Earthlink 2011 Annual Report Download - page 31

Table of Contents
If we are unable to interconnect with AT&T, Verizon and other incumbent carriers on acceptable terms, our ability to offer competitively
priced local telephone services will be adversely affected.
To provide local telephone services, we must interconnect with and resell the services of the incumbent carriers to supplement our own
network facilities, pursuant to interconnection agreements between us and the incumbent carriers. We operate under interconnection agreements
with AT&T, CenturyLink, Fairpoint Communications, Frontier Communications, Verizon and Windstream. An interconnection agreement
typically has a term of three years, although the parties may mutually agree to extend or amend such agreements. If we are not able to renegotiate
or enter into interconnection agreements on acceptable terms, or if we are subject to unfavorable arbitration decisions, our cost of doing business
could increase and our ability to compete could be impeded. Moreover, our interconnection agreements and traffic exchange with companies
other than ILECs (such as wireless and VoIP providers and other competitive carriers) are not subject to the statutory arbitration mechanism,
making it potentially more difficult to reach any agreement on terms that we view as acceptable. If we are unable to enter into or maintain
favorable interconnection agreements in our markets, our ability to provide local services on a competitive and profitable basis may be adversely
affected. Any successful effort by the incumbent carriers to deny or substantially limit our access to their network elements or wholesale services
also would harm our ability to provide local telephone services.
Our operating performance will suffer if we are not offered competitive rates for the access services we need to provide our long distance
services.
We depend on other communications companies to originate and terminate a significant portion of the long distance traffic initiated by our
customers. The FCC regulates the access rates charged by local carriers to interexchange carriers for the origination and termination of long
distance traffic. These access rates make up a significant portion of the cost of providing long distance service. The FCC has recently adopted
policy changes that over time are reducing carriers' access rates. These new rules significantly alter the manner in which all carriers, including
carriers that use different service platforms such as wireless and VoIP, are compensated for the origination and termination of
telecommunications traffic. These new rules also may alter the rates that we pay for our access services. We expect these new rules to result in a
loss of revenues and could potentially increase our volume of carrier disputes. Our operating performance will suffer if we are not offered these
access services at rates that are substantially equivalent to the costs of, and rates charged to, our competitors and that permit profitable pricing of
our long distance services.
We may experience reductions in switched access and reciprocal compensation revenue.
We may experience declines in revenues for switched access and reciprocal compensation as a result of lower volume of traditional long
distance voice minutes and FCC and state regulations compelling a reduction of switched access and reciprocal compensation rates. The FCC
recently adopted policy changes that over time are reducing carriers' access rates. We expect these new rules to result in a loss of revenues and
could potentially increase our volume of carrier disputes. In addition, the FCC currently is considering whether and how to reform its special
access rules. We rely to a considerable extent on interstate special access services purchased from the incumbent carriers in order to connect to
our customers. Switched access and reciprocal compensation together have been declining over time. There can be no assurance that we will be
able to compensate for the reduction in intercarrier compensation revenue with other revenue sources or increased volume.
Failure to obtain and maintain necessary permits and rights-of-way could interfere with our network infrastructure and operations.
To obtain and maintain rights-of-
way and similar franchises and licenses needed to install, operate and maintain fiber optic cable and our
other network elements, we must negotiate and manage agreements
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