**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+----+------------------------------+
| In the matter of                 | *  | WC Docket No. 04-259         |
|                                  | *) |                              |
| National Exchange Carrier        | ** | RM-10603                     |
| Association                      |    |                              |
|                                  | *  |                              |
| Petition to Amend Section 69.104 | *) |                              |
| of the                           | ** |                              |
|                                  |    |                              |
| Commission's Rules               | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
+----------------------------------+----+------------------------------+

**ORDER GRANTING PETITION FOR RULEMAKING, NOTICE OF PROPOSED RULEMAKING,
AND ORDER GRANTING INTERIM PARTIAL WAIVER**

**Adopted: July 14, 2004 Released: July 19, 2004**

**Comment Date: 60 days after Federal Register publication of this
Notice**

**Reply Comment Date: 90 days after Federal Register publication of this
Notice**

By the Commission:

**TABLE OF CONTENTS**

**Paragraph**

I. introduction 1

II\. background [2](#background)

III\. Notice of Proposed Rulemaking 9

A. Background 9

B. Discussion 15

1\. Cost of Provisioning and Cost Studies 18

2\. Impact of Network Architecture 22

3\. Line Port Charges 26

4\. Impact on ICLS and Other Universal Service Issues 27

5\. Impact on PICC, CCLC, and Retail Rates 30

IV\. Petition for Interim, Partial Waiver 35

A. Background 35

B. Discussion 39

V. procedural matters 46

A. Ex Parte Requirements 46

B. Initial Paperwork Reduction Act Analysis 47

C. Initial Regulatory Flexibility Analysis 48

D. Comment Filing Procedures 62

VI\. Conclusion 67

VII\. ordering clauses 68

**APPENDIX -- LIST OF COMMENTERS**

# introduction

1.  By this action, we grant a petition for rulemaking and initiate a
    proceeding to examine the proper number of end user common line
    charges (commonly referred to as subscriber line charges or SLCs)
    that carriers (both rate-of-return and price cap) may assess upon
    customers that obtain derived channel T-1 service where the customer
    provides the terminating channelization equipment.[^1] We also
    re-examine the proper number of SLCs that carriers may assess upon
    customers that obtain Primary Rate Interface (PRI) Integrated
    Service Digital Network (ISDN) service. Pending resolution of this
    rulemaking proceeding, we grant a partial waiver[^2] of section
    69.104(q) of the Commission's rules[^3] to permit rate-of-return
    carriers to reduce from twenty-four to five the number of SLCs that
    they may assess on customers of derived channel T-1 service where
    the customer provides the terminating channelization equipment
    without foregoing recovery of the associated SLC revenues from the
    interstate common line support universal service fund (ICLS).[^4]

# background

2.  Rate-of-return local exchange carriers (LECs) recover common line
    costs as follows:[^5] First, per line costs are recovered from end
    users through the SLC.[^6] Then, because the SLC is capped at \$6.50
    per line for residential and single line business (RES/SLB)
    customers[^7] and at \$9.20 per line for multi-line business (MLB)
    customers,[^8] common line costs that cannot be recovered through
    SLCs or other common line revenue sources are recovered from
    ICLS.[^9] ICLS comes from the universal service fund, to which all
    telecommunications carriers contribute based on their interstate
    revenues.

3.  For price cap carriers, the method of calculating the Average Price
    Cap CMT Revenue per Line was established in 2000 in the *CALLS
    Order*.[^10] CMT revenues are first recovered from end users through
    the SLC[^11] and from the \$650 million Interstate Access Support
    mechanism.[^12] Then, if revenues per line exceed the SLC caps,[^13]
    the difference is recovered through the MLB primary interexchange
    carrier charge (PICC),[^14] and if the PICC reaches its cap, through
    the carrier common line charge (CCLC).[^15] LECs assess the MLB PICC
    on interexchange carriers[^16] who, in turn, may pass the PICC on to
    their MLB customers.[^17]

4.  The Commission's rules have long specified that carriers, both
    rate-of-return and price cap, must assess one SLC "per line,"[^18]
    which is defined to mean per channel.[^19] For derived channel T-1
    services, therefore, one SLC is assessed for each derived channel
    (*i.e.*, up to 24 channels per T-1) provided to the customer.

5.  Beginning in the early 1990s, carriers began challenging the per
    channel approach to assessing the SLC for certain derived channel
    service offerings. The Commission first addressed this issue in 1992
    in response to a tariff filing in which NYNEX sought to assess only
    one SLC on customers of derived channel T-1 services.[^20] The
    Common Carrier Bureau rejected the NYNEX tariff, finding that,
    because the Commission's separations rules[^21] define the term
    "subscriber line" to mean a "communication channel," SLCs must be
    assessed on a per channel basis for derived channel T-1
    services.[^22] On review, the Commission upheld the Bureau's
    finding.[^23]

6.  Subsequently, in May 1995, the Commission released a notice of
    proposed rulemaking seeking comment on the assessment of SLCs for
    loops used to provide ISDN service or to provide other derived
    channel services.[^24] These issues were resolved for price cap
    carriers in 1997 in the *Access Charge Reform First Report and
    Order* where the Commission modified the SLC rules for loops used to
    provide Basic Rate Interface (BRI) ISDN and PRI ISDN services.[^25]
    Specifically, the Commission created exceptions to the general rule
    that one SLC be assessed for each channel of service provided,
    finding that a single SLC may be assessed for a loop used to provide
    BRI ISDN service, and that up to five SLCs may be assessed for a
    loop used to provide PRI ISDN service.[^26] The Commission relied on
    analyses of several Bell Operating Company (BOC) cost studies, which
    showed that PRI ISDN common line costs were approximately five times
    basic, analog common line costs, and that BRI ISDN common line costs
    were approximately the same as basic, analog common line costs.[^27]
    The net effects of these rule changes were (1) to increase the SLC
    if it was below the SLC cap, or (2) to raise the PICC (and the CCLC
    if the PICC was at its cap) if the SLC was at cap. These increases
    offset the loss of SLC revenues from ISDN services. The Commission
    also permitted price cap LECs to develop a separate line port charge
    for ISDN services to recover the difference between ISDN line port
    costs and basic, analog line port costs.[^28] Because of the limited
    record before it, the Commission expressly declined to make any
    finding with respect to derived channel services other than
    ISDN.[^29]

7.  In 2001, in the *MAG Order*, the Commission adopted identical rule
    changes for rate-of-return carriers.[^30] The supporting analysis
    was contained in a single paragraph, which stated that the changes
    were made to harmonize the rules for ISDN for rate-of-return
    carriers with the rules for price cap carriers.[^31] Cost data for
    rate-of-return carriers were neither provided by carriers nor relied
    on by the Commission. The net effects of these rule changes for
    rate-of-return carriers were (1) to increase the SLC if it was below
    the SLC cap, or (2) to increase ICLS if the SLC was at cap.[^32] The
    Commission also permitted rate-of-return carriers to develop a
    separate line port charge for ISDN services.[^33]

8.  Finally, we note that, in the *2002 Biennial Review Order*, we
    adopted the 2002 Biennial Review Staff Report in which the Wireline
    Competition Bureau concluded that the rules governing the assessment
    of the SLC on T-1 exchange access services "may not be necessary in
    the public interest," and recommended "that the Commission consider
    modifying these rules in a rulemaking proceeding in response to
    NECA's Petition for Rulemaking."[^34]

# Notice of Proposed Rulemaking

## Background

9.  On September 26, 2002, NECA filed a petition for rulemaking
    requesting that the Commission initiate a rulemaking proceeding to
    modify its rules governing the assessment of the SLC for derived
    channel T-1 services where the customer provides the terminating
    channelization equipment.[^35] NECA requested that the Commission
    harmonize its treatment of the assessment of SLCs for derived
    channel T-1 services with the rules for PRI ISDN services by
    amending the general SLC assessment rules to require that (as is the
    case for PRI ISDN) no more than five SLCs may be assessed for loops
    used to provide derived channel T-1 services.[^36] Specifically,
    NECA proposes modifying section 69.104(p) of the Commission's rules
    as follows (modifications are indicated by underscoring or striking
    through the text):

    \(p\) ~~Beginning January 1, 2002, n~~[N]{.underline}on-price cap
    local exchange carriers shall assess:

    \(1\) No more than one End User Common Line charge as calculated
    under the applicable method under paragraph (n) of this section for
    Basic Rate Interface integrated services digital network (ISDN)
    service.

    \(2\) No more than five End User Common Line charges as calculated
    under paragraph (o) of this section for Primary Rate Interface ISDN
    service.

    [(3) No more than five End User Common Line charges as calculated
    under paragraph (o) of this section for customer-ordered exchange
    access service that is provisioned using T-1 interfaces for which
    the customer supplies the terminating channelization
    equipment.]{.underline}[^37]

    NECA proposes this rule change for rate-of-return carriers
    only.[^38] In its reply comments, Verizon requests that any rule
    change be applied to price cap carriers for new T-1 service
    offerings.[^39]

10. NECA claims that its proposed rule change is necessary to bring SLC
    assessments more in line with costs, particularly because loops used
    for derived channel T-1 services (where the end user provides the
    terminating channelization equipment) are provisioned in the same
    manner, and therefore have the same common line costs, as loops used
    to provide PRI ISDN services.[^40] NECA bases this claim on its
    survey of the Rate Development Task Force (RDTF), which provided
    NECA with network diagrams purporting to show the loop
    configurations are the same for derived channel T-1 and PRI ISDN
    services.[^41] NECA claims that treating these services differently
    creates artificial price incentives that favor PRI ISDN services
    over derived channel T-1 services.[^42]

11. NECA estimates that, under its proposal, it would lose \$13 million
    in annual revenue due to the reduction in the number of SLCs it
    would assess on derived channel T-1 services.[^43] It proposes to
    recover this revenue through the development of a port charge,
    analogous to the ISDN port charge, and through an increase in ICLS
    support.[^44] It estimates that it would recover \$1.5 million
    through the port charge and \$11.5 million from ICLS.[^45]

12. All commenting incumbent LECs and incumbent LEC associations[^46]
    support the petition essentially for the same reasons presented by
    NECA.[^47] Specifically, ALLTEL, GVNW Consulting, NCTA, OPASTCO, TDS
    Telecom, and USTA all support NECA's assertions that loops used to
    provide the derived channel T-1 services at issue are provisioned in
    a similar manner to, and therefore have common line costs similar
    to, loops used to provide PRI ISDN services, and thus the SLC
    assessment rules for both services should be the same.[^48] TDS
    Telecom and NECA further contend that many of their members do not
    offer PRI ISDN services, at least in part because of the high switch
    vendor right-to-use fees associated with PRI ISDN switch software,
    and therefore are at a competitive disadvantage compared to larger
    carriers that offer PRI ISDN service.[^49] The Ad Hoc
    Telecommunications User Group also supports initiating a rulemaking,
    again essentially for the reasons stated in NECA's initial
    petition.[^50]

13. AT&T, the only party to oppose the *SLC T-1 Rulemaking Petition*,
    claims that NECA inappropriately seeks to shift recovery of common
    line costs from business end users through the payment of SLCs for
    these services to other telecommunications carriers, including AT&T,
    through contributions to ICLS and payment of the CCLC.[^51] AT&T
    also claims that NECA fails to provide sufficient cost support
    evidence to warrant the initiation of a rulemaking and that NECA
    members could voluntarily reduce the number of SLCs they assess for
    derived channel T-1 services if such reductions are necessary for
    them to compete with carriers that offer PRI ISDN services.[^52] No
    party challenges NECA's claim regarding the cost relationship
    between PRI ISDN loops and loops used to provision derived channel
    T-1 services.

14. NECA contends that AT&T misses the point of the *SLC T-1 Rulemaking
    Petition* -- better aligning rates with costs.[^53] The Commission
    previously aligned rates with costs for PRI ISDN services, and NECA
    argues that it is merely asking the Commission to do the same for
    derived channel T-1 service.[^54] NECA also estimates that the
    proposed rule change would cause the ICLS universal service fund to
    grow by only approximately \$11.5 million and SLC revenues to
    decline by only 1.4 percent.[^55] NECA claims that this increase in
    ICLS would be "extremely small" when compared to the overall size of
    the fund, and that the increase is preferable to continuing to
    assess above-cost rates for derived channel T-1 services.[^56] NECA
    further explains that AT&T's concerns regarding the effect of the
    proposed rule change on the CCLC are unfounded because, for
    rate-of-return carriers, the CCLC was eliminated on June 30,
    2003.[^57]

## Discussion

15. We grant the *SLC T-1 Rulemaking Petition* and initiate a rulemaking
    to examine the assessment of SLCs on derived channel T-1 services
    where the customer provides the terminating channelization
    equipment. We find that NECA and the parties supporting NECA have
    shown that our current rules, which require the assessment of 24
    SLCs for these derived channel T-1 services, may be inconsistent
    with the Commission's long-standing efforts to align rates with
    costs.[^58] We also find it appropriate to re-examine our earlier
    finding, based on BOC cost studies from the mid-1990s, that up to
    five SLCs may be assessed on customers of PRI ISDN service.[^59] Our
    examination of these issues will encompass both rate-of-return and
    price cap carriers.

16. We find unpersuasive AT&T's claims that we should deny the *SLC T-1
    Rulemaking Petition*. Its claim that NECA's proposal would
    inappropriately increase the size of the ICLS fund is one we will
    explore in the rulemaking proceeding. Without some further
    explanation as to why such an increase violates the statute or our
    rules, is contrary to the goal of basing rates on costs, or is
    otherwise contrary to the public interest, AT&T's bare claim fails
    to persuade us not to undertake the rulemaking. AT&T's allegation
    that NECA did not produce sufficient evidence to compel a rulemaking
    is similarly misplaced. NECA disclosed sufficient reasons in support
    of the action requested to justify the institution of a rulemaking
    proceeding, and that is all that is required under our rules.[^60]

17. As a threshold matter, we request that any party that proposes the
    Commission change its rules in this proceeding include in its
    comments the specific language of its requested rule change(s).[^61]

### Cost of Provisioning and Cost Studies

18. Circumstances in the telecommunications industry have changed
    considerably since 1997 when the Commission last examined data on
    the cost relationship between certain derived channel services --
    PRI ISDN -- and basic, analog service. NECA and others have
    introduced evidence that the common line components of derived
    channel T-1 services, where the customer provides the terminating
    channelization equipment, and of PRI ISDN services are provisioned
    in substantially similar manners, and, therefore, would be expected
    to have similar cost relationships to basic, analog service.[^62] No
    commenter challenged this claim or the claim that the common line
    cost relationship between derived channel T-1 service and basic
    analog service is at most 5:1. TDS Telecom, moreover, claims that
    the common line cost ratio of derived channel T-1 to basic, analog
    service may be even lower (4.02:1).[^63] TDS Telecom appears to have
    included certain non-common line cost components in its
    comparison.[^64] Removal of these costs results in a lower ratio of
    1.50:1. We tentatively conclude, therefore, that the number of SLCs
    that may be assessed on customers of derived channel T-1 service
    where the customer provides the terminating channelization equipment
    should be based on the actual common line cost relationship between
    these services, rather than on a per channel basis. We seek comment
    on this tentative conclusion and on its underlying rationale.

19. Although the current record suggests that this relationship may be
    somewhere between 1.5:1 and 5:1, this record does not include any
    cost studies and instead is based on only descriptive relationships
    and summary analysis. It, therefore, is insufficient to support any
    specific rule changes.[^65] We thus seek comment on the actual
    common line cost relationship between these services, and ask
    parties asserting a particular cost relationship to support their
    claims with a cost study showing the common line costs for derived
    channel T-1 service and basic, analog service, respectively. The
    cost studies should be sufficiently detailed to enable us to discern
    the common line cost relationship between these services with
    reasonable accuracy.

20. We also note that the cost data relied on by the Commission in 1997
    in the *Access Charge Reform First Report and Order* is no longer
    current. We therefore seek comment on the current relationship
    between PRI ISDN common line costs and basic, analog common line
    costs. Again, we ask parties asserting a particular cost
    relationship to support their claims with a cost study showing the
    common line costs for PRI ISDN service and basic, analog service,
    respectively. The cost studies should be sufficiently detailed to
    enable us to discern the common line cost relationship between these
    services with reasonable accuracy.

21. We ask that all cost studies include all of the underlying data used
    in the study, as well as the source(s) of the data, and clearly
    identify all of the assumptions made and formulas used. In
    particular, we ask parties to identify clearly all of the demand and
    growth assumptions reflected in their cost studies. In order to
    facilitate review by other parties and Commission staff, all cost
    studies should be fully transparent and verifiable. To the extent
    that a party expects to include confidential or proprietary data in
    a cost study, it may seek a protective order.

### Impact of Network Architecture

22. Different carriers may use different loop network architectures to
    provide derived channel T-1 service and PRI ISDN service, and use of
    different network architectures may result in different cost
    relationships between these services and basic, analog service. For
    example, NECA has indicated that its members generally provision
    derived channel T-1 service using short copper loops.[^66] We seek
    comment on what other network architectures are used to provide
    these services. For example, are carriers using fiber-based digital
    loop carrier systems to provide these services? Are carriers
    providing these services using all fiber loops, fiber to the
    premises, or other fiber-based loop architectures? Commenters should
    identify clearly the loop network architectures that they use to
    provide derived channel T-1 service, PRI ISDN service, and basic,
    analog service, including the relative frequency with which they
    deploy different architectures to provide these services. Commenters
    should also identify whether and, if so, why the loop architectures
    and their relative deployment frequencies are different from those
    used in their cost studies. We further request that commenters
    identify the key factors they consider to determine which loop
    network architecture(s) to deploy to provide derived channel T-1,
    PRI ISDN, and basic, analog services.

23. To the extent carriers do, in fact, use different loop network
    architectures to provide these services, we seek comment on whether
    we should establish different rules for different loop
    architectures. Do variations in cost relationships resulting from
    the use of different architectures support different SLC assessment
    rules reflecting these cost relationships? For example, what
    incentives might different SLC assessment rules create regarding the
    deployment of efficient loop technologies? If we conclude that cost
    disparities among different network architectures counsel against
    adoption of SLC assessment rules based on relative cost
    relationships, are there alternative means of aligning common line
    costs with SLC cost recovery rules.

24. We also seek comment on whether carriers might incur different costs
    in providing derived channel T-1, PRI ISDN, and basic, analog
    services, even if those services use the same loop architectures.
    For example, are copper loops used to provide T-1 or PRI ISDN
    services shorter or longer, on average, than copper loops used to
    provide basic, analog services? Do derived channel T-1 or PRI ISDN
    loops cause interference when they share cables with loops providing
    other services? Should factors like these affect our analysis? If
    so, we seek comment on the effect of any such factors on the costs
    and relative costs of loops used to provide these different
    services.

25. We also seek comment on the relationship between loop costs for
    derived channel T-1 loops and the loop costs of T-1 special access
    services. To the extent that these costs differ, we ask parties to
    explain in detail the causes of such variances.

### Line Port Charges

26. Sections 69.130 (for rate-of-return carriers) and 69.157 (for price
    cap carriers) of the Commission's rules permit carriers to assess a
    separate line port charge for ISDN line ports, and for other line
    ports, to the extent that the costs of these line ports exceed the
    costs of line ports used for basic, analog service.[^67] We further
    note that carriers have been assessing a port charge for PRI ISDN
    service in the range of \$23 per port pursuant to these rules,[^68]
    and that NECA estimates that, under its proposed rule change, it
    would recover \$1.5 million of "lost" SLC revenues from a port
    charge for derived channel T-1 service. We ask parties to identify
    with specificity the amount of (as well as the methodology used to
    calculate) the port charge that they would expect to assess for the
    port associated with derived channel T-1 service, as well as the
    amount (and calculation methodology) of the PRI ISDN port charge
    they currently assess upon end user customers. In light of the
    partial waiver of rule 69.104 that we grant herein to rate-of-return
    carriers,[^69] rate-of-return carriers should include in their
    comments the amount of the port charge that they may have developed
    prior to the comment date. More generally, we ask parties to comment
    on the principles that should be used to determine whether a cost
    should be included in the basic common line costs recovered through
    the SLC or in the line port costs recovered through the separate
    line port charge.

### Impact on ICLS and Other Universal Service Issues

27. ICLS seeks to ensure that each rate-of-return carrier continues to
    provide affordable, quality telecommunications services to its
    customers while also recovering its common line revenue
    requirement.[^70] It operates by providing each carrier with
    explicit universal service support for the difference between its
    study area common line revenue requirement and its common line
    revenues, which include SLC revenues, special access surcharges, and
    line port charges.[^71] We recognize that assessing fewer than 24
    SLCs for derived channel T-1 services will tend to decrease each
    carrier's revenues from SLCs and increase its ICLS. We seek comment
    on whether this is consistent with the goals of universal service.

28. We seek comment from rate-of-return carriers and any other
    interested party on the effect that changes in the SLC assessment
    rules for PRI ISDN and for derived channel T-1 services (including
    the development of any new port charges for derived channel T-1
    service) will have on ICLS. We ask parties to quantify the changes
    in the size of ICLS that they would expect as a result of possible
    rule changes that would alter the number of SLCs assessed for PRI
    ISDN service or for derived channel T-1 service. In so doing,
    parties should clearly identify the methodology used to perform such
    a calculation, including all of the underlying data and assumptions.
    In particular, parties should identify any changes in the demand for
    these services that would result from changing the SLC assessment
    rules and should identify how demand assumptions are used in their
    cost study calculations. With regard to the changes to ICLS
    resulting from any SLC assessment rule change for derived channel
    T-1 service, we expect that the parties' demand assumptions will
    differ from current demand figures and we ask parties to identify
    clearly the current demand figures, the anticipated demand figures
    associated with the proposed rule changes, and the basis for changes
    in demand assumptions resulting from any rule changes.

29. We also seek comment on the implications of the proposed rule change
    for other universal service issues. Commenters should address the
    effect of the proposed change on competitive eligible
    telecommunications carriers (ETCs) and the portability of universal
    service under our current ETC and portability rules.[^72] In
    particular, we seek comment on whether, pursuant to any rule change,
    competitive ETCs should report 24 lines for derived channel T-1
    services or should report the same number of lines for these
    services that the incumbent LECs are required to report.[^73]
    Commenters should also address whether changing the method of
    developing line counts will affect universal service support
    mechanisms.

### Impact on PICC, CCLC, and Retail Rates

30. We seek comment from price cap carriers and any other interested
    party on the effect that changes in the SLC assessment rules for PRI
    ISDN and for derived channel T-1 services (including the development
    of any new port charges for derived channel T-1 service) will have
    on the MLB PICC and on the CCLC. To the extent that we modify the
    SLC assessment rule for derived channel T-1 service so that the
    number of SLCs assessed for this service is no longer based on the
    number of lines (*i.e.*, channels), should we also modify the PICC
    rule to make the same change?[^74] Verizon requests that we modify
    the SLC and PICC assessment rules for "new services with T-1
    interfaces," but that we change neither the SLC nor the PICC rules
    for existing T-1 services unless we also modify the maximum CMT
    revenue per line permitted under section 61.3(d) of the Commission's
    rules.[^75] This modification would ensure that price cap carriers
    recover any lost revenues caused by assessment of fewer SLCs and
    PICCs.[^76] We seek comment on Verizon's proposal. Should SLC or
    PICC rules for price cap carriers distinguish between new and
    existing T-1 services? If we change the SLC and PICC assessment
    rules, should we also modify the maximum CMT revenues per line
    permitted under section 61.3(d) of the Commission's rules?

31. Commenting price cap carriers should also identify the new SLC (both
    RES/SLB and MLB), MLB PICC, and CCLC rates that would result from
    their proposals. In so doing, parties should identify clearly the
    methodology used to perform such calculations, including all of the
    underlying data and assumptions. We ask parties to quantify, based
    on their individual proposals, the amount of foregone SLC revenues
    (on an annualized basis) that they expect to recover from the MLB
    PICC and the CCLC.

32. Commenting carriers, both rate-of-return and price cap, that
    currently assess the SLC at rates below the SLC cap(s) should
    identify the increase in the level of the SLCs they assess (both
    RES/SLB and MLB) that would result from their desired rule
    change(s).

33. We note that, to the extent that a carrier is operating at the MLB
    SLC cap, setting the number of SLCs that may be assessed equal to
    the common line cost ratio between derived channel T-1 or PRI ISDN
    (as the case may be) and basic, analog service may result in MLB
    customers paying less than the full common line costs, with carriers
    recouping the shortfall from ICLS (for rate of return carriers) or
    from the MLB PICC and CCLC, if any (for price cap carriers).[^77] We
    seek comment on whether such a result is consistent with our policy
    goals and, if not, ask parties to propose an alternative that would
    result in all of the common line costs, but no more, for these
    services being recovered from MLB customers.

34. We also seek comment on the effect of any proposed rule changes on
    all classes (*i.e.*, residential, SLB, MLB) of end user customers.
    In particular, we ask parties that propose changes to the SLC
    assessment rules for customers of derived channel T-1 service to
    identify with specificity the rate change(s), both interstate and
    intrastate, that would result for customers of this service. In so
    doing, parties should identify the aggregate rate change(s) for
    these customers, and should further identify the changes that would
    result from Commission rule changes, and any changes in intrastate
    rates that the commenter anticipates would result.[^78] In light of
    the waiver we grant herein, *infra* at section IV.B, we ask that
    rate-of-return carriers identify with specificity the changes that
    they may have made by the comment date to the rates for their
    derived channel T-1 service.

# Petition for Interim, Partial Waiver

## Background

35. Because the Commission had not yet acted on the *SLC T-1 Rulemaking
    Petition*, on August 19, 2003, NECA and other LECs and LEC
    organizations filed a petition requesting that the Commission, on an
    interim basis, pending completion of the rulemaking proceeding,
    partially waive section 69.104 of its rules to permit rate-of-return
    carriers to reduce from twenty-four to five the number of SLCs they
    may assess on customers of derived channel T-1 service (where the
    customer provides the terminating channelization equipment) without
    foregoing recovery of the associated SLC revenues from ICLS.[^79]
    The Waiver Associations seek this interim, partial waiver for the
    same reasons that NECA and other parties support initiation of a
    rulemaking proceeding.[^80] They claim that SLC assessments for
    derived channel T-1 services do not reflect costs and are
    inconsistent with the assessment of SLCs for comparable PRI ISDN
    service, thereby sending incorrect price signals to the marketplace
    regarding derived channel T-1 service and PRI ISDN service.[^81]
    These problems are exacerbated for rural carriers and rural
    customers because ISDN service is often not available in rural
    areas.[^82] The Waiver Associations also claim that the effect on
    ICLS of granting the interim, partial waiver would be minimal.[^83]

36. Commenting LECs, LEC associations, and tariffing consultants support
    the *SLC T-1 Partial Waiver Petition*.[^84] These parties claim that
    grant of the waiver is in the public interest because (1) the record
    demonstrates that loops used to provide derived channel T-1 services
    and PRI ISDN services are functionally comparable, are provisioned
    in a comparable manner, and therefore have comparable common line
    costs;[^85] (2) the waiver would achieve the goal that underlies
    this aspect of rule 69.104 -- aligning rates with costs -- better
    than strict enforcement of the rule;[^86] and (3) the current
    pricing dichotomy between these similar services hinders investment
    in advanced services in rural America.[^87]

37. AT&T and Sprint Corporation oppose the waiver.[^88] They allege that
    the *SLC T-1 Partial Waiver Petition* represents not an attempt to
    align rates with costs, but rather an attempt to acquire additional
    receipts from ICLS.[^89] They claim that the petitioning parties may
    reduce from 24 to 5 the number of SLCs they assess on customers of
    derived channel T-1 services without a waiver, and that it is only
    their desire to recover from ICLS the foregone SLC revenues that
    requires any Commission action.[^90] AT&T also claims that the
    waiver sought by the Waiver Associations would result in an
    impermissible evisceration of the rule by waiver, and that a
    rulemaking proceeding is the proper venue to consider their
    claims.[^91]

38. The Waiver Associations and Great Plains respond to AT&T and Sprint
    by stating that ICLS was expressly designed to enable rate-of-return
    carriers to meet their common line revenue requirements after
    recovery of SLCs and any appropriate port charges.[^92] The Waiver
    Associations and Great Plains agree that a rule change would be a
    better result than a waiver; they sought a waiver only on an interim
    basis, until completion of the rulemaking, and only because more
    than one year had elapsed since they sought the initiation of a
    rulemaking proceeding.[^93]

## Discussion

39. The Commission has discretion to waive a rule for "good cause"
    shown.[^94] Generally, the Commission may grant a waiver of its
    rules where the particular facts make strict compliance inconsistent
    with the public interest if applied to petitioner and when the
    relief requested would not undermine the policy objective of the
    rule in question.[^95] In addition, the Commission may take into
    account considerations of hardship, equity, or more effective
    implementation of overall policy on an individual basis.[^96] Waiver
    of the Commission\'s rules is therefore appropriate if special
    circumstances warrant a deviation from the general rule, and such a
    deviation will better serve the public interest than strict
    adherence to the general rule.[^97] For the reasons discussed below,
    we find that the Waiver Associations have shown that good cause
    exists to grant an interim, partial waiver of rule 69.104(q),[^98]
    permitting rate-of-return carriers[^99] to assess SLCs for five
    channels only upon customers subscribing to derived channel T-1
    service where the customer provides the terminating channelization
    equipment without foregoing recovery of the associated SLC revenues
    from ICLS.[^100] The waiver we grant herein is interim and will
    remain in place only until we resolve the issues raised, *supra*, in
    the notice of proposed rulemaking, at which time the waiver will
    expire.[^101]

40. The Waiver Associations have demonstrated that grant of the *SLC T-1
    Partial Waiver Petition* would better achieve the purpose of rule
    69.104 than would continued strict application of the rule. In the
    *Access Charge Reform First Report and Order*, the Commission
    modified the SLC assessment rules for loops used to provision PRI
    ISDN service in order to "realign\[\] cost recovery in a manner that
    more closely reflects the manner in which those costs are
    incurred."[^102] Specifically, the Commission found that assessing a
    SLC for each derived channel of ISDN service "exceeds the NTS costs
    of ISDN service and therefore artificially discourages efficient use
    of ISDN."[^103]

41. The evidence in this proceeding suggests that, for rate-of-return
    carriers, loops used to provide derived channel T-1 service and to
    provide PRI ISDN service are provisioned in a comparable manner and
    therefore should have comparable costs.[^104] No party contests
    these showings with any alternative evidence; nor does any party
    claim that continuing to require the assessment of 24 SLCs for
    derived channel T-1 service aligns rates with costs for this
    service. Similarly, no party contests the evidence that many
    rate-of-return carriers do not offer PRI ISDN service and that,
    therefore, the harm caused by assessing 24 SLCs on derived channel
    T-1 services is particularly acute for rural carriers and their
    customers. Accordingly, grant of the partial waiver, which allows
    rate-of-return carriers to assess five SLCs for customers of derived
    channel T-1 service (where the customer provides the terminating
    channelization equipment), better achieves the purpose of the rule
    to align cost recovery (*i.e.*, rates) with the manner in which
    costs are incurred.[^105]

42. The Commission's existing rules allow rate-of-return carriers to
    assess a line port charge on their derived channel T-1 service
    customers, but only to the extent that the line port costs
    associated with this service exceed the costs of a line port used
    for basic, analog service.[^106] This is consistent with the
    principle of aligning rates with costs.[^107] Indeed, in the *MAG
    Order*, the Commission determined that such line port charges are
    mandatory, and that line port costs in excess of basic, analog line
    ports must be recovered through a separate charge and not through
    universal service mechanisms.[^108]

43. We are aware that, as a result of granting the waiver,
    rate-of-return carriers will recover from ICLS those loop costs that
    previously were recovered through the additional SLCs assessed on
    derived channel T-1 services.[^109] Although we share AT&T's and
    Sprint's concerns regarding growth of the universal service fund,
    this result is consistent with our rules capping the SLC to keep
    rates affordable in rural, high cost areas,[^110] and it will help
    advance the Commission's goal of ensuring that rate-of-return
    carriers are able to provide quality, affordable services while
    recovering their common line revenue requirement.[^111] We also note
    that the Waiver Associations estimate that the grant of the waiver
    would lead to only a relatively small increase (\$11.5 million) in
    ICLS as compared to the overall size of the universal service
    fund.[^112] These factors, in combination, show that grant of the
    waiver will not have a significant effect on universal service. To
    the extent that a party has evidence that the effect on ICLS will
    differ substantially from that predicted by the Waiver Associations
    -- and no party has introduced such evidence to date -- we encourage
    the submission of such evidence for our consideration in the
    accompanying rulemaking proceeding.

44. Carriers subject to this waiver order shall, when filing data
    pursuant to sections 35.611, 35.612, and 54.903(a) of the
    Commission's rules, calculate their line counts in a manner
    consistent with this order.[^113] Competitive ETCs, which are not
    subject to this order, shall continue to file line count data
    pursuant to section 54.307, using the existing assessment of 24
    loops per derived channel T-1 service.[^114]

45. Finally, as requested by the Waiver Associations,[^115] we expressly
    limit the duration of the waiver to not longer than the pendency of
    the accompanying rulemaking proceeding.[^116] By limiting the
    waiver's duration, we require parties ultimately to establish that a
    rule change is warranted in order to obtain long-term relief. The
    waiver we grant herein shall therefore expire upon the effectiveness
    of any order or, if applicable, rule changes, that result from the
    accompanying rulemaking.

# procedural matters

## *Ex Parte* Requirements

46. This proceeding will continue to be governed by
    "permit-but-disclose" *ex parte* procedures that are applicable to
    non-restricted proceedings under 47 C.F.R. § 1.1206.[^117] Parties
    making oral *ex parte* presentations are reminded that memoranda
    summarizing the presentation must contain a summary of the substance
    of the presentation and not merely a listing of the subjects
    discussed. More than a one- or two-sentence description of the views
    and arguments presented generally is required.[^118] Other rules
    pertaining to oral and written presentations are set forth in
    section 1.1206(b) as well.[^119] Interested parties are to file any
    written *ex parte* presentations in this proceeding with the
    Commission's Secretary, Marlene H. Dortch, 445 12^th^ Street, S.W.,
    TW-B204, Washington, D.C. 20554, and serve with one copy: Pricing
    Policy Division, Wireline Competition Bureau, 445 12^th^ Street,
    S.W., Room 5-A452, Washington, D.C. 20554, Attn: Jeremy D. Marcus.
    Parties shall also serve with one copy: Best Copy and Printing,
    Inc., Portals II, 445 12^th^ Street, S.W., Room, CY-B402,
    Washington, D.C., 20554, telephone (202) 488-5300, facsimile (202)
    488-5563, e-mail fcc@bcpiweb.com, or via its website
    http://www.bcpiweb.com.

## Initial Paperwork Reduction Act Analysis

47. The incorporated *Notice of Proposed Rulemaking* (*NPRM*) does not
    contain proposed or modified information collection requirements.

## Initial Regulatory Flexibility Analysis

48. As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^120] the Commission has prepared this present Initial
    Regulatory Flexibility Analysis (IRFA) of the possible significant
    economic impact on a substantial number of small entities by the
    policies and rules proposed in this *NPRM*. Written public comments
    are requested on this IRFA. Comments must be identified as responses
    to the IRFA and must be filed by the deadlines for comments on the
    *NPRM* provided in paragraph 62 of the item. The Commission will
    send a copy of the *NPRM*, including this IRFA, to the Chief Counsel
    for Advocacy of the Small Business Administration (SBA).[^121] In
    addition, the *NPRM* and IRFA (or summaries thereof) will be
    published in the Federal Register.[^122]

### Need for, and Objectives of, the Proposed Rules

49. In this NPRM, the Commission continues to explore means of better
    aligning cost recovery (*i.e.*, rates) with the manner in which
    costs are incurred. SLCs are generally assessed by carriers on
    customers on a per channel basis. In 1997 in the *Access Charge
    Reform First Report and Order*, to better align rates with costs,
    the Commission created an exception to the SLC assessment rules for
    price cap carriers for PRI ISDN and BRI ISDN services, determining
    that five SLCs could be assessed for PRI ISDN service and one SLC
    could be assessed for BRI ISDN service. In 2001 in the *MAG Order*,
    the Commission made the equivalent rule changes for rate-of-return
    carriers.[^123]

50. NECA requests that we amend the Commission's SLC assessment rules to
    reduce the number of SLC from twenty-four to five that carriers may
    assess upon customers of derived channel T-1 services (where the
    customer provides the terminating channelization equipment), with
    carriers recovering the foregone SLC revenues from a line port
    charge and from ICLS.[^124] This NPRM tentatively concludes that the
    number of SLCs that carriers may assess on customers of derived
    channel T-1 service (where the customer provides the terminating
    channelization equipment) should be based on the actual common line
    cost relationship between loops used to provide these services and
    loops used to provide basic, analog services, rather than on a per
    channel basis.[^125] We seek comment on this conclusion.[^126]
    Because the cost data relied on for the PRI ISDN exception to the
    general SLC assessment rules is from the mid-1990s, the Commission
    also seeks comment on whether the that exception in our rules should
    be modified.[^127] The Commission also requests that parties detail
    the affects their proposals will have on line port charges, ICLS and
    other universal service mechanisms, other access charges (*i.e.*,
    the PICC and the CCLC), and retail rates.[^128] The Commission
    requests that commenting parties provide detailed, transparent cost
    studies to support their proposals.[^129]

### Legal Basis

51. This rulemaking action is supported by sections 1, 2, 4(i), 4(j),
    201-205, and 303 of the Communications Act of 1934, as
    amended.[^130]

### Description and Estimate of the Number of Small Entities to Which the Notice will Apply

52. The RFA directs agencies to provide a description of, and, where
    feasible, an estimate of the number of small entities that may be
    affected by the proposed rules, if adopted.[^131] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^132] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^133] A "small business concern" is
    one which: (1) is independently owned and operated; (2) is not
    dominant in its field of operation; and (3) satisfies any additional
    criteria established by the SBA.[^134]

53. In this section, we further describe and estimate the number of
    small entity licensees and regulatees that may also be directly
    affected by rules adopted in this order. The most reliable source of
    information regarding the total numbers of certain common carrier
    and related providers nationwide, as well as the number of
    commercial wireless entities, appears to be the data that the
    Commission publishes in its *Trends in Telephone Service*
    report.[^135] The SBA has developed small business size standards
    for wireline and wireless small businesses within the three
    commercial census categories of Wired Telecommunications
    Carriers,[^136] Paging,[^137] and Cellular and Other Wireless
    Telecommunications. [^138] Under these categories, a business is
    small if it has 1,500 or fewer employees. Below, using the above
    size standards and others, we discuss the total estimated numbers of
    small businesses that might be affected by our actions.

54. We have included small incumbent LECs in this present RFA analysis.
    As noted above, a "small business" under the RFA is one that, *inter
    alia*, meets the pertinent small business size standard (*e.g.*, a
    wired telecommunications carrier having 1,500 or fewer employees),
    and "is not dominant in its field of operation."[^139] The SBA's
    Office of Advocacy contends that, for RFA purposes, small incumbent
    LECs are not dominant in their field of operation because any such
    dominance is not "national" in scope.[^140] We have therefore
    included small incumbent LECs in this RFA analysis, although we
    emphasize that this RFA action has no effect on Commission analyses
    and determinations in other, non-RFA contexts.

55. *Wired Telecommunications Carriers*. The SBA has developed a small
    business size standard for Wired Telecommunications Carriers, which
    consists of all such companies having 1,500 or fewer
    employees.[^141] According to Census Bureau data for 1997, there
    were 2,225 firms in this category, total, that operated for the
    entire year.[^142] Of this total, 2,201 firms had employment of 999
    or fewer employees, and an additional 24 firms had employment of
    1,000 employees or more.[^143] Thus, under this size standard, the
    majority of firms can be considered small.

56. *Incumbent Local Exchange Carriers (LECs)*. Neither the Commission
    nor the SBA has developed a size standard for small businesses
    specifically applicable to incumbent local exchange services. The
    closest applicable size standard under SBA rules is for Wired
    Telecommunications Carriers. Under that size standard, such a
    business is small if it has 1,500 or fewer employees.[^144]
    According to Commission data,[^145] 1,337 carriers reported that
    they were engaged in the provision of local exchange services. Of
    these 1,337 carriers, an estimated 1,032 have 1,500 or fewer
    employees and 305 have more than 1,500 employees. Consequently, the
    Commission estimates that most providers of incumbent local exchange
    service are small businesses that may be affected by the rules and
    policies adopted herein.

57. *Competitive Local Exchange Carriers (CLECs), Competitive Access
    Providers (CAPs), and "Other Local Exchange Carriers."* Neither the
    Commission nor the SBA has developed a size standard for small
    businesses specifically applicable to providers of competitive
    exchange services or to competitive access providers or to "Other
    Local Exchange Carriers," all of which are discrete categories under
    which TRS data are collected. The closest applicable size standard
    under SBA rules is for Wired Telecommunications Carriers. Under that
    size standard, such a business is small if it has 1,500 or fewer
    employees.[^146] According to Commission data,[^147] 609 companies
    reported that they were engaged in the provision of either
    competitive access provider services or competitive local exchange
    carrier services. Of these 609 companies, an estimated 458 have
    1,500 or fewer employees and 151 have more than 1,500
    employees.[^148] In addition, 35 carriers reported that they were
    "Other Local Service Providers." Of the 35 "Other Local Service
    Providers," an estimated 34 have 1,500 or fewer employees and one
    has more than 1,500 employees.[^149] Consequently, the Commission
    estimates that most providers of competitive local exchange service,
    competitive access providers, and "Other Local Exchange Carriers"
    are small entities that may be affected by the rules and policies
    adopted herein.

### Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

58. The *NPRM* explores options for further aligning SLC rates with loop
    costs in the Commission's access charge regime and examines the
    universal service implications of any such SLC rule changes. The
    *NPRM* considers the varying operating circumstances of
    rate-of-return and price cap carriers, the implications of
    competitive and intrastate regulatory conditions on the options
    available, and the need to facilitate and ensure the deployment of
    advanced services in rural America. If adopted, changes to the
    Commission's SLC assessment rules may require additional or modified
    recordkeeping. For example, LECs may have to file amendments to
    certain aspects of their end user tariffs that set forth the SLC
    rates, terms and conditions.[^150]

### Steps Taken To Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

59. The RFA requires an agency to describe any significant alternatives
    that it has considered in reaching its proposed approach, which may
    include the following four alternatives (among others): (1) the
    establishment of differing compliance or reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance or reporting requirements under the rule for small
    entities; (3) the use of performance, rather than design, standards;
    and (4) an exemption from coverage of the rule, or any part thereof,
    for small entities.[^151]

60. We will consider any proposals made to minimize significant economic
    impact on small entities. The overall objective of this proceeding
    is to consider the NECA proposal, as well as other proposals, that
    may better align rates with costs by amending the Commission's SLC
    assessment rules for PRI ISDN service and for derived channel T-1
    services (where the customer provides the terminating channelization
    equipment). The *NPRM* seeks comment on the merits of changes in the
    SLC assessment rules. Comments should be supported by specific
    economic analysis and cost studies.[^152] The adoption of rule
    changes may require LECs to amend their end user tariffs. To the
    extent that the Commission may adopt rule changes that better enable
    small rate-of-return carriers to compete in offering advanced
    services, such carriers may stand to benefit from this proceeding.

### Federal Rules That May Duplicate, Overlap, or Conflict With the Proposed Rules

61. None.

## Comment Filing Procedures

62. Pursuant to Sections 1.415 and 1.419 of the Commission\'s
    rules,[^153] interested parties may file comments on or before 60
    days and reply comments on or before 90 days after publication of
    this *NPRM* in the Federal Register. **All pleadings must reference
    WC Docket No. 04-259 and RM-10603.** Comments may be filed using the
    Commission\'s Electronic Comment Filing System (ECFS) or by filing
    paper copies.[^154] Comments filed through the ECFS can be sent as
    an electronic file via the Internet to
    \<http://www.fcc.gov/cgb/ecfs\>. Generally, only one copy of an
    electronic submission must be filed. If multiple docket or
    rulemaking numbers appear in the caption of this proceeding,
    however, commenters must transmit one electronic copy of the
    comments to each docket or rulemaking number referenced in the
    caption. In completing the transmittal screen, commenters should
    include their full name, U.S. Postal Service mailing address, and
    the applicable docket or rulemaking number. Parties may also submit
    an electronic comment by Internet e-mail. To get filing instructions
    for e-mail comments, commenters should send an e-mail to
    \<ecfs@fcc.gov\>, and should include the following words in the body
    of the message: "get form \<your e-mail address\>." A sample form
    and directions will be sent in reply. Commenters also may obtain a
    copy of the ASCII Electronic Transmittal Form (FORM-ET) at
    \<http://www.fcc.gov/e-file/email.html\>.

63. Parties who choose to file by paper must file an original and four
    copies of each filing. If more than one docket or rulemaking number
    appear in the caption of this proceeding, commenters must submit two
    additional copies for each additional docket or rulemaking number.

64. Filings can be sent by hand or messenger delivery, by commercial
    overnight courier, or by first-class or overnight U.S. Postal
    Service mail (although we continue to experience delays in receiving
    U.S. Postal Service mail). The Commission's contractor, Natek, Inc.,
    will receive hand-delivered or messenger-delivered paper filings for
    the Commission\'s Secretary at 236 Massachusetts Avenue, N.E., Suite
    110, Washington, D.C. 20002.

-   The filing hours at this location are 8:00 a.m. to 7:00 p.m.

-   All hand deliveries must be held together with rubber bands or
    fasteners.

-   Any envelopes must be disposed of before entering the building.

-   Commercial overnight mail (other than U.S. Postal Service Express
    Mail and Priority Mail) must be sent to 9300 East Hampton Drive,
    Capitol Heights, MD 20743.

-   All filings must be addressed to the Commission's Secretary, Office
    of the Secretary, Federal Communications Commission.

65. Regardless of whether parties choose to file electronically or by
    paper, parties should also file one copy of any documents filed in
    this docket with the Commission's copy contractor, Best Copy and
    Printing, Inc., Portals II, 445 12th Street, S.W., Washington, DC
    20554, telephone (202) 488-5300, facsimile (202) 488-5563, e-mail
    fcc@bcpiweb.com, or via its website at http://www.bcpiweb.com. In
    addition, one copy of each submission must be filed with the Chief,
    Pricing Policy Division, 445 12th Street, S.W., Washington,
    DC 20554. Documents filed in this proceeding will be available for
    public inspection during regular business hours in the Commission's
    Reference Information Center, 445 12th Street, S.W., Washington, DC
    20554, and will be placed on the Commission's Internet site. For
    further information, contact Jeremy D. Marcus at (202) 418-0059.

66. Accessible formats (computer diskettes, large print, audio recording
    and Braille) are available to persons with disabilities by
    contacting the Consumer & Governmental Affairs Bureau, at (202)
    418-0531, TTY (202) 418-7365, or at \<fcc504@fcc.gov\>.

# Conclusion

67. For the reasons provided herein, we grant the *SLC T-1 Rulemaking
    Petition* and initiate a rulemaking proceeding to examine the proper
    number of SLCs that rate-of-return and price cap carriers may assess
    upon customers that obtain derived channel T-1 service where the
    customer provides the terminating channelization equipment. In the
    rulemaking proceeding, we also will re-examine the proper number of
    SLCs that carriers may assess upon customers that obtain PRI ISDN
    service. Pending resolution of this proceeding, we grant a partial
    waiver of section 69.104(q) of the Commission's rules[^155] to
    permit rate-of-return carriers to reduce from twenty-four to five
    the number of SLCs that they may assess on customers of derived
    channel T-1 service (where the customer provides the terminating
    channelization equipment) without foregoing recovery of the
    associated SLC revenues from the ICLS.

# ordering clauses

68. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in section 1.407 of the Commission's rules, 47 C.F.R. § 1.407, the
    National Exchange Carrier Association, Inc. Petition for Rulemaking
    IS GRANTED.

69. IT IS FURTHER ORDERED that, pursuant to the authority contained in
    sections 1, 2, 4(i), 4(j), 201-205, and 303 of the Communications
    Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i), 154(j),
    201-205, and 303, NOTICE IS HEREBY GIVEN of the rulemaking described
    above and COMMENT IS SOUGHT on those issues.

70. IT IS FURTHER ORDERED that the Commission's Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    Notice of Proposed Rulemaking, including the Initial Regulatory
    Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
    Business Administration.

71. IT IS FURTHER ORDERED that, pursuant to the authority contained in
    sections 1, 2, 4(i), 4(j), and 201-205 of the Communications Act of
    1934, as amended, and section 1.3 of the Commission's rules, 47
    U.S.C. §§ 151, 152, 154(i), 154(j), 201-205 and 47 C.F.R. § 1.3, the
    Joint Petition for Expedited Waiver IS GRANTED to the extent stated
    herein.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

    **APPENDIX**

    **LIST OF COMMENTERS**

    ***Petition for Rulemaking:***

    [Comments]{.underline}

-   ALLTEL Communications, Inc.

-   GVNW Consulting, Inc. (GVNW)

-   National Telecommunications Cooperative Association (NTCA)

-   Organization for the Promotion and Advancement of Small
    Telecommunications Companies (OPASTCO)

-   TDS Telecommunications Corporation (TDS Telecom)

-   United States Telecom Association (USTA)

    [Opposition]{.underline}

```{=html}
<!-- -->
```
-   AT&T Corp. (AT&T)

    [Reply Comments]{.underline}

-   CenturyTel, Inc.

-   National Exchange Carrier Association, Inc. (NECA)

-   TDS Telecom

-   USTA

-   Verizon Telephone Companies

    ***Petition for Waiver:***

    [Comments]{.underline}

```{=html}
<!-- -->
```
-   Arlington Telephone Company, The Blair Telephone Company, Eastern
    Nebraska Telephone Company, Rock County Telephone Company, Hershey
    Cooperative Telephone Company, City of Faith Municipal Telephone
    Company, Kennebec Telephone Company, Roberts County Telephone
    Cooperative Association, RC Communications, and Northwest Telephone
    Cooperative Association

-   Great Plains Communications, Inc. (Great Plains)

-   GVNW

-   Matanuska Telephone Association, Inc. (Matanuska)

-   TDS Telecom

    [Opposition]{.underline}

```{=html}
<!-- -->
```
-   AT&T

    [Reply Comments]{.underline}

-   Eastern Rural Telecom Assn., Independent Telephone &
    Telecommunications Alliance, John Staurulakis Incorporated,
    Matanuska, NECA, NTCA, North Pittsburgh Telephone Company, North
    State Communications, OPASTCO, TDS Telecom, USTA, and Western
    Alliance

-   Great Plains

-   Sprint Corporation

[^1]: The National Exchange Carrier Association, Inc. (NECA) filed a
    petition for rulemaking on this matter on September 26, 2002.
    *National Exchange Carrier Association, Inc. Petition to Amend
    Section 69.104 of the Commission's Rules*, RM-10603, Petition for
    Rulemaking (filed Sept. 26, 2002) (*SLC T-1 Rulemaking Petition*).

[^2]: *See National Exchange Carrier Association, Inc. Petition to Amend
    Section 69.104 of the Commission's Rules*, RM 10603, Joint Petition
    for Expedited Waiver (filed Aug. 19, 2003) (*SLC T-1 Partial Waiver
    Petition*). The joint waiver petitioners are Eastern Rural Telecom
    Association, Independent Telephone and Telecommunications Alliance,
    John Staurulakis Inc., Matanuska Telephone Associations, Inc.
    (Matanuska), NECA, National Telecommunications Cooperative
    Association (NTCA), Organization for the Promotion and Advancement
    of Small Telecommunications Companies (OPASTCO), TDS
    Telecommunications Corporation (TDS Telecom), United States Telecom
    Association (USTA), and Western Alliance on behalf of their member
    carriers. *Id*. at 2. Because these organizations represent the
    overwhelming majority of rate-of-return carriers, the waiver applies
    to all rate-of-return carriers. *See infra* note 99 and accompanying
    text.

[^3]: *See* 47 C.F.R. § 69.104(q).

[^4]: *See* 47 C.F.R. § 54.901.

[^5]: The Commission's separations rules allocate one-fourth of common
    line costs to the interstate jurisdiction. *See* 47 C.F.R. §
    36.154(c). In this proceeding, we address interstate costs only.

[^6]: *See* 47 C.F.R. § 69.104. Under certain circumstances,
    rate-of-return carriers recover a special access surcharge from
    customers of private line or Wide Area Telecommunications Service
    (WATS) services prior to assessing the SLC. *See* *id*. § 69.115.

[^7]: *See* 47 C.F.R. § 69.104(n)(1).

[^8]: *See* 47 C.F.R. § 69.104(o)(1). The SLC is capped to ensure that
    end-user rates are affordable in rural (and other high cost) areas.
    *See, e.g.*, *Cost Review Proceeding for Residential and Single-Line
    Business Subscriber Line Charge (SLC) Caps*, CC Docket Nos. 96-262,
    94-1, Order, 17 FCC Rcd 10868, 10870, at para. 3 (2002) (*SLC Cost
    Study Order*), *aff'd, Nat'l Ass'n of State Util. Consumer Advocates
    v. FCC*, No. 02-1261, 2004 WL 1439686 (D.C. Cir. June 29, 2004).

[^9]: *See* 47 C.F.R. § 54.901. Rate-of-return carriers receive ICLS
    equal to the difference between their common line revenue
    requirement and revenues from SLCs and other common line revenues.

[^10]: *Access Charge Reform*, CC Docket Nos. 96-262, 94-1, 99-249,
    96-45, Sixth Report and Order in CC Docket Nos. 96-262 and 94-1,
    Report and Order in CC Docket No. 99-249, Eleventh Report and Order
    in CC Docket No. 96-45, 15 FCC Rcd 12962 (2000) (*CALLS Order*)
    (subsequent history omitted); 47 C.F.R. § 61.3(d). The Average Price
    Cap CMT Revenue per Line varies among carriers and among study
    areas. Price Cap CMT Revenue was designed to recover not only common
    line costs, but marketing costs and the TIC (transport and
    interconnection charge), as well.

[^11]: *See* 47 C.F.R. § 69.152.

[^12]: *See* 47 C.F.R. §§ 54.801 *et seq*.

[^13]: For price cap carriers different residential SLC caps apply to
    primary subscriber lines and secondary subscriber lines. The
    residential primary line SLC cap is \$6.50. *See* 47 C.F.R. §
    69.152(d)(1)(ii)(D). The residential secondary line SLC cap is
    \$7.00. *See* *id*. § 69.152(e)(1)(i). The SLC cap for the business
    customers of price cap carriers is \$9.20 for all subscriber lines.
    *See id.* § 69.152(k)(1).

[^14]: *See* 47 C.F.R. § 69.153(a). The PICC applies to MLB customers
    only and is capped at \$4.31 per line. *See id*.

[^15]: *See* 47 C.F.R. § 69.154.

[^16]: *Compare* 47 C.F.R. §§ 54.706, 709(a), *with* 47 C.F.R.
    69.153(a).

[^17]: *See SLC Cost Study Order*, 17 FCC Rcd at 10874, para. 12.

[^18]: 47 C.F.R. §§ 69.104(a) (rate-of-return carriers), 69.152(a)
    (price cap carriers).

[^19]: *See* 47 C.F.R. Part 36, App.-Glossary.

[^20]: *NYNEX Telephone Companies Revisions to Tariff F.C.C. No. 1*,
    Transmittal No. 116, Memorandum Opinion and Order, 7 FCC Rcd 7938,
    para. 2 (Common Carrier Bureau 1992) (*NYNEX Order*); *see also End
    User Common Line Charges*, CC Docket No. 95-72, Notice of Proposed
    Rulemaking, 10 FCC Rcd 8565, 8570, para. 10 (1995) (*1995 SLC
    NPRM*).

[^21]: *See* 47 C.F.R. Part 36.

[^22]: *NYNEX Order*, 7 FCC Rcd at 7938, paras. 4-5 (quoting 47 C.F.R.
    Part 36, Appendix-Glossary).

[^23]: *NYNEX Telephone Companies Revisions to Tariff F.C.C. No. 1*,
    Transmittal No. 116, Order on Reconsideration, 10 FCC Rcd 2247,
    para. 2 (1995) (*NYNEX Recon Order*).

[^24]: *1995 SLC NPRM*, 10 FCC Rcd 8565, 8570, 8673, paras. 1, 10, 15
    ("we seek comment on the proper application of SLCs to BRI and PRI
    ISDN service . . . as well as to other services that permit the
    provision of multiple derived channels over a single facility").

[^25]: *Access Charge Reform*, CC Docket Nos. 96-262, 94-1, 91-213,
    95-72, First Report and Order, 12 FCC Rcd 15982, 16028-33, paras.
    111-120 (1997) (*Access Charge Reform First Report and Order*),
    *aff'd*, *Southwestern Bell FCC*, 153 F.3d 523 (8^th^ Cir. 1998).

[^26]: *Id*. These changes were codified in section 69.152(l) of the
    Commission's rules. *See* 47 C.F.R. § 69.152(l).

[^27]: *Access Charge Reform First Report and Order*, 12 FCC Rcd at
    16030-33, paras. 113-18.

[^28]: *See* 47 C.F.R. § 69.157 (port charge). In recovering loop costs,
    price cap carriers assess the port charge on end users before
    assessing the MLB PICC and CCLC on interexchange carriers.

[^29]: *Access Charge Reform First Report and Order*, 12 FCC Rcd at
    16033, para. 120.

[^30]: *Multi-Association Group (MAG) Plan for Regulation of Interstate
    Services of Non-Price Cap Incumbent Local Exchange Carriers and
    Interexchange Carriers*, Second Report and Order and Further Notice
    of Proposed Rulemaking in CC Docket Nos. 00-256, Fifteenth Report
    and Order in CC Docket No. 96-45, and Report and Order in CC Docket
    Nos. 98-77 and 98-166, 16 FCC Rcd 19613, 19640-41, para. 56 (2001)
    (*MAG Order*) (subsequent history omitted). These rule changes were
    codified in section 69.104(p) of the Commission's rules. *See* 47
    C.F.R.

    § 69.104(p).

[^31]: *MAG Order*, 16 FCC Rcd at 19640-41, para. 56.

[^32]: Because the CCLC for rate-of-return carriers had not yet been
    eliminated at the time of the rule change, rate-of-return carriers
    could have recovered amounts over the SLC cap from the CCLC rather
    than from ICLS. The CCLC was eliminated for rate-of-return carriers
    as of July 1, 2003. *See id*. at 19642-45, paras. 61-65.

[^33]: *See* 47 C.F.R. § 69.130 (port charge). In recovering loop costs
    in their revenue requirement, rate-of-return carriers assess the
    port charge on end users before recovering any costs from ICLS.

[^34]: *Wireline Competition Bureau, Federal Communications Commission
    Biennial Regulatory Review 2002*, WC Docket No. 02-213, GC Docket
    No. 02-390, Staff Report, 18 FCC Rcd 4622, 4724 (WCB 2002), issued
    concurrently with *The 2002 Biennial Review*, GC Docket No. 02-390,
    Report, 18 FCC Rcd 4726 (2002).

[^35]: *SLC T-1 Rulemaking Petition* at 1, 5, 9, App. A.

[^36]: *Id*. at 1-2, 5-9.

[^37]: *Id*. at App. A.

[^38]: *Id*. at 1, 9, App. A.

[^39]: Verizon Telephone Companies (Verizon) Rulemaking Reply at 1-4.

[^40]: *SLC T-1 Rulemaking Petition* at 5-9.

[^41]: *Id*. at 6-9. The RDTF, according to NECA, is a group of
    participants in the NECA Traffic Sensitive Pool that represent
    approximately 37 percent of cost company revenue and of total pool
    revenue. *Id*. at 7 n.22. *See also* Letter from Colin Sandy, NECA,
    to Marlene H. Dortch, Sec'y, FCC, RM-10603 at 3-4 (filed Oct. 29,
    2003) (NECA Oct. 29, 2003 *Ex Parte* Letter).

[^42]: *SLC T-1 Rulemaking Petition* at 5-9. NECA also claims that a
    comparison of its federally-tariffed *rates* for derived channel T-1
    service and basic, analog service (after accounting for the 75:25
    intrastate:interstate separations factor) reveals a relationship of
    3.76:1. *See* Letter from Colin Sandy, NECA, to Marlene H. Dortch,
    Sec'y, FCC, RM-10603 at 2, 5 (filed Oct. 24, 2003) (NECA Oct. 24,
    2003 *Ex Parte* Letter); NECA Oct. 29, 2003 *Ex Parte* Letter at 2,
    5.

[^43]: *See* NECA Rulemaking Reply at 6.

[^44]: *See* *SLC T-1 Rulemaking Petition* at 4; NECA Rulemaking Reply
    at 4-7.

[^45]: *See* Letter from Colin Sandy, NECA, to Marlene H. Dortch, Sec'y,
    FCC, RM-10603 at 1 (filed June 17, 2003) (NECA June 17, 2003 *Ex
    Parte* Letter) (correcting Letter from Colin Sandy, NECA, to Marlene
    H. Dortch, Sec'y, FCC, RM-10603 at 1-3 (filed March 27, 2003) (NECA
    March 27, 2003 *Ex Parte* Letter) and NECA Rulemaking Reply at 6).

[^46]: On November 8, 2002, comments were sought on the *SLC T-1
    Rulemaking Petition*. *See* *Wireline Competition Bureau Seeks
    Comment on NECA's Petition for Rulemaking to Adjust the Application
    of End User Common Line Charges on Certain T-1 Exchange Access
    Services*, RM No. 10603, 17 FCC Rcd 22505 (WCB 2002).

[^47]: *See, e.g.*, NCTA Rulemaking Comments at 1-5; OPASTCO Rulemaking
    Comments at 1-4; TDS Telecom Rulemaking Comments at 1-4; CenturyTel,
    Inc. Rulemaking Reply at 1-6; TDS Telecom Rulemaking Reply at 1-3;
    USTA Rulemaking Reply at 1-3; Verizon Rulemaking Reply at 1-4.

[^48]: *See* ALLTEL Communications, Inc. (ALLTEL) Rulemaking Comments
    Erratum at 6-7 (filed Dec. 10, 2002); GVNW Consulting, Inc.
    Rulemaking Comments at 2-3; NCTA Rulemaking Comments at 2-4; OPASTCO
    Rulemaking Comments at 2-4; TDS Telecom Rulemaking Comments at 2-3;
    USTA Rulemaking Comments at 2-4.

[^49]: *See* NECA Rulemaking Reply at 6-7; TDS Rulemaking Comments at 3;
    *SLC T-1 Partial Waiver Petition* at 7 n.17. In the *SLC T-1 Partial
    Waiver Petition*, the petitioning parties state that "170 of over
    1000 companies in the NECA pool offer PRI ISDN service." *SLC T-1
    Partial Waiver Petition* at 7 n.17.

[^50]: Letter from Kevin DiLallo, Counsel, Ad Hoc Telecommunications
    Users Group, to Marlene H. Dortch, Sec'y, FCC, RM-10603 at 1-4
    (filed Feb. 14, 2003).

[^51]: AT&T Rulemaking Opposition at 1-2, 4-8.

[^52]: *Id*. at 2-3, 8-12.

[^53]: NECA Rulemaking Reply at 4-5.

[^54]: *Id*.

[^55]: *Id*. at 6 (as corrected by NECA June 17, 2003 *Ex Parte* Letter
    at 1).

[^56]: *Id*.

[^57]: *Id*. (citing *MAG Order*, 16 FCC Rcd at 19644-45, at para. 65).

[^58]: *See, e.g.*, *Access Charge Reform*, CC Docket Nos. 96-262, 94-1,
    99-249, 96-45, Order on Remand, 18 FCC Rcd 14976, 14977-78, para. 2
    (2003) ("The Commission has long recognized that, to the extent
    possible, interstate access costs should be recovered in the manner
    in which they are incurred.").

[^59]: We are not questioning our earlier decision to base the number of
    SLCs that may be assessed for PRI ISDN service on its common line
    cost relationship to basic, analog service. Rather, we question
    whether that cost relationship remains 5:1.

[^60]: *See* 47 C.F.R. § 1.407.

[^61]: For example, NECA included a specific proposed rule change in its
    petition. *See SLC T-1 Rulemaking Petition* at App. A; *see also
    supra* section III.A.

[^62]: *See, e.g.*, *SLC T-1 Rulemaking Petition* at 5-9; OPASTCO
    Rulemaking Comments at 1-4.

[^63]: *See* NECA Feb. 27, 2003 *Ex Parte* Letter, Attach. at 4. NECA
    also claims that an analysis of its federally tariffed rates shows a
    relationship of 3.76:1. *See* NECA Oct. 24, 2003 *Ex Parte* Letter
    at 2, 5; NECA Oct. 29, 2003 *Ex Parte* Letter at 2, 5. We do not
    rely on this showing because it is based on a rate relationship and
    not necessarily a cost relationship.

[^64]: In particular, it appears to have included (1) wire center costs,
    which would be recovered either through a switching charge or a line
    port charge, and (2) customer premises equipment, which would not be
    relevant to a cost comparison where the customer instead of the
    carrier provides this equipment. *See* NECA Feb. 27, 2003 *Ex Parte*
    Letter, Attach. at 4. When these costs are excluded, the ratio of
    remaining common line costs is 1.50:1.

[^65]: *See* *Access Charge Reform First Report and Order*, 12 FCC Rcd
    at 16033, para. 120 (declining to take any action with respect to
    other derived channel services because the limited record did not
    contain any cost studies for these services).

[^66]: Letter from Colin Sandy, NECA, to Marlene H. Dortch, Sec'y, FCC,
    RM-10603 at 3-4 (filed Jan. 31, 2003) (NECA Jan. 31, 2003 *Ex Parte*
    Letter).

[^67]: *See* 47 C.F.R. §§ 69.130, 69.157.

[^68]: *See* NECA Tariff F.C.C. No. 5, § 17.1.4(B) (\$23.51 per
    arrangement ISDN PRI Line Port charge); Verizon Tariff F.C.C. No. 1,
    § 4.1.7(C)(2) (\$23.43 per service ISDN PRI line port charge).

[^69]: *See infra* section IV.B.

[^70]: *See MAG Order*, 16 FCC Rcd at 19667-68, para. 128.

[^71]: *See id*. at 19673-74, para. 142.

[^72]: We note that the Joint Board recently reviewed related issues
    concerning the portability of universal service support and the
    designation of competitive ETCs. *See Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Recommended Decision, FCC
    04J-1 (rel. February 27, 2004).

[^73]: *See* 47 C.F.R. § 54.307. Currently, competitive ETCs receive per
    line support equal to that received by the incumbent carrier. *See
    id*.

[^74]: When the Commission modified the SLC assessment rules for PRI
    ISDN services, it also mirrored this change in the rule governing
    the assessment of the PICC. *See* 47 C.F.R. § 69.153(d).

[^75]: *See* 47 C.F.R. § 61.3(d).

[^76]: Verizon Rulemaking Reply at 1, 3-4.

[^77]: For example, if, without the cap, the MLB SLC would be \$12.00
    and we assume that five SLCs is the appropriate number to assess for
    derived channel T-1 service, then only \$46.00 (\$9.20 \* 5) of the
    \$60.00 in common line costs would be recovered from SLCs. The
    remaining amount (\$14.00, less some amount recovered from a line
    port charge) would be recovered from ICLS or the PICC. The
    calculations underlying this example are as follows:

    Common line costs = (Uncapped SLC) \* (# SLCs assessed) = 12.0 \* 5
    = 60.00

    SLC Revenues = (Capped SLC) \* (# SLCs assessed) = 9.20 \* 5 = 46.00

    Shortfall (*i.e.*, revenues -- costs) = 46.00 -- 60.00 = -14.00

[^78]: We understand that the rates end user customers pay for derived
    channel T-1 services reflect both interstate rate components and
    intrastate rate components. In order to understand the effect any
    rule change would have on end users, we are therefore requesting
    commenters to provide data on both interstate and intrastate rate
    changes that would result from SLC rule changes.

[^79]: *See SLC T-1 Partial Waiver Petition* at 1-4. Specifically, the
    following carriers and carrier organizations filed on behalf of
    themselves and their member carriers for this interim, partial
    waiver: Eastern Rural Telecom Association; Independent Telephone and
    Telecommunications Alliance; John Staurulakis Inc.; Matanuska; NECA;
    NTCA; OPASTCO; TDS Telecom; USTA; and Western Alliance
    (collectively, the "Waiver Associations"). *Id*. at 2, 10-12. In its
    Waiver Comments, Great Plains Communications, Inc. (Great Plains),
    as a member of OPASTCO and of NECA (but not the NECA pools),
    requests that the waiver (if granted) apply to it, as well. Great
    Plains Waiver Comments at 1-3, 5-6.

[^80]: *SLC T-1 Partial Waiver Petition* at 1-10.

[^81]: *See id*. at 1-8.

[^82]: *See id*. at 3-4.

[^83]: *See id*. at 8-9.

[^84]: Arlington Telephone Company, The Blair Telephone Company, Eastern
    Nebraska Telephone company, Rock Count Telephone Company, Hershey
    Cooperative Telephone Company, City of Faith Municipal Telephone
    Company, Kennebec Telephone Company, Roberts County Telephone
    Cooperative Association, RC Communications, and Northwest Telephone
    Cooperative Association Waiver Joint Comments (Joint Arlington
    Waiver Comments) at 1-3; GVNW Consulting Waiver Comments at 1-4;
    Great Plains Waiver Comments at 1-10; Matanuska Waiver Comments at
    1-9; TDS Telecom Waiver Comments at 1-8; Great Plains Waiver Reply
    at 1-8; and Waiver Association Waiver Reply at 1-9 (we note that two
    additional parties, North Pittsburgh Telephone Company and North
    State Communications, joined as signatories to the Waiver
    Association Waiver Reply that were not parties to the *SLC T-1
    Partial Waiver Petition*).

[^85]: *See, e.g.*, TDS Telecom Waiver Comments at 1-2 (claiming that
    the cost relationship of T-1 services to basic analog services is
    closer to 4:1 than to 24:1).

[^86]: *See, e.g.*, Great Plains Waiver Comments at 5-6.

[^87]: *See, e.g.*, Matanuska Waiver Reply at 7.

[^88]: *See* AT&T Waiver Opposition at 1-7; Sprint Waiver Reply at 1-4.

[^89]: AT&T Waiver Opposition at 2-3, 5-7; Sprint Waiver Reply at 2-3.

[^90]: AT&T Waiver Opposition at 3-4; Sprint Waiver Reply at 2-3.

[^91]: AT&T Waiver Opposition at 3-4.

[^92]: Waiver Association Waiver Reply at 5 (citing *MAG Order*, 16 FCC
    Rcd at 19617, para. 3); *see also* *id*. at 7-8; Great Plains Waiver
    Reply at 2-3. Great Plains also claims that, if rate-of-return LECs
    do not recover the necessary amounts from ICLS, then they will under
    earn. Great Plains Waiver Reply at 3-4. The Waiver Associations are
    not seeking a voluntary SLC reduction. Rather, any reductions in SLC
    revenues would not be considered voluntary revenue deductions for
    the purposes of calculating ICLS. *See* 47 C.F.R. § 54.901(a)(1);
    Great Plains Waiver Reply at 3-4; Waiver Associations Waiver Reply
    at 7-8.

[^93]: Great Plains Waiver Reply at 4-7; Waiver Association Waiver Reply
    at 3-5.

[^94]: 47 C.F.R. § 1.3.

[^95]: *WAIT Radio v. FCC*, 418 F.2d 1153 (D.C. Cir. 1969), *appeal
    after remand*, 459 F.2d 1203 (D.C. Cir. 1972), *cert. denied*, 409
    U.S. 1027 (1972) ("*WAIT Radio*"); *Northeast Cellular Tel. Co. v.
    FCC*, 897 F.2d 1164 (D.C. Cir. 1990) ("*Northeast Cellular*").

[^96]: *WAIT Radio*, 418 F.2d at 1157.

[^97]: *Northeast Cellular*, 897 F.2d at 1166; *WAIT Radio*, 418 F.2d at
    1159.

[^98]: *See* 47 C.F.R. 69.104(q). Although the Waiver Associations did
    not specify the particular subsection of rule 69.104 that they
    desire waived, we note that it is subsection (q). We thus partially
    waive subsection 69.104(q), rather than generally waiving section
    69.104 of our rules.

[^99]: Because the Waiver Associations represent the overwhelming
    majority of all rate-of-return carriers, we grant the waiver to all
    rate-of-return carriers that wish to avail themselves of this
    result. *See* Great Plains Waiver Comments at 1-3, 5-6 (noting that
    Great Plains is a member of OPASTCO and of NECA, but not of any NECA
    pool, and filing separately to ensure that the waiver could apply to
    it).

    Granting a waiver of a Commission rule to similarly situated parties
    that did not formally request the waiver is consistent with
    Commission precedent. *See, e.g.*, *Telephone Number Portability
    BellSouth Corporation Petition for Declaratory Ruling and/or
    Waiver*, CC Docket No. 95-116, Order, FCC 04-91, at para. 1 (rel.
    April 13, 2004) (granting BellSouth's request for a waiver of the
    five-year local number portability (LNP) cost recovery rule and
    extending the waiver to all incumbent LECs that had yet to include
    certain costs in their LNP cost recovery tariffs); *BellSouth
    Petition for Waiver of Section 32.22 of the Commission's Rules to
    Permit the Implementation of Flash-Cut Normalization Relating to
    Tax/Timing Difference Originating in 1988*, AAD 7-1626, Memorandum
    Opinion and Order, 2 FCC Rcd 5146, 5147, at paras. 10, 15 (Com. Car.
    Bur. 1987) (*BellSouth Section 32.22 Waiver Order*) (extending
    BellSouth's waiver petition to all carriers); *see also* 47 C.F.R. §
    1.3 (permitting the Commission, on its own motion, to grant a waiver
    of its rules).

[^100]: The Waiver Associations seek permission to recover some of their
    foregone SLC revenues from a to be developed line port charge. *See*
    *SLC T-1 Partial Waiver Petition* at 8-9. For the reasons stated
    *infra*, no waiver is necessary for rate-of-return carriers to
    assess a line port charge for derived channel T-1 service to the
    extent that the costs for the T-1 line port exceed the costs for a
    basic, analog line port.

[^101]: *See* *id*. at 4 ("The \[Waiver\] Associations request that the
    Commission grant a limited waiver of section 69.104 pending
    resolution of the issues to be considered in the recommended
    rulemaking proceeding.").

[^102]: *Access Charge Reform First Report and Order*, 12 FCC Rcd at
    16032, para. 115. By implication, this rationale for modifying the
    rule for price cap carriers (rule 69.152) also underlies the basis
    for the rule change for rate-of-return carriers (rule 69.104) made
    in the *MAG Order*. *See MAG Order*, 16 FCC Rcd at 19641-41, para.
    56.

[^103]: *Access Charge Reform First Report and Order*, 12 FCC Rcd at
    16032, para. 115. Based on the limited record in that proceeding,
    the Commission did not make any findings with respect to other
    derived channel (including T-1) services. *Id*. at 16033, para. 120.

[^104]: *See, e.g., SLC T-1 Partial Waiver Petition* at 4-7; TDS Telecom
    Waiver Comments at 4-6.

[^105]: *See, e.g.*, *Access Charge Reform First Report and Order*, 12
    FCC Rcd at 16032, para. 115; *see also* *id.* at 15998, para. 36;
    *SLC Cost Study Order*, 17 FCC Rcd at 10869-70, 74, paras. 1, 3, 12.

[^106]: *See* 47 C.F.R. § 69.130.

[^107]: *See MAG Order*, 16 FCC Rcd at 19654, para. 91.

[^108]: *See id*. at 19656, para. 96.

[^109]: For the purposes of calculating interstate common line support,
    the reduction in SLC revenues resulting from reducing from 24 to 5
    the number of SLCs assessed on customers of derived channel T-1
    service is not a voluntary revenue reduction. Rather, under the
    waiver, rate-of-return carriers will recover foregone SLC revenues
    through the normal operation of ICLS. *See* 47 C.F.R. §
    54.901(a)(1). We thus reject the suggestion of AT&T and Sprint that
    we treat the SLC revenue reduction as a voluntary reduction. *See*
    AT&T Waiver Opposition at 3-4; Sprint Waiver Reply at 2. To the
    extent, however, that a rate-of-return carrier reduces the number of
    SLCs it assesses to fewer than 5 SLCs, any corresponding reduction
    in SLC revenues will be treated as a voluntary revenue reduction and
    would not be recovered from ICLS. For example, if a rate-of-return
    carrier chooses to assess three SLCs, then the foregone revenues
    from not assessing the sixth through the twenty-fourth SLCs will be
    recovered from ICLS, but the foregone revenues from not assessing
    the fourth and fifth SLCs are voluntary reductions and may not be
    recovered from ICLS.

[^110]: *See SLC Cost Study Order*, 17 FCC Rcd at 10869-70, 79, paras.
    1, 3, 25; *see also Access Charge Reform First Report and Order*, 12
    FCC Rcd at 16010-11, para. 73.

[^111]: *See MAG Order*, 16 FCC Rcd at 19667-68, para. 128.

[^112]: *See SLC T-1 Partial Waiver Petition* at 8-9.

[^113]: *See* 47 C.F.R. §§ 36.611-12, 54.903(a).

[^114]: *See* 47 C.F.R. § 54.307.

[^115]: *See* *SLC T-1 Partial Waiver Petition* at 4.

[^116]: Grant of a waiver pending the result of a rulemaking proceeding
    is consistent with Commission precedent. *See, e.g.*, *Waiver of
    Certain Global Maritime Distress and Safety System (GMDSS) Rules
    Applicable to Fishing Vessels and Small Passenger Vessels*, Order,
    14 FCC Rcd 528, 534, at para. 11 (1998) ("In order to more fully
    examine these \[GMDSS\] issues, we believe it best to issue a
    temporary, conditional waiver of certain of the Commission's GMDSS
    rules applicable to fishing vessels until we conclude a rule making
    proceeding addressing the concerns of the fishing industry and such
    other parties who may elect to participate."); *BellSouth Section
    32.22 Waiver Order*, 2 FCC Rcd at 5147, para. 15 (granting blanket
    waiver of rule 32.22 until the Commission either denies the petition
    for rulemaking or issues a final order in the rulemaking
    proceeding).

[^117]: *See* 47 C.F.R. § 1.1206.

[^118]: *See* 47 C.F.R. § 1.1206(b)(2).

[^119]: *See id.*

[^120]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-12, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^121]: *See* 5 U.S.C. § 603(a).

[^122]: *See id*.

[^123]: *See supra* section II.

[^124]: *See supra* section III.A

[^125]: *See supra* section III.B.1.

[^126]: *Id*.

[^127]: *See* *supra* sections III.A, III.B.1.

[^128]: *See supra* sections III.B.3-III.B.5.

[^129]: *See supra* section III.B.1.

[^130]: 47 U.S.C. §§ 151, 152, 154(i), 154(j), 201-205, and 303.

[^131]: 5 U.S.C. § 603(b)(3).

[^132]: 5 U.S.C. § 601(6).

[^133]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 5 U.S.C. § 632).
    Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small
    business applies "unless an agency, after consultation with the
    Office of Advocacy of the Small Business Administration and after
    opportunity for public comment, establishes one or more definitions
    of such term which are appropriate to the activities of the agency
    and publishes such definition(s) in the Federal Register."

[^134]: 15 U.S.C. § 632.

[^135]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, *Trends in Telephone Service*, Table 5.3
    (August 2003) (*Trends in Telephone Service*).

[^136]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513310 (changed to 517110 in October 2002).

[^137]: *Id*. § 121.201, NAICS code 513321 (changed to 517211 in October
    2002).

[^138]: *Id*. § 121.201, NAICS code 513322 (changed to 517212 in October
    2002).

[^139]: 5 U.S.C. § 601(3).

[^140]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of "small business concern," which the RFA
    incorporates into its own definition of "small business." *See* 15
    U.S.C. § 632(a); 5 U.S.C. § 601(3). SBA regulations interpret "small
    business concern" to include the concept of dominance on a national
    basis. 13 C.F.R. § 121.102(b).

[^141]: 13 C.F.R. § 121.201, NAICS code 513310 (changed to 517110 in
    October 2002).

[^142]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 5, NAICS code 513310 (issued October 2000).

[^143]: *Id.* The census data do not provide a more precise estimate of
    the number of firms that have employment of 1,500 or fewer
    employees; the largest category provided is "Firms with 1,000
    employees or more."

[^144]: 13 C.F.R. § 121.201, NAICS code 513310 (changed to 517110 in
    October 2002).

[^145]: *Trends in Telephone Service* at Table 5.3.

[^146]: 13 C.F.R. § 121.201, NAICS code 513310 (changed to 517110 in
    October 2002).

[^147]: *Trends in Telephone Service* at Table 5.3.

[^148]: *Id.*

[^149]: *Id.*

[^150]: *See supra* section III.

[^151]: 5 U.S.C. § 603(c)(1)--(c)(4).

[^152]: *See supra* section III.B.

[^153]: 47 C.F.R. §§ 1.415, 1.419.

[^154]: See Electronic Filing of Documents in Rulemaking Proceedings, 63
    Fed. Reg. 24121 (1998).

[^155]: *See* 47 C.F.R. § 69.104(q).