 2008. The Company is currently in the application development stage of the project and
the Company will capitalize certain costs incurred in connection with developing or obtaining internal use software in accordance with American Institute of Certified Public Accountants Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Capitalized costs include direct development costs associated with internal use
software, including direct labor costs and external costs of materials and services. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as
incurred.

(3) Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." The Company's effective income tax rate for the
interim periods presented is based on the Company's actual effective tax rate for the nine months ended September 30, 2007 and differs from the federal and state statutory income tax rate
primarily due to nondeductible acquisition expenses.

For
the three months ended September 30, 2007, the Company recorded income tax expense of $3.4 million, resulting in an effective rate of (185.4%) compared to 38.0% for the
three months ended September 30, 2006. For the nine months ended September 30, 2007, the Company recorded income tax expense of $18.0 million, resulting in an effective tax rate
of 41.3% compared to 38.8% for the nine months ended September 30, 2006.

10

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During
the nine months ended September 30, 2007, the Company disposed of its 7.5% ownership interest in the Orange County-Poughkeepsie Limited Partnership and disposed of the
assets of Yates City Telephone Company, resulting in the recognition of gains of $44.9 million and $2.2 million, respectively, for federal and state income tax purposes that is taxed at
the Company's blended statutory rate of 37.6%. Furthermore, the Company effectively settled tax exposure items totaling $2.7 million with the Internal Revenue Service, or IRS, resulting in a
reduction of the Financial Accounting Standards Board, or FASB, Interpretation No. (FIN) 48, "Accounting for Uncertainty in Income Taxes," liability and income tax expense. The Company also recognized
other discrete items resulting in a reduction of income tax expense of $536,000. The Company treated these items as discrete events during the nine months ended September 30, 2007. Excluding
these discrete events, the Company's effective tax rate for the nine months ended September 30, 2007 was (97%).

In
2007, the Company considered all estimated expenses related to the Merger and determined that some of these expenses were not deductible for income tax purposes. Excluding the impact
of the non-deductible transaction costs attributable to the Merger, the annualized effective rate will be approximately 38%.

In
assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company expects
that future taxable income will more likely than not be sufficient to recover net deferred tax assets.

The
Company adopted FIN 48 on January 1, 2007. FIN 48 requires applying a "more likely than not" threshold to the recognition and de-recognition of tax positions. The
Company's unrecognized tax benefits totaled $3.7 million as of January 1, 2007 and $1.0 million as of September 30, 2007, of which $1.0 million would impact its
effective tax rate, if recognized. There are no amounts recorded for interest and penalties because the Company has net operating loss carryforwards which would be utilized to offset any actual cash
payments. Based on the outcome of certain examinations, the expiration of the statute of limitations for certain jurisdictions, or favorable resolution of the matters, we believe that within the next
12 months it is reasonably possible that none of our previously unrecognized tax benefits could be recorded to our income tax provision. The tax years subject to examination in the U.S. begin
in 2001 due to net operating loss carryforwards which generally serve to extend the period of time for examination. Tax years are typically subject to examination for three years after the filing of
the tax return.

(4) Discontinued Operations and Restructure Charges

In November 2001, the Company announced its plan to discontinue the competitive communications business operations of its wholly owned subsidiary, FairPoint
Carrier Services, Inc., or Carrier Services.

Net
liabilities of the discontinued competitive communications operations as of September 30, 2007 and December 31, 2006 were $0.5 million and $0.5 million,
respectively.

11

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(5) Interest Rate Swap Agreements

The Company assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected
future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate cash flow risk attributable to both the Company's outstanding
and forecasted debt obligations. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in
interest rates on the Company's future cash flows.

The
Company uses variable and fixed-rate debt to finance its operations, capital expenditures and acquisitions. The variable-rate debt obligations expose the
Company to variability in interest payments due to changes in interest rates. The Company believes it is prudent to limit the variability of a portion of its interest payments. To meet this objective,
from time to time, the Company enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash
flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company pays a variable interest rate plus an additional payment if the variable rate payment
is below a contractual rate, or it receives a payment if the variable rate payment is above the contractual rate. The chart below provides details of each of the Company's interest rate swap
agreements.

|Effective Date:  |  | Notional Amount |               | Rate |      | Rate, including
applicable margin |      | Expiration Date
|---------------- |  | --------------- | ------------- | ---- | ---- | --------------------------------- | ---- | ---------------
|February 8, 2005 |  | $               | 130.0 Million |      | 3.76 | %                                 | 5.51 | %              
|February 8, 2005 |  | $               | 130.0 Million |      | 3.98 | %                                 | 5.73 | %              
|February 8, 2005 |  | $               | 130.0 Million |      | 4.11 | %                                 | 5.86 | %              
|April 29, 2005   |  | $               | 50.0 Million  |      | 4.72 | %                                 | 6.47 | %              
|June 30, 2005    |  | $               | 50.0 Million  |      | 4.69 | %                                 | 6.44 | %              
|June 30, 2006    |  | $               | 50.0 Million  |      | 5.36 | %                                 | 7.11 | %              

As
a result of these swap agreements, as of September 30, 2007, approximately 89% of the Company's indebtedness bore interest at fixed rates rather than variable rates. Effective
on September 30, 2005, the Company amended the terms of its credit facility. This amendment reduced the effective interest rate margins applicable to the Company's interest rate swap agreements
by 0.25% to 1.75%.

The
aforementioned interest rate swaps qualify as cash flow hedges for accounting purposes. The effect of hedge ineffectiveness on net income was insignificant for the three and nine
months ended September 30, 2007. At September 30, 2007, the fair market value of these swaps was a $3.3 million liability and has been recorded, net of tax of $1.2 million,
as a decrease to accumulated other comprehensive income (loss). Of the $3.3 million, $1.2 million is included in other current assets and $4.5 million is included in deferred
credits and other long-term liabilities.

As
of September 30, 2007, the Company had entered into four additional swap agreements which had not reached their effective date. One swap agreement is for a notional amount of
$65.0 million at a rate of 4.91% (or 6.66% including the applicable margin), is effective as of December 31, 2007 and expires on December 30, 2011. A second swap agreement is for
a notional amount of $100.0 million at a rate of 5.02% (or 6.77% including the applicable margin), is effective as of December 31, 2008 and expires on December 31, 2010. The third
swap agreement is for a notional amount of $75.0 million at a

12

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rate
of 5.46% (or 7.21% including the applicable margin), is effective as of December 31, 2007 and expires on December 31, 2010. The fourth swap agreement is for a notional amount of
$150.0 million at a rate of 5.65% (or 7.40% including the applicable margin), is effective as of December 31, 2009 and expires on December 31, 2011. These swaps qualify as cash
flow hedges for accounting purposes.

In
addition, during the third quarter of 2007, the Company entered into four forward starting swap agreements, which are contingent upon the closing of the Merger, for a total notional
amount of $400 million. These swaps did not meet the criteria for hedge accounting. As of September 30, 2007, the changes in fair value of the contingent swap contracts resulted in a
$5.7 million pre-tax loss included in other income (expense) on our condensed consolidated statement of operations. Of the $5.7 million liability, $0.8 million is
included in other accrued liabilities and $4.9 million is included in deferred credits and other long-term liabilities on the condensed consolidated balance sheets.

(6) Investments

The Company had a 7.5% ownership in Orange County-Poughkeepsie Limited Partnership, which was consistently accounted for under the equity method using a
three-month lag due to the timing of our receipt of the partnership financial statements. On January 15, 2007, Taconic Telephone Corp., or Taconic, a subsidiary of the Company, entered into a
Partnership Interest Purchase Agreement, or the O-P Interest Purchase Agreement, with Cellco Partnership d/b/a Verizon Wireless and Verizon Wireless of the East LP, pursuant to which the
Company agreed to sell its 7.5% limited partnership interest in Orange County-Poughkeepsie Limited Partnership to Cellco Partnership, or the O-P Disposition. The O-P
Disposition closed on April 10, 2007. In the second quarter of 2007, the Company recorded a gain on the O-P Disposition of approximately $46.4 million. Total proceeds from
the sale were $55.0 million, of which approximately $1.2 million was paid to the Company in the form of distributions from Orange County-Poughkeepsie Limited Partnership in the first and
second quarters of 2007.

Summary
financial information for Orange County-Poughkeepsie Limited Partnership follows as of and for the periods included in the company's condensed consolidated financial statements:

As of
December 31, 2006(in thousands)Current assets

$
11,304Property, plant and equipment, net


38,917Total assets

$
50,221Total liabilities

$
431Partners' capital


49,790$
50,221


Three months ended
June 30,
2006

Nine months ended
June 30,
2006(in thousands)Revenues

$
42,588

$
131,282Operating income


32,891


103,769Net income


33,159


104,548


13

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In
August 2007, the Company received $2.7 million from the escrow account related to the sale of its investment in Southern Illinois Cellular Corporation, which was completed in
2006.

