**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 96-45          |
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| Wyoming Public Service           | ) |                              |
| Commission                       | * |                              |
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| Petition for Waiver of Targeting |   |                              |
| Requirements Found in Sections   | * |                              |
| 54.309 and 54.311 of the         | * |                              |
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**ORDER**

**Adopted:** March 8, 2001 **Released:** March 9, 2001

By the Deputy Chief, Common Carrier Bureau:

# INTRODUCTION

1.  In this Order, we grant a petition filed by the Wyoming Public
    Service Commission (Wyoming Commission) requesting a waiver of
    sections 54.309 and 54.311 of the Commission's rules[^1] to enable
    the Wyoming Commission to target forward-looking high-cost support
    and interim hold-harmless support for non-rural carriers to the
    Wyoming Commission's rate zones that currently are used for
    establishing both retail rates and rates for unbundled network
    elements (UNEs). [^2]

# background

2.  In the *Ninth Report and Order*, the Commission adopted sections
    54.309 and 54.311 of its rules, which require the targeting of
    forward-looking high-cost support and interim hold-harmless support
    for non-rural carriers to high-cost wire centers.[^3] The targeting
    of support to high-cost wire centers is meant to minimize
    inefficiencies and potential market distortions caused by
    distributing support on a uniform statewide basis.[^4] If support
    was not targeted, then the same amount of support would be available
    for any line served by a competitor within the state. This result
    would create uneconomic incentives for competitive entry, because
    support would be available to lower-cost areas, as well as high-cost
    areas.[^5]

3.  Consistent with the states' primary role in ensuring reasonable
    comparability of rates within their borders, the Commission has
    recognized that some states may wish to have federal forward-looking
    support and interim hold-harmless support for non-rural carriers
    targeted to an area different than the wire center.[^6] The
    Commission specifically has recognized that states may wish to have
    federal non-rural high-cost support targeted to UNE cost zones.[^7]
    Sections 54.309 and 54.311 of the Commission's rules permit states
    to file petitions for waiver of the Commission's targeting rules,
    requesting to target federal forward-looking high-cost support or
    interim hold-harmless support to an area different than the wire
    center.[^8] Petitions for waiver of the Commission's targeting rules
    must include a description of the particular geographic level to
    which the state wishes federal forward-looking high-cost support or
    interim hold-harmless support to be targeted, and an explanation of
    how that approach furthers the preservation and advancement of
    universal service within the state.[^9]

4.  The Wyoming Commission seeks a waiver of the Commission's targeting
    requirements in order to direct non-rural forward-looking high-cost
    support and interim hold-harmless support for non-rural carriers to
    the Wyoming Commission's retail and UNE rate zones.[^10] The Wyoming
    Commission's rate zones are based on four geographic areas -- Base
    Rate Area, Zone One, Zone Two and Zone Three. The Base Rate Area
    contains the highest density of access lines per square mile and
    Zone Three contains the lowest density of access lines per square
    mile.[^11] The four rate zones currently form the basis for UNE
    prices and retail rates for Qwest Corporation (Qwest).[^12] Qwest
    currently is the only non-rural carrier in Wyoming. According to the
    Wyoming Commission, zone boundaries are periodically reviewed and
    modified to reflect population changes and changing cost
    parameters.[^13] On May 8, 2000, the Common Carrier Bureau (Bureau)
    released a public notice seeking comment on the Wyoming Commission's
    petition.[^14] AT&T Corp. (AT&T), Qwest,[^15] and Western Wireless
    Corporation (Western Wireless) filed comments in support of the
    Wyoming Commission's petition.

# discussion

5.  We find that the targeting of support to the Wyoming Commission's
    retail and UNE rate zones will preserve and advance universal
    service within Wyoming, and, therefore, we grant the Wyoming
    Commission's request for waiver of section 54.309 and 54.311 of the
    Commission rules.

6.  We find that the Wyoming Commission's request is similar to a
    petition filed by the Washington Utilities and Transportation
    Commission (Washington Commission) and twenty rural incumbent local
    exchange carriers (rural LEC petitioners) for waiver of our rules
    for distributing high-cost loop support to rural LECs.[^16] Although
    the Washington Commission's proposal involved the targeting of
    high-cost support to rural as opposed to non-rural carriers, both
    the Washington Commission and Wyoming Commission proposals involve
    the targeting of support to wire center density zones.

