******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect or Word to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 Mescalero Apache Telecom, Inc. Waiver of Section 54.305 of the Commission's Rules ) ) ) ) ) ) ) ) CC Docket No. 96-45 ORDER Adopted: January 11, 2001 Released: January 18, 2001 By the Commission: I.INTRODUCTION 1. In this Order, we grant a request from Mescalero Apache Telecom, Inc. (Mescalero), a newly-formed tribally-owned carrier, for a waiver of section 54.305 of the Commission's rules. This waiver will enable Mescalero to receive high-cost universal service support based on the average cost of the 950 access lines acquired from Valor Telecommunications of New Mexico, LLC (Valor). These access lines serve the newly established study area within the Mescalero Apache Reservation in New Mexico. Absent this waiver, Mescalero would receive the per-line level of high-cost universal service support that Valor received for the lines prior to the transfer. 2. The grant of this waiver will enable Mescalero to fulfill its commitment to bring basic service to all unserved residences on the Reservation in its first two years of operation, as well as permit Mescalero to expand service in underserved areas of the Reservation. According to Mescalero, more than fifty percent of the residences on the Reservation are without telephone service. As the Commission previously concluded, enhancing tribal communities' access to telecommunications, including access to interexchange services, advanced telecommunications, and information services, increases tribal communities' access to education, commerce, government, and public services. By helping to bridge the physical distances between those living on the Reservation and the emergency, medical, employment, and other services that they may need, our action here will help improve the Mescalero Apache community's standard of living. III.background A.Section 54.305 Transfer of Universal Service Support 4. Section 54.305 of the Commission's rules provides that a carrier acquiring exchanges from an unaffiliated carrier shall receive the same per-line levels of high-cost universal service support for which the acquired exchanges were eligible prior to their transfer. For example, if a rural carrier purchases an exchange from a non-rural carrier that receives support based on our new universal service support mechanism for non-rural carriers, the loops of the acquired exchange receive the same per-line support as calculated under the new non-rural mechanism, regardless of the support that the rural carrier purchasing the exchange may receive for any other exchanges. In adopting section 54.305, the Commission sought to ensure that a selling carrier does not artificially inflate the price of an exchange in anticipation of the buyer's receipt of increased universal service support as a result of the transfer. High-cost support mechanisms currently include non-rural carrier forward-looking high-cost support, interim hold-harmless support for non-rural carriers, rural carrier high-cost loop support, local switching support, and Long Term Support (LTS). To the extent that a carrier acquires exchanges receiving any of these forms of support, the acquiring carrier will receive the same per-line levels of support for which the acquired exchanges were eligible prior to their transfer. A. The Petition 5. On June 30, 2000, Mescalero, GTE Southwest Incorporated (GTE), and Valor filed a joint petition for waiver of various Commission rules in order to effectuate Mescalero's acquisition of 950 access lines forming the nucleus of Mescalero's operations on the Reservation. Mescalero seeks a waiver of section 54.305 to receive high-cost support based on the average cost of the acquired access lines under its ownership, rather than the per-line level of support for which the acquired lines were eligible prior to their transfer. Mescalero estimates that it would receive, on average, an additional $1,790,000 annually in high-cost support over its first three years of operation. Absent the waiver, Mescalero estimates that it would receive the approximately $28,884 in support for which the access lines are currently eligible. Mescalero states that failure to waive section 54.305 will "seriously jeopardize [its] ability to fulfill its goal of providing high-quality basic and advanced telecommunications services to the Tribe and its people." Moreover, Mescalero emphasizes that it will be "wholly unable to extend service to the unserved areas within the Reservation if it cannot receive USF support based on the average cost of all of its lines." 6. On August 10, 2000, the Common Carrier Bureau released a public notice seeking comment on the petition. The Salt River Pima-Maricopa Indian Community and Saddleback Communications submitted comments in support of Mescalero's petition. Salt River contends waiver of section 54.305 is necessary to enable Mescalero to provide reasonably-priced service to previously unserved and underserved areas of the reservation. VII.DISCUSSION 8. Generally, Commission rules may be waived for good cause shown. As noted by the Court of Appeals for the D.C. Circuit, however, agency rules are presumed valid. The Commission may exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the public interest. In addition, the Commission may take into account considerations of hardship, equity, or more effective implementation of overall policy on an individual basis. Waiver of the Commission's rules is therefore appropriate only if special circumstances warrant a deviation from the general rule, and such a deviation will serve the public interest. For the reasons set forth below, we conclude that a waiver of section 54.305 of the Commission's rules is warranted in this instance. 9. We find that Mescalero has demonstrated that special circumstances warrant a deviation from our general rule. First, according to Mescalero, the percentage of residences on the Reservation without telephone service is 52 percent. The national average penetration level for all households in the United States is 94.6 percent. Mescalero explains that telecommunications services are only available in the higher density subscriber regions of the Reservation, and, as a result, many tribal members have no access to basic telecommunications services. The 950 access lines acquired by Mescalero serve only 42 percent of the Reservation's population of 4000. We conclude that application of section 54.305 in this instance could have the unintended effect of preventing the expansion of service in unserved and remote areas of the Reservation, and the improvement of service in underserved areas. 