FairPoint Communications 2004 Annual Report Download - page 16

communications common carriers, such as us, to the extent those facilities are used to provide, originate, or terminate interstate or
international communications. State regulatory commissions generally exercise jurisdiction over such facilities and services to the extent
those facilities are used to provide, originate or terminate intrastate communications. In addition, pursuant to the Telecommunications Act,
state and federal regulators share responsibility for implementing and enforcing the domestic pro-competitive policies introduced by that
legislation. In particular, state regulatory agencies have substantial oversight over the provision by incumbent telephone companies of
interconnection and non-discriminatory network access to competitive communications providers. Local governments often regulate the
public rights-of-way necessary to install and operate networks, and may require communications services providers to obtain licenses or
franchises regulating their use of public rights-of-way. Additionally, municipalities and other local government agencies may regulate limited
aspects of our business, including our use of public rights of way, and by requiring us to obtain construction permits and abide by building
codes.
We believe that competition in our telephone service areas will increase in the future as a result of the Telecommunications Act,
although the ultimate form and degree of competition cannot be ascertained at this time. Competition may lead to loss of revenues and
profitability as a result of: loss of customers; reduced usage of our network by our existing customers who may use alternative providers for
long distance and data services; and reductions in prices for our services which may be necessary to meet competition.
Federal Regulation
We must comply with the Communications Act which requires, among other things, that communications carriers offer services at just
and reasonable rates and on non-discriminatory terms and conditions. The amendments to the Communications Act contained in the
Telecommunications Act dramatically changed and are expected to continue to change the landscape of the communications industry. The
central aim of the Telecommunications Act was to open local communications marketplaces to competition while enhancing universal
service. Most significantly, the Telecommunications Act governs the removal of barriers to market entry into local telephone services,
requires incumbent local exchange carriers to interconnect with competitors, establishes procedures pursuant to which incumbent local
exchange carriers may provide other services, such as the provision of long distance services by regional bell operating companies, and
imposes on incumbent local exchange carriers duties to negotiate interconnection arrangements in good faith.
 Prior to the enactment of the Telecommunications Act, many states limited the services that could be
offered by a company competing with an incumbent local exchange carrier. The Telecommunications Act generally preempts state and local
laws that prevent competitive entry into the provision of any communications service. However, states can modify conditions of entry into
areas served by rural local exchange carriers where the state regulatory commission determines that such modification is warranted by the
public interest. Since the passage of the Telecommunications Act, we have experienced only limited competition from cable and wireless
service providers.
 The Federal Communications Commission regulates the prices that incumbent local telephone companies charge
for the use of their local telephone facilities in originating or terminating interstate transmissions. The Federal Communications
Commission has structured these prices, also referred to as "access charges," as a combination of flat monthly charges paid by the end-
users and usage sensitive charges paid by long distance carriers. State regulatory commissions regulate intrastate access charges. Many
states generally mirror the Federal Communications Commission price structure. A significant amount of our revenues come from network
access charges, which are paid to us by intrastate carriers and interstate long distance carriers for originating and terminating calls in the
regions served by our rural local exchange carriers. The amount of access
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