The
Company also has other investments in non-marketable securities which are accounted for using the cost and equity methods of accounting. The Company continually monitors
all of these investments for possible impairment by evaluating the financial performance of the businesses in which it invests and comparing the carrying value of the investment to quoted market
prices (if available), or the fair values of similar investments, which in certain instances, is based on traditional valuation models utilizing multiples of cash flows. When circumstances indicate
that a decline in the fair value of the investment has occurred and the decline is other than temporary, the Company records the decline in value as a realized impairment loss and a reduction in the
cost of the investment.

(7) Long Term Debt

Long term debt at September 30, 2007 and December 31, 2006 is shown below:

|                                                                                                                                                            |                                              | September 30,
2007 |         | December 31,
2006 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------ | ------- | ----------------- | -
|
|Senior secured notes (credit facility), variable rates ranging from 7.12% to 9.18% (weighted average rate of 7.17%) at September 30, 2007, due 2011 to 2012 |                                              | $                  | 604,090 |                   | $
|Senior notes, 11.875%, due 2010                                                                                                                             |                                              |                    | 2,050   |                   |  
|Senior notes to RTFC, fixed rate, ranging from 8.2% to 9.2%, due 2009 to 2014                                                                               |                                              |                    | 1,897   |                   |  
|                                                                                                                                                            |                                              |                    |         |                   |  
|                                                                                                                                                            | Total outstanding long-term debt             |                    |         | 608,037           |  
|Less current portion                                                                                                                                        |                                              |                    | (743    | )                 |  
|                                                                                                                                                            |                                              |                    |         |                   |  
|                                                                                                                                                            | Total long-term debt, net of current portion |                    | $       | 607,294           |  
|                                                                                                                                                            |                                              |                    |         |                   |  

The
approximate aggregate maturities of long-term debt for each of the five years subsequent to September 30, 2007 are as follows (in thousands):

Year ending September 30,2008

$
7432009


3072010


2,2082011


15,7582012


588,679Thereafter


342$
608,037


The
Company has a credit facility consisting of a revolving facility in an aggregate principal amount of up to $100.0 million and a term facility in an aggregate principal amount
of $588.5 million.

The
term facility matures in February 2012 and the revolving facility matures in February 2011. Borrowings bear interest, at the Company's option, for the revolving facility and for the
term facility at

14

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either
(a) the Eurodollar rate (as defined in the credit facility) plus an applicable margin or (b) the Base rate (as defined in the credit facility) plus an applicable margin. The
Eurodollar rate applicable margin and the Base rate applicable margin for loans under the term facility are 1.75% and 0.75%, respectively, and the Eurodollar rate applicable margin and the Base rate
applicable margin for loans under the revolving facility are 2.0% and 1.0%, respectively. Interest with respect to Base rate loans is payable quarterly in arrears and interest with respect to
Eurodollar loans is payable at the end of the applicable interest period and every three months in the case of interest periods in excess of three months.

The
credit facility provides for payment to the lenders of a commitment fee on any unused commitments equal to 0.5% per annum, payable quarterly in arrears, as well as other fees.

On
January 25, 2007, the Company entered into an amendment to its credit facility which is intended to facilitate certain transactions related to the Merger. Among other things,
such amendment: (i) permits the Company to consummate the O-P Disposition and retain the proceeds thereof up to an amount equal to $55.0 million; (ii) excludes the
gain on the O-P Disposition from the calculation of "Available Cash" under the credit facility, (iii) amends the definition of "Adjusted Consolidated EBITDA" to allow for certain
one-time add-backs to the calculation thereof for cash operating expenses incurred in connection with the Merger (subject to an overall cap on the amount of such
add-backs); (iv) amends the definition of "Consolidated Capital Expenditures" to exclude certain expenditures incurred by the Company in connection with transition and integration
costs prior to consummation of the Merger (subject to an overall cap on the amount of such exclusions); and (v) increases the leverage covenant and dividend suspension test to 5.50 to 1.00 and
5.25 to 1.00, respectively.

The
credit facility requires certain mandatory prepayments, including first to prepay outstanding term loans under the credit facility and, thereafter, to repay loans under the revolving
facility and/or to reduce revolving facility commitments with, subject to certain conditions and exceptions, 100% of the net cash proceeds the Company receives from any sale, transfer or other
disposition of any assets, 100% of net casualty insurance proceeds and 100% of the net cash proceeds the Company receives from the issuance of permitted securities and, at certain times if the Company
is not permitted to pay dividends, with 50% of the increase in the Company's Cumulative Distributable Cash (as defined in the credit facility) during the prior fiscal quarter. Reductions to the
revolving commitments under the
credit facility from the foregoing recapture events will not reduce the revolving commitments under the credit facility below $50.0 million.

The
credit facility provides for voluntary prepayments of the revolving facility and the term facility and voluntary commitment reductions of the revolving facility, subject to giving
proper notice and compensating the lenders for standard Eurodollar breakage costs, if applicable.

The
credit facility requires that the Company maintain certain financial covenants. The credit facility contains customary affirmative covenants, including, without limitation, the
following tests: a minimum interest coverage ratio equal to or greater than 3.0 to 1.0 and a maximum leverage ratio equal to or less than 5.50 to 1.0. The credit facility also contains negative
covenants and restrictions, including, among others, with respect to redeeming and repurchasing other indebtedness, loans and investments, additional indebtedness, liens, capital expenditures, changes
in the nature of the Company's business, mergers, acquisitions, asset sales and transactions with the Company's affiliates.

15

---



The
credit facility restricts the Company's ability to declare and pay dividends on its common stock as follows:



The
credit facility also permits the Company to use available cash to repurchase shares of its capital stock, subject to the same conditions.

The
Company may obtain letters of credit under the revolving facility to support obligations of the Company and/or obligations of its subsidiaries incurred in the ordinary course of
business in an aggregate principal amount not to exceed $10.0 million and subject to limitations on the aggregate amount outstanding under the revolving facility. As of September 30,
2007, a letter of credit had been issued for $1.4 million.

The
credit facility is guaranteed, jointly and severally, subject to certain exceptions, by all first tier subsidiaries of the Company. The Company has provided to Deutsche Bank Trust
Company Americas, as collateral agent for the benefit of the lenders under the credit facility and certain hedging creditors under permitted hedging agreements, collateral consisting of (subject to
certain exceptions) 100% of the Company's equity interests in the subsidiary guarantors and certain other intermediate holding company subsidiaries. Newly acquired or formed direct or indirect
subsidiaries of the Company which own equity interests of any subsidiary that is an operating company will be required to provide the collateral described above.

16

---



The
credit facility contains customary events of default, including but not limited to, failure to pay principal, interest or other amounts when due, breach of covenants or
representations, cross-defaults to certain other indebtedness in excess of specified amounts, judgment defaults in excess of specified amounts, certain ERISA defaults, the failure of any guaranty or
security document supporting the credit facility and certain events of bankruptcy and insolvency.

(8) Earnings Per Share

Earnings per share has been computed in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is computed by dividing net income by
the weighted average number of shares of common stock outstanding for the period. Except when the effect would be anti-dilutive, the diluted earnings per share calculation calculated using
the treasury stock method includes the
impact of stock units, shares of non-vested common stock and shares that could be issued under outstanding stock options.

The
following table provides a reconciliation of the common shares used for basic earnings per share and diluted earnings per share:

|                                                                                                           |  | Three Months Ended |  | Nine Months Ended
|---------------------------------------------------------------------------------------------------------- |  | ------------------ |  | -----------------
|
|
|Weighted average number of common shares used for basic (loss) earnings per share                          |  | 34,770             |  | 34,651           
|Effect of potential dilutive shares                                                                        |  |                   |  | 145              
|                                                                                                           |  |                    |  |                  
|Weighted average number of common shares and potential dilutive shares used for diluted earnings per share |  | 34,770             |  | 34,796           
|                                                                                                           |  |                    |  |                  
|Anti-dilutive shares excluded from the above reconciliation                                                |  | 786                |  | 1,522            

For
the three months ended September 30, 2007, all potentially dilutive shares are anti-dilutive due to the net loss during the third quarter of 2007.

(9) Disposition of Assets

On July 31, 2007, the Company completed the sale of the assets of Yates City Telephone Company, a wholly-owned indirect subsidiary of the Company, or
Yates, for $2.5 million, resulting in a gain of $2.2 million during the third quarter of 2007. Yates is located in Yates City, Illinois and had less than 500 access lines at the time of
the sale. The gain is recorded in income from operations as a gain on sale of operating assets.

(10) Subsequent Events

In October 2007, the Company entered into two interest rate swap agreements which are contingent upon closing of the Merger. The first swap agreement is for a
notional amount of $100.0 million at a rate of 4.5% (or 6.25% including the applicable margin), is effective as of June 30,

17

---



2008
and expires on December 31, 2010. The second swap agreement is for a notional amount of $100.0 million at a rate of 4.5% (or 6.25% including the applicable margin), is effective as
of June 30, 2008 and expires on December 31, 2010.

