FairPoint Communications 2009 Annual Report Download - page 41

Table of Contents
The Vermont Regulatory Settlement is conditioned on Vermont DPS receiving and finding acceptable a business plan demonstrating our ability to
meet our obligations under the Vermont Regulatory Settlement and our feasibility to operate as a going concern over the long term in a manner
consistent with Vermont utility regulation.
We are in the process of seeking approval of the Vermont Regulatory Settlement in connection with the confirmation of the Plan.
The foregoing summary of the Vermont Regulatory Settlement is qualified in its entirety by reference to the full text of the Vermont Regulatory
Settlement which is filed as an exhibit to the Plan.
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Our Northern New England operations in Maine currently operate under an AFOR implemented upon the Merger. The AFOR provides for the
capping of rates for basic local exchange services and allows pricing flexibility for other services, including intrastate long distance, optional services
and bundled packages. Under the terms of the ME 2008 Order, among other things, we reduced the caps on monthly basic exchange rates effective as
of August 1, 2008 by an amount designed to decrease revenues by approximately $1.5 million per month (depending on the applicable number of
access lines). The current AFOR caps basic exchange rates in Maine at the new level for five years after August 1, 2008. The AFOR also includes an
SQI requirement for our Northern New England operations in Maine, which establishes benchmarks for certain performance categories and imposes
penalties for the failure to meet the benchmarks. Our rural LECs in Maine currently operate under traditional rate of return regulation and have limited
forms of pricing flexibility. All telephone companies in Maine are required to establish intrastate access rates which do not exceed their interstate access
rates as they existed on January 1, 2003. Certain intrastate wholesale services are also subject to tariff requirements of the MPUC. In addition to the
regulation of rates and service, telephone companies are generally subject to regulation by the MPUC in other areas, including transactions with
affiliates, financing and reorganizations.
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In orders issued in 2004 and 2005, the MPUC ruled that it had the authority under federal law to regulate compliance with certain conditions that
our Northern New England operations must satisfy to sell long-distance services, and in particular to define the elements that our Northern New
England operations must provide on a wholesale basis to competitive carriers under Section 271 of the Communications Act. The MPUC ruled that it
had the authority to set rates for Section 271 elements and interpreted Section 271 to require our Northern New England operations to provide access to
elements that the FCC had held are not required to be proved as UNEs under Section 251 of the Communications Act. Prior to the Merger, Verizon
New England challenged the ruling in the U.S. District Court of Maine. Following an unfavorable ruling, Verizon New England appealed to the First
Circuit Court of Appeals. The First Circuit vacated the District Court's decision and held that the MPUC has no such authority. The court remanded the
matter for further proceedings by the District Court, which subsequently dismissed the case at our and the MPUC's request. On November 25, 2009,
the MPUC petitioned the FCC for a declaratory ruling requiring us to provide certain UNEs, which is now pending.
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Our ILEC business operations in New Hampshire are subject to rate of return regulation. We have adopted the contractual and tariffed rates and
terms and conditions that were in effect for the Verizon Northern New England business prior to the Merger. No rate proceeding is pending. Within this
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