**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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**MEMORANDUM OPINION AND ORDER**

**Adopted:** November 8, 2000 **Released:** November 9, 2000

By the Common Carrier Bureau:

# introduction

1.  In this Order, we grant the requests from the Public Service
    Commission of the District of Columbia (D.C. Commission) and New
    Jersey Board of Public Utilities (New Jersey Commission) for waivers
    to permit the retroactive distribution of federal universal service
    support to certain carriers that were not designated as eligible
    telecommunications carriers (ETCs) by January 1, 1998.[^1] These
    waivers will permit these carriers to receive federal universal
    service support for the period between January 1, 1998, and the date
    that these carriers were designated as ETCs. We find good cause to
    grant these requests and thereby permit consumers served by these
    carriers to benefit from the support to which they would have been
    entitled, but for the circumstances that prevented the D.C. and New
    Jersey Commissions from designating these carriers as eligible for
    receipt of federal universal service support prior to January 1,
    1998.

# background

## The Act

2.  Section 254(e) provides that, after the effective date of the
    Commission's regulations implementing section 254, "only an eligible
    telecommunications carrier designated under section 214(e) shall be
    eligible to receive specific Federal universal service support."[^2]
    The Commission established January 1, 1998, as the date on which the
    newly adopted modifications to the existing universal service
    support mechanisms would take effect.[^3] Therefore, as of January
    1, 1998, only carriers designated as ETCs are eligible to receive
    federal universal service support.[^4]

3.  In the *Fourth Reconsideration Order*, the Commission affirmed its
    conclusion that, as of January 1, 1998, universal service support
    may be disbursed only to carriers that have been designated as
    ETCs.[^5] The Commission concluded, however, that a state commission
    that was unable to designate, by January 1, 1998, a carrier that
    sought ETC designation before January 1, 1998, may, once it has
    designated such carrier, file with the Commission a petition for
    waiver requesting that the carrier receive universal service support
    retroactive to January 1, 1998.[^6] The Commission indicated that a
    state commission filing such a petition must explain why it did not
    designate such carrier as eligible by January 1, 1998, and provide a
    justification for why providing support retroactive to January 1,
    1998 serves the public interest.[^7] The Commission concluded that
    it is in the public interest to permit telecommunications carriers
    that were eligible to receive universal support on January 1, 1998,
    but that were not designated as eligible by their state commission
    by that date, to be permitted to seek retroactive support. The
    Commission concluded that allowing retroactive support will permit
    consumers served by those carriers to benefit from the support to
    which those carriers would have been entitled, but for the
    circumstances that prevented the state commission from designating
    the carrier as eligible for receipt of universal service support
    prior to January 1, 1998.[^8]

## Petitions for Waiver

4.  [D.C. Petition.]{.underline} On December 17, 1998, the D.C.
    Commission filed a petition on behalf of Bell Atlantic --
    Washington, D.C., Inc. (Bell Atlantic-DC) to waive the requirement
    that only carriers designated as ETCs may receive universal service
    support after January 1, 1998, and thereby permit Bell Atlantic-DC
    to receive universal service support retroactive to January 1,
    1998.[^9] The D.C. Commission notes that while Bell Atlantic-DC
    filed an application with the D.C. Commission requesting designation
    as an eligible carrier on September 30, 1997,[^10] Bell Atlantic-DC
    was not designated as an ETC by the D.C. Commission until December
    17, 1998.[^11] The D.C. Commission cites several justifications for
    its inability to designate Bell Atlantic-DC as an ETC by January
    1, 1998. Specifically, the D.C. Commission indicates that it has
    been subject to substantial staff reductions, procurement
    restrictions on retaining outside consultants, and an increased
    workload, which delayed the resolution of all matters pending before
    the D.C. Commission.[^12] Given these impediments, and difficulties
    in reconciling Bell Atlantic-DC's tariff revisions with the
    Commission's Lifeline rules, the D.C. Commission was unable to
    approve Bell Atlantic-DC's designation request until December 17,
    1998.[^13]

5.  The D.C. Commission argues that consumers should not be penalized
    for the D.C. Commission's delay in designating Bell Atlantic-DC as
    eligible to receive federal universal service support. The D.C.
    Commission notes that Bell Atlantic-DC took reasonable steps to be
    designated as an eligible carrier by January 1, 1998 and, at
    present, is the only eligible carrier in the District of
    Columbia.[^14] The D.C. Commission therefore contends that
    permitting Bell Atlantic-DC to receive support retroactive to
    January 1, 1998, will "serve the public interest in that it will
    allow BA-DC's low-income customers, many of whom are elderly, to
    continue to receive vital telecommunications services at an
    affordable price."[^15]