(11) Litigation

On June 6, 2005, a purported class action complaint was filed in the General Court of Justice, Superior Court Division, of the State of North Carolina by
Robert Lowinger on behalf of himself and all other similarly situated persons against the Company, the Company's Chairman and Chief Executive Officer, certain of the Company's current and former
directors and certain of the Company's stockholders. The complaint alleges violations of Sections 11 and 12(a)(2) and liability under Section 15 of the Securities Act, and alleges that the
Company's registration statement on Form S-1 (which was declared effective by the SEC on February 3, 2005) and the related prospectus dated February 3, 2005, each
relating to the Company's initial public offering of common stock, contained certain material misstatements and omitted certain material information necessary to be included relating to the Company's
broadband products and access line trends. The plaintiff, who has been a plaintiff in several prior securities cases, seeks rescission rights and unspecified damages on behalf of a purported class of
purchasers of the common stock "issued pursuant and/or traceable to the Company's IPO during the
period from February 3, 2005 through March 21, 2005". The Company removed the action to Federal Court. The plaintiff filed a motion to remand the action to the North Carolina State
Court, which was denied by the Federal Magistrate. The plaintiff has objected to and appealed the Magistrate's decision to the District Court Judge. The Company has contested the appeal and filed a
Motion to Dismiss the action. The Magistrate, on February 9, 2006, issued a Memorandum and a Recommendation to the District Court Judge that the Motion to Dismiss be granted and that the
complaint be dismissed with prejudice. The plaintiff filed a Notice of Objection to the Magistrate's Recommendation. On August 16, 2007, the United States District Court for the Western
District of North Carolina accepted the Magistrate's recommendations as its own and dismissed the complaint with prejudice.

From
time to time, the Company is involved in other litigation and regulatory proceedings arising out of its operations. Management believes that the Company is not currently a party to
any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the Company's financial position or results of operations.

18

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of the consolidated results
of operations and financial condition of FairPoint Communications, Inc. and its subsidiaries. The discussion should be read in conjunction with FairPoint's consolidated financial statements for
the year ended December 31, 2006 included in FairPoint's Annual Report on Form 10-K for the year ended December 31, 2006.

Overview

We are a leading provider of communications services in rural and small urban communities, offering an array of services, including local and long distance voice,
data, Internet and broadband product offerings. We are one of the largest telephone companies in the United States focused on serving rural and small urban communities, and we are the 12th largest
local telephone company in the United States, in each case based on number of access lines. We operate in 18 states with 309,857 access line equivalents (including voice access lines and high speed
data, or HSD, lines which include digital subscriber line, or DSL, wireless broadband and cable modems) in service as of September 30, 2007.

We
were incorporated in February 1991 for the purpose of acquiring and operating local exchange carriers in rural markets. Since 1993, we have acquired 35 such businesses, 30 of
which we continue to own and operate. Many of our telephone companies have served their respective communities for over 75 years. The majority of the communities we serve have fewer than 2,500
access lines. Most of our telephone companies qualify as rural local exchange carriers under the Telecommunications Act.

Rural
local exchange carriers, or RLECs, have historically been characterized by stable operating results and strong cash flow margins and operate in supportive regulatory environments.
In particular, existing state and federal regulations permit RLECs to charge rates that enable recovery of operating costs, plus a reasonable rate of return on invested capital (as determined by
relevant regulatory authorities). Historically, competition has typically been limited because RLECs primarily serve sparsely populated rural communities with predominantly residential customers, and
the cost of operations and capital investment requirements for new entrants is high. However, in our markets, we have experienced some voice competition from cable providers and competitive local
exchange carriers. We are also subject to competition from wireless and other technologies. If competition were to increase,
the originating and terminating access revenues we receive may be reduced. We periodically negotiate interconnection agreements with other telecommunications providers which could ultimately result in
increased competition in those markets.

Access
lines are an important element of our business. Recently, many rural telephone companies have experienced a loss of access lines due to increased competition, the introduction of
DSL services (resulting in customers substituting DSL for a second line) and challenging economic conditions. We have not been immune to these conditions but we have been able to mitigate our access
line loss somewhat through bundling services, retention programs, continued community involvement and a variety of other focused programs.

Our
board of directors has adopted a dividend policy which reflects our judgment that our stockholders would be better served if we distributed a substantial portion of the cash
generated by our business in excess of operating needs, interest and principal payments on our indebtedness, dividends on future senior classes of our capital stock, if any, capital expenditures,
taxes and future reserves, if any, as regular quarterly dividend payments to our stockholders, rather than retained and used for other purposes. However, our board of directors may, in its discretion,
amend or repeal the dividend policy to decrease the level of dividends provided for or discontinue entirely the payment of dividends.

19

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We
are subject to regulation by federal and state governmental agencies. At the federal level, the Federal Communications Commission has jurisdiction over interstate and international
communications services. State telecommunications regulators exercise jurisdiction over intrastate and local communications services.

On
January 15, 2007, we entered into the Merger Agreement pursuant to which Spinco will merge with and into the Company with the Company continuing as the surviving corporation.
Following the Merger, our operations will be more focused on small urban markets and will be more geographically concentrated in the northeastern United States. We expect to face more competition in
our business located in the northeastern United States and we expect to be less dependent on access and Universal Service Fund revenue.

As
of September 30, 2007, approximately $44.6 million of costs related to the Merger had been capitalized and $40.8 million had been expensed. These amounts were
partially offset by approximately $26.2 million and $12.3 million, respectively, for amounts that have or will be reimbursed to us by Verizon pursuant to the Merger Agreement. Under the
terms of the Merger Agreement, Verizon will reimburse us for up to $40.0 million of certain qualified transition costs (subject to the specific terms contained in the Merger Agreement). At
September 30, 2007, we had received approximately $18.3 million in cash reimbursements for qualified transition costs. As of September 30, 2007, approximately $20.2 million
was recorded within current receivables.

The
regulatory approval process is proceeding. We have submitted pre-filed testimony, answered data requests, participated in technical conferences, presented testimony at
hearings (which have concluded) and are preparing formal briefs and reply briefs. Settlement conferences with certain interveners continue. There can be no assurance that regulatory approval will be
received or received on a satisfactory and timely basis. In addition, at the current time, it is unclear what restrictions, if any, on our operations, capital structure and/or our ability to pay
dividends at the current level and/or what expenditure requirements, if any, may be imposed as part of any such regulatory approvals.

If
we cannot obtain a waiver under our credit facility, we anticipate that we may be in breach of certain financial covenants contained in our credit facility which will be measured as
of March 31, 2008, if we continue to make expected pre-closing Merger related expenditures in 2008 and the Merger has not been consummated. If such a breach occurs, the lenders party to our
credit facility could terminate our ability to borrow under our credit facility and accelerate the outstanding indebtedness under our credit facility. If the indebtedness under our credit facility
were accelerated, we would not have the ability to repay such indebtedness. See "Liquidity and Capital Resources."

On
January 15, 2007, we entered into the MSA with Capgemini U.S. LLC. Through the MSA, we intend to replicate and/or replace certain existing Verizon systems during a phased
period lasting from January 2007 through the fourth quarter of 2008. We are currently in the application development stage of the project and are recognizing costs in accordance with Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". We have recognized both external service costs associated with the MSA based on
total labor incurred as of September 30, 2007 compared to the total estimated labor to substantially complete the implementation project.

Management
views its business of providing video, data and voice communication services to residential and business customers as one business segment and currently aggregates these
revenue streams under the quantitative and qualitative thresholds defined in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information."

We
face risks that could materially adversely affect our business, consolidated financial condition, results of operations or liquidity or the market price of our common stock. For a
discussion of certain of the risks facing us, see Exhibit 99.1 to this Quarterly Report.

20

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Revenues

We derive our revenues from:



21

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The
following summarizes our revenues and percentage of revenues from continuing operations from these sources (in thousands):

|                                      |  | Revenues |        | % of Revenues |  
|------------------------------------- |  | -------- | ------ | ------------- | -
|
|
|
|Local calling services                |  | $        | 17,453 |               | $
|Universal service fund high cost loop |  |          | 5,245  |               |  
|Interstate access revenues            |  |          | 18,360 |               |  
|Intrastate access revenues            |  |          | 13,541 |               |  
|Long distance services                |  |          | 7,843  |               |  
|Data and Internet services            |  |          | 8,805  |               |  
|Other services                        |  |          | 4,460  |               |  
|                                      |  |          |        |               |  
|Total                                 |  | $        | 75,707 |               | $
|                                      |  |          |        |               |  

---

Operating Expenses

Our operating expenses are categorized as operating expenses and depreciation and amortization.



