FairPoint Communications 2007 Annual Report Download - page 22

Table of Contents
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Following the transactions, our incumbent local exchange carrier business operations in New Hampshire will be subject to rate of
return regulation. We will adopt the contractual and tariffed rates and terms and conditions rates that were in effect for the Northern New
England business prior to the merger. No rate proceeding is pending. Within this regulatory structure, the NHPUC has instituted rules
and policies to expedite offerings of new services, but we will be subject to regulations, such as tariff filing and cost allocation
requirements, that are not applicable to our competitors. In addition to our access tariff, we will maintain two New Hampshire wholesale
tariffs, one for interconnection, collocation and UNEs and another for services offered to carriers for resale. The order of the NHPUC
approving the spin-off and the merger includes conditions generally limiting rates for existing retain, wholesale and DSL services during
the three years following the closing of the merger to those in effect as of the close date of the merger.
The intrastate access tariff applicable to the Northern New England business that we will adopt includes provisions that are the
subject of a pending NHPUC proceeding. In response to a complaint by a competitive local exchange carrier, the NHPUC is investigating
the application of switched access carrier common line charges under this tariff in circumstances where the Northern New England
business did not, and we will not, provide a common line. The investigation addresses both prior charges and the interpretation of the
tariff prospectively. Hearings have been held and the matter is awaiting decision by the NHPUC. The outcome of this proceeding and its
impact on our New Hampshire operations after the transactions cannot be predicted.
In a case similar to that of the MPUC described under “— Maine — Unbundling of Network Elements,” the NHPUC had entered
orders asserting authority under federal law to require the Northern New England business to continue offering certain network elements
no longer required to be offered pursuant to Section 251 of the 1996 Act, and at existing total element long run incremental cost rates until
the NHPUC decided otherwise. The Northern New England business challenged the orders in the United States District Court for the
District of New Hampshire and obtained an order enjoining the NHPUC from enforcing the orders. The recent First Circuit decision that
considered the MPUC order also considered this New Hampshire decision and affirmed the District Court’s opinion.
The NHPUC is considering a complaint brought by a competitive local exchange carrier seeking a ruling that access charges, or at
least the carrier common line rate element, do not apply to certain interexchange calls where neither the calling nor the called party is served
by Verizon New England. Verizon New England is contesting this complaint. The proceeding, which was expanded to include similar
claims by other competitive carriers, may result in refunds of access charges collected in the past and a prohibition on charging some or
all of these charges by us in the future, which could result in reduced revenues for us. Hearings have been held, and the matter is awaiting
the decision of the NHPUC.
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In April 2006, the Vermont Public Service Board issued a final order adopting an amended alternative regulatory plan, referred to as
the amended Incentive Regulation Plan, for the Northern New England business to replace a plan adopted in 2000. The Amended Incentive
Regulation Plan is retroactive to July 1, 2005, and runs through December 31, 2010. Under the amended plan, the Northern New
England business committed to make broadband capability available to 75% of its access lines in Vermont by 2008 and 80% of its
access lines in Vermont by 2010 with milestones of 65% and 77% for 2007 and 2009, respectively. The Amended Incentive
Regulation Plan provides pricing flexibility for all new services, and no price increases are permitted for existing services such as basic
exchange service, message toll service and most vertical services. The final order also continues a service quality plan with a
$10.5 million penalty cap. Other provisions of the order include lifeline credits for qualified customers that subscribe to bundled services
and a requirement to separately public and distribute while and Yellow Pages directories. The Vermont Public Service board’s order
approving the transaction is conditioned on our being subject to the terms and conditions of the Amended Incentive Regulation Plan. As a
part of our settlement with the VDPS, we have agreed to exceed the existing Amended Incentive Regulation Plan’s broadband buildout
milestones and have agreed to a condition that requires us to reach 100% broadband availability in 50% of our exchanges in Vermont.
This requirement has
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