Citizens Communications Company

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Citizens Communications Company - Telecommunications Services - Category Directory

3 High Ridge Park
Stamford, Connecticut 06905
(203) 614-5600
www.czn.net

Sales

$2.4 billion

Business Description

Citizens Communications Company and its subsidiaries (Citizens) will be referred
to as the "Company," "we," "us" or "our" throughout this report.

We are a telecommunications company providing wireline communications services
to rural areas and small and medium-sized towns and cities as an incumbent local
exchange carrier, or ILEC. We offer our ILEC services under the "Frontier" name.
In addition, we provide competitive local exchange carrier, or CLEC, services to
business customers and to other communications carriers in certain metropolitan
areas in the western United States through Electric Lightwave, LLC, or ELI, our
wholly-owned subsidiary. We also provide electric distribution and generation
services to primarily rural customers in Vermont. We have a contract to sell
those electric distribution and generation operations.

Telecommunications Services

Our telecommunications services are principally ILEC services and also include
CLEC services delivered through ELI. As of December 31, 2003, we operated ILECs
in 23 states, serving approximately 2.4 million access lines and 120,500 digital
subscriber line (DSL) customers. Our CLEC services consist of a variety of
integrated telecommunications products.

As an ILEC, we are typically the dominant incumbent carrier in the markets we
serve and provide the "last mile" of telecommunications services to residential
and business customers in these markets. As an ILEC, we compete with CLECs that
may operate in our markets. As a CLEC, we provide telecommunications services to
businesses and other carriers in competition with the ILEC. As a CLEC, we
frequently obtain the "last mile" access to customers through arrangements with
the applicable ILEC. ILECs and CLECs are subject to different regulatory
frameworks of the Federal Communications Commission (FCC). ELI does not compete
with our ILEC business.

ILEC Services
-------------

Our ILEC services segment accounted for $2,040.9 million, or 83%, of our total
revenues in 2003. Approximately 24% of our ILEC services segment revenues came
from federal and state subsidies and regulated access charges.

Our ILEC services business is primarily with residential customers and, to a
lesser extent, non-residential customers. Our ILEC services segment provides:

* local network services,

* enhanced services,

* network access services,

* long distance and data services, and

* directory services.

Local network services. We provide telephone wireline access services to
residential and non-residential customers in our service areas. Our service
areas are largely residential and are generally less densely populated than what
we believe to be the primary service areas of the five largest ILECs.

Enhanced services. We provide our ILEC customers a number of calling features
including call forwarding, conference calling, caller identification, voicemail
and call waiting. We offer packages of telecommunications services. These
packages permit customers to bundle their basic telephone line with their choice
of enhanced, long distance and data services for a monthly fee and/or usage
depending on the plan.

We intend to increase the penetration of enhanced services. We believe that
increased sales of such services in our ILEC markets will produce revenue with
higher operating margins due to the relatively low marginal operating costs
necessary to offer such services. We believe that our ability to integrate these
services with other ILEC services will provide us with the opportunity to
capture an increased percentage of our customers' telecommunications
expenditures.

Network access services. We provide network access services to long distance
carriers and other carriers in connection with the use of our facilities to
originate and terminate interstate and intrastate telephone calls. Such services
are generally offered on a month-to-month basis and the service is billed on a
minutes-of-use basis. Access charges to long distance carriers and other
customers are based on access rates filed with the FCC for interstate services
and with the respective state regulatory agency for intrastate services.

Revenue is recognized when services are provided to customers or when products
are delivered to customers. Monthly recurring network access service revenue is
billed in advance. The unearned portion of this revenue is initially deferred on
our balance sheet and recognized in revenue over the period that the services
are provided. Non-recurring network access service revenue is billed in arrears.
The earned but unbilled portion of this revenue is recognized in revenue in the
period that the services are provided.

Long distance and data services. Long distance network service to and from
points outside of a telephone company's operating territories is provided by
interconnection with the facilities of interexchange carriers, or IXCs. We offer
long distance services in our territories to our ILEC customers. We believe that
many customers prefer the convenience of obtaining their long distance service
through their local telephone company and receiving a single bill.

We also offer data services including internet access via dial up or DSL access,
frame relay, ethernet and asynchronous transfer mode (ATM) switching in portions
of our system.

Directory services. Directory services involves the provision of white and
yellow page listings of residential and business directories. We provide this
service through a third party contractor who pays us a percentage of revenues
realized from the sale of advertising in these directories. Our directory
service also includes "Frontier Pages," an internet-based directory service
which generates advertising revenue. We recognize the revenue from these
services over the life of the related white or yellow pages book.

CLEC Services
-------------

ELI provides a broad range of wireline communications products and services to
businesses and other carriers in the western United States. ELI accounted for
$165.4 million, or 7%, of our total revenues in 2003. Our CLEC service revenues
have declined from a peak of $240.8 million in fiscal year 2000.

ELI's facilities-based network consists of optical fiber and voice and data
switches. ELI has a national internet and data network with switches and routers
in key cities, linked by leased transport facilities. In addition, ELI has a
long-haul, fiber-optic network connecting the cities it serves in the western
United States which utilizes an optically self-healing Synchronous Optical
Network (SONET) architecture. ELI currently provides the full range of its
services in the following cities and their surrounding areas: Boise, Idaho;
Portland, Oregon; Salt Lake City, Utah; Seattle, Washington; Spokane,
Washington; Phoenix, Arizona; and Sacramento, California.