Acquisitions and Dispositions



22

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Results of Operations

The following tables set forth the percentages of revenues represented by selected items reflected in our consolidated statements of operations. The comparisons
of financial results are not necessarily indicative of future results.

Three Months Ended September 30, 2007 Compared with Three Months Ended September 30, 2006

|                                                 |  | Three months ended
September 30, |         | Three months ended
September 30, |      
|------------------------------------------------ |  | -------------------------------- | ------- | -------------------------------- | -----
|
|
|Revenues                                         |  | $                                | 75,707  |                                  | 100.0
|Operating expenses                               |  |                                  | 54,846  |                                  | 72.4 
|Depreciation and amortization                    |  |                                  | 12,624  |                                  | 16.7 
|Gain on sale of operating assets                 |  |                                  | (2,164  | )                                | (2.9 
|                                                 |  |                                  |         |                                  |      
|Total operating expenses                         |  |                                  | 65,306  |                                  | 86.2 
|                                                 |  |                                  |         |                                  |      
|Income from operations                           |  |                                  | 10,401  |                                  | 13.8 
|                                                 |  |                                  |         |                                  |      
|Net gain on sale of investments and other assets |  |                                  | 2,759   |                                  | 3.6  
|Interest and dividend income                     |  |                                  | 294     |                                  | 0.4  
|Interest expense                                 |  |                                  | (9,924  | )                                | (13.1
|Loss on derivative instruments                   |  |                                  | (5,669  | )                                | (7.5 
|Equity in net earnings of investees              |  |                                  | 320     |                                  | 0.4  
|                                                 |  |                                  |         |                                  |      
|Total other (expense) income                     |  |                                  | (12,220 | )                                | (16.2
|                                                 |  |                                  |         |                                  |      
|Income before income taxes                       |  |                                  | (1,819  | )                                | (2.4 
|Income tax expense                               |  |                                  | (3,372  | )                                | (4.5 
|Minority interest in income of subsidiaries      |  |                                  |        |                                  |     
|                                                 |  |                                  |         |                                  |      
|Net (loss) income                                |  | $                                | (5,191  | )                                | (6.9 
|                                                 |  |                                  |         |                                  |      

23

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Revenues

Revenues increased $5.0 million to $75.7 million in the third quarter of 2007 compared to $70.7 million in the third quarter of 2006. Of this
increase, $2.0 million was attributable to companies acquired in the last twelve months and $3.0 million was attributable to our existing operations. We derived our revenues from the
following sources:

Local calling services.Local calling service revenues increased $0.9 million to $17.5 million in 2007 compared
to 2006. Excluding the impact of acquired operations, local calling service revenues increased $0.2 million compared to the third quarter of 2006. Voice access lines, including lines acquired,
decreased 3.5% from the third quarter of 2006 and decreased sequentially from the second quarter of 2007 by 1.8%. Voice access lines, excluding acquired lines, decreased 4.8% from the third quarter of
2006.

Universal Service Fund high cost loop.Universal Service Fund high cost loop receipts increased $0.1 million to
$5.2 million in the third quarter of 2007 compared to the third quarter of 2006. Excluding the impact of acquired companies, Universal Service Fund high cost loop receipts were flat compared to
2006.

Interstate access revenues.Interstate access revenues were $18.4 million for the three months ended
September 30, 2007 compared to $19.4 million for the three months ended September 30, 2006. Excluding the impact of acquired companies, interstate access revenues decreased
$1.5 million compared to 2006.

Intrastate access revenues.Intrastate access revenues increased $3.0 million to $13.5 million in 2007 compared
to 2006. Excluding the impact of acquired companies, intrastate access revenues increased $2.8 million compared to 2006. This increase is principally due to the settlement of certain previously
disputed access revenues of $4.4 million.

Long distance services.Long distance services revenues increased $1.1 million to $7.8 million in 2007 compared
to 2006. This is attributable to the increase in subscribers and minutes related to bundles and packages sold to our existing customers. Interstate long distance penetration as of September 30,
2007 was 53.7% of voice access lines as compared to 45.6% as of September 30, 2006.

Data and Internet services.Data and internet services revenues increased $1.7 million to $8.8 million in 2007
compared to 2006. Excluding the impact of acquired companies, data and internet services revenues increased $1.4 million compared to 2006. This increase is due primarily to increases in HSD
customers as we continue to market our broadband services. Our number of HSD subscribers increased from 57,095 as of September 30, 2006 to 66,978 as of September 30, 2007 and represents
a 27.6% penetration of voice access lines.

Other services.Other revenues decreased from $5.2 million in 2006 to $4.5 million in 2007. Excluding the
impact of acquired companies, other revenues decreased $0.9 million compared to 2006. This decrease is principally driven by a decrease in directory revenues in 2007.

Operating Expenses

Operating expenses, excluding depreciation and amortization.Operating expenses increased $14.5 million to
$54.8 million in 2007 compared to 2006. Approximately $1.4 million of this increase is related to operating expenses of the companies acquired during the last twelve months. In addition,
the primary drivers of this increase were Merger related expenses of $12.5 million and cost of goods sold of $0.6 million (principally related to HSD and long distance services), bad
debt expense of $0.6 million, materials and supplies expense of $0.3 million and audit and tax services of $0.3 million. These

24

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increases
were partially offset by decreases in employee related costs of $0.6 million, billing expenses of $0.5 million, contract services of $0.4 million and consulting expenses
of $0.3 million.

Depreciation and amortization.Depreciation and amortization expense decreased $0.2 million to $12.6 million in
2007 due primarily to the maturing nature of our plant assets.

Gain on sale of operating assets.Gain on sale of operating assets in the third quarter of $2.2 million resulted from
the sale of the assets of Yates.

Income from operations.Income from operations decreased $7.1 million to $10.4 million in 2007. This was driven
principally by the increase in expenses discussed above. Also driving the decrease in income from operations is the increased percentage of lower margin unregulated revenues in our total business mix
due to HSD and long distance revenue growth, which offset higher margin regulated revenues.

Other income (expense).Total other expense increased $4.4 million to $12.2 million in 2007. Net gains on sale
of investments and other assets increased $2.7 million, principally as a result of a gain on the release of escrowed funds related to the sale of Southern Illinois Cellular Corporation. Equity
in net earnings of investees decreased $1.5 million in 2007 due to the O-P Disposition in
April 2007. In addition, we recorded a loss on derivative instruments for the change in fair value of $5.7 million in the third quarter of 2007.

Income tax expense.Income tax expense of $3.4 million was recorded for the three months ended September 30,
2007, resulting in an effective rate of (185.4%) compared to 38.0% for the three months ended September 30, 2006.

During
the third quarter of 2007, we disposed of the assets of Yates, resulting in the recognition of a gain of $2.2 million for federal and state income tax purposes that is
taxed at our blended statutory rate of 37.6%. We treated this item as a discrete event during the third quarter.

We
account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Our effective income tax rate for the interim periods presented is based on our actual
effective tax rate for the nine months ended September 30, 2007 and differs from the federal statutory income tax rate primarily due to nondeductible permanent differences. In 2007, we
considered all estimated expenses related to the Merger and determined that some of these expenses were not deductible for income tax purposes. Based on current projections, we believe our annual
effective tax rate for 2007 will be 97%. Excluding the impact of the non-deductible transaction costs attributable to the Merger, the annualized effective rate will be approximately 38%.

As
of December 31, 2006, we had $235.1 million of federal and state net operating loss, or NOL, carryforwards. As a result, the income tax expense we record is generally
greater than the income taxes we currently pay.

Net (loss) income.Net loss was $5.2 million for the three months ended September 30, 2007 compared to net
income of $6.0 million for the three months ended September 30, 2006. The differences between 2007 and 2006 are a result of the factors discussed above.

