Skip Navigation

Federal Communications Commission

English Display Options

Commission Document

Accipiter Communications, Inc

Download Options

Released: January 30, 2013

Federal Communications Commission

DA 13-105

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Connect America Fund
)
WC Docket No. 10-90
)
Accipiter Communications, Inc. Petition for Temporary
)
Waiver of Certain High-Cost Universal Service Rules
)

ORDER

Adopted: January 30, 2013

Released: January 30, 2013

By the Chief, Wireline Competition Bureau:

I.

INTRODUCTION

1.
In this order, we find good cause to grant a petition filed by Accipiter Communications,
Inc. (Accipiter) for a limited, temporary waiver of certain rules governing the calculation of high-cost
universal service support.1 For the reasons discussed below, we grant Accipiter a waiver of the requested
rules through December 31, 2014.

II.

BACKGROUND

2.
In the USF/ICC Transformation Order, the Commission comprehensively reformed
universal service funding for high-cost, rural areas, adopting fiscally responsible, accountable, incentive-
based policies to preserve and advance voice and broadband service while ensuring fairness for
consumers who pay into the universal service fund.2 Among other things, the Commission imposed a
presumptive per line cap of $250 per month on total high-cost universal service support for all eligible
telecommunications carriers and found that support in excess of the $250 cap should not be provided
without further justification.3 Consistent with the Commission's goal to provide reasonable transitions so
that companies affected by reform have time to adapt to changing circumstances,4 the Commission


1 Accipiter Communications, Inc. Petition for Temporary Waiver of the Commission's Rules, WC Docket No. 10-90
et al. (filed Apr. 18, 2012) (Accipiter Petition or Petition). The Bureau recently granted Accipiter interim relief, as
necessary to ensure the continuation of Accipiter's wireline voice and broadband service during the pendency of the
Bureau's review. See Accipiter Communications, Inc. Petition for Temporary Waiver of Certain High-Cost
Universal Service Rules
, WC Docket No 10-90 et al., Order, DA 12-2016 (Wireline Comp. Bur. rel. Dec. 20, 2012)
(Accipiter Interim Support Order).
2 See Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further Notice of Proposed
Rulemaking, 26 FCC Rcd 17663, 17670, para. 11 (2011) (USF/ICC Transformation Order and/or FNPRM); pets.
for review pending sub nom
. In re: FCC 11-161, No. 11-9900 (10th Cir. filed Dec. 8, 2011).
3 USF/ICC Transformation Order, 26 FCC Rcd at 17765, para. 274.
4 Id. at 17671, para. 11.

Federal Communications Commission

DA 13-105

phased in the $250 cap over three years.5 From July 1, 2012 through June 30, 2013, carriers will receive
no more than $250 per line per month plus two-thirds of the difference between their uncapped per-line
amount and $250. From July 1, 2013 through June 30, 2014, carriers will receive no more than $250 per
line per month plus one-third of the difference between their uncapped per-line amount and $250.
Beginning July 1, 2014, carriers shall receive no more than $250 per line per month.
3.
The Commission also reformed high-cost loop support (HCLS) by adopting a benchmark
rule to moderate the expenses of rate-of-return carriers with very high costs compared to their similarly
situated peers, while further encouraging other rate-of-return carriers to invest and advance broadband
deployment.6 The new rule responded to problematic incentives and inequitable distribution of support
created by the prior rules, under which some carriers with high costs could receive reimbursement from
the federal universal service fund for up to 100 percent of their marginal expenditures on loop costs. The
Commission adopted the benchmarks rule to reverse these incentives and address these problems by, for
the first time, placing reasonable overall limits on costs eligible for reimbursement through HCLS and
redistributing freed-up HCLS to carriers that stay within these limits to encourage new broadband
investment. The Commission delegated to the Bureau the authority to adopt and implement a specific
methodology within the parameters set forth by the Commission, which the Bureau did in the HCLS
Benchmarks Implementation Order
.7
4.
To prevent disruption to consumers as these rules are phased in, the Commission
permitted "any carrier negatively affected by the universal service reforms . . . to file a petition for waiver
that clearly demonstrates that good cause exists for exempting the carrier from some or all of those
reforms, and that waiver is necessary and in the public interest to ensure that consumers in the area
continue to receive voice service."8 In the USF/ICC Transformation Order, the Commission stated that
"[w]e envision granting relief only in those circumstances in which the petitioner can demonstrate that the
reduction in existing high-cost support would put consumers at risk of losing voice services, with no
alternative terrestrial providers available to provide voice telephony service."9 In the Fifth Order on
Reconsideration
, the Commission clarified that waiver petitions will be evaluated not just based on the


