Verizon Wireless 2013 Annual Report Download - page 36

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Regulatory and Competitive Trends
Regulatory and Competitive Landscape
Verizon operates in a regulated and highly competitive market. Current
and potential competitors include other voice and data service providers
such as other wireless companies, traditional telephone companies, cable
companies, Internet service providers, software and application providers,
andothernon-traditionalcompanies.Manyofthesecompanieshavea
strong market presence, brand recognition, and existing customer rela-
tionships, all of which contribute to intensifying competition and may
affect our future revenue growth. Some of our competitors also are
subjecttofewerregulatoryconstraintsthanVerizon.Formanyservices
oeredbyVerizon,theFCCisourprimaryregulator.TheFCChasjurisdic-
tion over interstate telecommunications services and other matters under
the Communications Act of 1934, as amended (Communications Act or
Act). Other Verizon services are subject to state and local regulation.
FCC Regulation
Broadband
Verizon oers many dierent broadband and Internet access services. The
FCChasadoptedaseriesofordersthatimposelesserregulatoryrequire-
ments on broadband services than apply to older voice and slower data
services.Forexamplecertainfacilityunbundlingrequirementsthatapply
to narrowband facilities of traditional telephone companies do not apply
tobroadbandfacilities.Inaddition,theFCCconcludedthatbothwireline
and wireless broadband Internet access services qualify as largely dereg-
ulated information services. Our broadband Internet access services are
subject tovarious attemptsto imposeso-called“networkneutrality”
rules, some of which were armed and others vacated on appeal in early
2014. Verizon has been and remains committed to the open Internet
which provides consumers with competitive choices and unblocked
access to lawful websites and content when, where, and how they want.
Thiswillnotchangeinlightofthecourt’sdecision.Ourcommitment
applies to broadband Internet access services provided over both our
wireline and wireless networks and can be found on our website at
http://responsibility.verizon.com/broadband-commitment.
Video
Verizon oers a multi-channel video service that is regulated like tra-
ditionalcableservice.TheFCChasabodyofrulesthatapplytocable
operators, and these rules also generally apply to Verizon. In addition, the
Act generally requires companies to obtain a local cable franchise, and
theFCChasadoptedrulesthatinterpretandimplementthisrequire-
ment. In areas where Verizon oers its facilities-based multichannel video
services, Verizon has typically been required to obtain a franchise from
local authorities.
Wireline Voice
Verizon oers many dierent wireline voice services, including traditional
telephone service and other services that rely on newer technologies
suchasVoIP. For regulatory purposes,legacytelephoneservices are
generallyconsideredtobe“commoncarrier”services.Commoncarrier
services are subject to heightened regulatory oversight with respect to
rates,termsandconditions,andotheraspectsoftheservices.TheFCC
has not decided the regulatory classication of VoIP but has said VoIP
service providers must comply with certain rules, such as 911 capabilities
and law enforcement assistance requirements.
Wireless Services
The FCC regulates several aspects of Verizon Wireless’ operations.
Generally,theFCChasjurisdictionovertheconstruction,operation,acqui-
sition, and transfer of wireless communications systems. And all wireless
services require use of radio frequency spectrum, the assignment and
distributionofwhichissubjecttoFCCoversight.VerizonWirelessantici-
pates that it will need additional spectrum to meet future demand. It
can meet spectrum needs by purchasing licenses or leasing spectrum
from others, or by participating in a competitive bidding process for new
spectrumfromtheFCC.Bothprocessesaresubjecttocertainreviews,
approvals, and potential conditions.
Today,VerizonWirelessholds FCCspectrum licensesthat allowit to
provide a wide range of mobile and fixed communications services,
includingbothvoiceanddataservices.FCCspectrumlicensestypically
have a term of 10 years, at which time they are subject to renewal. While
theFCChasroutinelyrenewedallofVerizonWireless’licenses,challenges
could be raised in the future. If a wireless license were revoked or not
renewed, Verizon Wireless would not be permitted to provide services on
the spectrum. Some of our licenses require us to comply with so-called
“openaccess”FCCregulations,whichgenerallyrequirelicenseesofpartic-
ular spectrum to allow customers to use devices and applications of their
choice,subjecttocertaintechnicallimitations.TheFCChasalsoimposed
certain specic mandates on wireless carriers including construction and
geographic coverage requirements, technical operating standards, provi-
sion of enhanced 911 services, roaming obligations, and requirements for
wireless tower and antenna facilities.
The Communications Act imposes restrictions on foreign ownership
ofU.S.wirelesssystems.TheFCChasapprovedtheforeignownership
in Verizon that has resulted from the Wireless Transaction. In addition,
Verizon Wireless, Verizon and Vodafone entered into an agreement with
the federal government that imposes national security and law enforce-
ment-related obligations on the ways in which Verizon Wireless stores
information and otherwise conducts its business.
Intercarrier Compensation and Network Access
TheFCCregulatessomeoftheratesthatcarrierspayeachotherforthe
exchange voice trac (particularly traditional wireline trac) over dif-
ferent networks and other aspects of interconnection for some voice
services. In many instances, Verizon makes payments to other providers,
and in turn Verizon receives some payments from other carriers. In 2011,
theFCCissuedabroadreformorderchanging,amongotherthings,the
framework for many of the per-minute rates that carriers charge each
other for the exchange of voice trac. The new rules gradually reduce
many of these rates to zero. This order is subject to pending reconsidera-
tionpetitionsandappeals.TheFCCalsoregulatessomeoftheratesand
termsandconditionsforcertainwireline“specialaccess”andotherser-
vices and network facilities. Verizon is both a seller and a buyer of these
services.Forexample,onthewirelinesideVerizonsellswholesalecircuits
to other voice and data service providers. On the wireless side, Verizon
purchases special access and other services to transport trac to and
from cell towers. In addition, as required by the Act, Verizon unbundles
certain wireline network elements and makes these facilities and services
available to other network providers.
Universal Service
TheCommunicationsActchargestheFCCwithensuringthatcertain
groups and areas have access to communications services, including
rural and other high-cost areas, low income subscribers, schools and
OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS