FairPoint Communications 2007 Annual Report Download - page 17

Table of Contents
Under the 1996 Act, all local exchange carriers, including both incumbents and new competitive carriers, are required to: (i) allow
others to resell their services; (ii) ensure that customers can keep their telephone numbers when changing carriers, referred to as local
number portability; (iii) ensure that competitors’ customers can use the same number of digits when dialing and receiving
nondiscriminatory access to telephone numbers, operator service, directory assistance and directory listing; (iv) ensure competitive access
to telephone poles, ducts, conduits and rights of way; and (v) compensate competitors for the cost of completing calls to competitors’
customers from the other carrier’s customers.
In addition to these obligations, incumbent local exchange carriers, such as our telephone operating subsidiaries, are required to:
(i) interconnect their facilities and equipment with any requesting telecommunications carrier at any technically feasible point;
(ii) unbundle and provide nondiscriminatory access to network elements, referred to as unbundled network elements, or UNEs, such as
local loops and transport facilities, at regulated rates and on nondiscriminatory terms and conditions, to competing carriers that would be
“impaired” without them; (iii) offer their retail services for resale at wholesale rates; (iv) provide reasonable notice of changes in the
information necessary for transmission and routing of services over the incumbent local exchange carrier’s facilities or in the information
necessary for interoperability; and (v) provide, at rates, terms and conditions that are just, reasonable and nondiscriminatory, for the
physical co-location of equipment necessary for interconnection or access to UNEs at the premises of the incumbent local exchange
carrier. Competitors are required to compensate the incumbent local exchange carrier for the cost of providing these services.
Following the transactions, our non-rural operations will be subject to all of the above requirements. In addition, following the
transactions, as a Bell Operating Company, our non-rural operations will be subject to additional unbundling obligations that apply only
to Bell Operating Companies. In contrast to the unbundling obligations that apply generally to incumbent local exchange carriers, these
Bell Operating Company-specific requirements mandate access to certain facilities (such as certain types of local loops and inter-office
transport, and local circuit switching) even where other carriers would not be “impaired” without them.
Our existing rural operations will be exempt from the additional incumbent telephone company requirements until the applicable
rural telephone company receives a bona fide request for these additional services and the applicable state authority determines that the
request is not unduly economically burdensome, is technically feasible, and is consistent with the universal service objectives set forth in
the 1996 Act. This exemption will be effective for all of our existing rural incumbent local telephone operations, except in Florida where
the legislature has determined that all incumbent local exchange carriers are required to provide the additional services as prescribed in the
1996 Act. If a request for any of these additional services is filed by a potential competitor with respect to one of our other existing rural
operating territories, we will likely ask the relevant state regulatory commission to retain the exemption. If a state regulatory commission
rescinds an exemption in whole or in part and does not allow us adequate compensation for the costs of providing the interconnection, our
costs could increase significantly; we could face new competitors in that state; and we could suffer a significant loss of customers and
incur a material adverse effect on our business, financial condition and results of operations. In addition, we could incur additional
administrative and regulatory expenses as a result of the interconnection requirements. Any of these could result in a material adverse
effect on our results of operations and financial condition.
Under the 1996 Act, 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 doing so is
consistent with the public interest and is necessary to avoid a significant adverse economic impact on communications users, and where
imposing the requirement would be technically infeasible or unduly economically burdensome. If a state regulatory commission denies all
or a portion of a 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 interconnection rights. With the exception of
certain requests by us to modify the May 24, 2004 implementation date for local number portability in certain states, we have not
encountered a need to file any requests for suspension or modification of the interconnection requirements.
15