(17)	Commitments and Contingencies:

We anticipate total capital expenditures for business operations of approximately $750 million to $775 million for 2012. Although we from time to time make short-term purchasing commitments to vendors with respect to these expenditures, we generally do not enter into firm, written contracts for such activities.

In connection with the Transaction, the Company has undertaken activities to plan and implement network and systems conversions as well as other initiatives to integrate the operations and reduce costs. In the fourth quarter of 2011, the Company converted all of the remaining 13 states of the Acquired Business onto the Company's legacy financial and human resources systems, and converted the operating systems in four states of the Acquired Business to our legacy systems. In the first quarter of 2012, the Company successfully converted the operating systems in the remaining nine states of the Acquired Business to our legacy systems. Therefore, as of March 31, 2012, the Company had completed its network and systems integration into one platform. While these conversions are complete, the Company continues to simplify its processes, eliminate redundancies and further reduce its cost structure while improving its customer service capabilities. The Company incurred $68.2 million of operating expenses for integration costs and $38.8 million in capital expenditures related to integration activities during the first nine months of 2012. For the full year of 2012, the Company currently expects to incur operating expenses and capital expenditures of approximately $80 million and $50 million, respectively, related to completing its integration and cost savings initiatives. Our integration costs and related capital expenditures will be completed by the end of 2012.

In addition, the Federal Communications Commission (FCC) and certain state regulatory commissions, in connection with granting their approvals of the Transaction, specified certain capital expenditure and operating requirements for the acquired Territories for specified periods of time post-closing. These requirements focus primarily on certain capital investment commitments to expand broadband availability to at least 85% of the households throughout the acquired Territories with minimum download speeds of 3 megabits per second (Mbps) by the end of 2013 and 4 Mbps by the end of 2015. As of September 30, 2012, we had expanded broadband availability in excess of 1 Mbps to 84% of the households throughout the acquired Territories, in excess of 3 Mbps to 80% of the households throughout the acquired Territories, and in excess of 4 Mbps to 78% of the households throughout the acquired Territories.

To satisfy all or part of certain capital investment commitments to three state regulatory commissions, we placed an aggregate amount of $115.0 million in cash into escrow accounts and obtained a letter of credit for $190 million in 2010. Another $72.4 million of cash in an escrow account (with a cash balance of $47.6 million and an associated liability of $0.2 million as of September 30, 2012 that is reflected in Other liabilities) was acquired in connection with the Transaction to be used for service quality initiatives in the state of West Virginia. As of September 30, 2012, $90.5 million had been released from escrow and the Company had a restricted cash balance in these escrow accounts in the aggregate amount of $97.3 million. In October 2012, we received an additional $25.6 million that was released from an escrow account in the state of Washington, which concludes the escrow petition process in that state. In November 2012, we received funds from the release of another $29.1 million from escrow accounts in the state of West Virginia. In addition, as of September 30, 2012, the letter of credit had been reduced to $40.0 million. The aggregate amount of these escrow accounts and the letter of credit will continue to decrease over time as Frontier makes the required capital expenditures in the respective states.

In our normal course of business we have obligations under certain non-cancelable arrangements for services. During the third quarter of 2012, we entered into a take or pay arrangement for the purchase of future long distance and carrier services. Our total commitments under the arrangement are $74.8 million, $132.0 million, $141.8 million and $140.8 million for the years ended December 31, 2012, 2013, 2014 and 2015, respectively. As of September 30, 2012, we expect to utilize the services included within the arrangement and no liability for the take or pay provision has been recorded.

The Company has entered into an agreement to upgrade a significant portion of its existing vehicle fleet. As of September 30, 2012, the Company has accepted delivery of 679 new vehicles and expects to accept delivery of approximately 3,000 additional new vehicles by March 31, 2013. The new vehicles expected to be leased under this program will represent approximately 50% of our vehicle fleet. The minimum lease commitment for each vehicle is 1 year and the leases are renewable at the Company's option. The total annual lease expense for all of the new vehicles is expected to be approximately $30.0 million on an annualized basis upon the acceptance of the remaining vehicles.

We are party to various legal proceedings arising in the normal course of our business covering a wide range of matters or types of claims including, but not limited to, general contracts, billing disputes, rights of access, tax, consumer protection, trademark and patent infringement, employment, regulatory and tort. Litigation is subject to uncertainty and the outcome of individual matters is not predictable. However, we believe that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which Frontier is entitled, will not have a material adverse effect on our financial position, results of operations, or our cash flows.

We sold all of our utility businesses as of April 1, 2004. However, we have retained a potential payment obligation associated with our previous electric utility activities in the State of Vermont. The Vermont Joint Owners (VJO), a consortium of 14 Vermont utilities, including us, entered into a purchase power agreement with Hydro-Quebec in 1987. The agreement contains "step-up" provisions that state if any VJO member defaults on its purchase obligation under the contract to purchase power from Hydro-Quebec, then the other VJO participants will assume responsibility for the defaulting party's share on a pro-rata basis. Our pro-rata share of the purchase power obligation is 10%. If any member of the VJO defaults on its obligations under the Hydro-Quebec agreement, then the remaining members of the VJO, including us, may be required to pay for a substantially larger share of the VJO's total purchase power obligation for the remainder of the agreement (which runs through 2015). U.S. GAAP rules require that we disclose "the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee." U.S. GAAP rules also state that we must make such disclosure "… even if the likelihood of the guarantor's having to make any payments under the guarantee is remote…" As noted above, our obligation only arises as a result of default by another VJO member, such as upon bankruptcy. Therefore, to satisfy the "maximum potential amount" disclosure requirement we must assume that all members of the VJO simultaneously default, an unlikely scenario given that all VJO members are regulated utility providers with regulated cost recovery. Despite the remote chance that such an event could occur, or that the State of Vermont could or would allow such an event, assuming that all the members of the VJO defaulted on January 1, 2012 and remained in default for the duration of the contract (another 4 years), we estimate that our undiscounted purchase obligation for 2012 through 2015 would be approximately $316.1 million. In such a scenario, the Company would then own the power and could seek to recover its costs. We would do this by seeking to recover our costs from the defaulting members and/or reselling the power to other utility providers or the northeast power grid. There is an active market for the sale of power. We could potentially lose money if we were unable to sell the power at cost. We caution that we cannot predict with any degree of certainty any potential outcome.