FairPoint Communications 2009 Annual Report Download - page 34

Table of Contents
proposed to adopt open Internet access rules applicable to all broadband Internet access providers. However, we cannot predict what impact, if any, this
may have on our business. The FCC has preempted some state regulation of VoIP.
Because our non-rural operations are classified as a Bell Operating Company, they are subject to additional requirements in connection with their
provision of enhanced services. Specifically, our non-rural operations generally must provide enhanced services consistent with the FCC's so-called
 rules, which require each Bell Operating Company to ensure that unaffiliated enhanced service providers have nondiscriminatory
access to the telecommunications transmission capability underlying any enhanced services provided by the Bell Operating Company, except for where
the FCC specifically has provided relief from some or all of these requirements.
Additional rules and regulations may be extended to the Internet and to broadband Internet access. A variety of proposals are under consideration
in both federal and state legislative and regulatory bodies. For example, the FCC is considering reclassifying the transport component of broadband
service as a "telecommunications service." We cannot predict whether the outcome of pending or future proceedings will prove beneficial or detrimental
to our competitive position.
On February 17, 2009, Congress enacted the American Recovery and Reinvestment Act of 2009 which, among other programs, provides for
$7.2 billion for broadband development in unserved and underserved areas of the United States. We applied for stimulus funding during round one of
the application process, but did not receive any grant funding. We have also applied for stimulus funding in the second and final round of the application
process, but we cannot predict whether we will receive any grant funding. To the extent that our competitors have received, or will receive, stimulus
funding under this program, we may face more significant competition from such competitors.
State Regulation
The local service rates and intrastate access charges of substantially all of our telephone subsidiaries are regulated by state regulatory commissions
which typically have the power to grant and revoke franchises authorizing companies to provide communications services. In some states, our intrastate
long-distance rates are also subject to state regulation. States typically regulate local service quality, billing practices and other aspects of our business as
well.
Most state commissions have traditionally regulated LEC pricing through cost-based "rate-of-return" regulation. In recent years, however, state
legislatures and regulatory commissions in most of the states in which our telephone companies operate have either reduced the regulation of LECs or
have announced their intention to do so, and we expect this trend will continue. Such relief may take the form of mandatory deregulation of particular
services or rates; or it may consist of optional alternative forms of regulation ("AFOR"), which may involve price caps or other flexible pricing
arrangements. Some of these deregulatory measures are described in greater detail below. We believe that some AFOR plans allow us to offer new and
competitive services faster than under the traditional regulatory regimes.
The following summary addresses significant regulatory actions by regulatory agencies in Maine, New Hampshire and Vermont that have affected
or are expected to affect our Northern New England operations:

We are subject to certain orders issued by the state regulatory authorities in Maine, New Hampshire and Vermont in connection with the Merger.
We have entered into settlement negotiations with respect to these orders in connection with the Plan, as described below.
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