5 Id. at 17765, para. 275.
6 See id. at 17741-47, paras. 210-26.
7 See id. at 17743-44, paras. 214, 217; Connect America Fund; High-Cost Universal Service Support, WC Docket
Nos. 10-90, 05-337, Order, 27 FCC Rcd 4235 (Wireline Comp. Bur. 2012) (HCLS Benchmarks Implementation
Order
). The Commission is considering pending petitions for reconsideration and applications for review of the
HCLS Benchmarks Implementation Order.
8 USF/ICC Transformation Order, 26 FCC Rcd at 17839-40, paras. 539, 540. The Commission did not intend to
replace the ordinary standard for granting waivers under section 1.3 of the Commission's rules, but rather to provide
guidance in advance to potential applicants of the circumstances that would be persuasive and compelling grounds
for grant of a waiver under that waiver standard to assist potential applicants in effectively formulating their waiver
petitions. See Connect America Fund et al., WC Docket No 10-90 et al., Fifth Order on Reconsideration, 27 FCC
Rcd 14549, 14556-57, para. 19 (2012) (Fifth Order on Reconsideration). Generally, the Commission's rules may be
waived if good cause is shown. 47 C.F.R. 1.3. The Commission may exercise its discretion to waive a rule where
the particular facts make strict compliance inconsistent with the public interest. Cellular Telephone Co. v. FCC, 897
F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast Cellular). In addition, the Commission may take into account
considerations of hardship, equity, or more effective implementation of overall policy on an individual basis. WAIT
Radio v. FCC
, 418 F.2d 1153, 1159 (D.C. Cir. 1969); Northeast Cellular, 897 F.2d at 1166. Waiver of the
Commission's rules is appropriate only if both (i) special circumstances warrant a deviation from the general rule,
and (ii) such deviation will serve the public interest. Northeast Cellular, 897 F.2d at 1166.
9 USF/ICC Transformation Order, 26 FCC Rcd at 17840, para. 540.
2

Federal Communications Commission

DA 13-105

impact of reforms on voice service, but also on the continued operation of existing broadband-capable
networks and the effect on consumer rates.10 The Commission provided guidance on the types of
information that would be relevant for such waiver requests and delegated authority to the Bureau and the
Wireless Telecommunications Bureau to rule on all such requests.11
5.
Accipiter's Petition. Accipiter is an incumbent local exchange carrier providing voice
telephony and high-speed Internet service to a study area of 1,010 square miles northwest of Phoenix,
Arizona.12 On April 18, 2012, Accipiter filed a petition seeking a temporary waiver of the $250 per line
limit on high-cost universal service support and a postponement of the HCLS benchmarks rule, which had
not yet been implemented at that time.13 Following the release of the Bureau's HCLS Benchmarks
Implementation Order
, Accipiter amended its petition, seeking relief from the HCLS benchmarks rule as
implemented.14 Finally, on November 1, 2012, Accipiter filed a second amendment to its waiver
petition.15 In this Second Amendment, Accipiter states that it seeks a waiver of the $250 per line limit
and waiver of the HCLS benchmarks rule through December 31, 2014.16
6.
Accipiter generally argues that the $250 per-line limit and the HCLS benchmarks rule
should not apply to it because, unlike most other rural, rate-of-return carriers, it is a growing company
with rapidly increasing subscribership. Accipiter argues that it had significantly higher costs while it was
expanding its network, especially when calculated on a per-line basis. For example, Accipiter's study
area loop count increased by 46 percent from its 2009 cost study to its 2010 cost study.17 Moreover,
Accipiter argues that while in recent years it made significant investments to extend its network into
previously unserved areas, it is now positioned to add customers with relatively smaller incremental
capital expenditures and operating expenses.18 For this reason, Accipiter states that with ongoing
subscriber growth, it expects that by 2015 it will no longer require a waiver.19 Nevertheless, as Accipiter
explained in its Second Amendment to its Petition, without a waiver the company [

