Windstream 2007 Annual Report Download - page 58

Windstream Corporation
Form 10-K, Part I
Item 1. Business
• Our regulated Florida wireline subsidiary operates under alternative regulation established by Florida statute.
Under this plan, basic local rates may be increased once in any twelve-month period by an amount not to exceed
the twelve-month change in the GDP-PI less 1 percent. Non-basic services are grouped by type into categories in
accordance with PSC rules. We may increase rates for non-basic services as long as the annual increase for any
such category does not exceed 6 percent in any twelve-month period. Non-basic rates can be increased by up to 20
percent annually in exchanges where another local provider is providing service.
• Our regulated Georgia wireline subsidiaries operate under an alternative regulation plan established by Georgia
statute. Under this plan, basic local rates may be increased annually based on the annual change in GDP-PI. Other
local rates may be increased by filing revised tariffs.
• We have two regulated operating subsidiaries in Kentucky. On July 12, 2006, both elected a new form of
alternative regulation approved by the Kentucky General Assembly during the 2006 legislative session. The new
law freezes basic rates for electing companies for five years and then gives the PSC jurisdiction over rate
adjustments for basic service thereafter. Rates for non-basic services may be adjusted without PSC approval either
by filing revised tariffs or de-tariffing non-basic services and providing customer service agreements to end-users.
The new law caps rates for intrastate switched access services and deems an electing utility’s rates, charges,
earnings, and revenues to be just and reasonable. Wholesale interconnection arrangements between or among
companies, as well as complaints for basic service and service quality metrics remain under the jurisdiction of the
PSC.
• On February 23, 2006, the Governor of Mississippi signed into law HB 1252, which substantially reduced state
PSC regulation of wireline telecommunications services in Mississippi. The law became effective July 1, 2006.
Under the new law, only stand-alone basic service and intrastate network access services remain regulated by the
Mississippi Public Service Commission. Additionally, the PSC approved a rural ILEC price regulation plan as an
alternative form of regulation for rural companies. Effective June 13, 2007, Windstream elected to be regulated
under the rural ILEC price regulation plan. Under this plan, Windstream is required to meet certain service quality
metrics and to be able to offer high-speed Internet services to at least 80 percent of its customers by June 13, 2009.
• Our regulated Missouri wireline subsidiary is subject to an alternative regulation election established by statute.
Under Missouri’s alternative regulation, basic local service and intrastate network access rates may be adjusted
annually based on changes to the telephone service component of the Consumer Price Index. Prices for non-basic
services may be increased up to 5 percent per year.
• Our regulated Nebraska operations are subject to alternative regulation established by Nebraska statute. In
exchanges where local competition exists, companies can change rates upon ten days notice to the PSC. In
exchanges where the PSC determines that local competition does not exist, companies can change rates for all
services except basic local service with ten days notice to the PSC. In these exchanges, basic local rates may be
increased upon ninety days notice to affected subscribers. Basic local rate increases are reviewed by the PSC only
if rates are increased more than 10 percent in twelve consecutive months or in response to a formal complaint
signed by at least 2 percent of affected subscribers.
• On April 1, 2006, the New Mexico PSC began regulating Windstream pursuant to rules that govern retail prices
and service quality. These rules, adopted in January 2006, allow Windstream pricing flexibility on retail services.
The rules also streamline the introduction and withdrawal of tariffs and the packaging and bundling of services.
The PSC also adopted rules in late 2005 pertaining to intrastate network access rate reform. The rules generally
required: 1) the reduction of intrastate access rates to interstate levels according to prescribed criteria; 2) the
establishment of the initial benchmark rates to be used to determine support from the state USF; and 3) the
creation of a state USF to ensure revenue neutrality in connection with (1). On April 1, 2006, these rules were
implemented and all ILECs, including Windstream, reduced their intrastate network access rates to interstate
levels and began receiving support from the newly created state USF. Windstream expects to receive
approximately $8.3 million annually from the New Mexico state USF.
• Our regulated North Carolina subsidiary has operated since 1998 under an alternative regulation plan approved by
the PSC. Local rates are adjusted annually by the annual change in GDP-PI. Rate changes are effective upon 14
days notice. In March 2006, the Commission approved requested changes to our price regulation plan allowing
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