25

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Nine Months Ended September 30, 2007 Compared with Nine Months Ended September 30, 2006

|                                                 |  | Nine months ended
September 30, |         | Nine months ended
September 30, |      
|------------------------------------------------ |  | ------------------------------- | ------- | ------------------------------- | -----
|
|
|Revenues                                         |  | $                               | 215,276 |                                 | 100.0
|Operating expenses                               |  |                                 | 155,716 |                                 | 72.3 
|Depreciation and amortization                    |  |                                 | 37,873  |                                 | 17.6 
|Gain on sale of operating assets                 |  |                                 | (2.164  | )                               | (1.0 
|                                                 |  |                                 |         |                                 |      
|Total operating expenses                         |  |                                 | 191,425 |                                 | 88.9 
|                                                 |  |                                 |         |                                 |      
|Income from operations                           |  |                                 | 23,851  |                                 | 11.1 
|                                                 |  |                                 |         |                                 |      
|Net gain on sale of investments and other assets |  |                                 | 49,586  |                                 | 23.0 
|Interest and dividend income                     |  |                                 | 805     |                                 | 0.4  
|Interest expense                                 |  |                                 | (29,932 | )                               | (13.9
|Loss on derivative instruments                   |  |                                 | (5,669  | )                               | (2.6 
|Equity in net earnings of investees              |  |                                 | 4,889   |                                 | 2.2  
|                                                 |  |                                 |         |                                 |      
|Total other income (expense)                     |  |                                 | 19,679  |                                 | 9.1  
|                                                 |  |                                 |         |                                 |      
|Income before income taxes                       |  |                                 | 43,530  |                                 | 20.2 
|Income tax expense                               |  |                                 | (17,974 | )                               | (8.3 
|Minority interest in income of subsidiaries      |  |                                 | (1      | )                               | (0.0 
|                                                 |  |                                 |         |                                 |      
|Net income                                       |  | $                               | 25,555  |                                 | 11.9 
|                                                 |  |                                 |         |                                 |      

Revenues

Revenues increased $15.6 million to $215.3 million in 2007 compared to $199.7 million in 2006. Of this increase, $11.5 million was
attributable to companies acquired in the last twelve months and $4.1 million was attributable to our existing operations. We derived our revenues from the following sources:

Local calling services.Local calling service revenues increased $2.6 million to $52.5 million in 2007 compared
to 2006. Excluding the impact of acquired operations, local calling service revenues decreased $1.1 million compared to the nine months ended September 30, 2006. Voice access lines,
excluding acquired lines, decreased 4.8% from the prior year.

Universal Service Fund high cost loop.Universal Service Fund high cost loop receipts decreased $0.4 million to
$14.3 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. Excluding the impact of acquired companies, Universal Service Fund
high cost loop receipts decreased $1.4 million compared to 2006.

Interstate access revenues.Interstate access revenues were $54.9 million for the nine months ended
September 30, 2007 compared to $53.6 million for the nine months ended September 30, 2006. Excluding the impact of acquired companies, interstate access revenues decreased
$2.0 million compared to 2006.

Intrastate access revenues.Intrastate access revenues increased $4.9 million to $32.9 million in 2007 compared
to 2006. Excluding the impact of acquired companies, intrastate access revenues

26

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increased
$3.7 million compared to 2006. This increase is principally due to the settlement of certain previously disputed access revenues in the third quarter of 2007.

Long distance services.Long distance services revenues increased $4.6 million to $22.5 million in 2007
compared to 2006. This is attributable to the increase in subscribers and minutes related to bundles and packages sold to our existing customers. Interstate long distance penetration as of
September 30, 2007 was 53.7% of voice access lines as compared to 45.6% as of September 30, 2006.

Data and Internet services.Data and internet services revenues increased $4.2 million to $24.9 million in 2007
compared to 2006. Excluding the impact of acquired companies, data and internet services revenues increased $3.0 million compared to 2006. This increase is due primarily to increases in HSD
customers as we continue to market our broadband services. Our number of HSD subscribers increased from 57,095 as of September 30, 2006 to 66,978 as of September 30, 2007 and represents
a 27.6% penetration of voice access lines.

Other services.Other revenues decreased from $14.9 million in 2006 to $13.3 million in 2007. Excluding the
impact of acquired companies, other revenues decreased $2.5 million compared to 2006. This decrease is principally driven by a decrease in directory revenues in 2007.

Operating Expenses

Operating expenses, excluding depreciation and amortization.Operating expenses increased $43.5 million to
$155.7 million in 2007 from $112.2 million in 2006. Approximately $6.0 million of this increase is related to operating expenses of the companies acquired during the last twelve
months. In addition, the primary drivers of this increase were Merger related expenses of $28.4 million and increases in cost of goods sold of $2.4 million (principally related to HSD
and long distance services), operating taxes of $1.3 million (principally related to the O-P Disposition), official toll expenses of
$1.0 million, employee related costs of $0.7 million, materials and supplies expenses of $0.5 million and operating insurance expenses of $0.3 million.

Depreciation and amortization.Depreciation and amortization expense decreased $2.0 million to $37.9 million in
2007 due principally to the maturing nature of our plant assets.

Gain on sale of operating assetsGain on sale of operating assets in the nine months ended September 30, 2007 of
$2.2 million resulted from the sale of the assets of Yates.

Income from operations.Income from operations decreased $23.8 million to $23.9 million in 2007. This was
driven principally by the increase in expenses discussed above. Also driving the decrease in income from operations is the increased percentage of lower margin unregulated revenues in our total
business mix due to HSD and long distance revenue growth, which offset higher margin regulated revenues.

Other income (expense).Total other income (expense) increased $23.6 million to $19.7 million in 2007. Net
gains on sale of investments and other assets increased $35.3 million principally as a result of the sale of the Company's investment in Orange County-Poughkeepsie Limited Partnership. Interest
expense increased $0.4 million to $29.9 million in 2007. Equity in net earnings of investees decreased $3.3 million in 2007 due to the O-P Disposition in
April 2007. Interest and dividend income decreased $2.3 million to $0.8 million in 2007. In addition, we recorded a loss on derivative instruments for the change in fair value of
$5.7 million in 2007.

Income tax expense.Income tax expense of $18.0 million was recorded for the nine months ended September 30,
2007, resulting in an effective rate of 41.3% compared to 38.8% for the nine months ended September 30, 2006.

During
the nine months ended September 30, 2007, we disposed of our 7.5% ownership interest in the Orange County-Poughkeepsie Limited Partnership and the assets of Yates,
resulting in the

27

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recognition
of gains of $44.9 million and $2.2 million, respectively, for federal and state income tax purposes that is taxed at the Company's blended statutory rate of 37.6%.
Furthermore, we effectively settled tax exposure items totaling $2.7 million with the IRS resulting in a reduction of the FASB Interpretation No. (FIN) 48, "Accounting for Uncertainty in Income
Taxes," liability and income tax expense. We also recognized other discrete items resulting in a reduction of income tax expense of $536,000. We treated these items as discrete events during the nine
months ended September 30, 2007. Excluding these discrete events, our effective tax rate for the nine months ended September 30, 2007 was (97%).

As
of December 31, 2006, we had $235.1 million of federal and state NOL carryforwards. As a result, the income tax expense we record is generally greater than the income
taxes we currently pay.

Net income.Net income was $25.6 million for the nine months ended September 30, 2007 compared to net income of
$26.8 million for the nine months ended September 30, 2006. The differences between 2007 and 2006 are a result of the factors discussed above.

Liquidity and Capital Resources

Our short and long-term liquidity needs arise primarily from: (i) interest payments primarily related to our credit facility;
(ii) capital expenditures, including those related to the Merger; (iii) working capital requirements as may be needed to support the growth of our business, including those related to
the Merger; (iv) dividend payments on our common stock; and (v) potential acquisitions.

Our
board of directors has adopted a dividend policy which reflects our judgment that our stockholders would be better served if we distributed a substantial portion of our cash
available for distribution to our stockholders instead of retaining it in our business. As a result of this dividend policy, we may not have significant cash available to meet any unanticipated
liquidity requirements, other than available borrowings, if any, under our credit facility. If we do not have sufficient cash to meet such unanticipated liquidity requirements, our financial condition
and our business will suffer. However, our board of directors may, in its discretion, amend or repeal the dividend policy to decrease the level of dividends provided for or discontinue entirely the
payment of dividends. For the nine months ended September 30, 2007, we paid dividends on our common stock totaling $41.8 million, or $1.19343 per share. The amount of dividends we pay
following the Merger could be reduced as a result of conditions that may be imposed by regulatory authorities in connection with the approval of the Merger or financial covenants in new indebtedness
incurred in connection with the Merger.

For
the nine months ended September 30, 2007 and September 30, 2006, net cash provided by operating activities of continuing operations was $24.1 million and
$59.0 million, respectively. The decrease in net cash provided by operating activities in 2007 was primarily due to expenses related to the Merger.

Our
ability to service our indebtedness depends on our ability to generate cash in the future. We are not required to make any scheduled principal payments under our credit facility's
term loan facility prior to maturity in February 2012. However, we will need to refinance all or a portion of our indebtedness on or before maturity and we may not be able to refinance our
indebtedness on commercially reasonable terms or at all. If we were unable to renew or refinance our credit facility, our failure to repay all amounts due on the maturity date would cause a default
under our credit facility.

Our
credit facility consists of a revolving facility, or the revolver, in a total principal amount of up to $100.0 million, of which $76.5 million was available at
October 31, 2007 and a term loan facility, or the term loan, in a total principal amount of $588.5 million with $588.5 million outstanding at October 31, 2007. The term
loan matures in February 2012 and the revolver matures in February 2011. The revolver has a swingline sub-facility in an amount of $5.0 million and a letter of credit
sub-facility in an amount of $10.0 million, which will allow issuances of standby letters of credit for our account.

28

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Borrowings
under our revolver bear interest, at our option, at either (i) the Eurodollar rate plus 2.00% or (ii) a base rate, as such term is defined in our credit facility, plus 1.00%.

