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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of) ) Petition for Waiver filed by ) ) Rural Telephone Service Company ) AAD 96-38 ) Concerning the Definition of "Study Area" ) Contained in Part 36 Appendix-Glossary ) of the Commission's Rules ) MEMORANDUM OPINION AND ORDER Adopted: January 13, 1997 Released: January 13, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. On March 25, 1996, Rural Telephone Service Company (Rural) filed a petition for waiver of the definition of "Study Area" contained in the Part 36 Appendix-Glossary of the Commission's rules. That definition constitutes a rule freezing all study area boundaries, effective November 15, 1984. The requested waiver would allow Rural to expand its Kansas study area boundaries to include the new local exchange facilities it is constructing in Bogue and Hill City, Kansas. In this Order, we find that the public interest would be served by allowing Rural to expand its study area boundary to include the Bogue and Hill City areas. We therefore grant the petition. II. BACKGROUND 2. A study area is a geographic segment of a carrier's telephone operations. Generally, a study area corresponds to a carrier's entire service territory within a state. Thus, carriers operating in more than one state typically have one study area for each state, and carriers operating in a single state typically have a single study area. Study area boundaries are important primarily because carriers perform jurisdictional separations at the study area level. For jurisdictional separations purposes, the Commission froze all study area boundaries effective November 15, 1984. The Commission took that action primarily to ensure that carriers do not establish high cost exchanges within their existing service territories as separate study areas to maximize interstate cost allocations. A carrier must apply to the Commission for a waiver of the frozen study area rule if it wishes to sell or purchase an exchange. 3. Waiver of Commission rules is appropriate only if special circumstances warrant deviation from the general rule and such a deviation will serve the public interest. In evaluating petitions seeking a waiver of the rule freezing study area boundaries, the Commission employs a three-prong standard: first, the change in study area boundaries must not adversely affect the universal service fund (USF) support program; second, the state commission(s) having regulatory authority over the exchange(s) to be transferred does not object to the change; and third, the public interest supports such a change. A. Petition 4. Rural is a local exchange carrier that provides service to nearly 6,400 access lines in 26 Kansas exchanges. It plans to expand its operation by installing plant and providing local exchange service in the Bogue/Hill City exchange in competition with the United Telephone Company of Kansas (United). United already serves approximately 1,500 access lines in this exchange. United, however, is in the process of selling this exchange to Classic Telephone, Inc. (Classic). Rural seeks a waiver of the rule freezing study area boundaries to enable it to expand its existing study area to include the Bogue/Hill City exchange. 5. Rural plans to install modern telecommunications plant in the Bogue/Hill City exchange so that it can provide customer services such as voice mail, local Internet access, calling number delivery, selective call forwarding and distinctive ringing, call waiting, automatic recall and redial, customer originated trace, and other enhanced custom calling features. It plans to make single-party service available to all Bogue and Hill City residents by the end of 1996. In addition, Rural plans to connect this exchange to its fiber optic ring which links its 26 existing exchanges to each other and to the public switched telephone network. It argues that the new facilities will substantially improve the reliability and quality of the intrastate and interstate toll services to Bogue and Hill City subscribers. 6. Rural estimates that the total cost of its construction program in the Bogue/Hill City exchange will be approximately $7 million, and that, as a result, its annual USF draw would increase by $354,694. Rural states that the increase in USF support would be used for the purpose for which the USF was established, i.e., to promote or preserve universal service by supporting improved and affordable modern telecommunications services in high cost rural areas. B. Comments 7. On April 16, 1996, the Common Carrier Bureau (Bureau) released a Public Notice soliciting comments on the petition. On May 13, 1996, the National Exchange Carrier Association, Inc. (NECA) and the National Telephone Cooperative Association (NTCA) submitted comments supporting the petition and Classic and Sprint Corporation (Sprint) filed comments opposing the petition. On May 28, 1996, the Bureau received reply comments from NTCA and Rural. 8. In opposing the petitions, Classic states that Rural's petition is deficient and that the waiver would contravene the policies of the Commission and the public interest. Classic also asserts that the petition is misleading in its characterization of the factual circumstances giving rise to Rural's request and that Rural's petition should be denied outright or held in abeyance until the Commission resolves the recently initiated proceeding to develop new universal service rules, the outcome of which is directly relevant to Rural's petition. 9. Sprint raises a number of arguments against granting Rural's petition: (1) Rural has failed to establish that the requested study area boundary change will not adversely affect the USF; (2) Rural has failed to apprise the Commission of litigation it has filed against the Kansas Corporation Commission (KCC) after the KCC granted to Classic the obligation of provider of last resort for Bogue and Hill City; and (3) the waiver request, addressing a competitive over-build, cannot be found to be in the public interest under current Commission rules. 