Cricket Wireless 2012 Annual Report Download - page 26

compensation for intra-MTA traffic exchanged between local exchange carriers, or LECs, and wireless carriers
as of the effective date of the order. Various aspects of the FCC’s intercarrier compensation regime are subject to
review before the FCC, state regulatory bodies or federal or state courts. The outcome of such proceedings may
affect the manner in which we are charged or compensated for the exchange of traffic.
The FCC has adopted rules requiring commercial mobile radio service providers to provide automatic roaming
for voice and SMS text messaging services on just, reasonable and non-discriminatory terms. The FCC has also
adopted rules generally requiring carriers to offer data roaming services on commercially reasonable terms. These
orders, however, do not provide or mandate any specific mechanism for determining the reasonableness of roaming
rates and require that roaming complaints be resolved on a case-by-case basis, based on a non-exclusive list of
factors that can be taken into account in determining the reasonableness of particular conduct or rates. The FCC’s
data roaming order and rules were recently affirmed on appeal, although they are still subject to a petition for
reconsideration at the FCC. Our inability to obtain these roaming services on a cost-effective basis may limit our
ability to compete effectively for wireless customers, which may increase our churn and decrease our revenues,
which could materially adversely affect our business, financial condition and results of operations.
The FCC has adopted an order codifying and supplementing its previous internet openness principles
(sometimes referred to as “network neutrality” principles) into binding rules. These rules are intended to ensure
that consumers are able to access the lawful internet content, applications, and services of their choice, and to
attach non-harmful devices to the network. The rules also require greater transparency regarding providers’
network management practices. The rules in this proceeding are the subject of pending appeals in federal court,
and if they survive judicial review, contain uncertainties that will require future case-by-case interpretation and
enforcement by the FCC in specific complaints. These rules and pending review and complaint proceedings
affecting their interpretation and enforcement could have significant operational implications for how we manage
traffic on our network, the applications and devices that can be used on our networks, and our consumer
disclosure practices. We cannot predict how these rules, or their interpretation or enforcement, will affect our
business, financial condition and results of operations.
The FCC has rules in place requiring interstate communications carriers, including commercial mobile
wireless carriers, to contribute to a federal USF that reimburses communications carriers who are providing
subsidized communications services to underserved areas and users. The FCC requires carriers to determine their
percentage of traffic that is interstate or international and to make contributions based on the revenues associated
with such traffic. Our failure to comply with our USF obligations could subject us to significant fines or
forfeitures. The FCC is also considering whether to amend rules regarding USF contributions, and new
requirements could result in increased contribution obligations for us and other carriers.
We participate in the federal government’s Lifeline program, which provides support from the USF to subsidize
discounted telecommunications services for qualified low-income consumers. In order to participate in the Lifeline
program in any given state, a carrier must be designated as an ETC in that state. As of December 31, 2012, Cricket
had been designated as an ETC in 27 states and the District of Columbia. In January 2012, the FCC adopted an order
regarding the Lifeline program, the stated purpose of which is to streamline the administration of the program and to
implement measures to curb perceived waste, fraud and abuse in the program. In addition, various states are
considering or enacting rules with similar stated purposes as the FCC order. In connection with the FCC’s order,
among other things, we are required to have our Lifeline customers re-certify on an annual basis their eligibility to
participate in the program. These requirements could result in the loss of Lifeline customers and associated funding
from the USF if these customers fail to meet the FCC’s eligibility standards or fail to respond to requests to re-certify
their eligibility. Further, the FCC is developing a National Lifeline Accountability Database, the primary purpose of
which will be to validate the identity of Lifeline customers and prevent Lifeline support from being provided to more
than one eligible recipient per household in accordance with FCC regulations. While the timing of the deployment of
the database is uncertain, its implementation and use could reduce the number of customers we enroll in our Lifeline
programs and thus the amount of Lifeline funding we receive. In addition, the FCC could pursue enforcement action
against us and impose monetary penalties if it were to conclude that we violated any of the Lifeline rules. In addition,
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