On
January 25, 2007, we entered into an amendment to our credit facility that is intended to facilitate certain transactions related to the Merger. Among other things, such
amendment: (i) permits us to consummate the O-P Disposition and retain the proceeds thereof up to an amount equal to $55.0 million; (ii) excludes the gain on the
O-P Disposition from the calculation of "Available Cash" under our credit facility; (iii) amends the definition of "Adjusted Consolidated EBITDA" to allow for certain
one-time add-backs to the calculation thereof for operating expenses incurred in connection with the Merger (subject to an overall cap on the amount of such
add-backs); (iv) amends the definition of "Consolidated Capital Expenditures" to exclude certain expenditures incurred by us in connection with transition and integration costs
prior to consummation of the Merger (subject to an overall cap on the amount of such exclusions); and (v) increases the leverage covenant and dividend suspension test to 5.50 to 1.00 and 5.25
to 1.00, respectively. We expect that operating expenses incurred in connection with the Merger and expenditures in connection with transition and integration costs will exceed the aggregate cap by
the end of December 2007, and we will no longer be able to add any such expenses in excess of the cap back to calculate "Adjusted Consolidated EBITDA" and/or exclude any such expenditures in
excess of the cap to calculate "Consolidated Capital Expenditures" after such time.

Our
credit facility contains financial covenants, including, without limitation, the following tests: a minimum interest coverage ratio equal to or greater than 3.0 to 1 and a maximum
leverage ratio equal to or less than 5.50 to 1. Our credit facility contains customary affirmative covenants and also contains negative covenants and restrictions, including, among others, with
respect to redeeming and repurchasing our other indebtedness, loans and investments, additional indebtedness, liens, capital expenditures, changes in the nature of our business, mergers, acquisitions,
asset sales and transactions with affiliates. Subject to certain limitations set forth in our credit facility, we may use all of our Cumulative Distributable Cash (as defined in our credit facility)
accumulated after April 1, 2005 to declare and pay dividends, but we may not in general pay dividends in excess of such amount. On March 11, 2005, April 29, 2005 and
September 14, 2005, we entered into technical amendments to our credit facility.

Borrowings
under our credit facility bear interest at variable interest rates. We have entered into various interest rate swap agreements which are detailed in note 5 of the notes
to our condensed consolidated financial statements in this Quarterly Report. As a result of these swap agreements, as of September 30, 2007, approximately 89% of our indebtedness bore interest
at fixed rates rather than
variable rates. After these interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year unless we enter into a new interest
rate swap or purchase an interest rate cap or other interest rate hedge. To the extent interest rates increase in the future, we may not be able to enter into new interest rate swaps or to purchase
interest rate caps or other interest rate hedges on acceptable terms.

In
2003, the Company issued $225.0 million aggregate principal amount of the 117/8% notes. These notes were to mature on March 1, 2010. These notes are
general unsecured obligations of the Company, ranking pari passu in right of payment with all existing and future senior debt of the Company, including all obligations under our credit facility, and
senior in right of payment to all existing and future subordinated indebtedness of the Company. On February 9, 2005, we repurchased $223.0 million principal amount of the
117/8% notes tendered pursuant to the tender offer for such notes. $2.1 million principal amount of the 117/8% notes remains outstanding.

Net
cash provided by (used in) investing activities of continuing operations was $23.3 million and $(12.1) million for the nine months ended September 30, 2007 and 2006,
respectively. Proceeds from sales of investments and other assets were $60.2 million and $43.4 million for the nine months ended September 30, 2007 and 2006, respectively. In
addition, capital expenditures were $39.9 million and

29

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$25.6 million
for the nine months ended September 30, 2007 and 2006, respectively, and distributions from investments were $2.6 million and $7.9 million for the nine months
ended September 30, 2007 and 2006, respectively. The increase in capital expenditures primarily relates to Merger related capital expenditures. Distributions from investments decreased as a
result of the O-P Disposition.

On
January 15, 2007, Taconic entered into the O-P Interest Purchase Agreement pursuant to which Taconic agreed to effect the O-P Disposition. This
transaction closed on April 10, 2007 and therefore we no longer receive distributions from Orange County-Poughkeepsie Limited Partnership effective as of such date. In August 2007, we
received $2.7 million from the escrow account related to the sale of our investment in Southern Illinois Cellular Corporation, which was completed in 2006.

Net
cash used in financing activities from continuing operations was $42.4 million and $46.5 million for the nine months ended September 30, 2007 and 2006,
respectively. For the nine months ended September 30, 2007, net proceeds from issuance of long-term debt were $26 thousand. For the nine months ended September 30,
2006, net repayments of long-term debt were $5.1 million.

We
expect to fund the Merger through the issuance of approximately 53.8 million shares of our common stock to existing Verizon stockholders and the incurrence of
$1.7 billion of new indebtedness. We
anticipate that the new indebtedness will consist of bank debt and senior unsecured notes in proportions that have yet to be determined. We have obtained commitment letters for up to
$2.080 billion of bank financing to facilitate the re-financing of our existing bank debt with the new bank debt to be incurred in connection with the Merger.

We
expect that total capital expenditures for 2007 will be approximately $29.0 million to $31.0 million, excluding capital expenditures related to the Merger.

We
expect to continue to incur significant monthly cash expenditures related to the Merger through the closing of the Merger. We currently expect the Merger will close on
January 31, 2008; however the closing may be delayed if required regulatory approvals have not been obtained. If such a delay occurs, there can be no assurance that we will generate sufficient
cash from operations or have borrowings available under our credit facility to make these pre-closing Merger related expenditures and satisfy our debt service and our dividend and working capital
requirements. Subject to restrictions in our credit facility, we may incur more indebtedness to satisfy such obligations, but there can be no assurance that additional financing, if permitted under
the terms of our credit facility, will be available to us on terms acceptable to us or at all. If borrowings under our credit facility and/or other additional financing are not available to us and we
continue to make these pre-closing Merger related expenditures, we may need to decrease the level of dividends payable on our common stock or discontinue entirely the payment of dividends. In
addition, unless we have at least $10.0 million of cash on hand (including unutilized commitments under our credit facility's revolving facility), we will not be permitted under our credit
facility to pay dividends on our common stock.

In
addition, if we cannot obtain a waiver under our credit facility, we anticipate that we may be in breach of certain financial covenants contained in our credit facility which will be
measured as of March 31, 2008 if we continue to make expected pre-closing Merger related expenditures in 2008 and the Merger has not been consummated. If such a breach occurs, the
lenders party to our credit facility could terminate our ability to borrow under our credit facility and accelerate the outstanding indebtedness under our credit facility, and our ability to pay
dividends under our credit facility would be suspended. If the indebtedness under our credit facility were accelerated, we would not have the ability to repay such indebtedness.

We
expect to spend approximately $125.0 million to $140.0 million following the closing of the Merger (assuming the Merger closes on January 31, 2008) primarily on
network systems upgrades related to the integration of the acquired business. We plan to fund these expenditures through cash flow from operations, borrowings under the delayed draw term loan facility
of the new credit facility we

30

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expect
to enter into in connection with the consummation of the Merger and borrowings under the revolving facility of such new credit facility, if necessary.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Summary of Contractual Obligations

The tables set forth below contain information with regard to disclosures about contractual obligations and commercial commitments.

The
following table discloses aggregate information about our contractual obligations as of September 30, 2007 and the periods in which payments are due:

|                         |                                    | Payments due by period
|------------------------ | ---------------------------------- | ----------------------
|
|
|Contractual obligations: |                                    |                       
|                         | Debt maturing within one year      |                       
|                         | Long term debt                     |                       
|                         | Fixed interest payments            |                       
|                         | Variable interest payments         |                       
|                         | Operating leases                   |                       
|                         | Hardware and software contracts    |                       
|                         | Unrecognized tax benefits          |                       
|                         | Minimum purchase contract          |                       
|                         |                                    |                       
|                         | Total contractual cash obligations |                       
|                         |                                    |                       

The
following table discloses aggregate information about our derivative financial instruments as of September 30, 2007, the source of fair value of these instruments and their
maturities.

|                      |                                     | Fair Value of Contracts at Period-End
|--------------------- | ----------------------------------- | -------------------------------------
|
|
|Source of fair value: |                                     |                                      
|                      | Derivative financial instruments(1) |                                      
|                      |                                     |                                      

---

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make
estimates and assumptions that affect amounts reported in consolidated financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material
effect on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein.

The
Company capitalizes certain costs incurred in connection with developing or obtaining internal use software in accordance with American Institute of Certified Public Accountants
Statement of

31

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Position
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" (98-1). Capitalized costs include direct development costs associated with internal
use software, including direct labor costs and external costs of materials and services. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as
incurred.