6.  [New Jersey Petitions]{.underline}. The New Jersey Commission filed
    petitions on behalf of United Telephone Company of New Jersey, Inc.
    (United-NJ) and Bell Atlantic-New Jersey, Inc. (Bell Atlantic-NJ),
    respectively, to waive the requirement that only carriers designated
    as ETCs may receive federal universal service support after January
    1, 1998, and thereby permit United-NJ and Bell Atlantic-NJ to
    receive universal service support retroactive to January 1,
    1998.[^16] The New Jersey Commission notes that both United-NJ and
    Bell Atlantic-NJ requested designation from the New Jersey
    Commission prior to January 1, 1998.[^17]

7.  The New Jersey Commission indicates that, "due to the timing of the
    filing of its ETC and Lifeline petitions, and the press of Board
    business, the Board was unable to act on \[United's and Bell
    Atlantic-NJ's\] ETC application to assure January 1, 1998 federal
    universal service eligibility."[^18] Given these impediments, the
    New Jersey Commission was unable to designate United-NJ as an ETC
    until January 22, 1998,[^19] and Bell Atlantic-NJ until February 18,
    1998.[^20] The New Jersey Commission contends that without universal
    service support, the ability of United-NJ and Bell Atlantic-NJ to
    provide universal service throughout their service territories will
    be affected.[^21] The New Jersey Commission therefore contends that
    granting universal service support retroactive to January 1, 1998,
    for United-NJ and Bell Atlantic-NJ is in the public interest.[^22]

# Discussion

8.  We find that good cause exists to grant the requests from the D.C.
    and New Jersey Commissions to permit the retroactive distribution of
    federal universal service support to Bell Atlantic-DC, United-NJ,
    and Bell Atlantic-NJ. In so doing, we conclude that the D.C. and New
    Jersey petitions meet the specific requirements of section
    54.201(a)(2) for waiver of the requirement that only carriers
    designated as ETCs may receive federal universal service support
    after January 1, 1998.[^23]

9.  Generally, the Commission's rules may be waived for good cause
    shown.[^24] As noted by the Court of Appeals for the D.C. Circuit,
    however, agency rules are presumed valid.[^25] The Commission may
    exercise its discretion to waive a rule where the particular facts
    make strict compliance inconsistent with the public interest.[^26]
    In addition, the Commission may take into account considerations of
    hardship, equity, or more effective implementation of overall policy
    on an individual basis.[^27] 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.

10. We find that the facts demonstrate that the D.C. and New Jersey
    Commissions were unable to designate Bell Atlantic-DC, United-NJ,
    and Bell Atlantic-NJ as ETCs prior to January 1, 1998. As noted
    above, Commission rules provide that a state commission that is
    unable to designate as an ETC, by January 1, 1998, a carrier that
    sought such designation before January 1, 1998, may, once it has
    designated such carrier, file a petition requesting that the carrier
    receive universal service support retroactive to January 1,
    1998.[^28] According to the petitions, Bell Atlantic-DC, United-NJ,
    and Bell Atlantic-NJ sought designation from their respective state
    commissions prior to January 1, 1998, and took all reasonable steps
    to be designated prior to January 1, 1998.[^29] The petitions
    indicate that each of these carriers was designated as an ETC after
    January 1, 1998.[^30]

11. We find that, for the purposes of the pending waiver requests, the
    D.C. and New Jersey Commissions provide adequate justifications as
    to why they were unable to designate Bell Atlantic-DC, United-NJ,
    and Bell Atlantic-NJ as ETCs by January 1, 1998. For example, the
    D.C. Commission cites significant staff reductions and increased
    workloads that made it impossible to address Bell Atlantic-DC's
    request for designation prior to January 1, 1998.[^31] Similarly,
    the New Jersey Commission cites "the press of Board business" that
    precluded designation prior to January 1, 1998.[^32]

12. We conclude that it is in the public interest to permit Bell
    Atlantic-DC, United-NJ, and Bell Atlantic-NJ to receive federal
    universal service support retroactive to January 1, 1998. The
    commenters unanimously support this conclusion.[^33] As the D.C. and
    New Jersey Commissions note, the provision of universal service
    support to these carriers is necessary to ensure the affordable
    provision of service to consumers, including many low-income
    consumers.[^34] We conclude that, but for the circumstances that
    prevented the D.C. and New Jersey Commissions from designating Bell
    Atlantic-DC, United-NJ, and Bell Atlantic-NJ as ETCs prior to
    January 1, 1998, these carriers would have been entitled to federal
    universal service support as of January 1, 1998.[^35] We agree with
    the D.C. and New Jersey Commissions that denying these petitions
    would prevent these carriers from receiving universal service
    support for the period prior to designation, and thus unjustly harm
    these consumers. We thus conclude that waiver of section
    54.201(a)(1) is warranted, and therefore Bell Atlantic-DC,
    United-NJ, and Bell Atlantic-NJ will receive federal universal
    service support retroactive to January 1, 1998. We direct the
    Universal Service Administrative Company to provide such support.