REDACTED

].20


10 Fifth Order on Reconsideration, 27 FCC Rcd at 14557, para. 20.
11 USF/ICC Transformation Order, 26 FCC Rcd at 17840-42, paras. 542, 544.
12 Petition at 6. Accipiter was incorporated in 1995 and is authorized by the Arizona Corporation Commission to
serve portions of Maricopa and Yavapai counties in the state.
13 Id. at 2.
14 See Accipiter Communications, Inc. Petition for Waiver of the Commission's Rules Implementing Reform of
Universal Service Support, Amendment to Petition for Temporary Waiver, WC Docket No. 10-90 at 1-2 (filed July
19, 2012) (First Amendment).
15 Accipiter Communications, Inc. Petition for Waiver of the Commission's Rules Implementing Reform of
Universal Service Support, Second Amendment to Petition for Temporary Waiver, WC Docket No. 10-90 (filed
Nov. 1, 2012) (Second Amendment).
16 Id. at 1, 3.
17 Petition at 29.
18 Id. at 3.
19 Second Amendment at 1.
20 Id. at 3-4.
3

Federal Communications Commission

DA 13-105

7.
The Bureau sought comment on Accipiter's Petition on May 4, 2012.21 Cox
Communications, Inc. (Cox) and the National Telecommunications Cooperative Association (NTCA)
filed in response to Accipiter's Petition.22 Cox filed an opposition to Accipiter's Petition, defending itself
against certain allegations of prior anticompetitive behavior made in Accipiter's Petition.23 Cox also
argues that Accipiter is using federal universal service and Rural Utilities Service (RUS) loans to build its
network in suburban areas that do not need support and where Cox is competing without a subsidy.24
8.
NTCA filed comments in support of Accipiter's Petition, asserting that it highlights the
significant concerns arising from application of the $250 per line limit in section 54.302 of the
Commission's rules and the regression-based caps that will limit recovery of certain operating and capital
expenses.25

9.
Accipiter Interim Support Order. On December 20, 2012, the Bureau granted limited,
interim relief to Accipiter to ensure the continuation of Accipiter's wireline voice and broadband service
during the pendency of the Bureau's review of the Petition.26 In the Accipiter Interim Support Order, the
Bureau tentatively found that Accipiter's expenses were reasonable, pending further review.27 On
December 27, 2012, the Bureau sent a letter to Accipiter seeking additional financial and other
information necessary to complete its review of Accipiter's Petition.28 On January 4, 2013, Accipiter
filed its response.29

IV.

DISCUSSION

10.
We conclude that Accipiter has demonstrated that there is good cause to grant a limited,
temporary waiver of the Commission's rules until December 31, 2014.30 Based upon a thorough review