Our
critical accounting policies that require the use of estimates and assumptions were disclosed in detail in our Annual Report on Form 10-K for the year ended
December 31, 2006; apart from 98-1, they have not changed materially from that disclosure.

New Accounting Standards

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 is definitional and disclosure oriented and
addresses how companies should approach measuring fair value when required by GAAP; it does not create or modify any current GAAP requirements to apply fair value accounting. SFAS No. 157
provides a single definition for fair value that is to be applied consistently for all accounting applications, and also generally describes and prioritizes according to reliability the methods and
inputs used in valuations. The new measurement and disclosure requirements of SFAS No. 157 are effective for us in the first quarter of 2008. We are still evaluating the impact, if any, from
adopting SFAS No. 157.

In
February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of SFAS No. 115,"
which permits an entity to measure many financial assets and financial liabilities at fair value that are not currently required to be measured at fair value. Entities that elect the fair value option
will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with a few exceptions. SFAS
No. 159 amends previous guidance to extend the use of the fair value option to available-for-sale and held-to-maturity securities. The Statement also establishes presentation and disclosure
requirements to help financial statement users understand the effect of the election. SFAS No. 159 is effective for the first fiscal year beginning after November 15, 2007. The Company
is currently in the process of evaluating the impact of SFAS No. 159.

Inflation

We do not believe inflation has a significant effect on our operations.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

As of September 30, 2007, approximately 89% of our existing indebtedness bore interest at fixed rates or effectively at fixed rates. Our earnings are
affected by changes in interest rates as our long-term indebtedness under our credit facility has variable interest rates based on either the prime rate or LIBOR. If interest rates on our
variable rate indebtedness (excluding variable rate indebtedness which has its interest rate effectively fixed under interest rate swap agreements) outstanding at September 30, 2007 increased
by 10%, our interest expense would have increased, and our income before taxes would have decreased, by approximately $0.1 million for the three months ended September 30, 2007.

We
have entered into interest rate swaps to manage our exposure to fluctuations in interest rates on our variable rate indebtedness. The fair value of these swaps was a net liability of
approximately $8.9 million at September 30, 2007. The fair value indicates an estimated amount we would have paid to cancel the contracts or transfer them to other parties.

We
use variable and fixed-rate debt to finance our operations, capital expenditures and acquisitions. The variable-rate debt obligations expose us to variability
in interest payments due to changes in interest rates. We believe it is prudent to limit the variability of a portion of our interest payments. To meet this objective, we enter into interest rate swap
agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash flow exposure on

32

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the
debt obligations to fixed cash flows. Under the terms of the interest rate swaps, we pay a variable interest rate plus an additional payment if the variable rate payment is below a contractual
rate, or we receive a payment if the variable rate payment is above the contractual rate. The chart below provides details of each of our interest rate swap agreements as of September 30, 2007.

|Effective Date:   |  | Notional Amount |  | Rate |   | Rate, including
applicable margin |   | Expiration Date  
|----------------- |  | --------------- |  | ---- | - | --------------------------------- | - | -----------------
|February 8, 2005  |  | $130.0 Million  |  | 3.76 | % | 5.51                              | % | December 31, 2007
|February 8, 2005  |  | $130.0 Million  |  | 3.98 | % | 5.73                              | % | December 31, 2008
|February 8, 2005  |  | $130.0 Million  |  | 4.11 | % | 5.86                              | % | December 31, 2009
|April 29, 2005    |  | $50.0 Million   |  | 4.72 | % | 6.47                              | % | March 31, 2012   
|June 30, 2005     |  | $50.0 Million   |  | 4.69 | % | 6.44                              | % | March 31, 2011   
|June 30, 2006     |  | $50.0 Million   |  | 5.36 | % | 7.11                              | % | December 31, 2009
|December 31, 2007 |  | $65.0 Million   |  | 4.91 | % | 6.66                              | % | December 30, 2011
|December 31, 2007 |  | $75.0 Million   |  | 5.46 | % | 7.21                              | % | December 31, 2010
|December 31, 2008 |  | $100.0 Million  |  | 5.02 | % | 6.77                              | % | December 31, 2010
|December 31, 2009 |  | $150.0 Million  |  | 5.65 | % | 7.40                              | % | December 31, 2011
|June 30, 2008*    |  | $100.0 Million  |  | 4.99 | % | 6.74                              | % | December 30, 2010
|June 30, 2008*    |  | $100.0 Million  |  | 4.95 | % | 6.70                              | % | June 30, 2010    
|June 30, 2008*    |  | $100.0 Million  |  | 5.45 | % | 7.20                              | % | December 31, 2010
|June 30, 2008*    |  | $100.0 Million  |  | 5.30 | % | 7.05                              | % | December 30, 2010

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*
Contingent upon closing of the Merger.

Our
Annual Report on Form 10-K for the year ended December 31, 2006 contains information about market risks under "Item 7A. Quantitative and Qualitative
Disclosures about Market Risk."

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) of the Exchange
Act). Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Based
upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that
information required to be disclosed by us in this Quarterly Report has been timely recorded, processed, summarized and reported within the time periods specified in the rules of the SEC and
(b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

We continue to update our internal controls over financial reporting as necessary to accommodate any modifications to our business processes or accounting
procedures. During the second quarter of 2007, we converted our accounting and enterprise resource planning system and have continued to modify the system subsequent to the end of the second quarter.
However, during the quarter ended September 30, 2007, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings.

On June 6, 2005, a purported class action complaint was filed in the General Court of Justice, Superior Court Division, of the State of North Carolina by
Robert Lowinger on behalf of himself and all other similarly situated persons against the Company, the Company's Chairman and Chief Executive Officer, certain of the Company's current and former
directors and certain of the Company's stockholders. The complaint alleges violations of Sections 11 and 12(a)(2) and liability under Section 15 of the Securities Act, and alleges that the
Company's registration statement on Form S-1 (which was declared effective by the SEC on February 3, 2005) and the related prospectus dated February 3, 2005, each
relating to the Company's initial public offering of common stock, contained certain material misstatements and omitted certain material information necessary to be included relating to the Company's
broadband products and access line trends. The plaintiff, who has been a plaintiff in several prior securities cases, seeks rescission rights and unspecified damages on behalf of a purported class of
purchasers of the common stock "issued pursuant and/or traceable to the Company's IPO during the period from February 3, 2005 through March 21, 2005". The Company removed the action to
Federal Court. The plaintiff filed a motion to remand the action to the North Carolina State Court, which was denied by the Federal Magistrate. The plaintiff has objected to and appealed the
Magistrate's decision to the District Court Judge. The Company has contested the appeal and filed a Motion to Dismiss the action. The Magistrate, on February 9, 2006, issued a Memorandum and a
Recommendation to the District Court Judge that the Motion to Dismiss be granted and that the complaint be dismissed with prejudice. The plaintiff filed a Notice of Objection to the Magistrate's
Recommendation. On August 16, 2007, the United States District Court for the Western District of North Carolina accepted the Magistrate's recommendations as its own and dismissed the complaint
with prejudice.

From
time to time, we are involved in other litigation and regulatory proceedings arising out of our operations. Management believes that we are not currently a party to any legal
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.

Item 1A.    Risk Factors

During the quarter ended September 30, 2007, there were no material changes to the risk factors disclosed in "Item 1A. Risk Factors" of our Annual Report
on Form 10-K for the year ended December 31, 2006.

For
a discussion of the risks facing us, refer to Exhibit 99.1 to this Quarterly Report.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.



We did not sell any unregistered equity securities during the quarter ended September 30, 2007.



Under Delaware law, our board of directors may declare dividends only to the extent of our "surplus" (which is defined as total assets at fair market value minus
total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

34

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Our
credit facility restricts our ability to declare and pay dividends on our common stock as follows:



For
purposes of calculating "Adjusted Consolidated EBITDA" under our credit facility, we are permitted to add back certain operating expenses incurred in connection with the Merger
(subject to an overall cap on the amount of such add-backs). In addition, certain capital expenditures related to the Merger are excluded from the definition of "Consolidated Capital
Expenditures" under our credit facility (subject to an overall cap on the amount of such exclusions). As disclosed in Part I of this Quarterly Report, we expect that we will reach the aggregate
cap by the end of December 2007, and will no longer be able to add any such expenses back to calculate "Adjusted Consolidated EBITDA" or exclude any such expenditures from "Consolidated Capital
Expenditures." As a result, after we reach the aggregate cap, we expect that the amount of "Available Cash" we generate prior to the closing of the Merger will decrease, which may adversely affect our
ability to continue paying dividends at the current level.

Our
credit facility also permits us to use available cash to repurchase shares of our capital stock, subject to the same conditions.

See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsDescription of Certain IndebtednessCredit Facility" in our
Annual Report on Form 10-K for the year ended December 31, 2006 and note 7 of the notes to our condensed consolidated financial statements in this Quarterly Report for
a more detailed description of our credit facility and these restrictions.

