FairPoint Communications 2011 Annual Report Download - page 25

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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 still pending.
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Our ILEC business operations in New Hampshire are subject to intrastate 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. 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 for up to five years following the closing of the Merger to those in effect as of the closing
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. Verizon
Northern New England 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 tariff revisions went into effect on January 21, 2012.
The New Hampshire legislature recently allowed a statutory exemption applicable to telecommunications providers from certain municipal property taxes
to expire; as such our New Hampshire operations are now subject to the imposition of municipal property taxes on our utility telephone poles and conduit.
Also, as a result of a recent court case, municipalities are now allowed to assess property taxes on the use of municipal rights of way. The Company estimates
it will be billed approximately $6.5 million for these taxes of which $4.9 million was expensed for the nine months ended December 31, 2011. All of these
municipal property tax bills may be reduced through abatement proceedings that we may initiate no later than March 1, 2012. At present, we cannot predict
our total exposure based upon the abatement proceedings. During the fourth quarter of 2011, we made a tariff filing with the NHPUC requesting permission to
levy a municipal property tax surcharge on certain retail and resold access lines in the amount not to exceed $0.99 per line up to a total of 25 access lines per
billing account number. The NHPUC issued an Order on December 28, 2011, granting our request to apply the surcharge on a temporary basis effective
April 1, 2012, pending further regulatory proceedings to be undertaken during 2012.
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In Vermont, our Northern New England service territory operated under an alternative form of regulation since 2006 known as an Amended Incentive
Regulation Plan. That plan expired on March 31, 2011. On March 23, 2011, we entered into a Memorandum of Understanding with the Vermont Department
of Public Services whereby they agreed to seek approval of the 2011 Incentive Regulation Plan before the Vermont Public Service Board. The Board approved
the 2011 Incentive Regulation Plan on January 18, 2012, and that plan is effective retroactively to April 1, 2011. We believe the 2011 Incentive Regulation Plan
will decrease the scope of regulation for us, providing us with increased ability to compete in the Vermont telecommunications marketplace. Under the 2011
Incentive Regulation Plan, our exposure to annual retail service quality penalties has been decreased from $10.5 million to $1.65 million and we have pricing
discretion with respect to existing and new services other than basic local exchange service.
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