FairPoint Communications 2004 Annual Report Download - page 71

regulatory proceedings or legislative changes could affect the amount of Universal Service Fund support that we receive, and could have an
adverse effect on our business, revenue or profitability.
On February 28, 2005, the Federal Communications Commission issued a press release announcing additional requirements for the
designation of competitive Eligible Telecommunications Carriers for receipt of high-cost support. Although the written text of the Federal
Communications Commission order has not been released, the Federal Communications Commission has adopted additional mandatory
requirements for Eligible Telecommunications Carriers designation in cases where it has jurisdiction, and encourages states that have
jurisdiction to designate Eligible Telecommunications Carriers to adopt similar requirements. The Federal Communications Commission is
still considering revisions to the methodology by which contributions to the Universal Service Fund are determined. These revisions will be
part of an overall rulemaking regarding Universal Service Support which will be dealt with sometime in the next year.
 . Our
rural local exchange carriers are exempt from the Telecommunications Act's more burdensome requirements governing the rights of
competitors to interconnect to incumbent local exchange carrier networks and to utilize discrete network elements of the incumbent's network
at favorable rates. If state regulators decide that it is in the public's interest to impose these more burdensome interconnection requirements
on us, we would be required to provide unbundled network elements to competitors. As a result, more competitors could enter our traditional
telephone markets than are currently expected and we could incur additional administrative and regulatory expenses, and experience
additional revenue losses.
 Regulations create significant compliance costs for us. Our subsidiaries that provide
intrastate services are generally subject to certification, tariff filing and other ongoing regulatory requirements by state regulators. Our
interstate access services are provided in accordance with tariffs filed with the Federal Communications Commission. Challenges to our
tariffs by regulators or third parties or delays in obtaining certifications and regulatory approvals could cause us to incur substantial legal and
administrative expenses, and, if successful, such challenges could adversely affect the rates that we are able to charge our customers.
Our business 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 cannot predict whether and when the Federal
Communications Commission might modify its Communications Assistance for Law Enforcement Act rules or any other rules or what
compliance with new rules might cost. Similarly, we cannot predict whether or when federal or state legislators or regulators might impose
new security, environmental or other obligations on our business.
For a more thorough discussion of the regulatory issues that may affect our business, see "Item 1. Business—Regulatory
Environment."

 
The Telecommunications Act provides for significant changes and increased competition in the communications industry, including the
local communications and long distance industries. This statute and the Federal Communications Commission's implementing regulations
remain subject to judicial review and additional rulemakings of the Federal Communications Commission, thus making it difficult
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