Windstream 2010 Annual Report Download - page 115

The following tables reflect the minute-driven components of Windstream’s inter-carrier compensation revenues for
the twelve months ended December 31, 2010:
Revenues
Originating Traffic Terminating Traffic
Minutes Rate Minutes Rate
(Thousands) (Thousands)
Interstate switched access 3,846,184 $ 0.0070 4,049,695 $ 0.0060
Intrastate switched access 2,020,410 $ 0.0370 3,151,853 $ 0.0360
Local interconnection 4,675,767 $ 0.0100
In addition, inter-carrier and reciprocal compensation expense totaled $98.7 million and $121.8 million for the years
ended December 31, 2010 and 2009, respectively.
On December 21, 2010, the FCC adopted new regulations regarding the provision of broadband Internet access service.
The new regulations, among other things, will (1) require all providers of broadband Internet access service to disclose
network management practices, performance characteristics, and commercial terms of service; and (2) prohibit fixed
broadband ISPs from blocking lawful content, applications, services, or attachment of non-harmful devices and/or
engaging in unreasonable discrimination. The requirements will be enforced through a combination of mechanisms,
including informal and formal complaint processes. Because some of the rules require approval by the Office of
Management and Budget before becoming effective, none of the rules are binding yet. In January 2011, two different
suits were filed in federal court challenging the FCC’s authority to implement these rules. As such, we cannot predict at
this time the impact these new regulations may have on our revenues or expenses, or whether such impact would even
be material.
State Regulation
Local and Intrastate Rate Regulation
Most states in which our ILEC subsidiaries operate provide alternatives to rate-of-return regulation for local and
intrastate services, either by law or PSC rules. We have elected alternative regulation for our ILEC subsidiaries in all
states except New York. We continue to evaluate alternative regulation options in New York where our ILEC
subsidiary remains subject to rate-of-return regulation.
State Universal Service
We recognize revenue from state universal service funds in a limited number of states in which we operate. In 2010,
Windstream recognized $135.8 million in state universal service revenue. These payments are intended to provide
additional support, beyond the federal universal service receipts, for the high cost of operating in rural markets. For the
year ended December 31, 2010, Windstream received approximately $99.3 million from the Texas USF. There are two
high-cost programs of the Texas USF, one for large companies and another for small companies. In 2010, Windstream
received $88.2 million from the large company program and $11.1 million from the small company program. The
purpose of the Texas USF is to assist telecommunications providers in providing basic local telecommunications
services at reasonable rates to customers in high cost rural areas and to qualifying low-income and disabled customers.
By order of the Texas PUC, the Texas USF distributes support to eligible carriers serving areas identified as high cost,
on a per-line basis. Texas USF support payments are based on the number of actual lines in service and therefore are
subject to reductions when customers discontinue service or migrate to a competitive carrier. All customers of
telecommunications services in Texas contribute to the Texas USF through the payment of a monthly surcharge by
their customers.
The Pennsylvania PUC is currently conducting a review of its universal service fund. The review is focused on various
aspects of the fund as they pertain to the basic rates of eligible USF recipient companies and the impact of their
alternative regulation plans. The Company receives $13.3 million annually from the fund. The Company cannot
estimate at this time the financial impact, if any, that may result from changes to the Pennsylvania universal service
fund.
Inter-carrier Compensation
On October 5, 2007, Verizon filed a complaint with the Ohio PUC alleging that the Company’s intrastate access rates
are excessive and should be reduced to the same levels charged by the largest ILECs in Ohio, or in the alternative, to
the Company’s interstate access rate levels. On November 3, 2010, the Ohio PUC opened a generic proceeding and
released a proposed plan to reform inter-carrier compensation. If the proposed plan is adopted, it will not have a
material impact on the Company’s operations.
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