XO Communications 2010 Annual Report Download - page 15

The Telecom Act includes a number of provisions designed to encourage competition in local telephone
service, including requirements related to interconnection; intercarrier compensation; local number portability;
access to poles, conduits, rights of way and resale; as well as specific requirements imposed on ILECs related
to interconnection, collocation and access to unbundled network elements (‘‘UNE’’) available at forward
looking economic costs. As governed by the Telecom Act, CLEC access to ILEC networks and utility poles
are implemented through individually negotiated contracts that conform to applicable FCC rules. Although the
rights established in the Telecom Act are a necessary prerequisite to the introduction of full local competition,
they must be properly implemented and enforced to permit competitive telephone companies like us to
compete effectively with the ILECs. In a series of orders and related court challenges that date back to 1996,
the FCC has put into effect rules implementing the market-opening provisions of the Telecom Act, including
the requirement that the ILECs lease UNEs to competitors at cost-based rates. At the core of the series of
FCC orders is the FCC’s evolving effort to define and list which ILEC network facilities must be made
available as UNEs. Under pressure from the ILECs, the FCC has subsequently reduced the list. However, to
date the FCC has preserved access to those network elements critical to the operation of our business.
FCC Regulation of Wireless Services. XOH is the licensee of authorizations issued by the FCC in
LMDS and 39 GHz services. As an FCC licensee, XOH is subject to regulatory oversight, including limits on
the amount of foreign investment in certain FCC licenses, the transfer and assignment of FCC licenses and
regulations governing the construction, technical aspects and the nature of services that can be provided by
operators of wireless communications systems. The FCC regulates the use of the electromagnetic spectrum,
and has exclusive jurisdiction over licensing and technical rules governing the operation of wireless services.
The majority of our FCC licenses are in the LMDS spectrum range, which is one of the several
FCC-licensed services that permit licensees and/or their customers to transmit high capacity wireless
broadband traffic on an LOS basis. Generally, only LOS operations may be offered today because of where in
the spectrum LMDS frequencies are situated. Other FCC-licensed services with high-capacity broadband
wireless LOS capabilities include the 24 GHz band and the 39 GHz band. For discussion of the FCC’s
approval of our demonstrations of substantial service in licensed areas and LMDS license extensions granted
see ‘‘Description of Business — Licenses.’’
Additional Federal Regulations
The following discussion summarizes some additional specific areas of federal regulation that directly
affect our business.
Verizon and Qwest Petitions for Forbearance from Unbundling Requirements. On September 6, 2006
and on April 27, 2007, pursuant to section 10 of the Communications Act of 1934, as amended (the
‘‘Communications Act’’), the regulated, wholly owned subsidiaries of Verizon Communications, Inc.
(collectively ‘‘Verizon’’) and Qwest Corporation (‘‘Qwest’’), respectively, filed petitions for forbearance from
loop and transport unbundling obligations imposed by section 251(c), price cap regulations, dominant carrier
tariff regulation, computer III requirements, and section 214 dominant carrier regulations. Verizon sought relief
in six markets: Boston, MA; New York, NY; Pittsburgh, PA; Philadelphia, PA; Providence, RI and Virginia
Beach, VA. Qwest’s request included relief in four markets: Denver; Minneapolis; Phoenix and Seattle. On
December 4, 2007, the FCC, in a unanimous decision, denied Verizon’s requested relief in all six markets.
On January 14, 2008, Verizon filed an appeal in the United States Court of Appeals for the DC Circuit
(‘‘DC Circuit’’). On July 25, 2008, in a unanimous decision, the FCC adopted a Memorandum Opinion and
Order denying Qwest’s four petitions in their entirety. On July 29, 2008, Qwest filed an appeal of the FCC’s
decision with the United States Court of Appeals for the DC Circuit. We intervened in the appeals of the
FCC’s decisions in the Verizon and Qwest forbearance cases in support of the FCC. On June 19, 2009, the
DC Circuit ruled on Verizon’s appeal, remanding to the FCC a very limited question regarding how the FCC
reached its rejection of the forbearance petitions, but not overturning the actual decision. On July 17, 2009,
the DC Circuit remanded the pending Qwest appeal back to the FCC so that the issues in the Qwest
forbearance case could be decided simultaneously with the remand of the Verizon forbearance case.
Subsequently, on August 17, 2010 and August 23, 2010, respectively, Qwest and Verizon withdrew from the
FCC’s consideration those remand cases. In addition, on March 24, 2009, Qwest re-filed its petition for
forbearance for the Phoenix market, citing greater intermodal competition since the FCC had rejected Qwest’s
first petition for forbearance for the Phoenix market. On June 22, 2010, the FCC released an order denying
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