Windstream 2012 Annual Report Download - page 114

F-16
As part of the Order's reform of intercarrier compensation, the FCC established two recovery mechanisms that mitigate the
revenue reductions resulting from the reduction and ultimate elimination of terminating access rates. The mechanisms are the
ARC and the ARM, which are previously defined.
On April 25, 2012, the FCC decided that originating access rates for intrastate long distance traffic exchanged between an
Internet-protocol network and the traditional telecommunications network should be subject to default rates equal to interstate
originating access rates beginning on July 1, 2014. The FCC refused at that time to adopt a mechanism that would allow
companies to recover the loss of originating access revenues resulting from the change. On July 27, 2012, we filed a petition
for review with the U.S. Court of Appeals of the District of Columbia seeking relief from the April 2012 ruling on the grounds
that it is arbitrary, capricious, in excess of the FCC's statutory authority and otherwise not in accordance with law. That petition
for review was transferred to the U.S. Court of Appeals for the 10th Circuit on August 28, 2012, and on October 1, 2012, our
appeal was consolidated with 30 appeals on the Order. Our initial brief was filed on December 10, 2012, and briefing is
expected to be completed in the second quarter of 2013. We continue to assess the impacts of the FCC's intercarrier
compensation reform on our wholesale business activities.
Additional implications of the Order will likely result in future additional rulemaking and require significant interpretation,
management judgment and collaboration with other telecommunications carriers. As a result of these factors, we expect
numerous disputes with other carriers with respect to the proper amount of intercarrier compensation that is payable between
such parties, and these disputes can sometimes become significant. Our policy is to establish reserves on wholesale revenues
and accounts receivable balances when collectability is not reasonably assured. We do not believe that ultimate resolution of
uncertainties, including asserted and unasserted disputes and claims from other telecommunications carriers, relate to wholesale
services provided to date will have a material impact on the future consolidated results of operations, cash flows or our
financial condition.
Given our ongoing transformation towards business and enterprise, coupled with the positive impact of the ARC and the
additional universal service support available from the ARM, we do not believe the Order's reform of intercarrier compensation
will have a material impact on our results of operation, cash flows, or our financial condition.
Set forth below is a summary of intercarrier compensation revenue, reciprocal compensation expense and federal universal
service support, included in wholesale revenues on the consolidated statements of income, for the years ended December 31:
(Millions) 2012 2011
Intercarrier compensation revenue $ 337.3 $ 302.9
Intercarrier and reciprocal compensation expense $ 170.5 $ 81.6
Federal universal service support $ 123.1 $ 100.6
Broadband Stimulus
As part of the American Recovery and Reinvestment Act of 2009 ("ARRA") approximately $7.2 billion was allocated for the
purpose of expanding broadband services to unserved and underserved areas. The Rural Utilities Service, part of the United
States Department of Agriculture, approved eighteen of our applications for these funds for projects totaling $241.7 million.
The RUS will fund 75 percent of these approved grants, or $181.3 million, and we will fund the remainder of at least $60.4
million.
Selected information related to the broadband stimulus expenditures and receipts for the years ended December 31 is as
follows:
(Millions) 2012 2011
Inception
to Date
Stimulus capital expenditures funded by RUS $ 105.4 $ 21.7 $ 128.1
Stimulus capital expenditures funded by Windstream (a) 44.0 7.2 52.0
Total stimulus capital expenditures $ 149.4 $ 28.9 $ 180.1
Funds received from RUS $ 45.7 $ 4.0 $ 49.7
(a) Stimulus capital expenditures funded by Windstream are included in our capital expenditure totals for each period
presented in the statements of cash flows. This figure includes certain non-reimbursable charges for which we are
responsible for the full amount of the cost.