Sprint - Nextel 2012 Annual Report Download - page 26

Table of Contents
be forced to pay significant damages or stop selling certain products or services or stop using certain trademarks, which could have an adverse effect
on Sprint's results of operations.
Government regulation could adversely affect Sprint's prospects and results of operations; the FCC and state regulatory commissions may adopt
new regulations or take other actions that could adversely affect Sprint's business prospects, future growth or results of operations.
The FCC and other federal, state and local, as well as international, governmental authorities have jurisdiction over Sprint's business and
could adopt regulations or take other actions that would adversely affect Sprint's business prospects or results of operations.
The licensing, construction, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated by the
FCC and, depending on the jurisdiction, international, state and local regulatory agencies. In particular, the FCC imposes significant regulation on
licensees of wireless spectrum with respect to how radio spectrum is used by licensees, the nature of the services that licensees may offer and how the
services may be offered, and resolution of issues of interference between spectrum bands.
The FCC grants wireless licenses for terms of generally ten years that are subject to renewal and revocation. There is no guarantee that
Sprint's licenses will be renewed. Failure to comply with FCC requirements applicable to a given license could result in revocation of that license and,
depending on the nature of the non
- compliance, other Sprint licenses.
Depending on their outcome, the FCC's proceedings regarding regulation of special access rates could affect the rates paid by Sprint's
Wireless and Wireline segments for special access services in the future. Similarly, depending on their outcome, the FCC's proceedings on the
regulatory classification of VoIP services and a pending appeal of the FCC's 2011 order reforming universal service for high cost area and intercarrier
compensation could affect the intercarrier compensation rates and the level of USF contributions paid by Sprint.
Various states are considering regulations over terms and conditions of service, including certain billing practices and consumer - related
issues that may not be pre
- empted by federal law. If imposed, these regulations could make it more difficult and expensive to implement national sales
and marketing programs and could increase the costs of Sprint's wireless operations.
Degradation in network performance caused by compliance with government regulation, such as “net neutrality,” loss of spectrum or
additional rules associated with the use of spectrum in any market could result in an inability to attract new subscribers or higher subscriber churn in
that market, which could adversely affect Sprint's revenues and results of operations. Furthermore, additional costs or fees imposed by governmental
regulation could adversely affect Sprint's revenues, future growth and results of operations.
Regulatory developments regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries
could affect the sourcing and availability of minerals used in the manufacture of certain products, including handsets. Although Sprint does not
purchase raw materials, manufacture, or produce any electronic equipment directly, the regulation may affect some of Sprint's suppliers. As a result,
there may only be a limited pool of suppliers who provide conflict free metals, and Sprint cannot ensure that it will be able to obtain products in
sufficient quantities or at competitive prices. Also, because Sprint's supply chain is complex, it may face reputational challenges with its customers and
other stakeholders if we are unable to sufficiently verify the origins for all metals used in the products that Sprint sells.
Changes to the federal Lifeline Assistance Program could negatively impact the growth of the Assurance Wireless and wholesale subscriber base
and the profitability of the Assurance Wireless and wholesale business overall.
Virgin Mobile USA, L.P., Sprint's wholly
- owned subsidiary, offers service to low - income subscribers eligible for the federal Lifeline
Assistance program under the brand Assurance Wireless, which we refer to as Assurance Wireless. Assurance Wireless provides a monthly discount
to eligible subscribers in the form of a free block of minutes. Moreover, some of Sprint's wholesale customers also offer service to subscribers eligible
for the federal Lifeline Assistance program. This discount is subsidized by the Low
- Income Program of the federal USF and administered by the
Universal Service Administrative Company. Lifeline service is offered by both wireline and wireless companies, but more recent wireless entry,
particularly by prepaid carriers with a focus on lower income consumers, has caused a rapid increase in the amount of USF support directed toward the
Lifeline program. The FCC recently adopted reforms to the Low Income program to increase program effectiveness and efficiencies,
23