7.  In approving the Washington Commission's petition, we recognized
    that the targeting of support to wire center density zones would
    closely associate support with the cost of providing service, would
    reduce opportunities for "cream skimming," and, therefore, would
    promote efficient competitive entry.[^17] Similarly, we find that
    the Wyoming Commission's proposal to target non-rural high-cost
    support to retail and UNE cost zones will result in support amounts
    more closely reflecting the underlying cost of providing services,
    which, in turn, will decrease opportunities for "cream
    skimming,"[^18] and discourage uneconomic market entry.[^19] The
    Wyoming Commission's method of targeting non-rural high-cost support
    to retail and UNE cost zones furthers the Commission's goal of
    targeting support to the smallest practicable geographic area.[^20]
    Finally, we recognize that the targeting of support based on the
    Wyoming Commission's retail and UNE cost zones is consistent with
    the states' primary role of ensuring reasonable comparability of
    rates within their borders and would give the Wyoming Commission a
    degree of flexibility in reaching that goal.[^21] We, therefore,
    conclude that approval of the Wyoming Commission's waiver petition
    will preserve and advance universal service, and is in the public
    interest.

8.  We note that forward-looking high-cost support and interim
    hold-harmless support that has been transferred with acquired
    exchanges in accordance with section 54.305 of the Commission's
    rules shall not be subject to the Wyoming Commission's targeting
    proposal.[^22] 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.[^23] We recently granted a request for waiver of
    the definition of "study area" contained in Part 36
    Appendix-Glossary of the Commission's rules, which will enable Qwest
    to remove five exchanges from its Wyoming study area, and permit
    Citizens Telecommunications Company of Wyoming (Citizens) to create
    a new Wyoming study area for the acquired exchanges.[^24] If the
    five Wyoming exchanges are transferred from Qwest to Citizens prior
    to the implementation of the Wyoming Commission's targeting
    proposal, the forward-looking high-cost support that is transferred
    with the acquired exchanges is subject to the restrictions contained
    in section 54.305 of the Commission's rules and is not subject to
    the Wyoming Commission's new targeting mechanism.[^25]

9.  We condition grant of the Wyoming Commission's request for waiver of
    sections 54.309 and 54.311 of the Commission's rules on the Wyoming
    Commission submitting to the Universal Service Administrative
    Company (USAC) information necessary for USAC to administer the
    proposal, including information necessary to determine disaggregated
    support amounts in the Wyoming Commission's retail and UNE cost
    zones. For example, in order for USAC to calculate and distribute
    support under the Wyoming Commission's targeting proposal, the
    Wyoming Commission must submit: (1) loop counts for each wire center
    cost zone; and (2) maps showing the location of wire center cost
    zones. Without such information, USAC will be unable to calculate
    and distribute support to the Wyoming Commission's cost zones. We
    recognize that the Wyoming Commission will have to work closely with
    USAC to determine what information is necessary to implement the
    proposal. We direct USAC to obtain such information from the Wyoming
    Commission and other parties as USAC deems necessary for the
    implementation of the Wyoming Commission's proposal. For ease of
    administration, we conclude that USAC should implement the proposed
    methodology on July 1, 2001, or the start date of the quarter after
    USAC receives all necessary information from the Wyoming Commission,
    whichever is later.

# ordering clauses

10. Accordingly, IT IS ORDERED, pursuant to sections 1, 4 and 254 of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154, 254,
    sections 54.309 and 54.311 of the Commission's rules, 47 C.F.R. §§
    54.309, 54.311, and authority delegated by sections 0.291 and 1.3 of
    the Commission rules, 47 C.F.R. §§ 0.291, 1.3, that the petition
    filed by the Wyoming Public Service Commission on March 30, 2000, is
    GRANTED to the extent described herein.

11. IT IS FURTHER ORDERED that this order is EFFECTIVE UPON RELEASE.

FEDERAL COMMUNICATIONS COMMISSION

Carol E. Mattey

Deputy Chief, Common Carrier Bureau

[^1]: *See* 47 C.F.R. §§ 54.309, 54.311.

