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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//MO&O, US West Request for Limited Waiver of Section 22.903, DA 96-605//$ $/ 22-903, Cellular Geographic Service Area/$ FOR RECORD ONLY DA 96-605 Before the FEDER AL COMMUNICATIONS COMMISSION Washi ngton, D.C. 20554 In the Matter of) ) Request of U S WEST Communications, Inc. ) for a Limited Waiver of Section 22.903) of the Commission's Rules ) ORDER Adopted: April 17, 1996 Released: April 17, 1996 By the Acting Chief, Wireless Telecommunications Bureau: I. INTRODUCTION 1. This Order addresses the Request for Limited Waiver ("Request"), filed on January 23, 1995, by U S WEST Communications, Inc. ("U S WEST"), seeking a limited waiver of Section 22.903 of the Commission's rules, 47 C.F.R.  22.903. In the Request, U S WEST requests that the Commission waive any requirement in Section 22.903 that would prohibit it from providing cellular service to customers in U S WEST's local exchange service area awaiting the installation of landline telephone service. 2. In a Public Notice issued January 26, 1996, the Wireless Telecommunications Bureau sought comment on U S WEST's Request to determine whether the request is consistent with the waiver criteria set forth in Sections 1.3 and 22.119 of the Commission's rules and whether the request is consistent with the Commission's public interest goals. We received two comments and one reply comment in this proceeding. As discussed below, we grant U S WEST's Request for the limited purpose of ensuring that telephone subscribers have access to the public switched network, and require U S WEST to amend its Cost Allocation Manual to account for the costs of this program as "below the line." We further limit this waiver in duration to one year from the date of its release, and condition this grant on U S WEST's compliance with reporting requirements. II. BACKGROUND 3. The Request seeks a waiver of Section 22.903 of the Commission's rules, which governs the conditions under which Bell Operating Companies, their affiliates and successors (BOCs) may provide cellular service. Section 22.903 provides, in pertinent part, that: Ameritech Corporation, Bell Atlantic Corporation, BellSouth Corporation, NYNEX Corporation, Pacific Telesis Group, Southwestern Bell Corporation, U.S. West, Inc., their successors in interest and affiliated entities (BOCs) may engage in the provision of cellular service only in accordance with the conditions in this section, unless otherwise authorized by the FCC. BOCs may, subject to other provisions of law, have a controlling or lesser interest in or be under common control with separate corporations that provide cellular service only under the following conditions: * * * (b) Independence. Separate corporations must operate independently in the provision of cellular service. Each separate corporation must: (1) maintain its own books of account; (2) have separate officers; (3) employ separate operating, marketing, installation and maintenance personnel; and, (4) utilize separate computer and transmission facilities in the provision of cellular services. * * * 47 CFR  22.903 (b). 4. The original version of Section 22.903 was adopted as Section 22.901 in 1981, and amended in 1982 to apply only to AT&T and its affiliates. In 1983, the Commission further amended Section 22.901 to apply to the divested Bell Operating Companies. The final revision of the separate subsidiary requirement occurred in the 1994 Part 22 Rewrite Order as part of the comprehensive reorganization of Part 22 of the Commission's rules. In that Order, Section 22.903 was amended to incorporate the provisions of former Sections 22.901(b) and (c). Section 22.903 thus imposes the same structural separation requirements as the predecessor rule. III. CONTENTIONS OF THE PARTIES 5. In its Request , U S WEST seeks a partial waiver of Section 22.903 in order to make cellular service available to "held order" customers. U S WEST defines "held order" customers as local exchange customers who have been waiting for installation of their first landline telephone service lines for seven or more days because of a lack of facilities. U S WEST states that its program for held order customers was fashioned in cooperation with the Utah Public Service Commission and entails the acquisition by U S WEST of bulk-rate services and handsets from cellular providers, including its own cellular affiliate, U S WEST New Vector Group, Inc. (New Vector), after issuance of a request for purchase (RFP). The cellular services and handsets are then loaned to eligible held order customers. U S WEST states that it will pay the cellular provider for all recurring monthly charges and unlimited airtime, but toll (intrastate and interstate) charges will not be covered. Held order customers, according to U S WEST, will only be required to pay U S WEST an amount approximately equal to the standard monthly landline rates for this service, with U S WEST paying the difference between the cellular and landline rates. U S WEST states that it may take measures, depending on the RFP winners' technical capabilities, to limit the capabilities of the cellular service provided, such as blocking roaming capabilities, or limiting the range of the service to the customer's "home cell." U S WEST states that it expects that other state regulatory commissions within its 14-state area may seek or expect implementation of similar held order programs. 