Before the

Federal Communications Commission

Washington, D.C. 20554

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| In the Matter of                 | * |                              |
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| HYPERION COMMUNICATIONS          | ) |                              |
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| LONG HAUL, L.P.                  | * |                              |
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| Request for Waiver of Section    | * |                              |
| 101.1003(a) of the               | * |                              |
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| Commission's Rules Establishing  | * |                              |
| Eligibility Restrictions on      | * |                              |
| Incumbent LECs and Cable         |   |                              |
| Operators in the Local           | * |                              |
| Multipoint Distribution Service  | * |                              |
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ORDER

**Adopted:** February 1, 2000 **Released:** February 2, 2000

Before the Deputy Chief, Public Safety and Private Wireless Division,
Wireless Telecommunications Bureau:

# introduction

1.  This *Order* addresses a request for waiver filed on December 9,
    1999, by Hyperion Communications Long Haul, L.P. (Hyperion).[^1]
    Hyperion seeks a waiver of the Commission's Rule which imposes an
    eligibility restriction on incumbent local exchange carriers (LEC)
    and incumbent cable operators that own or seek to own a Local
    Mulitpoint Distribution Service (LMDS) license in their current
    service areas.[^2] For the reasons discussed below we deny the
    above-captioned waiver request and require Hyperion to begin
    divestiture proceedings within ninety days following the release
    date of this O*rder*.

# background

2.  Pursuant to Section 101.1003 of the Commission Rules, an incumbent
    LEC or cable operator is prohibited from possessing an attributable
    interest in an LMDS A Block license if the LMDS license's geographic
    service area significantly overlaps the incumbent\'s authorized or
    franchised service area.[^3] Significant overlap occurs when at
    least ten percent or more of the population of the LMDS Basic
    Trading Area (BTA), as determined by 1990 census figures for the
    counties contained in that service area, is located within the
    incumbent's authorized or franchised LEC or cable service area.
    Where such an overlap occurs, a LMDS licensee must partition and
    divest either the portion of its authorized or franchised service
    area that exceeds the overlap restriction, or the portion of its
    LMDS service area that exceeds the overlap restriction.[^4] The
    divestiture process must occur within ninety days following the
    final grant of an LMDS license or, as in this case, the incidence of
    a significant overlap.[^5]

3.  Section 101.1003 was adopted to encourage competition in the local
    telephone and multichannel video distribution (MVPD) markets.[^6] In
    the *Second Report and Order,* the Commission indicated that,
    although there are several potential and actual sources of
    competition to LECs and cable operators, none of these technologies
    has yet posed a "a significant competitive antidote to the
    incumbents' market power."[^7] The Commission concluded that LMDS,
    because of its spectrum capacity and potential to offer fixed video,
    voice, and data services, could serve as a vehicle of competition to
    both the MVPD and local telephone markets.[^8] The Commission
    further recognized, however, that an in-region LMDS license would be
    particularly valuable to incumbents as it would not only allow them
    to provide increased or additional services, but would also preserve
    excess profits that an independent LMDS competitor could erode.[^9]

4.  After reviewing the record compiled in the LMDS proceeding, the
    Commission decided to impose a temporary restriction on incumbent
    LECs and cable operators from obtaining full ownership of LMDS A
    block licenses that significantly overlapped with their service
    areas.[^10] The Commission explained that this method of eligibility
    restriction would allow incumbent LECs and cable operators to
    participate in the LMDS auction and provide LMDS service, but would
    also guarantee the entry of new LMDS operators who could provide
    competition.[^11] Nevertheless, the Commission did recognize that
    during the restriction period, some incumbent LECs and cable
    operators might be able to demonstrate that conditions in a
    particular market were sufficiently competitive to remove the
    restriction.[^12] Thus, the Commission provided that following the
    initial grant of LMDS licenses, an incumbent LEC or cable operator
    could obtain a waiver of the eligibility restriction upon
    demonstrating that the petitioner no longer had market power in its
    authorized or franchised service area due to the entry of a new
    competitor, other than an LMDS licensee, into such service
    area.[^13] The restriction, which was meant to be temporary, is
    currently due to terminate on June 30, 2000, but can be extended if
    the Commission deems an extension necessary in order to further
    promote competition in the local exchange and MVPD markets.[^14] The
    Commission recently released a *Sixth Notice of Proposed Rulemaking*
    seeking comment on whether to allow the eligibility restriction to
    sunset on June 30th of this year.[^15]