[^2]: Petition of the Wyoming Public Service Commission for Waiver of
    the Federal Communication Commission's Targeting Rules as Found in §
    54.309 and § 54.311 (filed Mar. 30, 2000) (Petition).

[^3]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Ninth Report and Order and Eighteenth Order on
    Reconsideration, FCC 99-306, at paras. 70, 82 (rel. Nov. 2, 1999)
    (*Ninth Report & Order*).

[^4]: *Ninth Report & Order* at paras. 75, 82.

[^5]: Section 254(e) of the Communications Act of 1934 states that
    eligible carriers may use support only for the "provision,
    maintenance, and upgrading of facilities and services for which the
    support is intended." *See* 47 U.S.C. § 254(e); *see also Ninth
    Report and Order* at paras. 75, 82*.*

[^6]: *Ninth Report and Order* at paras. 76, 86.

[^7]: *Id.* at para. 76.

[^8]: 47 C.F.R. §§ 54.309(c), 54.311(c).

[^9]: *Id.* As a prerequisite to filing a waiver petition of this
    nature, a state must first comply with the certification
    requirements relating to section 254(e) of the 1996 Act. *Ninth
    Report and Order* at paras. 76 n. 212, 86 n. 233. States are
    required to certify that federal high-cost support for non-rural
    carriers will be used only for the provision, maintenance, and
    upgrading of facilities and services for which the support is
    intended. 47 C.F.R. § 54.313. On March 31, 2000, the Wyoming
    Commission filed the required certification.

[^10]: Petition at 2.

[^11]: *Id.*

[^12]: *Id.*

[^13]: *Id.*

[^14]: *See Wyoming Public Service Commission Files for Waiver of the
    Non-Rural High-Cost Universal Service Support Targeting Requirements
    Included in Sections 54.309 and 54.311 of the Commission's Rules*,
    CC Docket No. 96-45, Public Notice, DA 00-1019 (Com. Car. Bur. rel.
    May 8, 2000).

[^15]: On July 16, 2000, U S WEST Communications, Inc. was renamed Qwest
    Corporation. *See, e.g.,* Citizens Telecommunications Company of
    Iowa and U S West Communications, Inc., Joint Petition for Waiver of
    the Definition of "Study Area" Contained in Part 36,
    Appendix---Glossary of the Commission's Rules, CC Docket No. 96-45,
    Notification of Change in Corporate Identity (filed July 25, 2000).

[^16]: *Petition of Washington Utilities and Transportation Commission
    and Twenty Rural Telecommunications Companies for Agreement with
    Designation of Rural Company Eligible Telecommunications Carrier
    Service Areas and for Approval of the Use of Disaggregation of Study
    Areas for the Purpose of Distributing Portable Federal Universal
    Service Support*, Memorandum Opinion and Order, CC Docket No. 96-45,
    DA 99-1844 (Com. Car. Bur. rel. Sept. 9, 1999) (*Washington Waiver
    Order*). The Washington Commission and the rural LEC petitioners
    requested a waiver of section 54.307 of the Commission's rules, 47
    C.F.R. § 54.307, to enable the Washington Commission to disaggregate
    federal high-cost loop support currently distributed at the study
    area level by using the Benchmark Cost Proxy Model to estimate the
    cost of providing services in density zones within each exchange
    served by the rural carriers. *Washington Waiver Order* at para. 2.

[^17]: *Id.* at paras. 8, 9, 12.

[^18]: For example, the Wyoming Commission's proposal would prevent
    carriers from collecting high-cost support for the provision of
    services in low-cost UNE zones.

[^19]: *See* AT&T Comments at 3.

[^20]: *See* Western Wireless Comments at 3 (citing *Ninth Report &
    Order* at paras. 70-76).

[^21]: *See Ninth Report and Order* at para. 76.

[^22]: 47 C.F.R. § 54.305.

[^23]: *Id.*

[^24]: *See Citizens Telecommunications Company of Wyoming and Qwest
    Corporation, Joint Petition for Waivers of the Definition of "Study
    Area" Contained in Part 36, Appendix -- Glossary of the Commission's
    Rules*, CC Docket No. 96-45, Order, DA 01-410 (Acc. Pol. Div. rel.
    February 16, 2001).

[^25]: *See id.* at para. 9.