FairPoint Communications 2004 Annual Report Download - page 18

The Federal Communications Commission generally must approve in advance most transfers of control and assignments of operating
authorizations by Federal Communications Commission-regulated entities. Therefore, if we seek to acquire companies that hold Federal
Communications Commission authorizations, in most instances we will be required to seek approval from the Federal Communications
Commission prior to completing those acquisitions. The Federal Communications Commission has the authority to condition, modify,
cancel, terminate or revoke operating authority for failure to comply with applicable federal laws or rules, regulations and policies of the
Federal Communications Commission. Fines or other penalties also may be imposed for such violations. Our interstate common carrier
services are also subject to nondiscrimination requirements and requirements that rates be just and reasonable.
The Federal Communications Commission has required that incumbent independent local exchange carriers that provide interstate
long distance services originating from their local exchange service territories must do so in accordance with "structural separation" rules.
These rules require that our long distance affiliates (i) maintain separate books of account, (ii) not own transmission or switching facilities
jointly with the local exchange affiliate, and (iii) acquire any services from its affiliated local exchange telephone company at tariffed rates,
terms and conditions. The Federal Communications Commission has initiated a rulemaking proceeding to examine whether there is a
continuing need for such requirements; however, we cannot predict the outcome of that proceeding.
The Telecommunications Act required all carriers to offer local number portability. This requirement allows telephone customers to
change service providers but keep their existing telephone numbers. Initially, the Federal Communications Commission set November 24,
2003 as the local number portability deadline for carriers within the Top 100 Metropolitan Statistical Areas and May 24, 2004 for carriers
outside the Top 100 Metropolitan Statistical Areas. On January 16, 2004, the Federal Communications Commission granted an extension of
time, to May 24, 2004, to local exchange carriers with fewer than two percent of the nation's subscriber lines, regardless of whether the
companies operate in a Top 100 Metropolitan Statistical Areas. Except for carriers that qualify as small entities under the Regulatory Flexibility
Act whose intermodal porting obligations were recently and temporarily stayed by the United States Court of Appeals for the District of
Columbia, all local exchange carriers with bona fide local number portability requests were required to be prepared to port numbers from
wireline to wireless carriers on or before May 24, 2004. We are in compliance with this requirement in all of the states in which we operate or
have received waivers to extend the time for implementation beyond the May 24th date in certain states where technical limitations hinder
compliance by this date.
Our operations and those of all communications carriers also may be impacted by legislation and regulation imposing new or greater
obligations related to assisting law enforcement, bolstering homeland security, minimizing environmental impacts, or addressing other
issues that impact our business. For example, existing provisions of the Communications Assistance for Law Enforcement Act and Federal
Communications Commission regulations implementing the Communications Assistance for Law Enforcement Act require
communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance. We
believe we are in compliance with those laws and regulations. These laws and regulations, however, are subject to both interpretation and
change which may result in requirements for us to incur additional costs.
State Regulation
Most states have some form of certification requirement that requires providers of communications services to obtain authority from the
state regulatory commission prior to offering common carrier services. Each of our 26 rural local exchange carriers operates as the
incumbent local telephone company in the states in which it operates and is certified in those states to provide local telephone services. State
regulatory commissions generally regulate the rates incumbent local exchange carriers
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