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(1) (a) (i) 1) a)S H*_0F_8S\E$ 96_8Sn6OM1. a. i. (1) (a) (i) 1) a)S H*_0F_8S\E/` ` ` 97_8Sn6OM1. a. i. (1) (a) (i) 1) a)S H*_0F_8S\E:` ` `  2(#xZ; 98_8Sn6OM1. a. i. (1) (a) (i) 1) a)S H*_0F_8S\EE` ` `  2@Z@*5 @"5@^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CC!CCPRCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYYddddooPoNoNCNodo8RoodȐYYoNoNNF2ldCddddddԍx47 C.F.R. 36 app. (defining "study area"). See MTS and WATS Market Structure, Amendment of Part  {O- x,67 of the Commission's Rules and Establishment of a Joint Board, Recommended Decision and Order, 49 Fed. Reg.  {Of- xY48325 (1984) 1984 JOINT BOARD("1984 Joint Board Recommended Decision"); Decision and Order, 50 Fed. Reg. 939 (1985) 1985 ORDER ADOPTING("1985  {O0- xOrder Adopting Recommendation"); see also Amendment of Part 36 of the Commission's Rules and Establishment  {O-of a Joint Board, Notice of Proposed Rulemaking, 5 FCC Rcd 5974 (1990)STUDY AREA NOTICE ("Study Area Notice").U The Commission took that action primarily to ensure that ILECs do not  xMplace highcost exchanges within their existing service territories in separate study areas to  Xy-maximize payments from the Universal Service Fund ("USF") support program. y4  {O^-  [ԍUSF PROCEDURE USF RULE xSee 1984 Joint Board Recommended Decision, supra note 1984 JOINT BOARD4, 66; 1985 Order Adopting Recommendation,  {O(- xsupra note 1985 ORDER ADOPTING4, 1, 5. The Commission created the USF to preserve and promote universal service. See Amendment  {O- xof Part 67 of the Commission's Rules and Establishment of a Joint Board, Decision and Order, 96 FCC 2d 781  x(1984). The USF rules allow ILECs with high local loop plant costs to allocate a portion of those costs to the  xinterstate jurisdiction, thus enabling the states to establish lower local exchange rates in study areas receiving such  {OL-assistance. See 47 C.F.R. 36.631.  XK- ` Bx3. USF REFORM` ` The study area freeze also prevents ILECs from transferring exchanges among  xexisting study areas for the purpose of increasing interstate revenue requirements and  xcompensation. An ILEC must apply to the Commission for a waiver of the rule freezing study  xarea boundaries if the ILEC wishes to sell exchanges to another carrier and if that transaction"0*&&JJ"  X- xwould have the effect of changing the study area boundaries of either carrier.  yOy-  [ԍx47 C.F.R. 1.3, 36 app. If the exchanges constitute a whole study area, the exchange transfer may be done in a way that does not alter any study area boundaries. We note that the  X- xkTelecommunications Act of 1996, enacted on February 8, 1996,z  yO-ԍxTelecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).z requires the reform of many  xymechanisms the Commission uses to support its universal service goals, including the USF, by  X- xMay 8, 1997.& {O -  ԍxId. sec. 101(a), 254(a)(2). The Commission has initiated a proceeding to address these issues. See  {O - xFederal-State Joint Board on Universal Service, Notice of Proposed Rulemaking and Order Establishing Joint Board,  x61 Fed. Reg. 10499 (1996). That proceeding includes portions of the record of a prior proceeding initiated in CC  {Ox -Docket 80286. Id.  39.  The new rules may alter the way USF support is calculated for and distributed to highcost areas.  Xv- B. NECA Request  XH- ` Qx4. ` ` NECA seeks clarification of the circumstances under which ILECs must obtain  xwaivers of the study area freeze rule in order to reconfigure existing study area boundaries or  xcreate new study areas. NECA claims that waivers are not required for a holding company to  xconsolidate existing study areas, for an ILEC to establish new study areas for previously unserved  xterritory, or for an ILEC to combine previously unserved territory into an existing study area.  xNECA also claims that waivers may not be required for an ILEC to adjust or realign study area  xboundaries to conform them to geographic and political boundaries, or for an ILEC to extend  xservice into areas served by other ILECs. NECA states that, even in situations arguably covered  xby the rule, we should consider establishing a materiality standard for requiring waiver petitions.  xSuch a standard, NECA explains, would enable ILECs involved in minor transactions to avoid  xthe expense and delay associated with the waiver process. According to NECA, waivers should  xbe unnecessary whenever a study area change can be reasonably expected to have insignificant  X4-impacts on the USF program.D 4 yO-ԍxNECA Letter at 25.D  X- C. Discussion   X- ` nx5. ` ` In general, ILECs must obtain waivers of the study area freeze rule before creating  xnew study areas or reconfiguring existing study areas because such changes would violate the  xjpolicy underlying the rule. The Commission adopted the rule based on the recommendation of  X- xLthe Docket 80286 FederalState Joint Board ("Joint Board").: .  {Or$-  ԍxSee 1984 Joint Board Recommended Decision, supra note 1985 ORDER ADOPTING4, at  6466; 1985 Order Adopting  {O<%-Recommendation, supra note 1985 ORDER ADOPTING4,  1.: The Joint Board stated, and the" 0*&&JJ3"  x-Commission concurred, that the intent of the rule is to prevent carriers from "setting up high cost  xexchanges within their existing service territory as separate companies to maximize high cost  X- xsupport."  {OK-  ԍx1984 Joint Board Recommended Decision, supra note 1985 ORDER ADOPTING4,  66; 1985 Order Adopting Recommendation, supra  yO-note 1985 ORDER ADOPTING4,  1. That statement implies that the rule is intended to prevent the disaggregation of study  xareas. Disaggregation would occur when a company divides an existing study area or when  xcompanies in the same state create new study areas by transferring portions of existing study areas among themselves.  X_- ` x6. ` ` That statement does not imply, however, that the rule is intended to prevent the  xconsolidation of existing study areas. As we have found, the consolidation of study areas cannot,  X1- xxby itself, result in increased USF draws. ^1" {O -  LԍRANGE RECONxSee U S West Comm., Inc., and Range Tel. Coop., Inc., Joint Petition for Waiver of the Definition of Study  {O - xArea, Order on Reconsideration, 10 FCC Rcd 13264,  14, n. 27 (Com. Car. Bur., 1995) ("U S WestRange Recon  {O-Order"). Indeed, the consolidation of study areas located within  X - xthe same state tends to reduce USF draws and is the type of study area reconfiguration that the  X - xCommission encourages as serving the public interest.  H {O-  ԍ RANGE xSee generally Study Area Notice, supra note STUDY AREA NOTICE4,  6, 17; 1984 Joint Board Recommended Decision, supra  {O-note 1985 ORDER ADOPTING4,  66; 1985 Order Adopting Recommendation, supra note 1985 ORDER ADOPTING4,  1. Hence, consolidation would not enable  xcompanies to gain an advantage under the USF rules. Nor would it enable companies to gain an  xadvantage under the small carrier assistance rules because that assistance decreases as the size of  X - xan eligible study area increases.  yO-  ԍxThe small carrier assistance rules are commonly referred to as the DEM rules (dial equipment minuteofuse  xrules). The DEM rules allow small ILECs to assign an increased share of local switching equipment costs to the  {O- xinterstate jurisdiction. See 47 C.F.R.  36.125(f). The Bureau therefore has considered impacts on that assistance  {Om- xprogram in deciding whether to grant requests for separate study areas. See, e.g., U S WestRange Recon Order,  {O7-supra note RANGE RECON12,  1719 (discussing whether the creation of separate study areas is in the public interest). We therefore agree with NECA that a waiver of the rule is not  X -required when a holding company is consolidating existing study areas in the same state. Z  yO-  >ԍxAccordingly, when we grant waivers to permit ILECs to transfer exchanges between their study areas, we  xrequire the buyers to add the exchanges to their existing study area in the state in which the exchanges are located.  {OB- x;We permit the buyers to create new study areas only if they and their affiliates are not operating in that state. See,  {O - xe.g.,  U S WestRange Recon Order, supra note RANGE RECON12,  1521; ALLTEL Serv. Corp., Petition for Waiver of the  {O- xDefinition of Study Area, Memorandum Opinion and Order, 9 FCC Rcd 4450, 4451,  67 (Com. Car. Bur., 1994);  {O - xALLTEL Serv. Corp., Petition for Waiver of the Definition of Study Area, Memorandum Opinion and Order, 8 FCC  yOj!-Rcd 6411,  6 (Acct. & Audits Div., Com. Car. Bur. 1993).  Xy- ` Bx7. ` ` NECA claims that the Joint Board identified two other conditions under which waivers of the rule should not be required. The Joint Board stated: "K0*&&JJI"Ԍ XxUnder the [frozen study area] approach, an existing company study area purchased  Pby a holding company which owned other companies within the same state could  pcontinue to be treated separately for separations purposes. Areas in which  Ctelephone service was instituted for the first time could also be treated as a  }separate study area if separately incorporated. In either case, the parent company  would also have the option of folding the new service territory into one of its  existing companies and using the average NTS costs for the expanded service area  in determining the high cost assistance. We expect this to be the case when the  XH-benefits of consolidated operations exceed the reduction in high cost support.H {O -ԍx1984 Joint Board Recommended Decision, supra note 1985 ORDER ADOPTING4,  66.   x=  This Joint Board statement, with which the Commission concurred, implies a waiver of the rule  xlis not required if a separately incorporated company is establishing a new study area for  xLpreviously unserved territory, or if a company is combining previously unserved territory with  X - xone of its existing study areas in the same state.: Z {O-ԍxId.: We do not require a waiver for either of these conditions.  X- ` x8. ` ` We are not persuaded by NECA's arguments that the Joint Board statement implies  xthat there are additional conditions under which waivers are not required, nor are we persuaded  xthat we should now establish a standard that would eliminate waiver petitions for transfers of  xexchanges serving small numbers of subscribers. We believe consideration of such action should  xawait the outcome of the joint effort of the Commission and the state commissions to reform the  X-universal service rules by May 8, 1997, a process that may also revise the study area freeze rule.] {O-ԍxSee supra para. USF REFORM3.]  X- ` x9. ` ` We therefore find that study area waivers are required whenever a company seeks  xto create or reconfigure study areas, except under any of the following three conditions: (a) a  xseparately incorporated company is establishing a study area for previously unserved territory;  x(b) a company is combining previously unserved territory with one of its existing study areas in the same state; and (c) a holding company is consolidating existing study areas in the same state.  XN- III. STUDY AREA WAIVERS ă  X - ` x 10. ` ` Alaska Telephone Company, Ducor Telephone Company, and Kingsgate  xMTelephone, Inc. filed petitions for waiver of the study area freeze rule in order to create new  xstudy areas, or to expand existing study areas, when they begin serving previously unserved"~0*&&JJ<"  X- xterritories.] {Oy-ԍxSee supra note PETITIONERS2.] In view of our decision herein, these companies do not require such waivers to take  xthe actions they propose. For this reason, we find that these waiver petitions are moot and should be dismissed.  X-x IV. ORDERING CLAUSES ă  X_- ` Bx 11.` ` Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 5(c), 201202 of the  xCommunications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 155(c), 201202, Section  x553(b)(A) of the Administrative Procedure Act, 5 U.S.C.  553(b)(A), and Sections 0.91, 0.291,  X - xand 1.3 of the Commission's Rules, 47 C.F.R. 0.91, 0.291, 1.3, that the petition of the  xNational Exchange Carrier Association, Inc. for clarification of the definition of "study area"  xcontained in the Part 36 AppendixGlossary of the Commission's rules, 47 C.F.R. Part 36  xAppendixGlossary, is GRANTED IN PART to the extent described above and OTHERWISE IS DENIED.  X- ` px 12. ` ` IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i), 5(c), 201202 of the  xCommunications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 155(c), 201202, Section  x553(b)(A) of the Administrative Procedure Act, 5 U.S.C.  553(b)(A), and Sections 0.91, 0.291,  XK- x and 1.3 of the Commission's Rules, 47 C.F.R. 0.91, 0.291, 1.3, that the petitions of Alaska  xTelephone Company, Ducor Telephone Company, and Kingsgate Telephone, Inc. for waiver of  x Part 36, Appendix-Glossary, of the Commission's Rules, 47 C.F.R. Part 36 AppendixGlossary, ARE DISMISSED. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhRegina M. Keeney x` `  hhChief, Common Carrier Bureau  x$//M&O; NECA Interp. Request, Study Area Waivers, AAD 95173, AAD 9629, AAD 9651, DA 96 616//$ $/Part 36 AppendixGlossary/$