21 See Wireline Competition Bureau Seeks Comment on Accipiter Communications, Inc. Petition for Temporary
Waiver of Certain High-Cost Universal Service Rules
, WC Docket No. 10-90, WT Docket No. 10-208, Public
Notice, 27 FCC Rcd 5024 (Wireline Comp. Bur. 2012) (seeking comments by June 5, 2012 and reply comments by
June 20, 2012).
22 See Cox Communications, Inc. Opposition to Petition for Waiver, WC Docket No. 10-90, WT Docket No. 10-208
(filed June 5, 2012) (Cox Opposition); NTCA Comments, WC Docket No 10-90, WT Docket No. 10-208 (filed June
5, 2102).
23 See Cox Opposition at 1-3; Petition at 10-11.
24 Cox Opposition at 4-8. Cox also argues that Accipiter's initial petition did not adequately show that it would be
unable to survive losses resulting from reductions in support caused by the $250 per line cap. See id. at 5.
Accipiter's subsequent filings, however, clearly demonstrate this, see, e.g., Second Amendment at 1, and Cox has
not disputed Accipiter's claims.
25 NTCA Comments at 1.
26 See Accipiter Interim Support Order, DA 12-2016, para. 1.
27 Id. at para. 9.
28 See Letter from Julie A. Veach, Chief, Wireline Competition Bureau, to Kenneth C. Johnson, Counsel to Accipiter
Communications, Inc., WC Docket No. 10-90 et al., DA 12-2084 (rel. Dec. 27, 2012) (Supplemental Letter).
29 See Letter from Kenneth C. Johnson, Counsel to Accipiter Communications, Inc., Response to Request for
Additional Information, WC Docket No. 10-90 et al. (filed Jan. 4, 2013) (Supplemental Response).
30 See supra note 8 (setting forth the waiver standard). In this context, the Commission has made clear that it
envisions granting waivers "only in those circumstances in which the petitioner can demonstrate that consumers
served by such carriers face a significant risk of losing access to a broadband-capable network that provides both
(continued...)
4

Federal Communications Commission

DA 13-105

of the information provided by Accipiter, including its financial statements, we conclude that a waiver is
necessary and in the public interest. First, Accipiter has demonstrated that, within two years, it will be
able to operate within the support limits (e.g., at or below $250 per line per month) established in the
USF/ICC Transformation Order 31
.
Second, this waiver ensures that those consumers in Accipiter's
service area, who have no alternative terrestrial provider of voice and broadband service, will maintain
access to a broadband-capable network that provides both voice and broadband service.32 Third, based on
our analysis, Accipiter's expenses appear reasonable, as further discussed below.
11.
Accipiter's Path to Meet Support Limits. Accipiter is a rapidly growing company whose
financial projections demonstrate that a waiver will permit it to operate within the support limits
established in the USF/ICC Transformation Order within a short timeframe. Specifically, Accipiter's
projections show that, by January 1, 2015 at the latest, it will no longer have its support capped by either
the Commission's $250 per line overall limit or the HCLS benchmarks rule.33
12.
Access to Voice and Broadband. The record supports Accipiter's claim that without a
waiver, some of its customers living in parts of its service area where there is no alternative terrestrial
provider of service risk losing access to a broadband-capable network that provides both voice as well as
broadband today.34 In its Petition, Accipiter states that without a waiver, it will be unable to support
services to approximately [

REDACTED

] telephone subscribers who have no terrestrial alternative for
voice or broadband service.35 We also note that, as an RUS borrower, Accipiter asserts that relief is
necessary to prevent unnecessary risk of default on its existing [

REDACTED

] RUS debt. We conclude
that while granting the requested relief will temporarily increase its high-cost support above the amount it
would receive under current rules, a waiver likely saves substantial costs related to the restructuring of its
RUS debt.36
13.
Accipiter's Expenses Appear Reasonable. Based on the financial information Accipiter
has provided, we find that Accipiter's expenses are reasonable. First, as noted above, Accipiter is a
rapidly growing company, with financial projections that show that, by January 1, 2015, its support will
not be capped by the Commission's $250 per line overall cap or the HCLS benchmarks.37 Furthermore,
the salaries and wages of Accipiter's small number of employees are comparable to other similarly-sized
rate-of-return carriers.38 Similarly, Accipiter's corporate operations expenses are reasonable given the
(Continued from previous page)


voice as well as broadband today, at reasonably comparable rates, in areas where there are no alternative providers
of voice or broadband." Fifth Order on Reconsideration, 27 FCC Rcd at 14557, para. 21.
31 See Petition at 2; Second Amendment at 1.
32 See Fifth Order on Reconsideration, 27 FCC Rcd at 14557, para. 20.
33 See Petition at 4.
34 See Fifth Order on Reconsideration, 27 FCC Rcd at 14557, para. 20.
35 Petition at 4. Accipiter acknowledges that some of these current subscribers may have access to mobile voice
services. There is no evidence in the record, however, that any provider or combination of providers would be able
to provide voice and broadband service throughout Accipiter's service area.
36 Petition at 5.
37 See Petition at 4.
38 Accipiter reports that it currently has [

