Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | CC Docket No. 96-98          |
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| ACS of Alaska Inc.,              | ** |                              |
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| ACS of Fairbanks, Inc., and      | *  |                              |
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| ACS of the Northland, Inc.       | ** |                              |
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| Petition to Amend Section 51.405 | *  |                              |
| of the Commission's Rules to     | *) |                              |
| Implement the Eighth Circuit's   | ** |                              |
| Decision in *Iowa Utilities      |    |                              |
| Board v. FCC* Regarding the      | *  |                              |
| Burden of Proof in Rural         | *) |                              |
| Exemption Cases Under Section    | ** |                              |
| 251(f)(1) of the Communications  |    |                              |
| Act                              | *  |                              |
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**ORDER**

**Adopted: August 27, 2001 Released: August 27, 2001**

By the Chief, Common Carrier Bureau:

# INTRODUCTION

1.  In this order, we address a petition for rulemaking filed on March
    5, 2001 by ACS of Alaska, ACS of Fairbanks, Inc., and ACS of the
    Northland, Inc. (collectively "ACS"). [^1] ACS requests that the
    Commission amend section 51.405 of its rules[^2] to reflect the
    decision of the United States Court of Appeals for the Eighth
    Circuit in *Iowa Utilities Board v. FCC* concerning the allocation
    of the burden of proof in rural exemption cases under section
    251(f)(1) of the Communications Act. [^3] For the reasons discussed
    below, we deny the ACS petition.

# bACKGROUND

2.  Section 251(f) of the Communications Act exempts certain rural
    telephone companies from the interconnection and unbundling
    requirements imposed on incumbent local exchange carriers under
    section 251 of the Act. Pursuant to section 251(f), a state
    commission may terminate an exemption for a rural telephone company
    if a bona fide request from a competing carrier for interconnection,
    services, or network elements "is not unduly economically
    burdensome, is technically feasible, and is consistent with section
    254 (other than subsections (b)(7) and (c)(1)(D) thereof)."[^4]

3.  In August 1996, as part of its implementation of section 251(f), the
    Commission promulgated section 51.405 of its rules to provide
    guidelines for state commissions to determine whether a rural local
    exchange carrier is entitled to the exemptions, suspensions or
    modifications set forth in section 251(f).[^5] Rule section 51.405
    provided that upon receipt of a bona fide request for
    interconnection, services, or access to unbundled network elements,
    a rural telephone company must prove to the state commission that it
    should be entitled to continued exemption from the requirements of
    section 251(c) of the Act.[^6] To justify its continued exemption,
    or a suspension or modification under section 251(f)(2), the rural
    telephone company must offer evidence that the application of the
    requirements of section 251 "would be likely to cause undue economic
    burden beyond the economic burden that is typically associated with
    efficient competitive entry."[^7] The Commission reasoned that it
    was appropriate to place the burden of proof with the rural
    telephone company rather than the requesting carrier since the rural
    telephone company was likely in control of the relevant information
    necessary for the state commission to make a determination as to the
    request.[^8]

4.  On July 18, 2000, the Eighth Circuit issued an opinion vacating the
    Commission's rule sections 51.405(a), (c), and (d).[^9] The court
    determined that section 51.405 focused on the statute's economic
    burden requirement and disregarded the statute's companion defenses
    of technical infeasibility and/or inconsistency with section 254 of
    the Act.[^10] The court also found that the Commission had diluted
    the broad protection Congress granted to small and rural telephone
    companies by interpreting the statute's phrase "unduly economically
    burdensome" to exclude economic burdens ordinarily associated with
    competitive entry.[^11] The court concluded that the statute's
    "language looks to the whole of the economic burden the request
    imposes, not just a discrete part."[^12]

5.  The court also disagreed with the Commission's requirement that the
    rural telephone company offer evidence to the state commission to
    prove it is entitled to a continuing exemption. The court determined
    that the language of the statute; namely, the use of the word
    "terminate" (rather than "grant") and the use of the word "until,"
    suggests that a rural telephone company has a continuing exemption
    unless demonstrated otherwise by the party making the request.[^13]
    Accordingly, the court vacated rule sections 51.405(a), (c), and (d)
    and concluded that the "plain meaning" of the statute requires that
    the party making a bona fide request under section 251(f) "prove
    that the request meets the three prerequisites to justify the
    termination of the otherwise continuing rural exemption."[^14] The
    Commission did not appeal the court's ruling.[^15]

6.  On March 5, 2001, ACS filed a petition for rulemaking ("ACS
    Petition") in which it requests that the Commission issue an order
    adopting a new section 51.405 to implement the Eighth Circuit's
    decision in *Iowa Utilities Bd. II* regarding the allocation of the
    burden of proof in rural exemption cases.[^16] ACS claims its
    request is necessary to ensure nationwide uniformity in the
    interpretation of section 251(f)(1).[^17] ACS states that although
    it qualifies for the exemptions provided for rural telephone
    companies under section 251(f) of the Act, the Regulatory Commission
    of Alaska (the "RCA") has granted the request of one of its
    competitors to terminate ACS' rural exemptions.[^18] ACS states that
    in terminating its exemption under section 251(f), the RCA
    improperly allocated the burden of proof to ACS to justify its
    continued exemption and required ACS to meet the "undue economic
    burden" standards set forth in section 51.405 of the Commission's
    rules.[^19] ACS asks the Commission to issue an order, without
    notice and comment, adopting a new section 51.405(a), and requests
    expedited relief in order to provide clarification in a case it has
    pending before the Alaska Superior Court on this issue.[^20] ACS
    contends that the Alaska authorities' faulty reliance on the
    Commission's interpretation of section 251(f)(1) requires that we
    adopt "a new rule to ensure that Section 251(f)(1) is correctly and
    consistently implemented in accordance with the Eighth Circuit's
    order in *Iowa Utilities Board II*."[^21]

# DISCUSSION

7.  The Eighth Circuit's opinion in *Iowa Utilities Bd. II* invalidates
    rule section 51.405(a) which placed the burden of proof on the rural
    telephone company to prove its continued entitlement to exemption
    from the Act's network sharing requirements. In invalidating section
    51.405(a), the court provided explicit guidelines as to the plain
    meaning of section 251(f)(1) of the Act and the appropriate
    allocation of the burden of proof. The court left no doubt that the
    Commission's rule impermissibly placed the burden of proof on the
    rural telephone company, emphasizing that the language of the
    statute "suggests that the rural telephone companies have a
    continuing exemption that is only terminated once a bona fide
    request is made, provided the request is not unduly economically
    burdensome, is technically feasible, and is consistent with §
    254."[^22] Indeed, the court found that the "\[t\]he plain meaning
    of the statute requires *the party making the request* to prove that
    the request meets the three prerequisites to justify the termination
    of the otherwise continuing rural exemption."[^23]

8.  The decision of the Eighth Circuit is, of course, binding upon this
    Commission. In light of the Eighth Circuit's reasoning that the
    "plain meaning" of the statute is clear, we decline to codify a new
    rule since such a rule would merely mirror the language of the
    statutory provision. We do not reach ACS' arguments with regard to
    whether the Commission may, in this instance, issue an order
    amending its rules without notice and comment as these arguments are
    rendered moot by our decision.[^24]

# ORDERING CLAUSE 

9.  Accordingly, IT IS ORDERED, pursuant to sections 1-4, 251, and 254
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154,
    251 and 254, and sections 1.405(d) and 1.407 of the Commission's
    rules, 47 C.F.R. §§ 1.405(d) and 1.407, that the petition for
    rulemaking requested by ACS IS DENIED for the reasons set forth
    above.

#  {#section .unnumbered}

# FEDERAL COMMUNICATIONS COMMISSION {#federal-communications-commission .unnumbered}

Dorothy T. Attwood Chief, Common Carrier Bureau

[^1]: Comments opposing ACS' petition for rulemaking were filed by
    General Communications, Inc. on April 5, 2001 and by the Regulatory
    Commission of Alaska on April 17, 2001.

[^2]: 47 C.F.R. § 51.405.

[^3]: *Iowa Utilities Bd. v. FCC*, 219 F.3d 744 (8^th^ Cir. 2000)
    ("*Iowa Utilities Bd. II.*").

[^4]: 47 U.S.C. § 251(f).

[^5]: *Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996*, CC Docket No. 96-98, First Report
    and Order, 11 FCC Rcd 15499, 16118 (1996) ("*Local Competition
    Order*") (subsequent history omitted).

[^6]: 47 C.F.R. § 51.405(a).

[^7]: 47 C.F.R. § 51.405(c), (d).

[^8]: *Local Competition Order*, 11 FCC Rcd at 16118.

[^9]: *Iowa Utilities Bd. II.,* 219 F.3d at 759-762.

[^10]: *Id.* at 760. (Section 254 of the Act concerns universal
    service).

[^11]: *Id.* at 761.

[^12]: *Id.*

[^13]: *Id.* at 762.

[^14]: *Id.*

[^15]: Several parties did appeal the Eighth's Circuit's decision;
    however, the Supreme Court's review was limited to other issues.
    *Petition for Writ of Certiorari*, *Verizon v. FCC*, 121 S.Ct. 877
    (2001) (No. 00-511); *Petition for Writ of Certiorari*, *WorldCom v.
    Verizon*, 121 S.Ct. 877 (2001) (No. 00-555); *Petition for Writ of
    Certiorari*, *FCC v. Iowa Utilities Bd.*, 121 S.Ct. 878 (2001) (No.
    00-587); *Petition for Writ of Certiorari*, *AT&T v. Iowa Utilities
    Bd.*, 121 S.Ct. 878 (2001) (No. 00-590); *Petition for Writ of
    Certiorari*, *GCI v. Iowa Utilities Bd.*, 121 S.Ct. 879 (2001) (No.
    00-602).

[^16]: ACS Petition at 1.

[^17]: *Id.* at 10.

[^18]: General Communications, Inc. ("GCI"), a competitor of ACS, sought
    termination of ACS' rural exemption in Fairbanks and Juneau, Alaska
    and the surrounding areas. As GCI's petition was initially denied by
    the Alaska Public Utilities Commission ("APUC") (the agency
    predecessor to the RCA), GCI appealed its decision to the Alaska
    Superior Court which ruled that the APUC had incorrectly assigned
    GCI the burden of proof. The Alaska Superior Court then remanded the
    case to the APUC with instructions to place the burden of proof on
    ACS to justify its continuing exemption. On October 11, 1999, the
    RCA terminated ACS' rural exemptions. ACS Petition at 3-4.

[^19]: ACS Petition at 4.

[^20]: ACS Petition at 1, 5-6. ACS sought partial suspension or
    modification of the requirements of section 251 from the RCA;
    however, its petition was dismissed. Accordingly, ACS states that it
    has engaged in interconnection negotiations and subsequent
    arbitration with GCI resulting in final orders issued by the RCA
    affirming those interconnection terms. ACS has filed an appeal of
    these final orders, as well as the RCA's order terminating its rural
    exemptions, in the Alaska Superior Court. ACS also filed a motion
    for stay of the RCA orders pending its appeal, citing the Eighth's
    Circuit's ruling in *Iowa Utilities Bd. II*. That motion was denied.
    ACS Petition at 4-5.

[^21]: ACS Petition at 6.

[^22]: *Iowa Utilities Bd.*, 219 F.3d at 762.

[^23]: *Id.* (emphasis added).

[^24]: The parties have also raised a number of questions, including
    jurisdictional issues, which have been posed in a variety of forums.
    S*ee* Letter from Tina M. Pidgeon, Counsel for GCI, to Magalie Roman
    Salas, FCC (August 23, 2001) and attachment; ACS Petition at 4-5 &
    nn.11-12. We expressly do not reach the merits of those claims or
    make any jurisdictional determinations on these issues.