6. U S WEST asserts that it meets its the test for a waiver because the cellular loaner program is specifically designed to remedy the problem of substantial inconvenience to subscribers who are without access to dial-tone service while they await installation of landline telephone service. U S WEST also contends that subscribers will benefit because calls to their landline telephone numbers will be call-forwarded to their cellular phones, thus enabling them to advertise their landline telephone numbers before landline service is initiated. 7. U S WEST claims that grant of its request will not undermine the purposes underlying Section 22.903. It states that cross-subsidization is not an issue because it does not seek relaxation of any of the restrictions governing its interaction with New Vector. According to U S WEST, cellular service for the held order program will be acquired pursuant to a RFP in which all cellular providers, including resellers, will be allowed to participate, and any dealings between U S WEST and New Vector will be conducted on a compensatory, arms-length basis. U S WEST also maintains that grant of its request will not increase opportunities for discrimination. 8. Finally, U S WEST states, eligibility for the held order program will be limited to only a relatively small number of customers who have not received service for their first lines for at least seven days or longer after placing orders. U S WEST states that it will report to the Commission on a quarterly basis on the number of customers by state that are participating in the cellular loaner program. 9. The Minnesota DPS and OAG support U S WEST's request, but contend that the Request is more restrictive than necessary and that the FCC should grant broader, more flexible relief. They argue that U S WEST's use of the qualifying phrase "due to a lack of facilities" creates uncertainty as to who is eligible for the program and gives U S WEST broad discretion to deny eligibility. DPS/OAG recommend that the Commission allow cellular service without limitation as to the reason for U S WEST's inability to provide timely landline service. 10. DPS/OAG also suggest several other changes to the held order program. They contend that the program should be extended to out-of-service situations, stating that customers without service due to U S WEST's lack of response to repair requests need telephone service as much as customers who initially request service and do not receive it in a timely manner. DPS/OAG also recommend that the Commission allow U S WEST to provide substitute cellular service within a time frame shorter than the seven days U S WEST has proposed. DPS/OAG propose a five-day minimum for held order customers and a two- day minimum for customers with medical needs. DPS/OAG argue that the Commission should not require payment from customers as a condition of the substitute cellular program. They state that "[t]he Commission should recognize and acknowledge that it is the traditional province of the states to determine rates for intrastate telephone service and not address this issue in the waiver request." DPS/OAG state that it would be unfair to charge landline rates to customers who receive cellular service under the program, citing such considerations as access to long distance, sound quality, battery power, and the need to obtain and return the cellular telephone. Finally, DPS/OAG endorse U S WEST's RFP approach, but contend that individual states may wish to work out the details of the held order program (such as distribution and return of cellular handsets), and urge the Commission "to make specific findings only to the extent necessary to address its concerns and leave other aspects of the substitute cellular service for determination at the state level." 11. AT&T opposes U S WEST's request. AT&T states that, in Utah, U S WEST has already asked for bids and granted a contract to New Vector so that U S WEST will resell New Vector's service without FCC approval. AT&T contends that grant of U S WEST's request "would deny entities that are in the business of providing wireless services the opportunity to govern how potential subscribers are exposed to cellular service," because U S WEST, rather than the cellular service provider, would control how the service is presented to customers. AT&T alleges that U S WEST would not be motivated to provide its landline customers with a positive experience with a competing technology and would have a strong incentive to ensure that these customers do not recognize cellular service as a viable replacement for wireline services. 12. AT&T argues that grant of the waiver request would allow the telephone company itself to provide service without involving New Vector, thus "significant issues would arise in this case regarding the ability of the Commission to detect attempts by U S WEST to have its landline ratepayers subsidize the held order cellular service." AT&T states that U S WEST's behavior in Utah "does not give AT&T any comfort about the company's ability to act in a non-discriminatory manner," given the short amount of time that AT&T had to respond to the RFP -- less than two weeks -- and the fact that the contract was awarded to New Vector. AT&T also argues that U S WEST has not taken action to eliminate the held order problem in its region and should not be afforded a waiver to do so. AT&T proposes instead that the "voucher" system, by which U S WEST reimbursed held order customers for cellular service that they acquired on their own, be modified by an adjustment in U S WEST's monthly reimbursement and by AT&T's voluntary waiver of early termination charges, which, AT&T contends, would likely be waived by other wireless providers in U S WEST's territory. 