35

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Item 3.    Defaults Upon Senior Securities.

Not applicable.

Item 4.    Submission of Matters to a Vote of Security Holders.

The Company held its annual meeting on August 22, 2007. As of the record date for the annual meeting, there were 35,241,541 shares of our common stock
outstanding. Below is a summary of the proposals voted on at the annual meeting and the outcome of such vote with respect to each proposal.

1.     The
proposal to adopt the Merger Agreement, as amended, and to approve the issuance of FairPoint common stock to Verizon stockholders pursuant to the Merger Agreement was
approved with 22,017,856 votes for, 316,208 votes against and 684,229 abstentions.

2.     The
proposal to elect David L. Hauser to serve as a director of FairPoint until the 2010 annual meeting was approved with 30,752,430 votes for, 2,642 votes against and
754,047 abstentions. Claude C. Lilly and Robert S. Lilien continued as directors of FairPoint serving until the 2008 annual meeting and Eugene B. Johnson and Patricia
Garrison-Corbin continued as directors of FairPoint serving until the 2009 annual meeting.

3.     The
proposal to ratify KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2007 was approved by
31,185,518 votes for, 214,388 votes against and 109,213 abstentions.

4.     The
proposal to adjourn the annual meeting, if necessary, to solicit additional proxies for the adoption of the Merger Agreement and approval of the issuance of FairPoint
common stock in connection therewith was approved by 30,205,777 votes for, 1,103,899 votes against and 199,443 abstentions.

Item 5.    Other Information.

Not applicable.

Item 6.    Exhibits.

The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is
incorporated herein by reference.

36

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be
signed on its behalf by the undersigned, thereunto duly authorized, and the undersigned also has signed this Quarterly Report in his capacity as the Registrant's Executive Vice President and Chief
Financial Officer (Principal Financial Officer).

|                       |  | FAIRPOINT COMMUNICATIONS, INC.
|---------------------- |  | ------------------------------
|Date: November 2, 2007 |  | By:                           

37

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Exhibit Index

|Exhibit No. |  | Description                                                                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1         |  | Agreement and Plan of Merger, dated September 13, 2006, among FairPoint, MJD Ventures, Inc., FairPoint Germantown Corporation and The Germantown Independent Telephone Company.(1)                                                    
|2.2         |  | Agreement and Plan of Merger, dated as of January 15, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)                                                                              
|2.3         |  | Amendment No. 1 to Agreement and Plan of Merger, dated as of April 20, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)                                                             
|2.4         |  | Amendment No. 2 to Agreement and Plan of Merger, dated as of June 28, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(3)                                                              
|2.5         |  | Amendment No. 3 to Agreement and Plan of Merger, dated as of July 3, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(4)                                                               
|2.6         |  | Distribution Agreement, dated as of January 15, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                                              
|2.7         |  | Amendment No. 1 to Distribution Agreement, dated as of March 30, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                             
|2.8         |  | Amendment No. 2 to Distribution Agreement, dated as of June 28, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                              
|2.9         |  | Amendment No. 3 to Distribution Agreement, dated as of July 3, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                               
|2.10        |  | Transition Services Agreement, dated as of January 15, 2007, by and among Verizon Information Technologies LLC, Northern New England Telephone Operations Inc., Enhanced Communications of Northern New England Inc. and FairPoint.(2)
|2.11        |  | Master Services Agreement, dated as of January 15, 2007, by and between FairPoint and Capgemini U.S. LLC.(2)                                                                                                                          
|2.12        |  | Amendment No. 1 to Master Services Agreement, dated as of July 6, 2007, by and between FairPoint and Capgemini U.S. LLC.(4)                                                                                                           
|2.13        |  | Employee Matters Agreement, dated as of January 15, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)                                                                                
|2.14        |  | Tax Sharing Agreement, dated as of January 15, 2007, by and among FairPoint, Verizon Communications Inc. and Northern New England Spinco Inc.(5)                                                                                      
|2.15        |  | Partnership Interest Purchase Agreement, dated as of January 15, 2007, by and among Verizon Wireless of the East LP, Cellco Partnership d/b/a Verizon Wireless and Taconic Telephone Corp.(2)                                         
|2.16        |  | Joinder Agreement, dated as of April 5, 2007, by and among Warwick Valley Telephone Company, Taconic Telephone Corp., Cellco Partnership d/b/a Verizon Wireless and Verizon Wireless of the East LP.(6)                               
|3.1         |  | Eighth Amended and Restated Certificate of Incorporation of FairPoint.(7)                                                                                                                                                             
|3.2         |  | Amended and Restated By-Laws of FairPoint.(7)                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                       

38

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|4.1   |  | Indenture, dated as of March 6, 2003, by and between FairPoint and The Bank of New York, relating to FairPoint's $225,000,000 117/8% Senior Notes due 2010.(8)                                                                                                                                                                                   
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.2   |  | Supplemental Indenture, dated as of January 20, 2005, by and between FairPoint and The Bank of New York, amending the Indenture dated as of March 6, 2003 between FairPoint and The Bank of New York.(7)                                                                                                                                         
|4.3   |  | Form of Initial Senior Note due 2010.(8)                                                                                                                                                                                                                                                                                                         
|4.4   |  | Form of Exchange Senior Note due 2010.(8)                                                                                                                                                                                                                                                                                                        
|10.1  |  | Credit Agreement, dated as of February 8, 2005, by and among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.(7)                                                                                                                       
|10.2  |  | First Amendment to Credit Agreement, dated as of March 11, 2005, among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.(7)                                                                                                             
|10.3  |  | Second Amendment and Consent to Credit Agreement, dated as of April 29, 2005, among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.(9)                                                                                                
|10.4  |  | Third Amendment to Credit Agreement, dated as of September 14, 2005, among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.(10)                                                                                                        
|10.5  |  | Fourth Amendment and Waiver to Credit Agreement, dated as of January 25, 2007, among FairPoint, various lending institutions, Bank of America, N.A., CoBank ACB, General Electric Capital Corporation and Deutsche Bank Trust Company Americas.(11)                                                                                              
|10.6  |  | Pledge Agreement, dated as of February 8, 2005, by FairPoint, ST Enterprises, Ltd., FairPoint Broadband, Inc., MJD Services Corp., MJD Ventures, Inc., C-R Communications, Inc., Comerco, Inc., GTC Communications,
 Inc., Ravenswood Communications, Inc., Utilities, Inc., FairPoint Carrier Services, Inc. and St. Joe Communications, Inc.(7)
|10.7  |  | Subsidiary Guaranty, dated as of February 8, 2005, by FairPoint Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., ST Enterprises, Ltd. and FairPoint Carrier Services, Inc.(12)                                                                                                                                                           
|10.8  |  | Form of Swingline Note.(7)                                                                                                                                                                                                                                                                                                                       
|10.9  |  | Form of RF Note.(7)                                                                                                                                                                                                                                                                                                                              
|10.10 |  | Form of B Term Note.(7)                                                                                                                                                                                                                                                                                                                          
|10.11 |  | Amended and Restated Tax Sharing Agreement, dated as of November 9, 2000, by and among FairPoint and its Subsidiaries.(13)                                                                                                                                                                                                                       
|10.12 |  | Affiliate Registration Rights Agreement, dated as of February 8, 2005.(7)                                                                                                                                                                                                                                                                        
|10.13 |  | Employment Agreement, dated as of March 17, 2006, by and between FairPoint and Eugene B. Johnson.(14)                                                                                                                                                                                                                                            
|10.14 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Walter E. Leach, Jr.(15)                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                  

39

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|10.15 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Peter G. Nixon.(15)              
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------
|10.16 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Shirley J. Linn.(15)             
|10.17 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and John P. Crowley.(15)             
|10.18 |  | Letter Agreement, dated as of March 23, 2007, by and between FairPoint and Patrick T. Hogan.(16)                                     
|10.19 |  | FairPoint Amended and Restated 1998 Stock Incentive Plan.(17)                                                                        
|10.20 |  | FairPoint Amended and Restated 2000 Employee Stock Incentive Plan.(18)                                                               
|10.21 |  | FairPoint 2005 Stock Incentive Plan.(7)                                                                                              
|10.22 |  | FairPoint Annual Incentive Plan.(7)                                                                                                  
|10.23 |  | Form of February 2005 Restricted Stock Agreement.(19)                                                                                
|10.24 |  | Form of Director Restricted Stock Agreement.(20)                                                                                     
|10.25 |  | Form of Director Restricted Unit Agreement.(20)                                                                                      
|10.26 |  | Form of Non-Director Restricted Stock Agreement.(21)                                                                                 
|21    |  | Subsidiaries of FairPoint.(22)                                                                                                       
|31.1  |  | Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                 
|31.2  |  | Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                 
|32.1  |  | Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|32.2  |  | Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|99.1  |  | Risk Factors.*                                                                                                                       

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