FairPoint Communications 2009 Annual Report Download - page 32

Table of Contents
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, results of operations and liquidity. 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 LECs 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 LECs, 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.
Long-Distance Operations
The FCC has required that ILECs that provide interstate long-distance services originating from their local exchange service territories must do so
in accordance with "non-structural separation" rules. These rules have required that our long-distance affiliates (i) maintain separate books of account,
(ii) not own transmission or switching facilities jointly with the local exchange affiliate, and (iii) acquire any services from their affiliated LEC at tariffed
rates, terms and conditions. The Bell Operating Companies are subject to a different set of rules allowing them to offer both long-distance and local
exchange services in the regions where they operate as Bell Operating Companies, subject to certain conditions with which we comply. In addition, our
operations have been obligated under the FCC's "equal access" scripting requirement to read new customers a list of all available long-distance carriers
presented in random order. Not all of our competitors must comply with these requirements. Therefore, these requirements may put us at a competitive
disadvantage in the interstate long-distance market. The FCC recently ruled that the Bell Operating Companies need no longer comply with these rules
for their long-distance services in order to avoid classification as a dominant carrier, and that their ILEC affiliates need no longer comply with the
separation rules for their long distance services, provided that they comply with certain existing and additional safeguards, such as providing special
access performance metrics, offering low-volume calling plans, and making available certain monthly usage information on customers' bills. The FCC
also has ruled that the Bell Operating Companies and their ILEC affiliates are no longer required to comply with the equal access scripting requirement.
However, until similar relief is granted in each state by the state PUC, FairPoint will continue to comply with the equal access scripting requirements.
Other Obligations under Federal Law
We are subject to a number of other statutory and regulatory obligations at the federal level. For example, the Communications Assistance for Law
Enforcement Act, or CALEA, requires telecommunications carriers to modify equipment, facilities and services to allow for authorized electronic
surveillance based on either industry or FCC standards. Under CALEA and other federal laws, we may be required to provide law enforcement officials
with call records, content or call identifying information, pursuant to an appropriate warrant or subpoena.
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