13. In its reply, U S WEST states the Commission should review and pass on the merits of its waiver request as filed. It states that it is willing to make some modification in its waiver request consistent with the suggestions of DPS/OAG, but only if such modified request meets the necessary standard for waiver of Section 22.903. Specifically, U S WEST opposes the DPS/OAG view that the program should be "tailored to meet the specific needs of individual states," claiming that a uniform program was designed for purposes of efficiency and minimized administrative costs. U S WEST thus defends the "lack of facilities" limitation on customer eligibility as verifiable and accounting for virtually all held orders which extend beyond seven days. It opposes extension of the program to customers with service outages as inappropriate, complex and costly. It also opposes reduction of the seven- day minimum held order period, arguing that a seven-day period is appropriate to determine the availability and operation of landline facilities and that a shorter period would increase administrative complexity and the "churn" of customers who would participate in the cellular loaner program only for a very brief period of time before receiving landline service. U S WEST states, however, that it would be willing to extend substitute cellular service to eligible held order customers identified before the seven days elapse, and that such an approach would not increase the number of customers receiving such service. U S WEST also agrees to modify its program to extend it to customers with certified medical needs after a two-day held order period. 14. U S WEST states that the DPS/OAG position that substitute cellular service should be provided free of charge should be rejected for two reasons: (1) statutory federal preemption of state regulation of rates charged for commercial mobile radio services (CMRS) and (2) the assurance that a "free" cellular loaner program is not being used to "lock in" customers who might otherwise choose the service of a competing local exchange carrier. U S WEST also states that the DPS/OAG position that states should be able to modify the design of the held order program in unspecified ways is inappropriate in a waiver context because the parameters of the request would not be properly defined. 15. U S WEST argues that AT&T's opposition contains nothing of substance that would warrant denial of the Request. U S WEST contends that AT&T's concerns about U S WEST's control over the quality of cellular service are unsupported because U S WEST is not the cellular service provider, that being instead the winner of the RFP. U S WEST also states that AT&T's claims about the potential for cross-subsidization are misplaced because the states will decide how U S WEST accounts for the cost of the program. U S WEST maintains that AT&T's concerns about the potential for discriminatory conduct are misplaced. It states that it awarded the contract for the cellular loaner program in Utah to New Vector after a bona fide RFP and after New Vector submitted the lower bid. Finally, U S WEST argues that AT&T's suggested changes to the voucher system (including its offer to forego termination charges) will not provide and adequate remedy to the held order problem in that AT&T is not a cellular provider in many U S WEST local exchange service areas and the loaner program is structured to meet customer concerns about seeking and acquiring their own cellular service. IV. DISCUSSION 16. The Commission may exercise its discretion to waive a rule where there is "good cause" to do so, because the particular facts would make strict compliance with the rule inconsistent with the public interest. Requests for waivers of the cellular rules must comply with the Commission's rule which allows the Commission to grant a waiver if the underlying purpose of the rule would not be served or would be frustrated by application to the instant case and a grant of the waiver would be in the public interest, or if, in view of unique or unusual factual circumstances, application of the rule would be inequitable, unduly burdensome or contrary to the public interest, or the applicant has no reasonable alternative. Waivers are thus appropriate if special circumstances warrant a deviation from the general rule, and such a deviation will better serve the public interest than adherence to the general rule. Further, the Commission's grant of a waiver must be based on articulated, reasonable standards that are predictable, workable, and not susceptible to discriminatory application. For the reasons stated below, we find that U S WEST has made the required showing of unique or unusual circumstances, pursuant to Section 22.119, for waiver of Section 22.903, and that the regulatory treatment of BOC-provided cellular service resulting from a waiver of Section 22.903 under the conditions proposed by U S WEST for its held order program would not undermine competition or otherwise violate the Communications Act. We therefore grant U S WEST's Request. 17. As a preliminary matter, we find that the interim substitute service provided by U S WEST under its held order program is cellular service, although we recognize the unique circumstances under which this cellular service will be provided. According to U S WEST, such service will be acquired from facilities-based cellular licensees and then sold, albeit at landline rates, by U S WEST's telephone operating company to its held order customers. The service will be provided over cellular frequencies through the use of cellular facilities, and by means of cellular handsets. Because it is cellular service, this temporary service is also appropriately classified as commercial mobile radio service. The fact that such service may be offered for a time to telephone service subscribers, in place of the usual landline service offered by telephone companies, does not alter its identity or character as cellular service or CMRS. As a BOC providing cellular service, U S WEST is required to obtain a waiver of Section 22.903 before it may be permitted to provide such service on conditions other than those specified in that rule. We note that U S WEST may have already implemented its held order program in Utah. While we appreciate U S WEST's and the states' desires to ensure service to held order customers in an expeditious fashion, we caution U S WEST and the other companies subject to our rules that, no matter the public interest objectives of the program at issue, the implementation of such a program predicated on a waiver request should not precede the filing or grant of the waiver request and that such actions risk forfeitures or other enforcement actions. 