**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+----+------------------------------+
| In the Matter of                 | *  | CC Docket No. 96-45          |
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| Gorham Telephone Company, Inc.,  | ** |                              |
| and Rural Telephone Service      |    |                              |
| Company, Inc.                    | *  |                              |
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| Joint Petition for Waiver of the | ** |                              |
| Definition of "Study Area"       |    |                              |
| Contained in Part 36,            | *  |                              |
| Appendix-Glossary of the         | *) |                              |
| Commission's Rules; Petition for | ** |                              |
| Waiver of Section 69.3(e)(11) of |    |                              |
| the Commission's Rules           | *  |                              |
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+----------------------------------+----+------------------------------+

**ORDER**

**Adopted: October 25, 2006 Released: October 25, 2006**

By the Chief, Wireline Competition Bureau:

# introduction

1.  In this Order, we grant a joint request from Gorham Telephone
    Company, Inc., (Gorham) and Rural Telephone Service Company, Inc.,
    (RuralTel) (collectively, the Petitioners) for a waiver of the study
    area boundary freeze codified in the Appendix-Glossary of Part 36 of
    the Commission's rules.[^1] The study area waiver will permit
    RuralTel to remove two exchanges comprising approximately 272 access
    lines from its Kansas study area. The waiver also will permit Gorham
    to add these exchanges to its existing Kansas study area.[^2] We
    also grant Gorham a waiver of section 69.3(e)(11) of the
    Commission's rules in order to allow it to continue to use the
    National Exchange Carrier Association (NECA) as its tariff pool
    administrator.[^3]

# study area waiver

## Background

2.  *[Study Area]{.underline}*. A study area is a geographic segment of
    an incumbent local exchange carrier's (LEC) telephone operations.
    The Commission froze all study area boundaries effective November
    15, 1984.[^4] The Commission took this action to prevent the
    establishment of high-cost exchanges within existing service
    territories as separate study areas merely to maximize high-cost
    universal service support. A carrier must therefore apply to the
    Commission for a waiver of the study area boundary freeze if it
    wishes to sell or purchase additional exchanges.[^5]

3.  *[Universal Service Support.]{.underline}* Section 54.305(b) 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.[^6] Section 54.305(b) is
    meant to discourage a carrier from transferring an exchange merely
    to increase its share of high-cost universal service support.[^7]

4.  *[The Petition for Waiver]{.underline}*. Gorham and RuralTel filed a
    joint petition for a waiver of the study area boundary freeze on May
    31, 2006. A study area waiver would permit RuralTel to alter the
    boundaries of its Kansas study area by removing the two exchanges
    that it is transferring to Gorham and would permit Gorham to add the
    acquired exchanges to its existing Kansas study area.[^8] The
    Petitioners state that granting of the waiver is in the public
    interest.[^9] Moreover, the Petitioners state that the change in
    study area boundaries will not adversely affect the universal
    service fund because of the operation of section 54.305 of the
    Commission's rules.[^10] The Petitioners note, however, that Gorham
    may be eligible for additional support for new investment pursuant
    to the Commission's "safety valve" rules and for additional
    interstate common line support (ICLS).[^11] The State Corporation
    Commission of the State of Kansas (Kansas Commission) has approved
    Gorham's application for a certificate of convenience and authority
    to provide incumbent LEC services in the two exchanges.[^12]

5.  In evaluating petitions seeking a waiver of the rule freezing study
    area boundaries, the Commission traditionally has applied a
    three-prong standard: (1) the change in study area boundaries must
    not adversely affect the universal service fund; (2) the state
    commission having regulatory authority over the transferred
    exchanges does not object to the transfer; and (3) the transfer must
    be in the public interest.[^13] In evaluating whether a study area
    boundary change will have an adverse impact on the universal service
    fund, we analyze whether a study area waiver will result in an
    annual aggregate shift in an amount equal to or greater than one
    percent of high-cost support in the most recent calendar year.[^14]
    The Commission began applying the one-percent guideline in 1995 to
    limit the potential adverse impact of exchange sales on the overall
    fund, also recognizing that, because high-cost loop support is
    capped, an increase in the draw of any fund recipient necessarily
    reduces the amounts that other LECs receive from the fund.[^15]
    After the Commission adopted section 54.305, it continued to apply
    the one-percent guideline to determine the impact on the universal
    service fund in light of the adoption of safety valve support and
    ICLS.[^16]

## Discussion

6.  We find that good cause exists to waive the study area boundary
    freeze codified in the Appendix-Glossary of Part 36 of the
    Commission's rules to permit RuralTel to alter the boundaries of its
    existing Kansas study area by removing the two exchanges that it is
    transferring to Gorham.[^17] We also find that good cause exists to
    permit Gorham to add the two acquired exchanges to its existing
    Kansas study area. For the reasons discussed below, we conclude that
    the Petitioners have satisfied the three-prong standard that the
    Commission applies to determine whether a study area waiver is
    warranted.

