FairPoint Communications 2011 Annual Report Download - page 24

Table of Contents
• The board of directors is required to appoint a “regulatory sub-committee” that will monitor compliance with the terms of the VT 2008
Order, as modified by the Vermont Regulatory Settlement, and all other regulatory matters involving the States of Vermont, New
Hampshire and Maine. We appointed a regulatory committee on the Effective Date.
• We are required to maintain a state president who will provide a senior regulatory presence in Vermont and be able to reasonably respond to
various future Company-based dockets or regulatory issues relating to telecommunications. We fulfilled this obligation in January of
2010.
• We agreed to seek to have a Chief Information Officer in place by June 30, 2010. We fulfilled this obligation in March of 2010.
• We agreed that management bonuses and the Success Bonus Plan would be based on a combination of EBITDAR (EBITDA plus
restructuring costs) and service metrics goals and the weighting for each of these categories would be computed and clearly stated for the
incentive and bonus plans for each individual and for the Company in total. We believe that we are in compliance with this commitment.
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• We were required to reimburse the State of Vermont for certain costs and expenses. We fulfilled this obligation in January 2011.
• During the first two years following the Effective Date of the Plan, we are barred from paying dividends if we are in material breach of the
Vermont Regulatory Settlement until we cure such breach.
• On February 13, 2012, the VT Public Service Board approved our request to use $6.6 million of the Amended Retail Service Quality
Plan and PAP Mode of Entry penalties to deploy broadband into unserved areas of Vermont. Approximately $5.3 million of this amount is
associated with pre-bankruptcy claims and, therefore, is included in the Cash Claims Reserve.
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Our Northern New England operations in Maine currently operate under an AFOR implemented upon consummation of 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 Merger 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 Telecom Group operations in Maine converted to price cap regulation on July 1, 2010. All telephone companies in Maine were
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 provided as UNEs under Section 251 of the Communications Act. Prior to the Merger, Verizon New England, Inc. (“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
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