5.  Hyperion,[^16] is a subsidiary of Adelphia Business Solutions (ABS),
    a publicly traded company that provides facilities based competitive
    local exchange carrier (CLEC) services in seventy-five markets in
    the United States.[^17] ABS is, in turn, wholly controlled by
    Adelphia Communications Corporation (Adelphia). Adelphia provides
    cable television services to approximately five million subscribers
    throughout the United States.[^18] When Hyperion acquired its A
    Block licenses in LMDS Auction No. 17, there were no instances of
    significant overlap between any of Hyperion's A Block licenses and
    Adelphia's cable franchise areas.[^19] However, on October 1, 1999,
    an overlap occurred when Adelphia acquired two cable television
    companies, Century Communications Corp. and FrontierVision Partners,
    L.P.[^20] Specifically, this acquisition created a significant
    overlap to occur between Hyperion's BTA 359 (Portsmouth, Ohio) and
    BTA 363 (Presque Isle, Maine) and certain franchise areas held by
    Century and FrontierVision.[^21] Hyperion submitted its waiver
    request on December 9, 1999, requesting a permanent waiver of the
    LMDS eligibility restriction or, in the alternative, a waiver
    pending the outcome of the *Sixth Notice of Proposed Rulemaking*.

# discussion

6.  [*Permanent Waiver Request*.]{.underline} The Commission's Rules
    allow for waiver of specific rule requirements upon certain
    showings. Section 1.925 of the Commission's Rules requires a
    petitioner to demonstrate either that (a) the underlying purpose of
    the rule will not be served, or would be frustrated by application
    to the instant case, and that a grant of the waiver is otherwise in
    the public interest; or (b) in view of unique or unusual factual
    circumstances of the instant case, application of the rule would be
    inequitable, unduly burdensome or otherwise contrary to the public
    interest.[^22] For the reasons discussed below, we conclude that
    Hyperion has failed to meet either of the showings required for
    grant of a waiver.

7.  First, Hyperion argues that requiring it to begin divestiture
    proceedings would frustrate the intent of the eligibility
    restriction and be contrary to the public interest. Hyperion
    contends that the LMDS marketplace has moved away from multichannel
    video offerings, and instead is focused more on providing high speed
    data and related telecommunications purposes.[^23] Hyperion asserts
    that by requiring it to divest its overlap interest in BTA 359 and
    BTA 363 will not advance MVPD competition.[^24] Furthermore,
    Hyperion argues that compelling it to divest would, in fact, further
    undermine the purpose of the eligibility restriction by forestalling
    the efforts of ABS and Hyperion to provide local exchange
    competition.[^25]

8.  Given the nascent LMDS deployment, Hyperion's reliance on the LMDS
    market's current position regarding MVPD deployment does not
    specifically demonstrate how the application of the LMDS eligibility
    restriction would frustrate the underlying purpose of the rule, or
    why grant of a waiver is in the public interest in this instance. It
    is still possible that the marketplace will support an MVPD offering
    and Hyperion offers no compelling information indicative of a
    different conclusion. For that reason, the Commission's primary
    objective to encourage competition in the telephony and MVPD markets
    is very much applicable to the Hyperion overlap situation. During
    the LMDS rulemaking proceeding, the Commission requested and
    considered an extensive number of comments before imposing an
    eligibility restriction on incumbents[^26] and, as discussed above,
    the Commission fully explained its rationale for the eligibility
    restriction in the *Second Report and Order.*[^27] Moreover, the
    validity of the eligibility restriction both generally and as it
    applied to rural telephone companies has recently been upheld by the
    D.C. Circuit Court in *Melcher*.[^28] Additionally, the Wireless
    Telecommunications Bureau (Bureau) has denied similar LMDS
    eligibility restriction waiver requests in the past.[^29] In the
    *Rural Telco Order,* the Bureau denied requests for waiver of LMDS
    eligibility restriction filed by several rural telephone companies
    finding that petitioners' status as rural telephone companies was
    not sufficient to warrant a waiver grant.[^30]