# Ordering Clauses

13. Accordingly, IT IS ORDERED that, pursuant to section 54.201 of the
    Commission's rules, 47 C.F.R. § 54.201, and the authority contained
    in section 0.291 of the Commission's rules, 47 C.F.R. § 0.291, the
    Petition for Waiver filed on December 17, 1998, by the Public
    Service Commission of the District of Columbia on behalf of Bell
    Atlantic-Washington, D.C., Inc. (Verizon Washington, D.C., Inc.) is
    GRANTED.

14. IT IS FURTHER ORDERED that the Petition for Waiver filed on December
    24, 1998, by the New Jersey Board of Public Utilities on behalf of
    United Telephone Company of New Jersey, Inc. is GRANTED.

15. IT IS FURTHER ORDERED that the Petition for Waiver filed on December
    28, 1998, by the New Jersey Board of Public Utilities on behalf of
    Bell Atlantic-New Jersey, Inc. (Verizon New Jersey, Inc.) is
    GRANTED.

16. IT IS FURTHER ORDERED that the Universal Service Administrative
    Company SHALL PROVIDE to Bell Atlantic-Washington, D.C., Inc.,
    United Telephone Company of New Jersey, Inc. and Bell Atlantic-New
    Jersey, Inc., federal universal service support retroactive to
    January 1, 1998, as discussed herein.

17. IT IS FURTHER ORDERED that a copy of this Memorandum Opinion and
    Order SHALL BE transmitted by the Common Carrier Bureau to the
    Universal Service Administrative Company.

    FEDERAL COMMUNICATIONS COMMISSION

    Carol E. Mattey Deputy Chief, Common Carrier Bureau

[^1]: *See Petition of the Public Service Commission of the District of
    Columbia for Waiver*, filed on December 17, 1998 (D.C. Petition);
    *Petition for Waiver of Section 214(e) and 254(e) of the
    Telecommunications Act of 1996 Filed by the New Jersey Board of
    Public Utilities*, filed on December 28, 1998 (Bell Atlantic-NJ
    Petition); *Petition for Waiver of Section 214(e) and 254(e) of the
    Telecommunications Act of 1996 Filed by the New Jersey Board of
    Public Utilities*, filed on December 24, 1998 (United-NJ Petition).

[^2]: *See* 47 U.S.C. § 254(e).

[^3]: *See* 47 C.F.R. § 54.201(a)(1).

[^4]: In Public Notices released on August 14, 1997 and September 29,
    1997, the Common Carrier Bureau alerted state commissions of their
    obligation to designate ETCs by January 1, 1998. *See Listing of
    Changes Adopted in the May 8 Order that Will Take Effect January 1,
    1998*, Public Notice, DA 97-1747 (rel. Aug. 14, 1997); *Common
    Carrier Bureau Announces Procedures for States Regarding Lifeline
    Consents, Adoption of Intrastate Discount Matrix for Schools and
    Libraries, and Designation of Eligible Telecommunications Carriers*,
    Public Notice, DA 97-1892 (rel. Sept. 29, 1997).

[^5]: *Federal-State Joint Board on Universal Service*, Fourth Order on
    Reconsideration in CC Docket No. 96-45, Report and Order in CC
    Docket Nos. 96-45, 96-262, 94-1, 91-213, 95-72, 13 FCC Rcd 5318,
    5333, para. 23 (1997) (*Fourth Reconsideration Order*).

[^6]: *Fourth Reconsideration Order*, 13 FCC Rcd at 5333, para. 23. *See
    also* 47 C.F.R. § 54.201(a)(2).

[^7]: *Fourth Reconsideration Order*, 13 FCC Rcd at 5333, para. 23. *See
    also* 47 C.F.R. § 54.201(a)(2).

[^8]: *Fourth Reconsideration Order*, 13 FCC Rcd at 5333, para. 23.

[^9]: D.C. Petition at 1 (Bell Atlantic-DC is now Verizon Washington,
    D.C., Inc.). On November 16, 1999, the Common Carrier Bureau sought
    comment on the D.C. Petition. *See Public Service Commission of the
    District of Columbia Seeks Retroactive Universal Service Support on
    Behalf of Bell Atlantic-Washington, D.C., Inc.*, Public Notice, CC
    Docket No. 96-45, DA 99-1609 (rel. Nov. 16, 1999). Comments were
    filed in response to this Public Notice by the Office of the
    People's Counsel for the District of Columbia (OPC Comments), Bell
    Atlantic (Bell Atlantic Reply Comments), and the Public Service
    Commission of the District of Columbia (D.C. Commission Reply
    Comments).

