Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 96-45          |
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| Spectra Communications Group,    | ) |                              |
| LLC                              | * |                              |
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| And                              |   |                              |
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| GTE Midwest Incorporated         | * |                              |
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| Joint Petition for Waiver of     | * |                              |
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| Definition of "Study Area"       |   |                              |
| Contained in the                 | * |                              |
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| Part 36 Appendix-Glossary of the | ) |                              |
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| Commission's Rules and Section   | * |                              |
| 69.3(e)(9) of the Commission's   |   |                              |
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| Spectra Communications Group,    | ) |                              |
| LLC                              | * |                              |
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| Petition for Waiver of Section   |   |                              |
| 61.41(c) of the Commission's     | * |                              |
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+----------------------------------+---+------------------------------+

**ORDER**

**Adopted: July 26, 2000 Released: July 27, 2000**

By the Deputy Chief, Accounting Policy Division:

#  {#section .unnumbered}

# Introduction

1.  In this Order, we grant requests from Spectra Communications Group,
    LLC (Spectra) and GTE Midwest Incorporated (GTE) for a waiver of the
    definition of "study area" contained in the Part 36
    Appendix-Glossary of the Commission's rules.[^1] This waiver will
    permit GTE to remove 107 exchanges comprising 116,149 access lines
    from its GTE Systems of Missouri, Contel Missouri, and GTE Missouri
    study areas (collectively, Missouri study areas). This waiver also
    will permit Spectra to combine the 107 exchanges it is acquiring
    from GTE into a single new study area for Missouri.

2.  We also grant Spectra's request for waiver of section 61.41(c)(2) of
    the Commission\'s rules to permit Spectra to operate under
    rate-of-return regulation after acquiring the 107 GTE exchanges that
    are currently under price cap regulation. Finally, we grant the
    request of Spectra and GTE for waiver of section 69.3(e)(9) of the
    Commission's rules to permit the acquired access lines to re-enter
    the National Exchange Carrier Association, Inc. (NECA) common line
    pool.

# STUDY AREA WAIVER

A.  **Background**

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3.  *[Study Area Boundaries]{.underline}*. A study area is a geographic
    segment of an incumbent local exchange carrier's (LEC's) telephone
    operations. Generally, a study area corresponds to an incumbent
    LEC\'s entire service territory within a state. Thus, incumbent LECs
    operating in more than one state typically have one study area for
    each state. When a carrier acquires additional entire study areas in
    a given state, however, the carrier may operate more than one study
    area in that state. The Commission froze all study area boundaries
    effective November 15, 1984,[^2] and an incumbent LEC must apply to
    the Commission for a waiver of the study area boundary freeze if it
    wishes to sell or purchase additional exchanges.

4.  *[Transfer of Universal Service Support]{.underline}*. Section
    54.305 of the Commission's rules provides that a carrier acquiring
    exchanges from an unaffiliated carrier shall receive the same
    per-line levels of high-cost universal service support for which the
    acquired exchanges were eligible prior to their transfer.[^3] For
    example, if a rural carrier purchases an exchange from a non-rural
    carrier that receives support based on the Commission's new
    universal service support mechanism for non-rural carriers,[^4] the
    loops of the acquired exchange shall receive the same per-line
    support as calculated under the new non-rural mechanism, regardless
    of the support the rural carrier purchasing the exchange may receive
    for any other exchanges.[^5] Section 54.305 is meant to discourage
    carriers from transferring exchanges merely to increase their share
    of high-cost universal service support, especially during the
    Commission's transition to universal service support mechanisms that
    provide support to carriers based on the forward-looking economic
    cost of operating a given exchange.[^6] High-cost support mechanisms
    currently include non-rural carrier forward-looking high-cost
    support,[^7] interim hold-harmless support for non-rural
    carriers,[^8] rural carrier high-cost loop support,[^9] local
    switching support,[^10] and Long Term Support (LTS).[^11] To the
    extent that a carrier acquires exchanges receiving any of these
    forms of support, the acquiring carrier will receive the same
    per-line levels of support for which the acquired exchanges were
    eligible prior to their transfer.

5.  As described in the Commission's recent order adopting an integrated
    interstate access reform and universal service proposal put forth by
    the members of the Coalition for Affordable Local and Long Distance
    Service (CALLS), beginning July 1, 2000, if a price cap LEC acquires
    exchanges from another price cap LEC the acquiring carrier will
    become eligible to receive interstate access universal service
    support for the acquired exchanges.[^12] Because the interstate
    access universal service support mechanism is capped at \$650
    million, transactions involving the transfer of support will not
    increase the mechanism's overall size.[^13] If a non-price cap LEC
    acquires exchanges from a price-cap LEC, per-line interstate access
    universal service support will not transfer.[^14]

6.  *[The Petition for Waiver]{.underline}*. GTE Midwest, an incumbent
    LEC that currently serves approximately 435,384 access lines in
    Missouri, proposes to sell 107 telephone exchanges that serve
    approximately 116,149 access lines in Missouri.[^15] GTE seeks a
    waiver of the rule freezing study area boundaries to allow it to
    remove these exchanges from three of GTE's Missouri study areas.
    Spectra is a new company formed to purchase and operate the
    exchanges it is purchasing from GTE.[^16] Spectra seeks a waiver of
    the rule freezing study area boundaries to allow it to form a new
    single study area in Missouri.[^17]

7.  On April 3, 2000, the Common Carrier Bureau (Bureau) released a
    public notice soliciting comments on the petition.[^18] No comments
    were filed.

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B.  **Discussion**

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8.  We find that good cause exists to waive the definition of study area
    contained in the Part 36 Appendix-Glossary of the Commission's rules
    to permit GTE to remove 107 exchanges from its Missouri study areas
    and to permit Spectra to combine the 107 exchanges into a single new
    study area for Missouri.

9.  Generally, the Commission's rules may be waived for good cause
    shown.[^19] As noted by the Court of Appeals for the D.C. Circuit,
    however, agency rules are presumed valid.[^20] The Commission may
    exercise its discretion to waive a rule where the particular facts
    make strict compliance inconsistent with the public interest.[^21]
    In addition, the Commission may take into account considerations of
    hardship, equity, or more effective implementation of overall policy
    on an individual basis.[^22] 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. In evaluating petitions seeking a waiver of the
    rule freezing study area boundaries, the Commission traditionally
    has applied a three-prong standard: first, the change in study area
    boundaries must not adversely affect the universal service funds;
    second, no state commission having regulatory authority over the
    transferred exchanges may oppose the transfer; and third, the
    transfer must be in the public interest.[^23] For the reasons
    discussed below, we conclude that Spectra and GTE have satisfied
    these criteria and demonstrated that good cause exists for a waiver
    of the Commission's study area freeze rule.

10. First, we find that Spectra and GTE have demonstrated that the
    proposed changes in the study area boundaries will not adversely
    affect any of the universal service mechanisms. Because, under the
    Commission's rules, carriers purchasing high-cost exchanges can only
    receive the same level of per-line support as the selling company
    was receiving for those exchanges prior to the sale, there can, by
    definition, be no adverse impact on the universal service fund
    resulting from this transaction.[^24] As such, Spectra will receive
    the same per-line levels of interim hold-harmless support for which
    the 107 GTE exchanges were eligible prior to their transfer.[^25]
    Because GTE does not currently receive LTS for the acquired
    exchanges, we note that Spectra will be ineligible to receive LTS
    for those exchanges. We also note that because Spectra will not be a
    price cap LEC,[^26] it will not be eligible to receive interstate
    access universal service support for the acquired exchanges.[^27]

11. Second, no state commission having regulatory authority over the
    transferred exchanges opposes the transfer. In a letter to the
    Common Carrier Bureau, the Missouri Public Service Commission has
    indicated that it does not oppose grant of the requested study area
    waiver for GTE and Spectra.[^28]

12. Finally, we conclude that the public interest is served by a waiver
    of the study area freeze rule to permit GTE to remove the 107
    exchanges from its Missouri study areas and to permit Spectra to
    combine the 107 exchanges into a single new study area. In addition
    to the services that GTE currently provides to customers in
    Missouri, Spectra intends to offer customers services such as
    Internet access, voice mail, and broader caller ID
    availability.[^29] Spectra also states that, by being headquartered
    in Missouri, it will be able to provide improved customer
    services.[^30] Spectra also notes that CenturyTel, Inc. will provide
    operational and marketing support to Spectra, to the extent required
    to serve the rural and low-density exchanges Spectra intends to
    acquire.[^31] Based on these facts and the findings of the Missouri
    Public Service Commission, we conclude that petitioners have
    demonstrated that grant of this waiver serves the public interest.

# WAIVER OF THE COMMISSION'S PRICE CAP RULES

## Background

13. Section 61.41(c) of the Commission\'s rules provides that any price
    cap telephone company subject to a merger, acquisition, or similar
    transaction shall continue to be subject to price cap regulation
    notwithstanding such transaction.[^32] In addition, when a non-price
    cap company acquires, merges with, or otherwise becomes affiliated
    with a price cap company or any part thereof, the acquiring company
    becomes subject to price cap regulation and must file price cap
    tariffs within a year.[^33] Moreover, LECs that become subject to
    price cap regulation are not permitted to withdraw from such
    regulation.[^34] Under these rules, Spectra's acquisition of GTE's
    107 Missouri exchanges would subject Spectra to price cap regulation
    for the acquired exchanges.

14. In the *LEC Price Cap Reconsideration Order*, the Commission
    explained that section 61.41(c) is intended to address two concerns
    regarding mergers and acquisitions involving price cap
    companies.[^35] The first concern was that, in the absence of the
    rule, a LEC might attempt to shift costs from its price cap
    affiliate to its non-price cap affiliate, allowing the non-price cap
    affiliate to charge higher rates to recover its increased revenue
    requirement, while increasing the earnings of the price cap
    affiliate. The second concern was that, absent the rule, a LEC might
    attempt to game the system by switching back and forth between
    rate-of-return regulation and price cap regulation. For example,
    without such a rule, a price cap company may attempt to "game" the
    system by opting out of price cap regulation, building a large rate
    base under rate-of-return regulation so as to raise rates and then,
    after returning to price caps, cutting costs back to an efficient
    level, thereby enabling it to realize greater profits. It would not
    serve the public interest, the Commission stated, to allow a carrier
    alternately to "fatten up" under rate-of-return regulation and "slim
    down" under price cap regulation, because the rates would not
    decrease in the manner intended under price cap regulation.[^36]

15. The Commission nonetheless recognized that narrow waivers of the
    price cap "all-or-nothing" rule might be justified if efficiencies
    created by the purchase and sale of exchanges outweigh the threat
    that the system might be subject to gaming.[^37] Such waivers will
    not be granted unconditionally, however. Waivers of the
    all-or-nothing rule will be granted conditioned on the selling price
    cap company's downward adjustment to its price cap indices to
    reflect the sale of exchanges.[^38] That adjustment is needed to
    remove the effects of transferred exchanges from rates that have
    been based, in whole or in part, upon the inclusion of those
    exchanges in a carrier's price cap indices. [^39] In addition,
    waiver of the all-or-nothing rule has been granted subject to the
    condition that the acquiring carrier obtain prior Commission
    approval of any attempt to return to price cap regulation.[^40]

16. Spectra intends to operate under rate-of-return regulation, while
    GTE is subject to price cap regulation. Spectra seeks a waiver of
    section 61.41(c)(2) of the Commission's rules to permit it to be
    regulated under rate-of-return regulation after acquiring from GTE
    the 107 Missouri exchanges that are currently under price cap
    regulation. Absent a waiver of the all-or-nothing price cap rules,
    all of Spectra's operations would become subject to price cap
    regulation no later than one year after acquiring the price cap
    exchanges from GTE.

## Discussion

17. For the reasons discussed below, we find that good cause exists for
    us to waive section 61.41(c)(2) of the Commission's rules, and that
    it would be in the public interest to grant Spectra's waiver
    request. As discussed previously, the courts have interpreted
    section 1.3 of the Commission's rules to require a petitioner
    seeking a waiver of a Commission rule to demonstrate that special
    circumstances warrant a deviation from the general rule, and such a
    deviation will serve the public interest.[^41]

18. Because Spectra is significantly smaller than any of the carriers
    subject to mandatory price caps, we find that special circumstances
    support a waiver of section 61.41(c)(2) of the Commission's rules.
    In evaluating requests for waiver of section 61.41(c)(2), the Bureau
    has taken into account the company's preferences and, in particular,
    the preferences of small carriers.[^42] Spectra has expressed a
    preference for operating under rate-of-return regulation.[^43] After
    the proposed transaction, Spectra will still be far smaller than any
    of the LECs subject to mandatory price caps, [^44] and also will be
    significantly smaller than many other carriers that have been
    granted waivers of section 61.41(c)(2) of the Commission's
    rules.[^45] Therefore, we believe that Spectra presents special
    circumstances to support its waiver request.

19. We conclude that, in this case, waiver of section 61.41(c)(2) of the
    Commission's rules will serve the public interest. We agree with
    Spectra that the circumstances surrounding Spectra's acquisition of
    GTE's exchanges fail to give rise to the dangers of cost-shifting
    and gaming of the system.[^46] Spectra is not seeking to maintain
    separate affiliates under different systems of regulation, and,
    therefore, Spectra will have no opportunity to shift costs between
    price cap and rate-of-return affiliates.[^47] Moreover, to safeguard
    against possible gaming resulting from attempts to elect price cap
    regulation, we will require Spectra to seek prior Commission
    approval if it seeks to elect price cap regulation. At that time,
    the Commission can make a determination if the transaction raises
    concerns that the Commission sought to address in section 61.41 of
    its rules. We believe that requiring Spectra to seek Commission
    approval before electing price cap regulation is sufficient to deter
    gaming in the future.

20. In accordance with section 61.45 of the Commission's rules, we also
    require GTE to adjust its price cap indices to reflect the removal
    of the transferred access lines from its Missouri study areas.[^48]
    Section 61.45 of the Commission's rules grants the Commission
    discretion to require price cap carriers to make adjustments to
    their price cap indices to reflect cost changes resulting from rule
    waivers.[^49] We require GTE to make such an adjustment. [^50]

# IV. WAIVER OF SECTION 69.3(e)(9) {#iv.-waiver-of-section-69.3e9 .unnumbered}

## Background

21. Under section 69.3(g)(3) of the Commission's rules, telephone
    companies involved in mergers or acquisitions that wish to have more
    than 50,000 common lines re-enter the NECA common line pool must
    request a waiver of section 69.3(e)(9).[^51] In adopting the 50,000
    line threshold for waiver requests, the Commission recognized that
    this requirement should not deter local exchange carriers from
    executing a transaction that otherwise would be desirable.[^52]
    Therefore, if the telephone company has met all other legal
    obligations, a request for waiver of section 69.3(e)(9) will be
    deemed granted sixty-one (61) days from the date of the public
    notice inviting comment on the waiver request unless, *inter alia*,
    the merger or acquisition involves one or more partial study
    areas.[^53] In mergers or acquisitions involving one or more partial
    study areas, petitioners seeking waiver of section 69.3(e)(9) must
    demonstrate that the re-entry of non-pooling access lines into the
    common line pool would not have a substantial adverse effect on the
    pool's revenue requirement and would not significantly increase the
    LTS obligations of the remaining non-pooling LECs.[^54] Such
    petitions must be filed as part of a Part 36 study area waiver
    request.[^55] Spectra and GTE seek a waiver of section 69.3(e)(9) of
    the Commission's rules to permit Spectra to return the 116,149
    access lines it is acquiring from GTE to the NECA common line pool.
    [^56]

## Discussion

22. Because re-entry of Spectra's acquired 116,149 non-pooling access
    lines into the common line pool will not have a substantial adverse
    effect on the pool's revenue requirement and will not increase the
    LTS obligations of non-pooling LECs, we conclude that good cause
    exists for us to waive section 69.3(e)(9) of the Commission's rules.
    NECA has advised Spectra that including these access lines in the
    common line pool will cause a change of slightly more than one half
    of one percent (0.53%) in the overall common line pool revenue
    requirement.[^57] We agree with NECA that such an increase in the
    common line pool's revenue requirement is not significant enough to
    justify a denial of Spectra's waiver request. We also conclude that
    including Spectra's acquired access lines in the common line pool
    will not increase the LTS obligations of contributing carriers. In
    accordance with section 54.305 of the Commission's rules, because
    GTE does not currently receive LTS for the acquired exchanges,
    Spectra will also be ineligible to receive LTS for those
    exchanges.[^58] As such, the LTS obligations of contributing
    carriers will not be impacted. We, therefore, conclude that there is
    good cause to grant Spectra a waiver of section 69.3(e)(9) because
    NECA\'s common line pool will not be adversely affected, and there
    will be no significant increase in LTS obligations.

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V.  **ORDERING CLAUSES**

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23. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 5(c), 201,
    and 202 of the Communications Act of 1934, as amended, 47 U.S.C. §§
    151, 154(i), 155(c), 201, and 202, and sections 0.91, 0.291, and 1.3
    of the Commission\'s rules, 47 C.F.R. §§ 0.91, 0.291, and 1.3, that
    the petition for waiver of Part 36, Appendix‑Glossary, of the
    Commission\'s rules, filed by Spectra Communications Group, LLC and
    GTE Midwest Incorporated, on March 17, 2000, IS GRANTED.

24. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 5(c), 201, and
    202 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154(i), 155(c), 201, and 202, and sections 0.91, 0.291, and 1.3 of
    the Commission\'s rules, 47 C.F.R. §§ 0.91, 0.291, and 1.3, that the
    petition for waiver of sections 61.41(c) and 69.3(e)(9) of the
    Commission's rules, filed by Spectra Communications Group, LLC and
    GTE Midwest Incorporated, IS GRANTED.

25. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 5(c), 201, and
    202 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154(i), 155(c), 201, and 202, and sections 0.91, 0.291, 1.3, and
    61.43 of the Commission\'s rules, 47 C.F.R. §§ 0.91, 0.291, 1.3, and
    61.43, that GTE Midwest Incorporated SHALL ADJUST its price cap
    indices in its annual price cap filing to reflect cost changes
    resulting from this transaction, consistent with this Order.

FEDERAL COMMUNICATIONS COMMISSION

Katherine L. Schroder

Deputy Chief, Accounting Policy Division

[^1]: Spectra Communications Group, LLC and GTE Midwest Incorporated,
    Joint Petition for Waiver of the Definition of "Study Area" in the
    Appendix to Part 36 of the Commission's Rules (Glossary) and Section
    69.3(e)(9) of the Commission's Rules and Petition for Waiver of
    Section 61.41(c) of the Commission's Rules, CC Docket No. 96-45
    (filed Mar. 17, 2000) (Petition).

[^2]: 47 C.F.R. § 36 app. (defining \"study area\"). *See* *MTS and WATS
    Market Structure, Amendment of Part 67 of the Commission\'s Rules
    and Establishment of a Joint Board*, CC Docket Nos. 78-72, 80-286,
    Recommended Decision and Order, 49 Fed. Reg. 48325 (1984); Decision
    and Order, 50 Fed. Reg. 939 (1985); *see also* *Amendment of Part 36
    of the Commission\'s Rules and Establishment of a Joint Board*, CC
    Docket No. 80-286, Notice of Proposed Rulemaking, 5 FCC Rcd 5974
    (1990).

[^3]: 47 C.F.R. § 54.305.

[^4]: On November 2, 1999, the Commission released two orders finalizing
    implementation plans for high-cost reform for non-rural carriers.
    *Federal-State Joint Board on Universal Service*, Ninth Report and
    Order and Eighteenth Order on Reconsideration, CC Docket No. 96-45,
    FCC 99-306 (rel. Nov. 2, 1999); *Federal-State Joint Board on
    Universal Service*; *Forward-Looking Mechanism for High Cost Support
    for Non-Rural LECs*, CC Docket Nos. 96-45, 97-160, Tenth Report and
    Order (rel. Nov. 2, 1999). The new mechanism, which went into effect
    on January 1, 2000, does not apply to rural carriers. The new
    mechanism for non-rural carriers directs support to carriers based
    on the forward-looking economic cost of operating a given exchange.
    *See* 47 C.F.R. § 54.309. The Commission's forward-looking
    methodology for calculating high-cost support for non-rural carriers
    targets support to states where the statewide average
    forward-looking cost per line exceeds 135 percent of the national
    average forward-looking cost. *See* *id.* The total amount of
    support directed to non-rural carriers in a high-cost state equals
    76 percent of the amount the statewide average forward-looking cost
    per line exceeds the national cost benchmark, multiplied by the
    number of lines served by non-rural carriers in the state. Carriers
    serving wire centers with an average forward-looking cost per line
    above the national cost benchmark shall be eligible to receive
    support. The amount of support provided to a non-rural carrier
    serving a particular wire center depends on the extent to which
    per-line forward-looking economic costs in that wire center exceed
    the national cost benchmark.

[^5]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45*,* Report and Order, 12 FCC Rcd 8776, 8942-43 (1997)
    (*First Report and Order*); as corrected by *Federal-State Joint
    Board on Universal Service*, Errata, CC Docket No. 96-45, FCC 97-157
    (rel. June 4, 1997), *affirmed in part, reversed in part and
    remanded in part sub nom. Texas Office of Public Utility Counsel v.
    FCC*, 183 F.3d 393 (5^th^ Cir. 1999).

[^6]: *Id.*

[^7]: *See* 47 C.F.R. § 54.309.

[^8]: In the event that support provided to a non-rural carrier in a
    given state is less under the forward-looking methodology, the
    carrier is eligible for interim hold-harmless support, which is
    equal to the amount of support for which the non-rural carrier would
    have been eligible under the Commission's existing high-cost support
    mechanism. *See* 47 C.F.R. § 54.311

[^9]: Rural carriers receive high-cost loop support when their average
    cost per loop exceeds the nationwide average loop cost. *See* 47
    C.F.R. §§ 36.601-36.622.

[^10]: Incumbent LECs that are designated eligible telecommunications
    carriers and serve study areas with 50,000 or fewer access lines
    receive support for local switching costs. 47 C.F.R. § 54.301. Local
    switching support enables participants to assign a greater
    proportion of local switching costs to the interstate jurisdiction.

[^11]: Carriers that participate in the NECA common line pool are
    eligible to receive LTS. *See* 47 C.F.R. § 54.303. LTS supports
    interstate access rates for carriers that are members of the NECA
    pool, by reducing the amount of interstate-allocated loop costs that
    such carriers must recover through carrier common line charges. *See
    First Report and Order,* 12 FCC Rcd at 9163-9165.

[^12]: *See Access Charge Reform*, Sixth Report and Order in CC Docket
    No. 96-262 and 94-1, Report and Order in CC Docket No. 99-249,
    Eleventh Report and Order in CC Docket No. 96-45, FCC 00-103, at
    para. 225 (rel. May 31, 2000) (*Interstate Access Universal Service
    Order*).

[^13]: *See* 47 C.F.R. § 54.801(a); *see also Interstate Access
    Universal Service Order* at para. 201.

[^14]: Section 54.801 of the Commission's rules states that, if "all or
    a portion of a study area served by a price cap LEC is sold to an
    entity other than a price cap LEC, . . . then the support that would
    otherwise be provided under this subpart, had such study area or
    portion thereof not been sold, will not be distributed or
    collected." 47 C.F.R. § 54.801(b).

[^15]: Petition at 2-4. *See also* NECA Universal Service Fund 1999
    Submission of 1998 Study Results filed October 1, 1999.

[^16]: Petition at 1. Spectra is a newly formed venture of Spectronics
    Corporation, CenturyTel, Inc., and Local Exchange Carrier, LLC. *See
    id.* at 3.

[^17]: *Id.* at 5.

[^18]: *GTE Midwest Incorporated and Spectra Communications Group, LLC
    Filed Petition for Waiver of Sections 61.41(c) and 69.3(e)(9) and
    the Definition of \"Study Area\" in Part 36 of the Commission\'s
    Rules*, Public Notice, DA 00-404 (rel. Apr. 3, 2000).

[^19]: 47 C.F.R. § 1.3.

[^20]: *WAIT Radio v. FCC*, 418 F.2d 1153, 1159 (D.C. Cir. 1969), *cert.
    denied*, 409 U.S. 1027 (1972).

[^21]: *Northeast Cellular Telephone Co. v. FCC*, 897 F.2d 1164, 1166
    (D.C. Cir. 1990).

[^22]: *WAIT Radio*, 418 F.2d at 1159; *Northeast Cellular*, 897 F.2d at
    1166.

[^23]: *See, e.g.,* *US WEST Communications, Inc., and Eagle
    Telecommunications, Inc., Petition for Waiver of the Definition of
    \"Study Area\" Contained in Part 36, Appendix-Glossary of the
    Commission\'s Rules*, AAD 94-27, Memorandum Opinion and Order, 10
    FCC Rcd 1771, 1772 (1995).

[^24]: *See* 47 C.F.R. § 54.305.

[^25]: We note that the Federal-State Joint Board on Universal Service
    (Joint Board) recently recommended that interim hold-harmless
    support for exchanges transferred to non-rural carriers be phased
    down over the same time period as the seller's support would have
    been phased down. *See* *Federal-State Joint Board on Universal
    Service*, CC Docket No. 96-45, Recommended Decision, FCC 00J-1, at
    paras. 19-22 (rel. Jun. 30, 2000). The Joint Board also recommended
    that interim hold-harmless support for exchanges transferred to
    rural carriers should not be phased down following the transfer
    until the Commission reexamines the operation of section 54.305 of
    the Commission's rules and/or reforms the high-cost mechanism for
    rural carriers. *Id.* at para. 21.

[^26]: *See infra* discussion at paras. 17-20.

[^27]: *See* 47 C.F.R. § 54.801(b).

[^28]: Petition at 10, Exhibit C.

[^29]: *Id.* at 9.

[^30]: *Id.* at 9-10.

[^31]: *Id.* at 10. According to Spectra, CenturyTel, Inc. will make a
    preferred equity investment in the company and will have minority
    board representation. *Id.* at 3.

[^32]: 47 C.F.R. § 61.41(c)(1).

[^33]: 47 C.F.R. § 61.41(c)(2). *See Policy and Rules Concerning Rates
    for Dominant Carriers,* CC Docket No. 87-313, Second Report and
    Order*,* 5 FCC Rcd 6786, 6821 (1990), Erratum, 5 FCC Rcd 7664 (Com.
    Car. Bur. 1990) (*LEC Price Cap Order*), *modified on recon.*, Order
    on Reconsideration, 6 FCC Rcd 2637 (1991) (*LEC Price Cap
    Reconsideration Order*), *aff\'d sub nom*. *National Rural Telecom
    Ass\'n v. FCC*, 988 F.2d 174 (D.C. Cir. 1993), *petitions for
    further recon. dismissed*, 6 FCC Rcd 7482 (1991), *further
    modification on recon*., *Amendments of Part 69 of the Commission\'s
    Rules Relating to the Creation of Access Charge Subelements for Open
    Network Architecture, Policy and Rules Concerning Rates for Dominant
    Carriers*, Report and Order and Order on Further Reconsideration and
    Supplemental Notice of Proposed Rulemaking, 6 FCC Rcd 4524 (1991),
    *further recon*., Memorandum Opinion and Order on Second Further
    Reconsideration, 7 FCC Rcd 5235 (1992).

[^34]: 47 C.F.R. § 61.41(d).

[^35]: *See LEC Price Cap Reconsideration Order* at 2706.

[^36]: *Id.*

[^37]: *Id.* at 2706 n. 207.

[^38]: *See* *Price Cap Performance Review for Local Exchange Carriers*,
    CC Docket No. 94-1, First Report and Order, 10 FCC Rcd 8961, 9104-06
    (1995) (*LEC Price Cap Review Order*). The Price Cap Indices, which
    are the upper bounds for rates that comply with price cap
    regulation, are calculated pursuant to a formula specified in the
    Commission\'s rules for price cap carriers. *See* 47 C.F.R. § 61.45.

[^39]: *See* *LEC Price Cap Review Order* at 9105-9106.

[^40]: *See, e.g.,* *Rye Telephone Company, Inc. and U S WEST
    Communications, Inc., Joint Petition for Waiver of Definition of
    "Study Area" Contained in the Part 36 Appendix-Glossary of the
    Commission's Rules and Petition for Waiver of Section 61.41(c)(2) of
    the Commission's Rules*, CC Docket No. 96-45, Order, DA 00-1585, at
    para. 17 (Acc. Pol. Div. rel. Jul. 18, 2000); *ALLTEL Corp. Petition
    for Waiver of Section 61.41 of the Commission's Rules and
    Application for Transfer of Control*, CCB/CPD No. 99-1, Memorandum
    Opinion and Order, 14 FCC Rcd. 14191, 14202 (1999) (*ALLTEL/Aliant
    Merger Order)*.

[^41]: *See supra* discussion at para. 9.

[^42]: *See, e.g., ALLTEL/Aliant Merger Order* at 14204-05. In fact, the
    Commission traditionally has been sensitive to the unique
    administrative burdens imposed on small telephone companies by the
    application of its rules. *See, e.g., id.* at 14204; *In the Matter
    of Minburn Telecommunications, Inc., Petition for Waiver of Sections
    61.41(c) and (d) of the Commission's Rules*, CCB/CPD No. 99-16,
    Memorandum Opinion and Order, 14 FCC Rcd 14184, 14187 (Com. Car.
    Bur. 1999). For example, in the *LEC Price Cap Order*, the
    Commission decided that small telephone companies would not be
    required to operate under a regulatory regime that was designed
    largely on the basis of the historical performance of the largest
    LECs. The Commission, therefore, limited the mandatory application
    of price cap regulation to the eight largest LECs \-- the seven
    Regional Bell Operating Companies (RBOCs) and GTE. *See Price Cap
    Order* at 6818-19.

[^43]: Petition at 13.

[^44]: According to Spectra, after the proposed transaction, it will
    serve 116,149 access lines, representing approximately 3.5 percent
    of the access lines in Missouri. *See* *id.* at 5.

[^45]: *See, e.g., CenturyTel of Northwest Arkansas, LLC et al., Joint
    Petition for Waiver of Definition of "Study Area" Contained in the
    Part 36 Appendix-Glossary of the Commission's Rules, Petition for
    Waiver of Sections 61.41(c) and 69.3(g)(2) of the Commission's
    Rules*, CC Docket No. 96-45, Memorandum Opinion and Order, DA
    00-1434 (Acc. Pol. Div. rel. June 27, 2000) *(*approving the
    conversion of 214,270 access lines from price cap to rate-of-return
    regulation); *ALLTEL/Aliant Merger Order* (approving the conversion
    of approximately 300,000 access lines from price cap to
    rate-of-return regulation); *In the Matter of ALLTEL Service
    Corporation, Petition for Waiver of Section 61.41 of the
    Commission's Rules*, Order, 8 FCC Rcd 7054 (Com. Car. Bur. 1993)
    (approving the conversion of approximately 285,000 access lines from
    price cap to rate-of-return regulation).

[^46]: *See* Petition at 11-12.

[^47]: *Id.*

[^48]: *See* 47 C.F.R. § 61.45(d)(1)(iv). The Price Cap Indices, which
    are the upper bounds for rates that comply with price cap
    regulation, are calculated pursuant to a formula specified in the
    Commission's rules for price cap carriers. *See also Price Cap
    Performance Review for Local Exchange Carriers,* CC Docket No. 94-1,
    First Report and Order, 10 FCC Rcd 8961 (1995).

[^49]: *See* 47 C.F.R. § 61.45(d)(1)(iv).

[^50]: The Bureau has required carriers to make adjustments to their
    price cap indices in past study area waivers involving the sale of
    exchanges operated by carriers subject to price cap regulation.
    *See, e.g.,* *Northland Telephone Company d/b/a PTI Communications,
    Inc. and U S West Communications, Inc., Petition for Waiver of
    Sections 61.41(c)(2), 69.3(e)(6) and the Definition of \"Study
    Area\" Contained in Part 36, Appendix-Glossary of the Commission\'s
    Rules*, Memorandum Opinion and Order, 12 FCC Rcd 13329, 13336 (Acc.
    Aud. Div. 1997); *GTE North, Inc., and PTI Communications of
    Michigan, Inc., Petition for Waiver of Sections 61.41(c) and the
    Definition of \"Study Area\" Contained in Part 36, Appendix-Glossary
    of the Commission\'s Rules*, Memorandum Opinion and Order, 12 FCC
    Rcd 13882, 13888 (Acc. Aud. Div. 1997); *Golden Belt Telephone
    Association, Inc., and United Telephone Company of Kansas, Petition
    for Waiver of Sections 61.41(c)(2) and the Definition of \"Study
    Area\" Contained in Part 36, Appendix-Glossary of the Commission\'s
    Rules*, Memorandum Opinion and Order, 12 FCC Rcd 16335, 16341 (Acc.
    Aud. Div. 1997); *Rural Telephone Service Company, Inc., and United
    Telephone Company of Kansas, Petition for Waiver of Sections
    61.41(c)(2) and the Definition of \"Study Area\" Contained in Part
    36, Appendix-Glossary of the Commission\'s Rules*, Memorandum
    Opinion and Order, 12 FCC Rcd 16343, 16350 (Acc. Aud. Div. 1997).

[^51]: 47 C.F.R. § 69.3(g)(3). Under section 69.3(e)(9) of the
    Commission's rules, a telephone company or group of affiliated
    telephone companies that elects to file its own Carrier Common Line
    tariff(s) must file Carrier Common Line tariff(s) for all its study
    areas. *See* 47 C.F.R. § 69.3(e)(9). In order to have more than
    50,000 acquired common lines re-enter the common line pool, carriers
    must obtain a waiver of this requirement.

[^52]: *See Amendment of Part 69 of the Commission's Rules Relating to
    the Common Line Pool Status of Local Exchange Carriers Involved in
    Mergers or Acquisitions*, CC Docket No. 89-2, Report and Order, 5
    FCC Rcd 231, 235, 244 (1989) (*Common Line Pool Order*). We also
    note that the Commission specifically delegated to the Chief of the
    Common Carrier Bureau the authority to act on such waiver requests.
    *See id.* at 244.

[^53]: *See* 47 C.F.R. § 69.3(g)(3); *see also Common Line Pool Order*
    at 245.

[^54]: *Id.* In the *Common Line Pool Order*, the Commission also
    required that the re-entry of non-pooling access lines not
    significantly increase Transitional Support. We note that, in
    accordance with section 69.612 of the Commission's rules,
    Transitional Support expired on June 30, 1994. *See* 47 C.F.R. §
    69.612(b). We also note that in the *First Report and Order* the
    Commission concluded that the burden of LTS for common line pool
    LECs should be shifted from the non-pooling LECs to all providers of
    interstate telecommunications services. *See First Report and Order*
    at 9164-9166.

[^55]: *See Common Line Pool Order* at 245.

[^56]: Petition at 14.

[^57]: *See* Petition at 17 (citing Exhibit D, Letter from Romita
    Biswas, Manager, Rate Development, National Exchange Carrier
    Association, Inc., to Kenneth Matzdorff, Spectra Communications
    Group, LLC, dated March 16, 2000).

[^58]: *See* 47 C.F.R. § 54.305. We note that, since adoption of section
    69.3 of the Commission's rules, the burden of LTS for common line
    pool LECs has shifted from the non-pooling LECs to all providers of
    interstate telecommunications services. *See First Report and Order*
    at 9164-9166; Petition at 16. As such, even in the absence of
    section 54.305 of the Commission's rules, we do not believe that
    including Spectra's acquired access lines in the common line pool
    would significantly increase the LTS obligations of contributing
    carriers.