9.  Hyperion states that the circumstances surrounding its overlap are
    unique and materially distinguishable from the situation presented
    in the *Rural Telco Order.* Hyperion argues that the circumstances
    giving rise to its overlap occurred inadvertently some time
    following the auction and "was not an effort . . . to acquire the
    license for anticompetitive purposes."[^31] Additionally, Hyperion
    contends that its position as a CLEC competitor and the unlikelihood
    of potential cable competition being foreclosed by Hyperion's use of
    the spectrum set its situation apart and warrants a grant of its
    waiver request.[^32] We disagree that Hyperion's situation is
    distinguishable from that of the rural telephone companies in the
    *Rural Telco Order,* because Hyperion attempts to base the necessity
    of its waiver request on its status as a competitive LEC without
    offering additional information to bolster its argument. Hyperion's
    reliance on status alone does not demonstrate unique facts that
    render the eligibility restriction inequitable, unduly burdensome,
    or otherwise contrary to the public interest. Hyperion\'s status as
    a Competitive LEC does not negate the Commission\'s obligation to
    also promote competition in the MVPD marketplace. Moreover,
    Hyperion's statement regarding the improbability of potential cable
    competition in BTAs 359 and 363 is not supported by any additional
    information. The Bureau can not base the grant of a waiver request
    on Hyperion\'s unsupported assertions or predictions.

10. Finally, the issues raised by Hyperion, particularly those dealing
    with the restriction as it pertains to MVPD, do not present a unique
    or unusual circumstance such that merits a waiver request, but
    rather introduces questions about the effectiveness of the
    eligibility restriction. These issues are best addressed through the
    instant rulemaking proceeding implemented by the *Sixth Notice of
    Proposed Rulemaking*.[^33] Accordingly, as it has offered no
    additional information in support of its waiver request, Hyperion\'s
    request for a permanent waiver of Section 101.1003 of the
    Commission's Rules is denied.

11. *[Divestiture Extension]{.underline}*. In the alternative, Hyperion
    has requested that the Bureau extend its divestiture date until
    after the Commission concludes the eligibility restriction sunset
    proceeding.[^34] Hyperion asserts that requiring it to divest prior
    to the completion of the rulemaking would be inequitable, burdensome
    and contrary to the public interest.[^35] Hyperion compares its
    situation to the CMRS spectrum cap cases, wherein the Commercial
    Wireless Division granted divestiture extensions to various parties
    due to the Commission's reexamination of the spectrum cap
    rules.[^36]

12. Based on the record before us, we reach a different outcome here.
    The Commission's rules explicitly require LMDS applicants and
    licensees to divest any overlap interest within ninety days.[^37]
    Thus, if we were to grant Hyperion an indefinite extension, then the
    Bureau would be acting in a manner inconsistent with a policy
    established by the Commission.[^38] We reject Hyperion's attempt to
    liken its situation to the CMRS spectrum cap cases. In those cases,
    the Commercial Wireless Division granted an extension of the parties
    compliance date, because the Commission, as part of its biennial
    review, was considering eliminating the rule with respect to the 45
    MHz spectrum cap.[^39] Conversely, in this case, the LMDS rule in
    question sunsets on June 30, 2000 and the Commission is considering
    potentially extending the rule's termination date.[^40] We believe
    that in light of the current proceeding enforcement of the
    restriction is appropriate in the interim. Moreover, Hyperion was
    familiar with the restriction and should have been particularly
    vigilant of overlap issues given Adelphia's large cable holdings.
    Finally, as discussed above, Hyperion has some flexibility with
    respect to its divestiture of the overlap interest in that it may
    partition either the overlap portion of the franchised service area,
    the LMDS BTA or to a trustee in the event that a buyer is not
    available.[^41] Consequently, Hyperion is directed to come into
    compliance with Section 101.1003(f) of the Commission's Rules within
    ninety days following release of this *Order.*

# ordering clauses

13. For the reasons set forth above, IT IS ORDERED pursuant to Section
    4(i) of the Communications Act of 1934, as amended, 47 U.S.C. §
    154(i) and Section 1.925 of the Commission's Rules, 47 C.F.R. §
    1.925, that the Request for Waiver of Section 101.1003(a) filed by
    Hyperion Communications Long Haul, L.P., on December 9, 1999, is
    HEREBY DENIED.