10. In response, Rural states that its proposal satisfies all three of the criteria employed by the Bureau to evaluate study area waivers. Rural contends that it has shown the following: (1) that the KCC and the local Bogue and Hill City franchising authorities support its waiver request and have thereby granted Rural all necessary authorizations; (2) that Rural will provide Bogue and Hill City residents state-of-the-art telecommunications facilities and modern services that they have lacked for decades; and (3) that the impact of its proposed waiver on the USF will be within the parameters approved in prior Bureau rulings. Rural states that Classic's and Sprint's oppositions are attempts to delay Bureau action on Rural's petition while they complete the exchange sale proposed in AAD 95-171. Rural states that any delay would be to the detriment of the citizens of Bogue and Hill City. Therefore, in its reply comments, Rural requests that the Commission strike Classic's and Sprint's comments from the record. Classic and Sprint oppose Rural's request to strike their comments. Subsequently, on July 10, 1996, Rural filed a Motion for Acceptance of Response to Unauthorized Pleadings and a Response to Unauthorized Pleadings; and on July 22, 1996, Classic and Sprint filed Responses to Rural's June 7, 1996 filings. III. DISCUSSION 11. Procedural Issues. We turn first to the procedural issues raised by Rural's request that we strike Classic's and Sprint's comments from the record. Contrary to Rural's allegations, we do not find that Classic's and Sprint's comments are devoid of substantive merit or filed with the sole purpose of delaying Rural's entry into the Bogue/Hill City exchange. We therefore decline to strike Classic's and Sprint's comments from the record. Moreover, we conclude that Rural's request to strike Classic's and Sprint's comments was in the nature of a motion and thus, under Section 1.727 of our rules, Classic and Sprint were entitled to submit oppositions within ten days after submission of Rural's motion. Classic's and Sprint's oppositions were, therefore, timely filed. Rule 1.727 provides, in addition, that no reply may be filed in response to an opposition to a motion. We therefore shall deny Rural's "Motion for Acceptance of Response to Unauthorized Pleadings," (Motion) which seeks permission to submit a reply to Classic's and Sprint's oppositions. For that reason, Rural's Motion of July 10, 1996, pleading replying to Classic's and Sprint's oppositions, as well as Sprint's and Classic's July 22, 1996, filings responding to Rural's July 10, 1996, pleading, are excluded from the record. 12. State Commission views and public interest considerations. The KCC does not object to the requested waiver. The KCC states that Rural has demonstrated it has the financial, managerial and technical capabilities to provide this exchange with efficient and sufficient telecommunications service, and it has granted Rural a Certificate of Convenience and Necessity. Further, the KCC states that its decision to grant two certificates to serve the Bogue and Hill City areas will bring greater benefits for the telecommunications consumers in these areas. The KCC notes that subscribers in these communities will have the ability to choose their telecommunications carrier. 13. Rural states that it will install advanced telecommunications facilities in the Bogue/Hill City exchange and will be able to provide improved service in the exchange. We agree that Rural's installation of advanced telecommunications facilities will improve service to the telephone subscribers in the Bogue/Hill City exchange. Thus, we conclude the public interest will be served by Rural's provision of service in this area. 14. We find that granting Rural's petition to expand its study area to include the Bogue/Hill City exchange is consistent with Section 214(e) of the Communications Act of 1934, as amended (the Act), which permits more than one carrier to qualify for receipt of universal service assistance. The Federal-State Joint Board has recently completed its review of existing universal service programs and recommended changes required to make these programs consistent with the Act. The Joint Board delivered its recommended decision to the Commission on November 8, 1996, and based on those recommendations, the Commission will formulate rules for universal service by May 8, 1997. 15. We conclude that the three-prong standard for granting a study area waiver has been met, and that the study area waiver request should be granted. We have carefully reviewed the objections of Classic and Sprint, and determined that their objections have been adequately addressed by the KCC. IV. ORDERING CLAUSES 16. Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 201 and 202 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 201 and 202, and Sections 0.91, 0.291 and 1.3 of the Commission's rules, 47 C.F.R.  0.91, 0.291 and 1.3, that the petition of Rural Telephone Service Company, for waiver of Part 36, Appendix-Glossary, of the Commission's rules, 47 C.F.R. Part 36 Appendix-Glossary, IS GRANTED. 17. IT FURTHER ORDERED, pursuant to Sections 0.91, 0.291 and 1.727 of the Commission's rules, 47 C.F.R.  0.91, 0.291 and 1.727 of the Commission's rules, 47 C.F.R.  0.91, 0.291 and 1.727 that the "Motion for Acceptance of Response to Unauthorized Pleadings," filed by Rural Telephone Service Company on July 10, 1996, is DENIED, and the "Response to Unauthorized Pleadings" filed by Rural Telephone Company on July 10, 1996, the "Response" filed by Sprint Corporation on July 22, 1996, and the "Reply" filed by Classic Telephone, Inc., should be and hereby are stricken from the record of this proceeding. 18. IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i), 5(c), 201 and 202 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 201 and 202, and Sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, that this Order IS EFFECTIVE IMMEDIATELY UPON RELEASE. FEDERAL COMMUNICATIONS COMMISSION Regina Keeney Chief, Common Carrier Bureau