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The FCC's Order reforming payments between carriers for various types of traffic also includes a Further Notice of
Proposed Rulemaking. Depending on the rules adopted by the FCC in this proceeding, the payments we make to
underlying carriers to access the Public Switched Telephone Network may increase, which may result in us increasing
the retail price of our service, potentially making our offering less competitive with traditional providers of
telecommunications services, or may reduce our profitability.
The FCC's Order reforming payments between carriers for various types of traffic includes a Further Notice of Proposed
Rulemaking which may result in the FCC adopting additional rules applicable to the exchange of traffic between regulated
providers of telecommunications services. While it is uncertain what rules, if any, the FCC will adopt and when the FCC may
do so, it is possible that as a result of this proceeding the charges our underlying service providers assess us will increase when
we send traffic to the PSTN. Should this occur, we may have to raise the retail rate of our offering, potentially making our
services less competitive with traditional providers of telecommunications services, or our profit margins may decrease. The
FCC proceeding is ongoing and we cannot predict whether the FCC will act or what rules it may adopt nor can we predict what
impact it may have on our business at this time.
The FCC and Congress are investigating call completion rates to rural areas of the United States. One company made a
voluntary contribution of approximately $1 million to the U.S. Treasury during the course of the FCC’s investigation
and agreed to implement a compliance plan. The investigations into rural call completion rates remain ongoing. We
may become subject to an investigation or an enforcement action.
Although we rely on third party carriers to handle all of our traffic destined for the PSTN, including to rural areas, it is possible
that the FCC could focus on our practices and procedures for routing such calls. We are monitoring call completion rates and
we are working with our underlying carriers to improve call quality and completion rates throughout our network. It is possible
that we, like other providers in the communications marketplace, may be subject to fines or other enforcement actions should
the FCC determine that our call completion rates to rural areas are, or have been, unacceptable.
The FCC has proposed a number of rules that would include new reporting obligations. At this time, it remains unclear what
rules the FCC will adopt and whether we will be subject to additional reporting obligations. It is possible that as a result of this
proceeding, our compliance costs will increase and the charges our underlying service providers assess us may increase. The
FCC proceeding is still in its early stages and we cannot predict whether the FCC will act or what rules it may adopt, nor can
we predict what impact it may have on our business at this time.
A petition filed by tw telecom inc. with the FCC seeks an Order that its provision of facilities-based interconnected
VoIP services should be classified as "telecommunications services," "telephone exchange services," and/or "exchange
access" under relevant federal law. We cannot predict the outcome of this proceeding nor its impact on our business at
this time.
In July 2011, the FCC released a Public Notice concerning a Petition for Declaratory Ruling filed by tw telecom inc. The
Petitioner requests the FCC to clarify that incumbent providers of local telephone service, like AT&T and Verizon, allow for
direct IP-to-IP interconnection with incumbent local exchange carriers for certain IP-based services. Specifically, tw telecom
seeks direct IP-to-IP interconnection from incumbent local telephone companies for the transmission and routing of tw
telecom's facilities-based VoIP services and for voice services that originate and terminate in Time Division Multiplexing
format but are converted to IP format for transport (referred to by the industry as "IP-in-the-middle" voice services).
Additionally, tw telecom is asking for the FCC to clarify that its facilities-based VoIP services are "telecommunications
services" as well as "telephone exchange services" and/or "exchange access," as those terms are defined under the
Communications Act of 1934, as amended by the Telecommunications Act of 1996. We cannot predict the outcome of this
proceeding nor its potential impact on our business at this time. Depending on how the FCC rules on the tw telecom petition,
we could be subject to greater regulation at the state level which would increase our costs of doing business. It is also possible
that an adverse ruling by the FCC in this proceeding could change the intercarrier compensation rate that our carriers pay to
handle our traffic which could also increase our costs. Increased costs to us may require us to raise our prices, making our
services less competitive, reduce our profit margins, or both.