FairPoint Communications 2005 Annual Report Download - page 30

local exchange carriers have received in the past. In addition, several parties have raised objections to the size of the Universal Service Fund and the types of
services eligible for support. A number of issues regarding the source and amount of contributions to, and eligibility for payments from, the Universal Service
Fund are pending and will likely be addressed by the Federal Communications Commission or Congress in the near future. For example, a number of
proposals to be examined by the Federal Communications Commission in its current rulemaking with respect to the reform of the intercarrier compensation
system include reforms of the Universal Service Fund. The outcome of any regulatory proceedings or legislative changes could affect the amount of Universal
Service Fund support that we receive, and could have an adverse effect on our business, revenue or profitability.
On February 28, 2005, the Federal Communications Commission issued a press release announcing additional requirements for the designation of
competitive Eligible Telecommunications Carriers for receipt of high-cost support. In its corresponding order, released on March 17, 2005, the Federal
Communications Commission adopted additional mandatory requirements for Eligible Telecommunications Carriers designation in cases where it has
jurisdiction, and encourages states that have jurisdiction to designate Eligible Telecommunications Carriers to adopt similar requirements. The Federal
Communications Commission is still considering revisions to the methodology by which contributions to the Universal Service Fund are determined. These
revisions will be part of an overall rulemaking regarding Universal Service Support which will be dealt with sometime in 2006.
 Our rural local
exchange carriers are exempt from the Telecommunications Act’s more burdensome requirements governing the rights of competitors to interconnect to
incumbent local exchange carrier networks and to utilize discrete network elements of the incumbent’s network at favorable rates. If state regulators decide that
it is in the public’s interest to impose these more burdensome interconnection requirements on us, we would be required to provide unbundled network
elements to competitors. As a result, more competitors could enter our traditional telephone markets than are currently expected and we could incur additional
administrative and regulatory expenses, and experience additional revenue losses.
 Regulations create significant compliance costs for us. Our subsidiaries that provide intrastate
services are generally subject to certification, tariff filing and other ongoing regulatory requirements by state regulators. Our interstate access services are
provided in accordance with tariffs filed with the Federal Communications Commission. Challenges to our tariffs by regulators or third parties or delays in
obtaining certifications and regulatory approvals could cause us to incur substantial legal and administrative expenses, and, if successful, such challenges
could adversely affect the rates that we are able to charge our customers.
Our business also may be impacted by legislation and regulation imposing new or greater obligations related to assisting law enforcement, bolstering
homeland security, minimizing environmental impacts, or addressing other issues that impact our business. For example, existing provisions of the
Communications Assistance for Law Enforcement Act and Federal Communications Commission regulations implementing the Communications Assistance
for Law Enforcement Act require communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic
surveillance. We cannot predict whether and when the Federal Communications Commission might modify its Communications Assistance for Law
Enforcement Act rules or any other rules or what compliance with new rules might cost. Similarly, we cannot predict whether or when federal or state
legislators or regulators might impose new security, environmental or other obligations on our business.
For a more thorough discussion of the regulatory issues that may affect our business, see “Item 1. Business—Regulatory Environment.”
28