Earthlink 2010 Annual Report Download - page 22

Table of Contents
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 Qwest, 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. Upon being granted relief by the FCC, Qwest 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, or
MSA.
In January 2007, Qwest filed additional petitions for relief from dominant carrier regulation in the metropolitan statistical areas of Denver,
Minneapolis-St. Paul, Phoenix and Seattle. In February 2008, Verizon re-
filed petitions, which had previously been denied, for relief from
dominant carrier regulation for the State of Rhode Island and Virginia Beach. In July 2008, the FCC denied the Qwest petitions. Qwest
subsequently refiled a petition for forbearance for the Phoenix MSA only in March 2009. The FCC issued an order in June 2010 denying Qwest
petition for Phoenix and setting forth specific thresholds and analytical frameworks that must be met for grant of such petitions. Qwest has since
appealed the FCC decision and order and that appeal remains in the courts. If a court or the FCC upholds or grants any forbearance or similar
petitions filed by incumbent carriers in the future affecting markets in which we operate, our ability to purchase wholesale network services from
these carriers at cost-
based prices that would allow us 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. Generally, the state public utility commissions require providers such as us to obtain
certificates of authority from the commission before initiating service within the state. In most states, we also are 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. 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.
Public utility commissions or third parties may raise issues with regard to our compliance with applicable laws or regulations.
We have authority to offer intrastate long distance 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, using
incumbent carriers' network elements and our own local switching facilities.
State public utility commissions 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. Public utility
commissions arbitrate
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