[^10]: D.C. Petition at 1 *citing* Formal Case No. 962T, Letter from J.
    Henry Ambrose to Jesse P. Clay, Jr., at 3 (dated September 30,
    1997).

[^11]: *See* Public Service Commission of the District of Columbia,
    *Formal Case No. 962, In the Matter of the Implementation of the
    District of Columbia Telecommunications Act of 1996 and
    Implementation of the Telecommunications Act of 1996*, Order No.
    11265 (dated Dec. 17, 1998) (D.C. Commission Order).

[^12]: D.C. Petition at 4-6.

[^13]: D.C. Petition at 5.

[^14]: D.C. Petition at 5.

[^15]: D.C. Petition at 5-6.

[^16]: *See* United-NJ Petition; Bell Atlantic-NJ Petition (Bell
    Atlantic-NJ is now Verizon New Jersey). On August 9, 2000, the
    Common Carrier Bureau sought comment on both the United-NJ and Bell
    Atlantic-NJ petitions. *See New Jersey Board of Public Utilities
    Seeks Retroactive Universal Service Support on Behalf of Bell
    Atlantic-New Jersey, Inc., and United Telephone Company of New
    Jersey, Inc.*, Public Notice, CC Docket No. 96-45, DA 00-1807 (rel.
    Aug. 9, 2000). Comments were received in response to this Public
    Notice by Sprint Corporation (Sprint Comments) and Verizon New
    Jersey (Verizon Comments).

[^17]: *See* United-NJ Petition at 2 (indicating that United-NJ filed
    its designation application on November 7, 1997); Bell Atlantic-NJ
    Petition at 1(indicating that Bell Atlantic-NJ filed its designation
    application on December 18, 1997).

[^18]: United-NJ Petition at 4; Bell Atlantic-NJ Petition at 4.

[^19]: United-NJ Petition at 2 (designation effective Feb. 1, 1998).

[^20]: Bell Atlantic-NJ Petition at 1-2.

[^21]: United-NJ Petition at 4-5; Bell Atlantic-NJ Petition at 4.

[^22]: United-NJ Petition at 5; Bell Atlantic-NJ Petition at 4.

[^23]: *See* 47 C.F.R. § 54.201(a)(2).

[^24]: 47 C.F.R. § 1.3.

[^25]: *WAIT Radio v. FCC*, 418 F.2d 1153, 1159 (D.C. Cir. 1969), *cert.
    Denied*, 409 U.S. 1027 (1972).

[^26]: *Northeast Cellular Telephone Co., v. FCC*, 897 F.2d 1164, 1166
    (D.C. Cir. 1990).

[^27]: *WAIT Radio*, 418 F.2d at 1159; *Northeast Cellular*, 897 F.2d at
    1166.

[^28]: 47 C.F.R. § 54.201(a)(2).

[^29]: D.C. Petition at 1-2, 5; United-NJ Petition at 2, 4; Bell
    Atlantic-NJ Petition at 1-2, 4.

[^30]: *See* D.C. Commission Order (designating Bell Atlantic-DC as an
    ETC on December 17, 1998); United-NJ Petition at 2 (indicating that
    United-NJ was designated as an ETC on January 22, 1998); Bell
    Atlantic-NJ Petition at 1-2 (indicating that Bell Atlantic-NJ was
    designated as an ETC on February 18, 1998).

[^31]: D.C. Petition at 4-5 (noting staff reductions of as much as 40
    percent).

[^32]: United-NJ Petition at 4; Bell Atlantic-NJ Petition at 4.

[^33]: *See* OPC Comments at 2-3; Sprint Comments at 1-3; Verizon
    Comments at 1-2; Bell Atlantic-DC Reply Comments at 1-2; D.C.
    Commission Reply Comments at 1. Although OPC supports the Bell
    Atlantic-DC Petition, it suggests that the current use of Lifeline
    funds in D.C. may be inconsistent with the Commission's rules.
    Specifically, OPC suggests that the D.C. Commission may be allowing
    Bell Atlantic-DC to apply Lifeline funds to services other than the
    "core" supported services. OPC Comments at 3-4. The D.C. Commission,
    however, responds that it "did not permit BA-DC to use universal
    service support to fund non-core services." D.C. Commission Reply
    Comments at 3-4. *See also* Bell Atlantic Reply Comments at 2. We
    believe that the resolution of this issue is outside the scope of
    this proceeding. We therefore make no findings relating to these
    claims.

[^34]: *See* D.C. Petition at 5-6; United-NJ Petition at 4-5; Bell
    Atlantic-NJ Petition at 4.

[^35]: *See* Sprint Comments at 2; Verizon Comments at 1-2.