7.  *[Impact on the Universal Service Fund]{.underline}*. We conclude
    that the universal service fund will not be adversely affected by
    granting this study area waiver. With regard to the 272 lines that
    RuralTel is transferring to Gorham, section 54.305(b) of the
    Commission's rules limits high-cost loop support and local switching
    support.[^18] Therefore, Gorham is limited to the same per-line
    levels of support that RuralTel was receiving prior to the
    transfer.[^19] Although Gorham may be eligible for safety valve
    support for investments in the acquired lines, there is nothing in
    the record to suggest that such eligibility would significantly
    increase the federal universal service fund or would come close to
    the one-percent threshold.[^20] As stated above, ICLS is not subject
    to the limitations of section 54.305(b) of the Commission's
    rules.[^21] The Petitioners state that as a result of this
    transaction, for the year 2007, Gorham's ICLS will increase by
    approximately \$39,500 and RuralTel's ICLS will be reduced by
    approximately \$132,000.[^22] As a result, there is a net decrease
    of approximately \$92,500 in universal service support as a result
    of this transaction. We find, therefore, that this transaction will
    have no adverse impact on the universal service fund.

8.  To further ensure that this transaction is in the public interest,
    we direct Gorham, as part of its annual universal service data
    submissions, to file a schedule showing its methodology for
    excluding the costs associated with the acquired access lines from
    the costs associated with Gorham's pre-acquisition exchange.[^23]

9.  *[State Commission Position]{.underline}*. On August 9, 2006, the
    Kansas Commission issued an order approving Gorham's application for
    a certificate of convenience and authority to provide incumbent LEC
    services in the two exchanges.[^24] Thus, we find that the state
    commission with regulatory authority over the transferred exchanges
    does not oppose the transfer.

10. *[Public Interest Analysis]{.underline}*. Finally, we are persuaded
    that the public interest is served by a waiver of the study area
    freeze rule to permit RuralTel to remove from its Kansas study area
    the two exchanges and to permit Gorham to add the acquired exchanges
    to its existing Kansas study area. Importantly, Gorham intends to
    make several improvements to the facilities in the Paradise and
    Luray exchanges, including installing fiber and/or Digital
    Subscriber Line technology throughout the acquired exchanges and
    providing services over such facilities at affordable and
    competitive prices.[^25] Because expanding the availability of
    broadband communications is one of the Commission's top priorities,
    we believe that Gorham's proposed improvements should benefit
    consumers in the exchanges at issue. Based on the totality of these
    representations, we conclude that the transfer of the two exchanges
    to Gorham will serve the public interest by, among other things,
    providing increased access to advanced services in rural areas.

# WAIVER OF SECTION 69.3(e)(11)

## Background

11. Under section 69.3 of the Commission's rules, annual access tariffs,
    including the tariffs filed by NECA on behalf of companies that
    participate in NECA's access tariffs, go into effect on July 1 of
    each year.[^26] To minimize the complexity of administering NECA's
    common line pool, any change in NECA common line tariff
    participation resulting from a merger or acquisition of telephone
    properties is effective on the next annual access tariff filing
    effective date following the merger or acquisition.[^27] Because the
    next annual access tariff filing effective date is July 1, 2007,
    Gorham would have to wait until that date to participate in NECA's
    access tariffs and would be required to file its own interstate
    tariff for the interim period.[^28] To avoid the burdens associated
    with filing its own tariff during this interim period, Gorham has
    requested a waiver of section 69.3(e)(11) of the Commission's
    rules.[^29] The waiver would enable Gorham to include the acquired
    access lines in the NECA carrier common line tariff. The Petitioners
    indicate that the inclusion of the small number of access lines that
    it is acquiring from United in the NECA carrier common line tariffs
    would represent a minimal increase in NECA common line pool
    participation.[^30]