14. This action is taken pursuant to Sections 0.131 and 0.331 of the
    Commission's Rules, 47 C.F.R. §§ 0.131, 0.331.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Ramona Melson
>
> Deputy Chief, Public Safety and Private Wireless Division
>
> Wireless Telecommunications Bureau

[^1]: Hyperion Communications Long Haul, L.P. Request for Waiver of
    Section 101.1003(a) of the Commission's Rules (filed Dec. 9, 1999)
    (Waiver Request). On January 28, 2000, Hyperion supplemented this
    request by including a copy of comments filed in response to the
    *Sixth Notice of Proposed Rulemaking* (CC Docket No. 92-297)
    (Hyperion Supplement).

[^2]: 47 C.F.R. § 101.1003(a).

[^3]: 47 C.F.R. § 101.1003(a).

[^4]: 47 C.F.R. § 101.1003(f)(1)(ii)(A)-(B).

[^5]: 47 C.F.R.§ 101.1003(f)(4)-(6). If an incumbent is unable to find a
    buyer in that time period, then divestiture may be made to an
    interim trustee provided the incumbent has no interest in or control
    of the trustee, and the trustee may dispose of the divested portion
    of the license as it sees fit. 47 C.F.R. § 101.1003(f)(1)(iii).

[^6]: Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate
    the 29.5-30.0 GHz Frequency Band, to Establish Rules and Policies
    for Local Multipoint Distribution Service and for Fixed Satellite
    Services, *Second Report and Order, Order on Reconsideration, and
    Fifth Notice of Proposed Rulemaking*, FCC 97-82, 12 FCC Rcd 12545,
    12625, ¶ 179 (1997) (*Second Report and Order*).

[^7]: *Id.* at 12618, ¶ 164.

[^8]: *Id.* at 12610, ¶ 149, 12618-9, ¶ 165 and 12621 ¶ 170.

[^9]: *Id.* at 12617, ¶ 163.

[^10]: *Id*.

[^11]: *Id.* at 12633, ¶ 199.

[^12]: *Id.*at 12633, ¶ 199.

[^13]: *Id. See also* 47 C.F.R. § 101.1003(a)(2). The Commission has
    indicated that waiver pursuant to this section is available only to
    entities seeking to obtain an LMDS license through assignments or
    transfers of control. *See* Rulemaking to Amend Parts 1, 2, 21, and
    25 of the Commission's Rules to Redesignate the 27.5-29.5 GHz
    Frequency Band, to Reallocate the 29.5-30.0 GHz Frequency Band, to
    Establish Rules and Policies for Local Multipoint Distribution
    Service and for Fixed Satellite Services, *Third Order on
    Reconsideration*, 13 FCC Rcd 4856, 4871, ¶ 27 (1998).

[^14]: *Id.* at 12616, ¶ 160.

[^15]: *See* Rulemaking to Amend Parts 1, 2, 21, and 25 of the
    Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band,
    to Reallocate the 29.5-30.0 GHz Frequency Band, to Establish Rules
    and Policies for Local Multipoint Distribution Service and for Fixed
    Satellite Services, CC Docket No. 92-297, *Sixth Notice of Proposed
    Rule Making*, FCC 99-379, released Dec. 13, 1999, 64 Fed. Reg.
    71373, Dec. 21, 1999.

[^16]: Hyperion's predecessor, Baker Creek Communications (Baker Creek),
    L.P. originally acquired the licenses at auction. Hyperion, a Baker
    Creek affiliate, acquired the licenses from Baker Creek through an
    assignment of authorization. *See* FCC File No. 0000006086.

