Earthlink 2014 Annual Report Download - page 16

Table of Contents
Forbearance.
The Communications Act provides the FCC with the authority to not enforce, or “forbear”
from enforcing, statutory requirements
and regulations if certain factors are satisfied. If the FCC were to forbear from enforcing regulations that have been established to enable
competitors to offer broadband Internet access and VoIP, our business could be adversely affected. In December 2005, the FCC granted, in part,
a petition for forbearance filed by CenturyLink (formerly Qwest) seeking relief from specified dominant carrier regulations, including some
unbundling obligations related to high capacity loops and transport, in those portions of the Omaha metropolitan statistical area where facilities-
based competition had allegedly increased significantly. The FCC's dominant carrier regulations require CenturyLink, in part, to offer UNEs and
also serve as a check on dominant carrier pricing for other wholesale services, such as special access lines, that we seek to purchase at
commercially acceptable prices. Since being granted relief by the FCC, CenturyLink has substantially increased the prices for the network
elements that we use to provide services in eight central offices in the Omaha metropolitan statistical area.
Since 2007, the FCC has denied a series of petitions by CenturyLink and Verizon seeking similar forbearance from unbundling requirements in
particular metropolitan areas. However, the FCC has granted a series of petitions forbearing from dominant carrier regulation for most
incumbent LECs’
enterprise broadband services, such as Ethernet. Most recently, in a June 2010 order denying a CenturyLink petition for
forbearance from unbundling requirements in Phoenix, the FCC set forth specific thresholds and analytical frameworks that must be met for
grant of such petitions. That FCC decision was affirmed by a court of appeals. The FCC is currently reviewing a petition filed by CenturyLink
seeking forbearance from dominant carrier regulation of certain of its subsidiaries’
enterprise broadband services, as well as a petition filed by
USTelecom seeking forbearance from a range of incumbent LEC regulatory obligations (including restrictions on the provision of special access
services via contract tariff and the requirement to offer competitors access to newly deployed conduit at regulated rates). If the FCC grants these
or similar forbearance petitions filed by incumbent carriers in the future affecting markets in which we operate, our costs could increase and,
thus, our ability to achieve our target profit margins in those markets could be materially adversely affected. The grant of these petitions also
would enable incumbent carriers to compete with their competitors, including us, more aggressively on price in the affected markets.
Other Federal Regulation. In addition to the specific matters listed above, we are subject to a variety of other FCC filing, reporting, record-
keeping and fee payment requirements. The FCC has the authority generally to condition, modify, cancel, terminate, revoke or decline to renew
licenses and operating authority for failure to comply with federal laws and the FCC's rules, regulations and policies. Fines or other penalties
also may be imposed for such violations. The FCC or third parties may raise issues with regard to our compliance with applicable laws and
regulations. Moreover, we are subject to additional federal regulation and compliance requirements from other government agencies such as the
Federal Trade Commission, the Internal Revenue Service and the Securities and Exchange Commission.
State Regulation
We are subject to various state laws and regulations. Most state PUCs require providers such as us to obtain certificates of authority from the
commission before offering communications services between points within the state. We may also be required to file tariffs or price lists setting
forth the terms, conditions and prices for specified services that are classified as intrastate and to update or amend our tariffs when we adjust our
rates or add new products. We also are subject to various reporting and record-
keeping requirements and contribute to state USF, E911 and other
funds, and collect and/or pay other taxes, fees and surcharges where applicable. Certificates of authority can be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for a carrier's failure to comply with state laws or rules, regulations and policies of state
regulatory authorities. State utility commissions generally have authority to supervise telecommunications service providers in their states and to
enforce state utility laws and regulations. Fines or other penalties also may be imposed for violations. PUCs or third parties may raise issues with
regard to our compliance with applicable laws or regulations.
Through certain of our operating subsidiaries, we have authority to offer intrastate long distance services in all 50 U.S. states, and have authority
to offer local telephone services in all 50 U.S. states and the District of Columbia. We provide local services, where authorized, by reselling the
retail local services of the incumbent carrier in a given territory and, in some established markets, by using incumbent carriers' network elements
and our own local switching facilities.
State PUCs have responsibility under the Communications Act to oversee relationships between incumbent carriers and their competitors with
respect to such competitors' use of the incumbent carriers' network elements and wholesale local services. PUCs arbitrate interconnection
agreements between the incumbent carriers and competitive carriers such as us when requested by one of the parties. Under the
Telecommunications Act, the decisions of state PUCs with regard to interconnection disputes may be appealed to federal courts. There remain
important unresolved issues regarding the scope of the authority of PUCs and the extent to which the commissions will adopt policies that
promote local telephone service competition.
States also regulate in part the intrastate carrier access services of carriers like us. As an interexchange carrier (“IXC”),
we are required to pay
intrastate access charges to local exchange carriers when they originate or terminate our intrastate long distance
11