Earthlink 2006 Annual Report Download - page 23

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Government regulations could force us to change our business practices.
Internet access. Changes in the regulatory environment regarding the Internet could cause our revenues to decrease and/or our costs to
increase. Currently, ISPs as “information service” providers, are largely unregulated, other than with respect to regulations that govern
businesses generally, such as regulations related to consumer protection. As information services and telecommunications services converge,
however, the FCC may seek to impose additional regulations, including the imposition of regulatory fees such as Universal Service Fund
payments, on information service providers that could adversely affect our business.
VoIP. The current regulatory environment for VoIP services remains unclear. Our VoIP services are not currently subject to all of the
same regulations that apply to traditional telephony. It is possible that Congress and some state legislatures may seek to impose increased fees
and administrative burdens on VoIP providers. The FCC has already required certain VoIP providers to contribute directly into the Universal
Service Fund as well as to meet various emergency service requirements (such as E911) and interception or wiretapping requirements, such as
the Communications Assistance for Law Enforcement Act, or CALEA. In addition the FCC may seek to impose other traditional telephony
requirements such as disability access requirements, consumer protection requirements, number assignment and portability requirements, and
other obligations, including additional obligations regarding E911 and CALEA. Such regulations could result in substantial costs depending on
the technical changes required to accommodate the requirements, and any increased costs could erode our pricing advantage over competing
forms of communication and may adversely affect our business.
CLEC regulation. New Edge is a regulated CLEC. Telecommunications laws and regulations applicable to CLECs have been subject to
change and to reversal by the courts, and we cannot be certain that such changes will not continue to occur in the future. Our results of
operations could be materially, adversely affected by future changes of these legal and regulatory rights or obligations. In addition, New Edge
makes use of ILECs and other CLECS. Such services are often made available by regulation. Changes in such regulation that might curtail
New Edge
’s access to such services or that would otherwise negatively impact the rates or conditions of such services for New Edge could
have a material adverse impact on our operations.
Tax. The tax treatment of activities on or relating to the Internet is currently unsettled. A number of proposals have been made at the
federal, state and local levels and by foreign governments that could impose taxes on the online sale of goods and services and other Internet
activities. Future federal and state laws imposing taxes on the provision of goods and services over the Internet could make it substantially
more expensive to operate our business.
Other. Our business is also subject to a variety of other U.S. laws and regulations that could subject us to liabilities, claims or other
remedies, such as laws relating to bulk email or “spam,” access to various types of content by minors, anti-spyware initiatives, encryption, data
protection, data retention, security breaches and consumer protection. Compliance with these laws and regulations is complex and may require
significant costs. In addition, the regulatory framework relating to Internet services is evolving and both the federal government and states from
time to time pass legislation that impacts our business. It is likely that additional laws and regulations will be adopted that would affect our
business. We cannot predict the impact future regulatory changes or developments may have on our business, financial condition, results of
operations or cash flows. The enactment of any additional laws or regulations, increased enforcement activity of existing laws and regulations,
or claims by individuals could significantly impact our costs or the manner in which we conduct business, all of which could adversely impact
our results of operations and cause our business to suffer.
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