18. The purposes of our cellular structural separation rules are well settled. As noted above, the restrictions in Section 22.903 were placed on the BOCs to prevent them from "using predatory pricing tactics or misallocating the shared costs of cellular and conventional wireline service . . . ." In particular, the Commission expressed concern that without structural separation, BOCs could favor their own cellular affiliates through improper cross- subsidization or discriminatory interconnection practices. Accordingly, Section 22.903 requires structural separation between U S WEST's cellular activities and its landline local exchange activities. 19. In the case before us, we find that rigid application of Section 22.903 to U S WEST's held order program would not serve the public interest objectives of the rules. AT&T has not convinced us that these purposes will be undermined if U S WEST, through its telephone operating company, is permitted to provide cellular service to held order landline customers, rather than through its cellular separate subsidiary. Any concern about the effect on potential wireless subscribers of their introduction to wireless services through the temporary cellular service U S WEST will provide is more than offset by the public interest benefit in providing a means for landline held order customers to gain access to the public switched network. The Commission has previously noted, in the very different context of a study area waiver, the public interest benefit in waiving certain rules to allow customers of a local exchange carrier (LEC) to be served by alternatives to that LEC's provision of local exchange services, particularly where service may be improved by doing so. As in that context, we believe that the scope of the waiver we grant here should be constrained by the public interest purpose which underlies its grant, as we discuss below. 20. We find that U S WEST's Request presents special circumstances because it affects a relatively small number of customers, who would otherwise not gain access to the public switched network on the conventional terms and conditions enjoyed by telephone service subscribers, and because, consistent with the underlying purpose of our structural separation rule, U S WEST will gain no anticompetitive advantage in the provision of cellular service. We therefore waive the application of Section 22.903 to U S WEST for the purpose of providing temporary cellular service to landline local exchange customers who have not received landline service, under the terms by which U S WEST has framed its Request, and subject to the conditions described below. We believe that this decision will serve the public interest by permitting subscribers experiencing delays in obtaining landline telephone service to gain access to the public switched network by means of temporary cellular service. 21. We also note that, in the period since U S WEST filed its Request, Congress has enacted the Telecommunications Act of 1996. Section 601(d) of the 1996 Act provides: Notwithstanding section 22.903 of the Commission's regulations (47 C.F.R. 22.903) or any other Commission regulation, a Bell operating company or any other company may, except as provided in sections 271(e)(1) and 272 of the Communications Act of 1934 as amended by this Act as they related to wireline service, jointly market and sell commercial mobile services in conjunction with telephone exchange service, exchange access, intraLATA telecommunications service, interLATA telecommunications service, and information services." Arguably, this provision provides some measure of relief to U S WEST by allowing it to sell cellular service in conjunction with telephone exchange service. On the other hand, U S WEST's held order program may not be within the scope of Section 601(d), because the program does not entail any "joint" marketing or sales of landline service and CMRS. Moreover, the fact that the held order program might involve cellular service provided by non-affiliated entities rather than service provided exclusively by U S WEST's own affiliate, New Vector, would also indicate that U S WEST may not be engaged in the type of joint marketing or joint sales activity contemplated by Section 601(d). We need not reach such difficult issues of statutory interpretation because we have decided to waive the provisions of Section 22.903 which would prohibit U S WEST's held order program. We believe that in any event the relief accorded the BOCs in Section 601(d) does not impair our authority for reasonable regulation of such activity. For purposes of this waiver order, we clarify that the U S WEST held order program must be separate and distinct from any other U S WEST activity involving the joint marketing of cellular and landline services and that U S WEST may not utilize the held order program as a means to market or promote the cellular service offerings of its affiliate, New Vector. We defer the matter of the scope of Section 601(d) to a Commission proceeding that will review the full range of issues pertaining to Section 22.903. 