REDACTED]

employees. See Appendix to Supplemental Response. The
total cash compensation of Accipiter's CEO is below that of the median for companies with a similar number of
access lines and operating revenues. Likewise, the compensation of Accipiter's other employees is comparable to
the median for similar positions in similarly-situated companies. See National Telecommunications Cooperative
(continued...)
5

Federal Communications Commission

DA 13-105

size and growth rate of Accipiter's operation.39 For example, according to data submitted by the National
Exchange Carrier Association (NECA), companies with 500 to 1,500 loops have corporate operations
expenses that are on average 40 percent of their total loop revenue requirement.40 NECA reported that
Accipiter had 935 loops as of year-end 2011, and Accipiter's 2011 corporate operations expenses were 19
percent of its total loop revenue requirement, significantly less than similarly sized peers.41
14.
Moreover, Accipiter has not made affiliate payments, entered into any leases, or made
any distributions to owners or shareholders that appear imprudent. For example, Accipiter made no
[

REDACTED]

.42 Accipiter has not [

REDACTED]

from 2009 to the present date.43 Finally, Accipiter
states that it expects to [

REDACTED

].44 Accipiter plans to use those funds in a prudent manner to, for
example, [

REDACTED

], as part of its plan to reduce per-line support.45
15.
Opposing Accipiter's waiver petition, Cox asserts that Accipiter should not receive
support for costs associated with its service in suburban areas, including areas where Cox competes with
it, and that Accipiter's waiver request includes such costs.46 Cox argues that high-cost support should not
be used to fund investment in areas where competitive alternatives are available.47 Accipiter counters that
providing service in areas with population densities that allow for economies of scale, such as the areas in
which it competes with Cox, reduces its overall dependence on high-cost universal service support
because revenues from those areas help offset costs incurred in serving higher-cost areas.48
16.
We agree with Cox that, as the Commission previously found, providing universal
service support in areas of the country where another voice and broadband provider is offering high-
quality service without government assistance is an inefficient use of limited universal service funds.49
On the record before us, however, we cannot conclude that Accipiter is using universal service support in
that manner. In the USF/ICC Transformation Order, the Commission adopted a rule to eliminate
universal service support where an unsubsidized competitor offers voice and broadband service
(Continued from previous page)


Association, 2012 Survey of Compensation and Benefits in the Independent Telecommunications Industry, at 86,
Table 36a, 108, Table B (2012).
39 Petition at 3.
40 See National Exchange Carrier Association, Inc., Universal Service Fund Data: NECA Study Results, 2012
Report (filed Sept. 28, 2012), http://www.fcc.gov/wcb/iatd/neca.html. 2013 support is based on 2011 cost data filed
September 28, 2012.
41 See id.; see also Petition at Exhibit 3.
42 Supplemental Response, App. at A-8.
43 Id.
44 Id.
45 Id.
46 Cox Opposition at 5.
47 Id.
48 See Letter from Patrick Sherrill, President and Chief Executive Officer, Accipiter Communications, Inc., to
Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 10-90 et al., at 2 (filed Aug.
7, 2012).
49 USF/ICC Transformation Order, 26 FCC Rcd at 17767, para. 281.
6