## Discussion 

12. We find that Gorham has demonstrated special circumstances warrant a
    deviation from section 69.3(e)(11) of the Commission's rules and
    that it would be in the public interest to grant Gorham's waiver
    request.[^31] NECA has indicated that it has no objection to
    including the acquired exchanges in the NECA tariff, as this would
    create no undue administrative burden for NECA.[^32] Based on NECA's
    representation in its letter, we conclude that including the
    acquired access lines in the NECA carrier common line tariff
    represents a minimal increase in NECA common line pool
    participation. Also, we believe that it would be administratively
    burdensome for Gorham to develop and file its own interstate tariff
    for use only until July 1, 2007, for a relatively small number of
    access lines. Consequently, we find that Gorham presents special
    circumstances to justify a waiver of section 69.3(e)(11). Moreover,
    we believe that a waiver of section 69.3(e)(11) is in the public
    interest because it allows Gorham to devote its resources to
    providing improved telecommunications services to the affected rural
    areas rather than spending those resources on a tariff filing. We
    therefore conclude that good cause exists to grant a waiver of
    section 69.3(e)(11) to Gorham.

# other matters

13. On May 11, 2001, the Commission adopted an order requiring incumbent
    LECs to freeze, on an interim basis, the Part 36 jurisdictional
    separations factors beginning July 1, 2001.[^33] In the *Separations
    Freeze Order*, the Commission addressed how an incumbent LEC
    acquiring exchanges from another incumbent LEC shall recalculate its
    frozen separations factors.[^34] Accordingly, Gorham is required to
    recalculate its jurisdictional separations factors pursuant to the
    *Separations Freeze Order* and the Commission's rules.[^35]

# ordering clauses

14. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 5(c), 201,
    202 and 254 of the Communications Act of 1934, as amended, 47 U.S.C.
    §§ 151, 154(i), 155(c), 201, 202, and 254, and sections 0.91, 0.291,
    and 1.3 of the Commission's rules, 47 C.F.R. §§ 0.91, 0.291, and
    1.3, that the joint petition for waiver of the study area boundary
    freeze as codified in Part 36, Appendix‑Glossary, of the
    Commission's rules, filed by Gorham Telephone Company, Inc., and
    Rural Telephone Service Company, Inc., on June 15, 2006, IS GRANTED,
    as described herein.

15. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 5(c), 201, and
    202 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154(i), 155(c), 201, and 202, and sections 0.91, 0.291, and 1.3 of
    the Commission's rules, 47 C.F.R. §§ 0.91, 0.291, and 1.3, that
    Gorham Telephone Company, Inc., SHALL SUBMIT, as part of its annual
    universal service data submissions to the fund administrator, a
    schedule showing the methodology for excluding costs associated with
    the acquired access lines from costs associated with its
    pre-acquisition study area.

16. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 5(c), 201, and
    202 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154(i), 155(c), 201, and 202, and sections 0.91, 0.291, and 1.3 of
    the Commission's rules, 47 C.F.R. §§ 0.91, 0.291, and 1.3, that the
    petition for clarification or waiver of section 69.3(e)(11) of the
    Commission\'s rules, 47 C.F.R. § 69.3(e)(11), filed by Gorham
    Telephone Company, Inc., on June 15, 2006, IS GRANTED, as described
    herein.

17. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 5(c), 201, and
    202 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154(i), 155(c), 201, and 202, and sections 0.91, 0.291, 1.3,
    36.3(d), and 36.3(e) of the Commission's rules, 47 C.F.R. §§ 0.91,
    0.291, 1.3, 36.3(d), and 36.3(e), that Gorham Telephone Company,
    Inc., SHALL ADJUST its jurisdictional separations factors to reflect
    this transaction, consistent with this Order.

    FEDERAL COMMUNICATIONS COMMISSION

    Thomas J. Navin

    Chief

    Wireline Competition Bureau

[^1]: *See* 47 C.F.R. Part 36 App.; Gorham Telephone Company, Inc. and
    Rural Telephone Service Company, Inc., Joint Petition for Waiver of
    the Definition of "Study Area" of the Appendix-Glossary of Part 36
    of the Commission's Rules, CC Docket No. 96-45 (filed June 15, 2006)
    (Petition). The Petition also includes a request by Gorham for
    waiver of section 69.3(e)(11) of the Commission's rules. *Id.* On
    July 25, 2006, the Wireline Competition Bureau (Bureau) released a
    public notice seeking comment on the petitions. *See* *Wireline
    Competition Bureau Seeks Comment on the Petition of Gorham Telephone
    Company, Inc., and Rural Service Telephone Company, Inc., to Waiver
    the Study Area Boundary Freeze, as Codified, in Part 36, and Gorham
    Telephone Company's Request for Waiver of Section 69.3(e)(11) of the
    Commission's Rules,* CC Docket No. 96-45, Public Notice, 21 FCC Rcd
    8514 (2006). We note that the Bureau has granted transfer of control
    of the exchanges. *See Notice of Streamlined Domestic 214
    Applications Granted*, WC Docket Nos. 06-112, 06-116, & 06-117,
    Public Notice, 21 FCC Rcd 8709 (2006).

