Before the

# Federal Communications Commission {#federal-communications-commission .unnumbered}

**Washington, D.C. 20554**

In the Matter of )

)

Petition by the Iowa Utilities Board )

for Temporary Waiver ) CCB/CPD No. 00-15

of the Section 51.507(f) )

UNE Deaveraging Requirement )

# Order {#order .unnumbered}

Adopted: July 12, 2000 Released: July 13, 2000

By the Chief, Common Carrier Bureau:

# Summary

1.  In this order, we grant the Iowa Utilities Board a temporary waiver
    of section 51.507(f) of the Commission's rules until December
    31, 2000. Section 51.507(f) requires state commissions to establish
    at least three deaveraged rate zones for the pricing of unbundled
    network elements (UNEs).[^1]

# Background

2.  The Commission promulgated certain rules in the August 1996 *Local
    Competition Order* to implement section 251 of the Communications
    Act of 1934, as amended.[^2] One such rule, section 51.507(f),
    requires each state commission to "establish different rates for
    elements in at least three defined geographic areas within the state
    to reflect geographic cost differences."[^3] Section 51.501(b)
    states that "the term 'element' includes network elements,
    interconnection, and methods of obtaining interconnection and access
    to unbundled elements."[^4]

3.  A number of parties appealed the *Local Competition Order*, and the
    U.S. Court of Appeals for the Eighth Circuit stayed the
    Commission\'s section 251 pricing rules in September 1996 pending
    its consideration of the appeal.[^5] In July 1997, the Eighth
    Circuit vacated the deaveraging rule, among others, on the grounds
    that the Commission lacked jurisdiction.[^6] On January 25, 1999,
    however, the U.S. Supreme Court reversed the Eighth Circuit's
    decision with regard to the Commission's section 251 pricing
    authority, and remanded the case to the Eighth Circuit for
    proceedings consistent with the Supreme Court's opinion.[^7]

4.  Because the section 251 pricing rules had not been in force for more
    than two years, and because not all states had established at least
    three deaveraged rate zones, the Commission stayed the effectiveness
    of section 51.507(f) on May 7, 1999, to allow the states to bring
    their rules into compliance.[^8] The Commission stated that the stay
    would remain in effect until six months after the Commission
    released its order in CC Docket No. 96-45 finalizing and ordering
    implementation of high-cost universal service support for non-rural
    local exchange carriers.[^9] The Commission did so to allow the
    states to coordinate their consideration of deaveraged rate zones
    with issues raised in the Universal Service proceeding.[^10] The
    Commission said it would entertain on a case-by-case basis waiver
    petitions filed by state commissions that sought relief from the
    general rule in light of their particular facts and
    circumstances.[^11]

5.  On November 2, 1999, the Commission adopted its order in CC Docket
    No. 96-45.[^12] In that order, the Commission announced that section
    51.507(f) would become effective six months later, on May 1, 2000,
    consistent with its earlier decision in CC Docket No. 96-98.[^13] On
    April 6, 2000, the Commission denied a reconsideration petition by
    GTE Florida that sought continuation of the stay until May 1,
    2001.[^14] The Commission reasoned that further nationwide delay of
    the deaveraging rule "would impede the ability of competitive local
    exchange carriers to obtain interconnection and UNEs at cost-based
    rates, and to compete in the local market."[^15]

6.  The Common Carrier Bureau released an order April 28, 2000, granting
    limited waivers from the deaveraging requirement to seven state
    commissions.[^16] The longest of the waivers extend until October
    31, 2000.[^17] The Bureau granted the waivers because the state
    commissions had demonstrated through their considerable efforts that
    they were committed to implementing the deaveraging requirement and
    merely had been delayed by procedural difficulties.[^18] The Bureau
    recognized the difficult nature of deaveraging, acknowledged the
    unique and drawn out history of the Commission's deaveraging rule,
    and observed that circumstances in particular states will not always
    allow as expedient an implementation of the Commission's rules as it
    might wish.[^19] The Bureau concluded that a short delay would
    assist the states in establishing more precise rate zones, thereby
    aiding rather than impeding the ability of competitive LECs to
    obtain cost-based UNEs.[^20] Two days before the Bureau released the
    waiver order on the first set of petitions, the Iowa Utilities Board
    filed this petition seeking a limited waiver of section 51.507(f)
    until December 31, 2000, so that it could complete a deaveraging
    proceeding involving U S WEST.[^21]

# Discussion

7.  We grant the Iowa Board a limited waiver of section 51.507(f) until
    December 31, 2000. Generally, the Commission\'s rules may be waived
    for good cause shown.[^22] The Commission may exercise its
    discretion to waive a rule where the particular facts make strict
    compliance inconsistent with the public interest.[^23] In addition,
    the Commission may take into account on an individual basis
    considerations of hardship, equity, or more effective implementation
    of overall policy.[^24] Waiver of the Commission's rules is
    therefore appropriate if special circumstances warrant a deviation
    from the general rule, and such a deviation will serve the public
    interest.[^25] We conclude that such circumstances are present here.

8.  The petition explains that U S WEST had filed a tariff on March 15,
    2000, to deaverage its wholesale and UNE prices into three zones
    based on exchange size, and to begin deaveraging its retail
    rates.[^26] Three parties, including AT&T, filed objections, raising
    what the Iowa Board describes as complex issues on matters such as
    U S WEST's proposed zones, the scope of the required deaveraging,
    and the pricing methodology.[^27] Thus, the Iowa Board docketed the
    matter as a contested case, with opportunity for discovery, several
    rounds of pre-filed testimony, a formal hearing scheduled to begin
    September 26, 2000, and initial and reply briefs.[^28] The Iowa
    Board's May 19 supplement to its petition further explains that some
    of the issues center around U S WEST's refusal to remove from its
    calculations data related to thirty-two rural exchanges that the
    Iowa Board has already authorized U S WEST to sell.[^29] The Iowa
    Board has since ordered U S WEST to file exhibits indicating the
    effect of the sale on U S WEST's proposed UNE prices.[^30] For all
    these reasons, the Iowa Board states that it will not be possible to
    resolve the matter by May 1, 2000.[^31] The Iowa Board says it
    anticipates a written decision by December 31, 2000.[^32]

9.  In light of these facts, we find good cause to grant the Iowa Board
    its limited waiver request. As was the case in the petitions that
    were the subject of our prior waiver order, the Iowa Board has
    demonstrated through considerable efforts its commitment to our
    deaveraging policy in the face of special procedural circumstances,
    including the resistance of U S WEST to provide data necessary for
    the Iowa Board to evaluate the deaveraged rates. Granting the waiver
    will allow the Iowa Board needed additional time to procure and
    review information necessary for it to determine the appropriateness
    of the proposed prices. This will serve the public interest by
    helping to produce rates that are closer to cost than might result
    were we to insist upon strict compliance with the rule deadline in
    this instance. Thus, we disagree with AT&T's contention that the
    Iowa Board has failed to demonstrate the requisite special
    circumstances necessary for a waiver.[^33] We remain committed to
    the notion that deaveraging plays a crucial role in affording
    competitive local exchange carriers an opportunity to compete in the
    local market. Mispriced deaveraged rates, however, defeat the
    purpose of deaveraging in the first place.

10. AT&T argues that U S WEST 's refusal to remove the thirty-two
    exchanges from its calculations, or to provide the underlying data,
    is grounds for sanctions against U S WEST, and should not be the
    basis for a waiver from which U S WEST will benefit.[^34] We find
    this argument misplaced. Whether U S WEST should exclude the
    thirty-two exchanges, as well as whether U S WEST should be
    sanctioned, are matters for the Iowa Board in the first instance,
    and not for the Commission. Moreover, it is questionable that delays
    in deaveraging are to U S WEST's ultimate benefit. Until U S WEST
    offers deaveraged UNE rates, it arguably is not eligible under
    section 271 of the Communications Act for entry into the
    long-distance market in Iowa.[^35] Under the Commission's recently
    adopted order implementing the proposal of the Coalition for
    Affordable Local and Long-Distance Service, U S West will also be
    allowed to deaverage its subscriber line charges in Iowa and may
    receive increased universal service support once its rates are
    deaveraged.[^36]

11. In the previous waiver order, the Bureau granted some of the state
    commissions extensions until October 31, 2000, which was less time
    than those commissions requested.[^37] The Bureau did so because the
    availability of cost-based UNEs plays a critical role in the
    development of local competition, and the Bureau hopes to spur that
    competition as quickly as possible.[^38] AT&T argues that the issues
    the Iowa Board faces are no more complex than those these prior
    petitioners faced, and thus that any waiver we grant the Iowa Board
    should be similarly limited to October 31, 2000.[^39] Unlike those
    previous petitions, however, the Iowa Board has provided us with a
    more definite picture of its docket status and projected completion
    date, and has requested a specific, relatively short extension from
    the May 1, 2000, deadline.[^40] Thus, we grant the Iowa Board a
    limited waiver of section 51.507(f) until December 31, 2000.

# Ordering Clauses

12. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 201,
    251, 303(r), and 405 of the Communications Act of 1934, as amended,
    47 U.S.C. §§ 154(i), 154(j), 201, 251, 303(r), and 405, and Sections
    0.91, 0.201-03, and 0.291 of the Commission\'s rules, 47 C.F.R. §§
    0.91, 0.201-03, and 0.291, that the waiver petition is GRANTED to
    the extent described above.

    Federal Communications Commission

    Lawrence E. Strickling

    Chief, Common Carrier Bureau

[^1]: *See* 47 U.S.C. § 51.507(f).

[^2]: *See In re* Implementation of the Local Competition Provisions of
    the Telecommunications Act of 1996, CC Docket No. 96-98, *Report and
    Order*, 11 FCC Rcd. 15,499 (1996) (Local Competition Order).

[^3]: 47 C.F.R. § 51.507(f).

[^4]: 47 C.F.R. § 51.501(b).

[^5]: Iowa Utilities Board v. FCC, 96 F. 3d 1116 (8th Cir. 1996) (per
    curiam) (temporarily staying the *Local Competition Order* until the
    filing of the court's order resolving the petitioners' motion for
    stay). *See also* Iowa Utilities Board v. FCC, 109 F.3d 418 (8th
    Cir.) (dissolving temporary stay and granting petitioners' motion
    for stay, pending a final decision on the merits of the appeal),
    *motion to vacate stay denied*, 117 S. Ct. 429 (1996).

[^6]: Iowa Utilities Board v. FCC, 120 F.3d 753, 800 n.21, 819 n.39, 820
    (8th Cir. 1997).

[^7]: AT&T v. Iowa Utilities Board, 119 S. Ct. 721, 733, 738 (1999).

[^8]: *See In re* Deaveraged Rate Zones for Unbundled Network Elements,
    CC Docket No. 96-98, *Stay Order*, 14 FCC Rcd. 8300, 8300-01 (1999).

[^9]: *Id.*, 14 FCC Rcd. at 8301.

[^10]: *Id.*, 14 FCC Rcd. at 8302.

[^11]: *Id.*, 14 FCC Rcd. at 8303.

[^12]: *In re* Federal-State Joint Board on Universal Service, CC Docket
    No. 96-45, *Ninth Report & Order and Eighteenth Order on
    Reconsideration*, 14 FCC Rcd. 20,432 (1999).

[^13]: *Id.*, 14 FCC Rcd. at 20,492-93. *See In re* Deaveraged Rate
    Zones for Unbundled Network Elements, CC Docket No. 96-98, *Stay
    Order*, 14 FCC Rcd. 8300, 8301 (1999).

[^14]: *In re* Deaveraged Rate Zones for Unbundled Network Elements, CC
    Docket No. 96-98, *Order on Reconsideration*, FCC 00-121 (rel. April
    6, 2000).

[^15]: *Id.* at para. 4.

[^16]: *In re* Petitions for Waiver of the Section 51.507(f) UNE
    Deaveraging Requirement, CCB/CPD Nos. 00-07 to 00-14, *Order*, DA
    00-956 (Common Car. Bur. rel. April 28, 2000) (Waiver Order). The
    seven commissions are: the Public Utility Commission of Oregon, the
    Nebraska Public Service Commission, the Wisconsin Public Service
    Commission, the Public Utilities Commission of Ohio, the Arizona
    Corporation Commission, the North Carolina Utilities Commission, and
    the Idaho Public Utilities Commission. *Id.* at ¶ 1. The Bureau also
    granted the Public Service Commission of the District of Columbia a
    permanent waiver in that order. *Id*. at ¶¶ 1, 19.

[^17]: *Id*. at ¶ 7.

[^18]: *Id.* at ¶¶ 7, 17-18.

[^19]: *Id.* at ¶ 18.

[^20]: *Id.*

[^21]: *In re* Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996, CC Docket No. 96-98, *Petition by
    the Iowa Utilities Board for Temporary Waiver*, CCB/CPD No. 00-15,
    at 1-2 (filed April 26, 2000) (Iowa Pet.).

[^22]: 47 C.F.R. § 1.3.

[^23]: Northeast Cellular Tel. Co. v. FCC, 897 F.2d 1164, 1166 (D.C.
    Cir. 1990) (Northeast Cellular).

[^24]: WAIT Radio v. FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969), *cert.
    denied*, 409 U.S. 1027 (1972).

[^25]: *Id.*, 418 F.2d at 1159; *Northeast Cellular*, 897 F.2d at 1166.

[^26]: *Iowa Pet.* at 3.

[^27]: *Iowa Pet.* at 3 & attach. A at 1-2.

[^28]: *Iowa Pet.* at 3.

[^29]: *In re* Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996, CC Docket No. 96-98, *Supplement to
    Petition by the Iowa Utilities Board for Temporary Waiver*, CCB/CPD
    No. 00-15, at 2-3 (filed May 19, 2000) (Iowa Supp. Pet.).

[^30]: *Id..* at 3.

[^31]: *Iowa Pet.* at 3; *Iowa Supp. Pet.* at 3.

[^32]: *Iowa Pet.* at 3.

[^33]: *See In re* Iowa Utilities Board's Petition for Limited Waiver of
    47 C.F.R. Section 51.507(f), CCB/CPD No. 00-15, Comments of AT&T, at
    4 (filed June 5) (AT&T Opposition).

[^34]: AT&T Opposition at 4.

[^35]: *See* 47 U.S.C. §§ 271(c)(2)(B)(i) (conditioning Bell operating
    company entry into in-region long-distance market on compliance with
    sections 251(c)(2) and 252(d)(1)); 251(c)(2) (requiring incumbent
    local exchange carriers to provide interconnection at just,
    reasonable, and nondiscriminatory rates); 252(d)(1) (requiring
    determinations by state commissions of just and reasonable rates for
    interconnection and UNEs to be based on costs); *Local Competition
    Order*, 11 FCC Rcd. at 15,882 (basing UNE deaveraging requirement on
    conclusion that deaveraged rates more closely reflect costs).

[^36]: *See In re* Access Charge Reform, CC Docket No. 96-262*, Sixth
    Report and Order in CC Docket No. 96-262 and 96-1*, FCC 00-193, at
    ¶¶ 73, 113, 127, 206-210 (rel. May 31, 2000).

[^37]: *See Waiver Order*, at ¶¶ 7, 17. *See, e.g.,* Public Utilities
    Commission of Ohio's Petition for Waiver, CCB/CPD No. 00-10, at 4
    (filed April 7, 2000) (Ohio Pet.) (requesting an extension until "no
    earlier than May 2001"); North Carolina Utilities Commission's
    Petition for Waiver, CCB/CPD No. 00-13, at 5 (filed April 19, 2000)
    (N.C. Pet.) (requesting an extension until "no earlier than May 1,
    2001"); Idaho Public Utilities Commission's Petition for Limited
    Waiver of FCC Rule 47 CFR § 51.507(f), CCB/CPD No. 00-14, at 1
    (filed April 13, 2000) (Idaho Petition) (requesting an extension
    until December 31, 2001).

[^38]: *Waiver Order* at ¶ 17.

[^39]: AT&T Opposition at 3-4, 6.

[^40]: *Compare* Iowa Pet. at 3 (stating that the Iowa Board has
    scheduled a formal hearing for September 26, 2000, and anticipates
    issuing a written decision by December 31, 2000) *with* Neb. Pet. at
    1, 3 (requesting a waiver "until such time that \[the Nebraska
    Public Service\] Commission concludes its cost model
    investigation"), Wis. Pet. at 2 (estimating a decision "by sometime
    around the end of the year" but not making a specific extension
    request), Ohio Pet. at 4 (requesting an extension until "no earlier
    than May 2001," and providing no estimated completion date), N.C.
    Pet. at 5 (stating that hearings have been scheduled for July 31,
    2000, and August 28, 2000, but that motions to modify the schedule
    have been filed, and requesting an extension until "no earlier than
    May 1, 2001," but providing no estimated completion date), *and*
    Idaho Pet. at 1 (explaining that a March 28, 2000, public workshop
    set a schedule for the state's non-rural universal service fund,
    stating that once the universal service is finalized the Idaho
    commission will be ready to implement deaveraging, and requesting an
    extension until December 31, 2001).