Federal Communications Commission

DA 13-105

throughout an incumbent carrier's entire study area.50 The Commission also sought comment on a
process for determining support in study areas with less than 100 percent overlap, such as Accipiter's,
including how to allocate costs among the overlapped and non-overlapped areas.51 Resolving this cost-
allocation issue is typically necessary to determine whether universal service funds are being used to
subsidize competitive areas, or, to the contrary, and as Accipiter claims here, net revenues from
competitive areas are reducing a carrier's universal service needs. We do not wish to prejudge the
Commission's resolution of this cost allocation issue. And, we note that Cox has not alleged that
Accipiter is using the support in a manner inconsistent with our rules. Accordingly, although we take
Cox's concerns seriously, the fact that Accipiter faces competition from an unsubsidized competitor in
part of its study area does not at this time justify a denial of its waiver petition.
17.
For these reasons, we grant Accipiter a limited, temporary waiver of the $250 per line cap
and the HCLS benchmarks rule until December 31, 2014. We implement this limited, temporary waiver
in a manner designed to ensure that Accipiter does not receive more high-cost support than necessary or
more high-cost support than it received prior to the implementation of the reforms adopted in the
USF/ICC Transformation Order. Specifically, beginning with support for January 2013 and through
support for December 2014, we grant Accipiter's request for a waiver of the above-mentioned rules, but
provide that its support for any month shall not exceed the average monthly amount of total high-cost
support that it received for January 1, 2012 through June 30, 2012. We direct the Universal Service
Administrative Company, beginning with support for January 2013, to provide support to Accipiter
pursuant to the terms of this order in place of the monthly support provided in the Accipiter Interim
Support Order
.
18.
We expect, as Accipiter states, that by the end of 2014 Accipiter will no longer require a
waiver, and we do not anticipate extending this waiver beyond that date.52 During this time, we expect
Accipiter to continue to actively pursue all appropriate measures to reduce its dependency on federal
high-cost universal service support.
19.
As a condition of receiving support pursuant to this order, Accipiter must maintain its
existing services. To the extent that Accipiter must discontinue, reduce or impair service, it must
coordinate with the Bureau on a transition plan to minimize customer disruption.

V.

ORDERING CLAUSES

20.
Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 5(c), 201, and 254 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 155(c), 201, 254, and sections 0.91,
0.291, and 1.3 of the Commission's rules, 47 C.F.R. 0.91, 0.291, 1.3, that this order IS ADOPTED.


50 Id. There is no evidence in the record to suggest that Cox or any other competitor provides service throughout
Accipiter's service area.
51 USF/ICC Transformation FNPRM, 26 FCC Rcd at 18056-59, paras. 1061-78. Specifically, the Commission
sought comment on what particular methodology should be used, including whether it should use a cost model to
accomplish that allocation. See id. at 18058, para. 1074; see also Further Inquiry Into Certain Issues in the
Universal Service-Intercarrier Compensation Transformation Proceeding
, WC Docket No. 10-90 et al., Public
Notice, 26 FCC Rcd 11112, 11117 (Wireline Comp. Bur. 2012).
52 Petition at 4, 17-18; Second Amendment at 1. See USF/ICC Transformation Order, 26 FCC Rcd at 17766, para.
278.
7

Federal Communications Commission

DA 13-105

21.
IT IS FURTHER ORDERED that the petition for waiver of section 54.302 of the
Commission's rules, 47 C.F.R. 54.302, and the benchmarks rule to limit reimbursements for capital and
operating costs, filed by Accipiter Communications, Inc. IS GRANTED as described herein.
22.
IT IS FURTHER ORDERED that, pursuant to section 1.102(b)(1) of the Commission's
rules, 47 C.F.R. 1.102(b)(1), this order SHALL BE EFFECTIVE upon release.
FEDERAL COMMUNICATIONS COMMISSION
Julie A. Veach
Chief
Wireline Competition Bureau
8

Note: We are currently transitioning our documents into web compatible formats for easier reading. We have done our best to supply this content to you in a presentable form, but there may be some formatting issues while we improve the technology. The original version of the document is available as a PDF, , or as plain text.

close
FCC

You are leaving the FCC website

You are about to leave the FCC website and visit a third-party, non-governmental website that the FCC does not maintain or control. The FCC does not endorse any product or service, and is not responsible for, nor can it guarantee the validity or timeliness of the content on the page you are about to visit. Additionally, the privacy policies of this third-party page may differ from those of the FCC.