[^2]: Gorham is acquiring the Luray and Paradise exchanges from
    RuralTel. *See* Petition at 1. The two exchanges subject to this
    transaction were recently acquired by RuralTel from United Telephone
    Company of Kansas and are included as part of a companion study area
    waiver granted today by the Bureau. *See Rural Telephone Service
    Company, Inc., Nex-Tech, Inc., United Telephone Company of Kansas,
    and United Telephone Company of Eastern Kansas, Joint Petition for
    Waiver of the Definition of "Study Area" Contained in Part 36,
    Appendix-Glossary of the Commission's Rules; Petition for Waiver of
    Section 69.3(e)(11) of the Commission's Rules*, CC Docket No. 96-45,
    Order, DA 06-2111 (rel. Oct. 25, 2006) (*RuralTel-United Waiver
    Order*).

[^3]: *See* 47 C.F.R. § 69.3(e)(11).

[^4]: *See MTS and WATS Market Structure, Amendment of Part 67 of the
    Commission's Rules and Establishment of a Joint Board,* CC Docket
    Nos. 78-72, 80-286, Decision and Order, 50 Fed. Reg. 939 (1985)
    (*Part 67 Order*), adopting Recommended Decision and Order, 49 Fed.
    Reg. 48325 (1984). *See also* 47 C.F.R. Part 36, App.

[^5]: *Part 67 Order* at para. 1.

[^6]: 47 C.F.R. § 54.305(b). This rule applies to high-cost loop support
    and local switching support. A carrier's acquired exchanges may
    receive additional support pursuant to the Commission's "safety
    valve" mechanism. *See* 47 C.F.R. § 54.305(d)-(f). A carrier
    acquiring exchanges also may be eligible to receive interstate
    common line support, which is not subject to the limitations set
    forth in section 54.305(b). *See* 47 C.F.R. § 54.902.

[^7]: *See Federal-State Joint Board on Universal Service,* CC Docket
    No. 96-45, Report and Order, 12 FCC Rcd 8776, 8942-43 (1997)
    (subsequent history omitted).

[^8]: Including the exchanges recently acquired from United, RuralTel
    owns and operates approximately 16,000 access lines in 41 exchanges
    in one study area in the state of Kansas. *See* Petition at 2;
    *RuralTel-United Waiver Order* at paras. 1, 4. Gorham owns and
    operates approximately 330 access lines in one study area in the
    state of Kansas. *See* Petition at 2.

[^9]: *See* Petition at 5-6. *See also infra* para. 10.

[^10]: *See* Petition at 4-5. *See also* 47 C.F.R. § 54.305(b).

[^11]: *See* Petition at 4-5; 47 C.F.R. §§ 54.305(d)-(f) and 54.902(b).

[^12]: *See* *infra* note Error: Reference source not found.

[^13]: *See, e.g., US WEST Communications, Inc., and Eagle
    Telecommunications, Inc., Joint Petition for Waiver of the
    Definition of "Study Area" Contained in Part 36, Appendix-Glossary
    of the Commission's Rules,* AAD 94-27, Memorandum Opinion and Order,
    10 FCC Rcd 1771, 1772, para. 5 (1995) (*PTI/Eagle Order*).

[^14]: *See* *id.* at 1774, paras. 14-17. *See also US WEST
    Communications, Inc., and Eagle Telecommunications, Inc., Joint
    Petition for Waiver of \"Study Area\" Contained in Part 36,
    Appendix-Glossary of the Commission\'s Rules, and Petition for
    Waiver of Section 61.41(c) of the Commission\'s Rules*, AAD 94-27,
    Memorandum Opinion and Order on Reconsideration, 12 FCC Rcd 4644
    (1997).

[^15]: *See PTI/Eagle Order*, 10 FCC Rcd at 1773, para. 13.

[^16]: *See* *supra* note Error: Reference source not found. *See also
    Multi-Association Group (MAG) Plan for Regulation of Interstate
    Services of Non-Price Cap Incumbent Local Exchange Carriers and
    Interexchange Carriers in CC Docket No. 00-256*, *Federal-State
    Joint Board on Universal Service in CC Docket No. 96-45, Access
    Charge Reform for Incumbent Local Exchange Carriers Subject to
    Rate-of-Return Regulation in CC Docket No. 98-77, Prescribing the
    Authorized Rate of Return From Interstate Services of Local Exchange
    Carriers in CC Docket No. 98-166*, Second Report and Order and
    Further Notice of Proposed Rulemaking, Fifteenth Report and Order,
    and Report and Order, 16 FCC Rcd 19613, 19667-69, paras. 155-57
    (2001), *recon. pending*.

