FairPoint Communications 2005 Annual Report Download - page 15

Under the Telecommunications Act, state regulatory commissions have jurisdiction to arbitrate and review interconnection disputes and agreements
between incumbent local exchange carriers and competitive local exchange carriers, in accordance with rules set by the Federal Communications Commission.
State regulatory commissions may also formulate rules regarding fees imposed on providers of communications services within their respective states to
support state universal service programs. States often require prior approvals or notifications for certain acquisitions and transfers of assets, customers, or
ownership of regulated entities. Therefore, in most instances we will be required to seek state approval prior to completing new acquisitions of rural local
exchange carriers. States generally retain the right to sanction a carrier or to revoke certifications if a carrier materially violates relevant laws and/or regulations.
Local Government Authorizations
We may be required to obtain from municipal authorities permits for street opening and construction or operating franchises to install and expand
facilities in certain rural communities. Some of these franchises may require the payment of franchise fees. We have obtained such municipal franchises as
were required. In some rural areas, we do not need to obtain such permits or franchises because the subcontractors or electric utilities with which we have
contracts already possess the requisite authorizations to construct or expand our networks.
Promotion of Local Service Competition and Traditional Telephone Companies
As discussed above, the Telecommunications Act provides, in general, for the removal of barriers to entry into the communications industry in order to
promote competition for the provision of local service. Congress, however, has recognized that states should not be prohibited from taking actions necessary to
preserve and advance universal service, and has further recognized that special consideration should be given to the appropriate conditions for competitive
entry in areas served by rural telephone companies, such as our 28 rural local exchange carrier subsidiaries.
Pursuant to the Telecommunications Act, all local exchange carriers, including both incumbents and new competitive carriers, are required to: (i) allow
others to resell their services at retail rates; (ii) ensure that customers can keep their telephone numbers when changing carriers; (iii) ensure that competitors’
customers can use the same number of digits when dialing and receive nondiscriminatory access to telephone numbers, operator service, directory assistance
and directory listing; (iv) ensure access to telephone poles, ducts, conduits and rights of way; and (v) compensate competitors for the competitors’ costs of
completing calls to competitors’ customers. Competitors are required to compensate the incumbent telephone company for the cost of providing these
interconnection services. Under the Telecommunications Act, our rural local exchange carriers may request from state regulatory commissions, suspension or
modification of any or all of the requirements described above. A state regulatory commission may grant such a request if it determines that such exemption,
suspension or modification is consistent with the public interest and necessary to avoid a significant adverse economic impact on communications users and
generally avoid imposing a requirement that is technically unfeasible or unduly economically burdensome. If a state regulatory commission denies some or all
of any such request made by one of our rural local exchange carriers, or does not allow us adequate compensation for the costs of providing interconnection,
our costs could increase and our revenues could decline. In addition, with such a denial, competitors could enjoy benefits that would make their services more
attractive than if they did not receive such interconnection rights. With the exception of the previously referenced requests to modify the May 24, 2004
implementation date for local number portability in certain states, we have not encountered a need to file any such requests for suspension or modification of
the interconnection requirements.
The Telecommunications Act, with certain exceptions, imposes the following additional duties on incumbent telephone companies by requiring them to:
(i) interconnect their facilities and equipment with
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