22. We agree with U S WEST that our grant of its Request should be in accord with the parameters of the Request itself, and we do not believe it is appropriate, absent any overriding federal purpose, to require U S WEST to expand the scope of activities inconsistent with Section 22.903 beyond the level that it has requested. We therefore grant the Request as modified by U S WEST's reply comments. We need not, in the context of the waiver we grant here, address the modifications to the held order program suggested by DPS/OAG. If U S WEST wishes to broaden the scope of the waiver we grant here, it is free to file an additional request for such relief. 23. We also need not address the DPS/OAG position that the charges for the temporary cellular service in U S WEST's held order program should be determined by individual state public utility commissions, because a decision on this issue is not necessary for or instrumental to our decision to grant the waiver requested by U S WEST. We note that Congress has set forth the conditions for state regulation of CMRS, and we believe that these statutory provisions have relevance here. 24. We note that our decision that the temporary cellular service to be provided by U S WEST is CMRS has other ramifications as well. Contrary to the position put forward in U S WEST's reply, we do not believe that the decision as to how U S WEST will account for the costs of the held order program may be left to the states, at least insofar as those costs are generated by the provision of CMRS. Consistent with the Commission's decision in the CMRS Second Report and Order, we require U S WEST as a condition of this waiver order to file changes in its Cost Allocation Manual required under Part 64 of the Commission's rules to reflect as "below the line" all the expenses generated by U S WEST's resale of cellular service, including the costs of acquiring such service. We believe that this action addresses the concerns of AT&T regarding the potential for cross-subsidization and the incentive for discrimination by U S WEST in favor of its cellular affiliate, will protect ratepayers for U S WEST's landline services from subsidizing U S WEST's CMRS operations, and will encourage U S WEST from relying any more than necessary on this program as a substitute for building and maintaining its wireline network. 25. Finally, we remain concerned about the incidence of the provision of cellular service outside of the Commission's current competitive safeguards embodied in Section 22.903. Because we believe that the interim provision of cellular service to landline local exchange service customers will provide only a temporary solution to U S WEST's held order problem, we see no need to grant a permanent waiver of our rules. Accordingly, we limit the duration of the waiver we grant here to one year from the release date of this order. In addition, we accept U S WEST's offer to provide a quarterly report detailing at the end of each quarter the number of customers by state that are participating in the cellular loaner program, but we believe that additional reporting requirements are also necessary and appropriate. Specifically, we require U S WEST to include in its quarterly report, in addition to the information described above, (1) the total number of customers, by state, who acquired cellular service under the held order program at any time during the quarter and cumulatively over the duration of the program; (2) the total number of customers, by state, who were provided with temporary cellular service for a period of 30 or more days, by quarter and cumulatively; and (3) the total number of customers, by state, who were provided temporary cellular service for 90 or more days during the course of the program, with a breakout in the last category that specifies the length of time such customers have received the cellular service. We believe that this additional information will not only provide us with the details to judge the extent of participation in U S WEST's cellular loaner program, but will also provide the Commission and the states with a valuable quarterly indicator as to the scope of U S WEST's held order situation. V. ORDERING CLAUSES 26. Accordingly, IT IS ORDERED that, pursuant to the authority of Sections 4 and 303 of the Communications Act of 1934, as amended, 47 U.S.C.  154 and 303, and Sections 1.3 and 22.119 of the Commission's rules, 47 C.F.R.  1.3 and 22.119, a waiver of Section 22.903, 47 C.F.R.  22.903, is GRANTED to U S WEST Communications, Inc. for the provision of resold cellular service to its held order landline local exchange customers, as described herein. Such waiver will expire upon one (1) year from the date of release of this Order. 27. IT IS FURTHER ORDERED that U S WEST Communications, Inc. SHALL FILE, within thirty (30) days of the release of this Order, amendments to its Cost Allocation Manual, and subsequent amendments as may be necessary, pursuant to Section 64.903 of the Commission's Rules, 47 C.F.R.  64.903, as described herein. 28. IT IS FURTHER ORDERED that U S WEST Communications, Inc. SHALL FILE, upon ninety (90) days of the release of this Order, and each quarter thereafter during such period as cellular service is provided pursuant to the terms of this Order, a Report detailing the number of customers participating, or having participated, in U S WEST's held order program, as described herein. FEDERAL COMMUNICATIONS COMMISSION Michele C. Farquhar Acting Chief, Wireless Telecommunications Bureau