[^17]: Waiver Request at 2.

[^18]: *Id.*

[^19]: *Id.* at 4.

[^20]: *Id.* at Exhibit 4.

[^21]: Hyperion concluded, based on 1990 census figures, that the
    population overlap for BTA 363 was 39 % and that the overlap for BTA
    359 was 84 %. *See* Waiver Request at Exhibit 1.

[^22]: 47 C.F.R. § 1.925(b)(3).

[^23]: Waiver Request at 7; *see also* Hyperion Supplement at 6-9.

[^24]: *Id.* at 8.

[^25]: *Id.* at 7-9. Hyperion states that "ABS is a proven CLEC
    competitor. . . about to dramatically expand its nationwide
    footprint. . . ."*Id*. at 9.

[^26]: *See e.g., Second Report and Order*, 12 FCC Rcd at 12608-11 ¶
    146-151.

[^27]: *See supra* ¶ 3-4.

[^28]: *See Melcher v. FCC*, 134 F.3d 1143 (D.C. Cir. 1998).

[^29]: *See* Requests for Waiver of the Commission's Rules Establishing
    Eligibility Restrictions on Incumbent LECs and Cable Operators in
    the Local Multipoint Distribution Service, *Order*, 13 FCC Rcd 18694
    (1998) (Rural Telco Order), *aff'd,* Requests for Waiver of the
    Commission's Rules Establishing Eligibility Restrictions on
    Incumbent LECs and Cable Operators in the Local Multipoint
    Distribution Service, *Memorandum Opinion and Order,*14 FCC Rcd
    13477 (1999).

[^30]: *Rural Telco Order*, 13 FCC Rcd at 18701-2, ¶ 11-12.

[^31]: Waiver Request at 9.

[^32]: *Id.*

[^33]: *See Stockholders of Renaissance Communications Corp. and Tribune
    Corp*., 12 FCC Rcd 11866, 11887-88 ¶ 50 (1997).

[^34]: Waiver Request at 9. *See supra* para. 4, n.15 (discussing
    Commission's recent request for comment on extending termination
    date for Section 101.1003).

[^35]: *Id.* at 9-10.

[^36]: *See e.g.,* *Western Wireless PCS III*, 11 FCC Rcd 14487 (CWD
    1996) (*Western Wireless III*) (Commercial Wireless Division granted
    licensee a waiver until completion of PCS partitioning and
    disaggregation proceeding to come into compliance with CMRS spectrum
    aggregation limit); *see also* *Pioneer Telephone Association,
    Inc.,* DA 99-1823, 1999 WL 694140 (CWD 1999) (Commercial Wireless
    Division granted petitioners waiver to exceed 45 MHz CMRS spectrum
    cap until conclusion of spectrum cap proceeding).

[^37]: 47 C.F.R. § 101.1003(f)(4).

[^38]: *See Jelks v. FCC*, 146 F.3d 878, 881 (1998) (a subordinate body
    like the Division cannot alter a policy set by the Commission),
    *cert den.* 119 S.Ct 1045 (1999); *Amor Family Broadcasting Group v.
    FCC*, 918 F.2d 960, 962 (D.C. Cir. 1990) (even if internal
    inconsistency at a subordinate level were shown, the Commission
    itself would not be acting inconsistently) *citing Homemakers North
    Shore, Inc. v. Bowen*, 832 F.2d 408, 413 (7^th^ Cir. 1987).

[^39]: *See* 1998 Biennial Regulatory Review \-- Spectrum Aggregation
    Limits for Wireless Telecommunications Carriers, WT Docket 98-205,
    *Notice of Proposed Rulemaking*, 13 FCC Rcd 25132 (1998).; s*ee
    also* 1998 Biennial Regulatory Review \-- Spectrum Aggregation
    Limits for Wireless Telecommunications Carriers, WT Docket 98-205,
    *Report and Order*, FCC 99-244 (released Sept. 22, 1999).

[^40]: *See Sixth Notice of Proposed Rulemaking*, FCC 99-379, ¶ 40.

[^41]: *See supra* para 2.