FairPoint Communications 2010 Annual Report Download - page 31

Table of Contents
penalties for the failure to meet the benchmarks. Our Legacy FairPoint operations in Maine and Vermont converted to price cap regulation on July 1, 2010. 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.
Maine — Unbundling of Network Elements
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 provided 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.
New Hampshire
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 regulatory
structure, the NHPUC has instituted rules and policies to expedite offerings of new services, but we are 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 maintain two New Hampshire wholesale tariffs, one for
interconnection, co-location 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 retail, 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.
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 Verizon 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
Verizon 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.
In 2008, the NHPUC issued an order determining that intra-LATA carrier common line switched access charges did not apply to certain interexchange calls
where neither the calling nor the called party is served by our Northern New England operations. This decision was reversed by the New Hampshire Supreme
Court on appeal. Following this decision, the NHPUC directed us to file tariff revisions to remove such charges prospectively and we objected to this
requirement. The matter remains pending before the NHPUC.
Vermont
In April 2006, the Vermont Board issued a final order adopting an amended alternative regulatory plan (the “Amended Incentive Regulation Plan”) for the
Verizon 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. The Vermont Board has extended the Amended Incentive Regulation Plan through March 31, 2011 to allow the parties time to
negotiate a replacement plan. Under the Amended Incentive Regulation Plan, the Verizon 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
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