FairPoint Communications 2009 Annual Report Download - page 31

Table of Contents
VoIP services must contribute to federal universal service funding. The FCC also increased the percentage of revenues subject to federal universal
service contribution obligations that wireless providers may use as their methodology for funding universal service. One alternative under consideration
would be to impose surcharges on telephone numbers or network connections instead of carrier revenues. Any further change in the current assessment
mechanism could result in a change in the total contribution that LECs, wireless carriers or others must make and that would be collected from
customers. We cannot predict whether the FCC or Congress will require modification to any of the universal contribution rules, or the ultimate impact
that any such modification might have on us or our customers.
Local Service Competition
The 1996 Act provides, in general, for the removal of barriers to market entry in order to promote competition in the provision of local
telecommunications and information services. As a result, competition in our local exchange service areas will continue to increase from competitive
LECs, wireless providers, cable companies, Internet service providers, electric companies and other providers of network services. Many of these
competitors have a significant market presence and brand recognition, which could lead to more competition and a greater challenge to our future
revenue growth.
Under the 1996 Act, all LECs, including both incumbents and competitive LECs, 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 receive 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, ILECs are subject to additional requirements to: (i) interconnect their facilities and equipment with any requesting
telecommunications carrier at any technically feasible point; (ii) unbundle and provide nondiscriminatory access to certain network elements, referred to
as unbundled network elements ("UNEs"), including some types of 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 ILEC'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 ILEC's premises. Competitors are required to compensate the
ILEC for the cost of providing these services.
Our non-rural operations are subject to all of the above requirements. In addition, our non-rural operations are subject to additional unbundling
obligations that apply only to Bell Operating Companies. In contrast to the unbundling obligations that apply generally to ILECs, 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 Legacy FairPoint rural operations are exempt from the additional ILEC requirements until the applicable rural carrier 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 Legacy
FairPoint rural ILEC operations, except in Florida where the legislature has determined that all ILECs 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
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