10. Second, Mescalero is a newly-formed, tribally-owned and operated, carrier established for the purpose of addressing the severe shortage of telecommunication services on the Reservation. In addressing Mescalero's waiver request, we are mindful of our obligation to work with Indian Tribes on a government-to-government basis consistent with the principles of Tribal self-governance. In doing so, we attempt to ensure that Indian Tribes have adequate access to telecommunications services. By granting this waiver, the Mescalero Apache Tribe will gain control over the deployment and provision of telecommunications services on the Reservation, thereby furthering tribal self-government and self- determination. As a tribally-owned and operated carrier, Mescalero is particularly suited to understand and address the unique needs of the Mescalero Apache community and to set communications priorities and goals for the welfare of the membership. For example, Mescalero submits that it will extend lines to unserved and underserved residents in remote areas on the reservation, but will not impose line extension charges on its customers. Such charges may present an obstacle to subscribership. As the Commission has observed previously, the extension of service to tribal communities is particularly challenging because they are among the poorest populations in the United States and, therefore, are less able to absorb the costs of extending lines to remote and high-cost areas. We view Mescalero's plan not to assess line extension charges as demonstrating its acute awareness of the impediments to increased telecommunications and deployment on tribal lands and its commitment to overcome them. 11. Third, the high costs faced by Mescalero as a tribally-owned start-up company seeking to address the acute shortage of telecommunications services on the Reservation are unusually severe. Mescalero submits that the existing facilities, which Mescalero describes as antiquated and in poor condition, have reached capacity and cannot be expanded to serve the currently unserved areas of the reservation without first upgrading the system. Moreover, Mescalero states that the terrain of the Reservation is generally extremely rugged. As a result, Mescalero explains, the projected cost of providing service and upgrading facilities on the Reservation are much higher than the cost of serving other subscribers in New Mexico and higher than for most subscribers in any other state. According to Mescalero, its projected study area cost per loop of $2,138 far exceeds the cost per loop of other New Mexico carriers, rural local exchange companies (with average costs per loop of $741 and $561, respectively) and most carriers in the United States. Mescalero indicates that for universal service calculation purposes, based on currently available data, only six cost carriers in the United States have universal service fund study area cost per loop figures higher than Mescalero's projected loop cost. Given the high costs associated with upgrading the existing facilities and extending service to unserved areas on the Reservation, we find that, without waiver of the per-line support limit, and the resulting increase in support, Mescalero is unlikely to be able to upgrade the existing facilities sufficiently to support its planned build-out to underserved and unserved areas. 12. Finally, we conclude that waiver of section 54.305 in this particular instance is in the public interest. Mescalero, a wholly-owned and operated tribal carrier, has been established to address the severe shortage of telecommunications services on the Reservation. In its petition, Mescalero states that, with a waiver of section 54.305, it will improve existing services throughout the Reservation without significant increases in basic service rates. More importantly, however, Mescalero commits to providing service to all unserved residences in the first two years of operation using universal service support to achieve that goal. Ultimately, Mesacalero intends to provide affordable services that will rival services offered in any metropolitan area. Waiver of our rule in this instance will increase access to telecommunications services on the Reservation consistent with our statutory goal of preserving and advancing universal service. Such a waiver is also consistent with our mandate to ensure that consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high-cost areas, have access to telecommunications and information services. 13. We find that this result is consistent with our obligations under the historic federal trust relationship between the federal government and federally-recognized Indian tribes to encourage tribal sovereignty and self-governance and to ensure a standard of livability for members of Indian tribes on tribal lands. By granting this waiver we will enhance Mescalero Apache tribal communities' access to telecommunications, including access to interexchange services, advanced telecommunications, and information services, and thereby increase the tribal communities' access to education, commerce, government, and public services. These measures will also help bridge the physical distances between those living on the Reservation and the emergency, medical, employment, and other services that they may need to improve the standard of living on the Reservation. Moreover, this result will be realized under the direction of the Mescalero Apache Tribe. Accordingly, based on Mescalero's representations and commitments, and in light of the advancement of the Mescalero Apache Tribe's self-determination and self-governance, we conclude that Mescalero has demonstrated the grant of this waiver request serves the public interest. 14. We further note that waiver of section 54.305 in this instance will have minimal effect on the high-cost universal service mechanisms. We estimate that the additional support received by Mescalero as a result of this waiver will result in an annual aggregate shift that is less than one percent of any of the high-cost universal service mechanisms. This is consistent with the Commission's prior analysis of whether a transfer of exchanges has an adverse impact on the universal service support mechanisms. 15. We emphasize that section 54.305 continues to serve an important purpose in the administration of high-cost universal service support. As discussed above, the Commission adopted this rule to ensure that a selling carrier does not artificially inflate the price of an exchange in anticipation of the buyer's receipt of increased universal service support as a result of the transfer. The action we take here does not undermine the validity of the rule. We grant a waiver in this instance in recognition of the unique opportunity it presents to promote subscribership and infrastructure deployment on the unserved areas of the Mescalero Apache Reservation. We will not, however, routinely grant waiver of this rule and those seeking a waiver of section 54.305 will bear a heavy burden. XVI.ORDERING CLAUSES 17. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), and 254, and section 1.3 of the Commission's rules, 47 C.F.R.  1.3, that the petition for waiver of section 54.305 of the Commission's rules, 47 C.F.R.  54.305 filed by Mescalero Apache Telecom, Inc., IS GRANTED, as described herein. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary