Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 94-129         |
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| Implementation of the Subscriber | ) |                              |
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| Selection Changes Provisions of  |   |                              |
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| Telecommunications Act of 1996   | ) |                              |
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| McLeodUSA Telecommunications     | * |                              |
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ORDER

**Adopted: November 22, 2000 Released: November 24, 2000**

By the Associate Chief, Accounting Policy Division, Common Carrier
Bureau:

**I. INTRODUCTION AND BACKGROUND**

1.  In its *Carrier Change Orders*,[^1] the Commission adopted rules
    applicable to carriers changing a consumer\'s preferred carrier.
    [^2] In this Order, we grant McLeodUSA Telecommunications Services,
    Inc. (McLeodUSA), a limited waiver of the authorization and
    verification requirements of the Commission\'s rules and *Carrier
    Change Orders*.[^3] McLeodUSA seeks this waiver as part of a merger
    transaction whereby CapRock Communications Corp., the parent company
    of CapRock Telecommunications Corp. (CTC) and IWL Communications,
    Inc. d/b/a CapRock Services Corp. (IWL), will become a direct
    subsidiary of McLeodUSA's parent company, McLeodUSA
    Incorporated.[^4] Our ruling on this waiver does not prejudge in any
    way the Commission's ultimate determination as to whether the
    requested transfers of control will serve the public interest,
    convenience and necessity.[^5] We grant this limited waiver to the
    extent necessary to enable McLeodUSA to become the preferred carrier
    of the consumers currently presubscribed to CTC and IWL, without
    first obtaining the consumers' authorization and verification.

2.  Section 258 of the Communications Act of 1934, as amended by the
    Telecommunications Act of 1996, makes it unlawful for any
    telecommunications carrier to \"submit or execute a change in a
    subscriber\'s selection of a provider of telephone exchange service
    or telephone toll service except in accordance with such procedures
    as the Commission shall prescribe.\"[^6] The goal of section 258 is
    to eliminate the practice of \"slamming,\" the unauthorized change
    of a subscriber\'s preferred carrier. Pursuant to section 258,
    carriers are absolutely barred from changing a customer\'s preferred
    local or long distance carrier without first complying with the
    Commission\'s verification procedures.[^7] In the *Section 258
    Order*, the Commission revised its procedures to ensure that
    carriers obtain the requisite authority prior to changing a
    customer\'s preferred carrier. The Commission requires that carriers
    follow one of the Commission\'s prescribed verification procedures
    before submitting carrier changes on behalf of consumers.[^8]

3.  McLeodUSA seeks a waiver of our verification rules to allow it to be
    designated the preferred local and/or long distance carrier for
    customers of CTC and IWL without first obtaining each customer's
    authorization and verification. Because we conclude that, under the
    circumstances presented, it is in the public interest to grant the
    waiver, we grant McLeodUSA a waiver, subject to the conditions
    represented in its filings.

    **II. DISCUSSION**

4.  Generally, the Commission's rules may be waived for good cause
    shown.[^9] As noted by the Court of Appeals for the D.C. Circuit,
    however, agency rules are presumed valid.[^10] The Commission may
    exercise its discretion to waive a rule where the particular facts
    make strict compliance inconsistent with the public interest.[^11]
    In addition, the Commission may take into account considerations of
    hardship, equity, or more effective implementation of overall policy
    on an individual basis.[^12] Waiver of the Commission\'s rules is
    therefore appropriate only if special circumstances warrant a
    deviation from the general rule, and such a deviation will serve the
    public interest.[^13]

5.  We find that McLeodUSA has demonstrated that good cause exists to
    justify a limited waiver of the Commission's authorization and
    verification requirements to the extent necessary to enable
    McLeodUSA to transfer to its own customer base the affected CTC and
    IWL local and/or long distance customers. In its Waiver Petition,
    McLeodUSA states that its parent company, McLeodUSA Incorporated,
    recently entered into an agreement to merge with CapRock
    Communications Corp. (CCC) and acquire control of CCC's operating
    subsidiaries, CTC and IWL.[^14] After consummating the merger,
    McLeodUSA Incorporated plans to consolidate its subsidiaries'
    operations by transferring to McLeodUSA the local and long distance
    customer bases of CTC and IWL.[^15]

6.  We conclude that special circumstances exist to justify a waiver.
    Without this waiver, the service of some former CTC and IWL
    customers might temporarily be interrupted when those companies
    cease providing presubscribed service to customers who fail to
    respond in a timely fashion to requests for preferred carrier change
    authorization; some customers might also pay potentially higher
    casual calling rates after the discontinuance of presubscribed
    service. We conclude that a waiver of the Commission's carrier
    change rules and orders is necessary to provide a seamless
    transition with no disruption of service to the transferred
    customers.

7.  We find that McLeodUSA has demonstrated that a limited waiver of the
    authorization and verification rules is in the public interest
    because it will prevent consumers from temporarily losing service or
    paying significantly higher rates, and because McLeodUSA has agreed
    to notify the affected customers as described below. McLeodUSA
    states that it will undertake a two-step process to notify the
    affected customers of the transfer. In a first letter, McLeodUSA
    will inform customers of the proposed transfer and assure them that
    no charges or rate increases will be imposed as a result of the
    transfer.[^16] McLeodUSA states that it will advise the affected
    customers that they may choose a different preferred carrier, should
    they desire to do so.[^17] In addition, customers will be given a
    toll-free number to call with any questions they may have about the
    transition.[^18] According to McLeodUSA, once the proposed transfer
    has been consummated, it will notify these customers of that event
    and reiterate the foregoing information, assurances, and
    advice.[^19]

8.  In addition, McLeodUSA has agreed that, if the Commission waives its
    rules to permit McLeodUSA to provide service to CTC's and IWL's
    former customers, McLeodUSA will work with the complainants and the
    Commission to investigate and resolve complaints regarding services
    provided by CTC or IWL.[^20] We conclude that these conditions will
    adequately protect the rights of the transferred customers of CTC
    and IWL.

9.  For the foregoing reasons, we grant McLeodUSA a waiver of the
    authorization and verification requirements of our rules for the
    limited purposes described above. The grant of this waiver is
    conditioned upon McLeodUSA's provision of customer notification and
    handling of complaints and upon Commission approval of the transfers
    of control of licenses and lines from CTC and IWL to McLeodUSA
    Incorporated, as described above and further detailed in the Waiver
    Petition and Petition Supplement.

    **III. ORDERING CLAUSES**

10. Accordingly, pursuant to authority contained in Sections 1, 4, and
    258 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154, 258, and the authority delegated under sections 0.91, 0.291,
    and 1.3 of the Commission\'s rules, 47 C.F.R. §§ 0.91, 0.291, 1.3,
    the waiver request filed by McLeodUSA Telecommunications Services,
    Inc., on October 6, 2000, and supplemented on November 21, 2000**,**
    IS GRANTED subject to the conditions, and to the extent, indicated
    herein.

11. IT IS FURTHER ORDERED that this Order is effective upon release.

    FEDERAL COMMUNICATIONS COMMISSION

    K. Michele Walters

Associate Chief,

Accounting Policy Division,

Common Carrier Bureau

[^1]: *Implementation of the Subscriber Carrier Selection Changes
    Provisions of the Telecommunications Act of 1996 and Policies and
    Rules Concerning Unauthorized Changes of Consumers\' Long Distance
    Carriers*, CC Docket No. 94-129, Further Notice of Proposed Rule
    Making and Memorandum Opinion and Order on Reconsideration, 12 FCC
    Rcd 10674 (1997), Second Report and Order and Further Notice of
    Proposed Rule Making, 14 FCC Rcd 1508 (1998) (*Section 258 Order*);
    *stayed in part, MCI WorldCom v. FCC*, No. 99-1125 (D.C. Cir. May
    18, 1999); *First Order on Reconsideration*, FCC 00-135 (released
    May 3, 2000), 65 Fed. Reg. 47678 (August 3, 2000); *stay lifted, MCI
    WorldCom v. FCC*, No. 99-1125 (D.C. Cir. June 27, 2000); Third
    Report and Order and Second Order on Reconsideration, FCC 00-255
    (released August 15, 2000); *reconsideration pending*; *Policies and
    Rules Concerning Unauthorized Changes of Consumers\' Long Distance
    Carriers*, CC Docket No. 94-129, Report and Order, 10 FCC Rcd 9560
    (1995), *stayed in part*, 11 FCC Rcd 856 (1995); *Policies and Rules
    Concerning Changing Long Distance Carrier*s, CC Docket No. 91-64, 7
    FCC Rcd 1038 (1992), *reconsideration denied*, 8 FCC Rcd 3215 (1993)
    (*PIC Change Recon. Order*); Investigation of Access and Divestiture
    Related Tariffs, CC Docket No. 83-1145, Phase I, 101 F.C.C.2d 911
    (*Allocation Order*), 101 F.C.C.2d 935 *(Waiver Order*),
    *reconsideration* *denied*, 102 F.C.C.2d 503 (1985)
    (*Reconsideration Order*) (the *Reconsideration Order* denied
    reconsideration of both the *Allocation Order* and the *Waiver
    Order*). We refer to these orders collectively as the *Carrier
    Change Orders*.

[^2]: 47 C.F.R. §§ 64.1100 - 64.1190.

[^3]: On October 6, 2000, McLeodUSA filed a Petition relating to its
    acquisition of the customer bases of CapRock Telecommunications
    Corp. and IWL Communications, Inc. (Waiver Petition). On November
    21, 2000, McLeodUSA filed a supplement to its Waiver Petition
    (Petition Supplement).

[^4]: *See* CapRock Telecommunications Corp. and IWL Communications,
    Inc. d/b/a CapRock Services Corp. Seek FCC Consent to Transfer
    Control to McLeodUSA Inc., Public Notice, DA 00-2515 (rel. Nov. 6,
    2000) (Section 214 domestic and international authority); Wireless
    Telecommunications Bureau Assignment of Authorization and Transfer
    of Control Applications Accepted for Filing, Public Notice, WTB
    Report No. 665, File No. 0000234323 (rel. Oct. 11, 2000) (Part 90:
    IWL Communications) and Wireless Telecommunications Bureau
    Assignment of Authorization and Transfer of Control Applications
    Accepted for Filing, Public Notice, WTB Report No. 672, File No.
    0000237961 (rel. Oct. 18, 2000) (Part 90: Abacus Signal);
    Application of IWL Communications, Inc., to Transfer Control of 35
    Private Land Mobile Radio Call Signs (filed Oct. 5, 2000) (Part 101:
    Lead Call Sign WNQN346); Satellite Earth Station Applications
    Accepted for Filing, Public Notice (rel. October 25, 2000) (Part 25:
    IWL Communications, Inc., File No. SES-T/C-20001006-01902; IWL
    Communications, Inc., File No. SES-T/C-20001006-01905; SpaceLink
    Systems, Inc., File No. SES-T/C-20001006-01906).

[^5]: *See* 47 U.S.C. §§ 214, 310(d).

[^6]: 47 U.S.C. § 258.

[^7]: The Commission\'s rules and orders clearly contemplate that a
    switchless reseller may be a customer\'s preferred carrier.
    Therefore, changes to a customer\'s preferred carrier that do not
    involve a change in the customer\'s underlying facilities-based
    carrier are nonetheless subject to the Commission\'s authorization
    and verification rules. *See Section 258 Order* at paras. 145-146;
    *WATS International Corp. v. Group Long Distance (USA), Inc.*, 12
    FCC Rcd 1743, 1752 (1997) (*citing* *PIC Change Recon. Order*, 8 FCC
    Rcd at 3218).

[^8]: Pursuant to these procedures, a carrier must: (1) obtain the
    subscriber\'s written authorization; (2) obtain confirmation from
    the subscriber via a toll-free number provided exclusively for the
    purpose of confirming orders electronically; or (3) utilize an
    independent third party to verify the subscriber\'s order. *See* 47
    C.F.R. § 64.1150.

[^9]: 47 C.F.R. § 1.3.

[^10]: *WAIT Radio v. FCC*, 418 F.2d 1153, 1157 (D.C. Cir. 1969), *cert.
    denied*, 409 U.S. 1027 (1972).

[^11]: *Northeast Cellular Telephone Co. v. FCC*, 897 F.2d 1164, 1166
    (D.C. Cir. 1990).

[^12]: *WAIT Radio*, 418 F.2d at 1157.

[^13]: *WAIT Radio*, 418 F.2d at 1159; *Northeast Cellular*, 897 F.2d at
    1166.

[^14]: Waiver Petition at 3.

[^15]: Waiver Petition at 3.

[^16]: McLeodUSA filed sample notification letters. *See* Waiver
    Petition, Exhibit A, and Petition Supplement, Attachment
    (Notification Letters); Waiver Petition at 5.

[^17]: Waiver Petition at 4; Notification Letters.

[^18]: Waiver Petition at 4; Notification Letters.

[^19]: Waiver Petition at 4-5; Notification Letters.

[^20]: Waiver Petition at 5.