[^17]: Generally, the Commission may waive its rules for good cause
    shown. *See* 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. *See* *Northeast
    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. *See* *WAIT
    Radio v. FCC*, 418 F.2d 1153, 1159 (D.C. Cir. 1969), *cert. denied*,
    409 U.S. 1027 (1972); *Northeast Cellular*, 897 F.2d at 1166. Waiver
    of the Commission's rules is therefore appropriate only if special
    circumstances warrant a deviation from the general rule, and such
    deviation will serve the public interest.

[^18]: *See* 47 C.F.R. § 54.305(b).

[^19]: We note that because RuralTel's high cost support for the Luray
    and Paradise exchanges were already subject to section 54.305 as a
    result of the exchanges being recently acquired from United, the
    same per-line support that United received prior to its transaction
    with RuralTel is passed to Gorham. *See* *supra* note Error:
    Reference source not found; *RuralTel-United Waiver Order* at note
    22.

[^20]: In reaching this conclusion, we note that the proposed study area
    waiver directly involves the transfer of only approximately 272
    access lines. Moreover, safety valve support is capped at 50 percent
    of any positive difference between a rural carrier's calculated
    high-cost loop support for the transferred exchanges and the index
    year amount. *See* 47 C.F.R. § 54.305(d). Also, the total amount of
    safety valve support available to rural carriers is capped at five
    percent of annual high-cost loop support available to rural carriers
    in any particular year, thereby providing an additional limitation
    on the amount of safety valve support available to carriers. *See*
    47 C.F.R. § 54.305(e).

[^21]: *See supra* note Error: Reference source not found.

[^22]: *See* Petition at Exhibit A.

[^23]: *See* 47 C.F.R. §§ 36.611, 54.301.

[^24]: *See* *In the Matter of the Joint Application of Rural Telephone
    Service Company, Inc. (RuralTel) and Gorham Telephone Company, Inc.
    (Gorham) for Permission of RuralTel to Cease Operating as a
    Telephone Public Utility in Two Kansas Exchanges It Is Acquiring
    from United and to Grant Gorham a Certificate of Public Convenience
    for the Same Two Exchanges, and for Authority to Transfer Property,
    Plant and Equipment of RuralTel Located in the Two Exchanges to
    Gorham and Complete All Matters Incident to the Transfer,* State
    Corporation Commission of the State of Kansas, Docket No.
    06-GRHT-1095-COC, Order Approving Stipulation and Agreement and
    Granting Certificate to Gorham Telephone Company, Inc., Upon the
    Consummation of the Sale of Exchanges (Aug. 9, 2006).

[^25]: *Id*. at 6.

[^26]: *See* 47 C.F.R. § 69.3(a).

[^27]: 47 C.F.R. § 69.3(e)(11). *See Amendment of Part 69 of the
    Commission's Rules Relating to the Common Line Pool Status of Local
    Exchange Carriers Involved in Mergers or Acquisitions*, CC Docket
    No. 89-2, Report and Order, 5 FCC Rcd 231, 248 (1989).

[^28]: *See* 47 C.F.R. § 69.3(a).

[^29]: *See* Petition at 6-7*.*

[^30]: *Id.*

[^31]: *See supra* note Error: Reference source not found.

[^32]: *See* Letter from Tracey E.J. Saltenberger, NECA, to Marlene H.
    Dortch, Federal Communications Commission, CC Docket No. 96-45
    (filed August 25, 2006).

[^33]: *See Jurisdictional Separations and Referral to the Federal-State
    Joint Board*, Report and Order, CC Docket No. 80-286, 16 FCC Rcd
    11382 (2001) (*Separations Freeze Order*). On May 15, 2006, the
    Commission extended the separations freeze an additional three
    years. *See* *Jurisdictional Separations and Referral to the
    Federal-State Joint Board, Order and Further Notice of Proposed
    Rulemaking*, CC Docket No. 80-286, 21 FCC Rcd 5516 (2006). *See
    also* 47 C.F.R. § 36.3(c) and (d).

[^34]: *See Separations Freeze Order*, 16 FCC Rcd at 11405-07, paras.
    48-53.

[^35]: *See* 47 C.F.R § 36.3(d).