Earthlink 2014 Annual Report Download - page 15

Table of Contents
In December 2012, the FCC adopted an order clarifying its USF contribution rules that adversely affect companies like us that use special access
services purchased from incumbent carriers to provide only broadband Internet access to our customers. The FCC stated that in these cases, the
incumbent carrier must pay a USF contribution on its special access revenues, which these carriers as a matter of course pass through to the
special access customer. This in turn increases our cost of purchasing special access service and using it as an input in providing broadband
Internet access services. However, we must compete against broadband Internet access services provided by incumbent carriers and cable
television companies, among others, which are not subject to USF contribution requirements and therefore do not incur this added cost. Several
companies have petitioned for FCC reconsideration of this decision, but we cannot predict whether these petitions will be successful or when
they may be decided.
In November 2011, the FCC adopted extensive revisions to its high-
cost support USF program, which largely subsidizes the provision of local
telephone service by incumbent carriers in rural areas. Under the new program, it should be difficult for incumbent carriers to receive subsidies
for services provided in competition with unsubsidized providers like us, although we cannot be certain that this will occur. It is also possible,
under certain conditions, for competitive providers like us to seek subsidies for constructing and operating broadband Internet access facilities in
rural areas. However, we cannot predict whether provision of broadband Internet access services in such rural areas will be economically
practicable, even with potential subsidies.
Customer Proprietary Network Information and Privacy.
The Communications Act and the FCC's rules require carriers to implement measures
to prevent the unauthorized disclosure of Customer Proprietary Network Information (“CPNI”).
CPNI includes information related to the
quantity, technological configuration, type, destination and the amount of use of a telecommunications service or an interconnected VoIP
service. CPNI rules include restrictions on telecommunications carriers and providers of interconnected VoIP service. We must file a verified
certification of compliance by March 1 of each year that affirms the existence of training and other sales and marketing processes designed to
prevent improper use and unauthorized release of CPNI. An inadvertent violation of these and related CPNI requirements by us could subject our
company to significant fines or other regulatory penalties.
Additional measures to protect CPNI and consumer privacy are proposed from time to time, and both Congress and the FCC currently are
considering such additional measures. These developments appear to be part of a broader trend to protect consumer information as it continues
increasingly to be transmitted in electronic formats. We cannot predict whether additional requirements governing CPNI or other consumer data
will be enacted, or whether such additional requirements will affect our ability to market or provide our services to current and future customers.
Network Management and Internet Neutrality.
In August 2005, the FCC adopted a policy statement that outlined four principles intended to
preserve and promote the open and interconnected nature of the public Internet, stating that consumers are entitled to access lawful Internet
content and to run applications and use services of their choice, subject to the needs of law enforcement and reasonable network management. In
an August 2008 decision, the FCC characterized these net neutrality principles as binding and enforceable and stated that network operators have
the burden to prove that their network management techniques are reasonable. In that order, which was overturned by a court decision in April
2010, the FCC imposed sanctions on a broadband Internet access provider for managing its network by blocking or degrading some Internet
transmissions and applications in a way that the FCC found to be unreasonably discriminatory. In December 2010, the FCC issued new rules to
govern network management practices that, among other things, require public disclosure of network management practices and prohibit
unreasonable discrimination in the transmission of Internet traffic. After these rules took effect, on January 14, 2014, the U.S. Court of Appeals
for the District of Columbia Circuit vacated certain aspects of these rules, including rules that barred fixed telecommunications providers and
cable television operators from engaging in unreasonable discrimination and prevented all broadband providers, fixed and wireless, from
blocking traffic. In May 2014, the FCC adopted a Notice of Proposed Rulemaking in which it sought comment on a range of proposals to replace
the vacated rules, including options that the FCC would adopt pursuant to Section 706 of the Communications Act and those that would include
reclassification of some or all aspects of broadband Internet access services as telecommunications services under Title II of the
Communications Act. In November 2014, President Obama expressed support for reclassification of broadband Internet access service under
Title II, coupled with forbearance from many of the provisions of this title. It is not possible to determine what course the FCC will take or what
specific broadband network management techniques or related business arrangements may be deemed reasonable or unreasonable in the future.
We cannot predict how any future legislative, regulatory or judicial decisions relating to net neutrality might affect our ability to manage our
broadband network or develop new products or services.
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