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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                   )         AAD 97-24
Petition for Waivers Filed by      )
                                   )         
East Plains Telecom, Inc., Fort Randall      )
Telephone Company, U S WEST        )
Communications, Inc., and Vivian Telephone   )         
Company                            )              
                                   )
Concerning Sections 69.3(e)(11), 69.3(i)(4),      )
and the Definition of "Study Area"      )
Contained in the Part 36 Appendix-Glossary   )
of the Commission's Rules          )


                  MEMORANDUM OPINION AND ORDER

   Adopted:  April 18, 1997             Released:  April 18, 1997

By the Deputy Chief, Accounting and Audits Division
Common Carrier Bureau:

                         I.  INTRODUCTION
     
     1.  On January 23, 1997, East Plains Telecom, Inc. ("East Plains"), Fort Randall Telephone
Company ("Fort Randall"), U S WEST Communications, Inc. ("U S WEST"), and Vivian Telephone
Company ("Vivian") filed a joint petition for waiver of various Commission rules.  The petitioners
seek waivers of the definition of "Study Area" contained in the Part 36 Appendix-Glossary of the
Commission's rules.  The requested waivers would allow East Plains, Fort Randall, U S WEST, and
Vivian to alter the boundaries of their existing South Dakota study areas as a result of U S WEST's
sale of eight telephone exchanges.  U S WEST seeks waiver of the rule freezing study area
boundaries to enable it to remove these eight exchanges from its South Dakota study area.  East
Plains, Fort Randall, and Vivian seek waivers of this rule to allow each of them to add the exchanges
they are acquiring to their existing South Dakota study areas.  In addition, East Plains, Fort Randall,
and Vivian seek waivers of Sections 69.3(e)(11) and 69.3(i)(4) of the rules, if necessary, so that they
may continue to be issuing carriers in the National Exchange Carrier Association ("NECA")
common line tariffs.  
               
     2.  On February 3, 1997, the Bureau released a Public Notice soliciting comments on the joint
petition.  The petitioners also provided additional information concerning the joint petition.  In this
Order, we find that the public interest would be served by allowing East Plains, Fort Randall, U S
WEST, and Vivian to alter their study area boundaries and allowing East Plains, Fort Randall, and
Vivian to continue operating under rate-of-return regulation after acquiring the exchanges. We
therefore grant the joint petition, as explained more fully below.
     
                     II.  STUDY AREA WAIVERS
A.  Background

     3.  A study area is a geographic segment of an incumbent local exchange carrier's ("ILEC")
telephone operations.  Generally, a study area corresponds to an ILEC's entire service territory within
a state.  Thus, an ILEC operating in more than one state typically has one study area for each state,
and an ILEC operating in a single state typically has a single study area.  Study area boundaries are
important primarily because ILECs perform jurisdictional separations at the study area level.  For
jurisdictional separations purposes, the Commission froze all study area boundaries effective
November 15, 1984.  The Commission took that action primarily to ensure that ILECs do not set
up high-cost exchanges within their existing service territories as separate study areas to maximize
interstate cost allocations.  An ILEC must apply to the Commission for a waiver of the frozen study
area rule if it wishes to sell or purchase an exchange.

     4.  Waiver of Commission rules is appropriate only if special circumstances warrant
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 employs a
three-prong standard:  first, the change in study area boundaries does not adversely affect the current
universal service fund ("USF") support program; second, the state commission(s) having regulatory
authority over the exchange(s) to be transferred does not object to the change; and third, the public
interest supports the change. 
     5.  The Commission's concern about adverse USF impacts was mitigated, in the short term
at least, by its adoption of the Joint Board's recommendation for an indexed cap on the USF.  The
Commission nonetheless recognized that, even in the short term, the granting of a study area waiver
may adversely affect the fund's distribution, if not its size.  Under the indexed USF cap rules, any
study area reconfiguration that increases the USF draw of one USF recipient often reduces that of
other USF recipients.  Consequently, in evaluating whether a study area change would have an
adverse impact on the distribution or level of the USF, the Commission applies a "one-percent"
guideline to study area waiver requests filed after January 5, 1995.  Under this guideline, no study
area waiver is granted if it would result in an annual aggregate shift in USF assistance in an amount
equal to or greater than one percent of the total USF, unless the parties can demonstrate
extraordinary public interest benefit.  To prevent ILECs from evading this limitation by
disaggregating a single large sale of exchanges into a series of smaller transactions that in the
aggregate have the same effect on the USF, the Commission further requires that the guideline be
applied to all study area waivers granted to either ILEC, as a purchaser or seller, pending completion
of the current review of the universal service program.
B.  Petition and Pleadings

     6.  U S WEST is a price cap company that serves approximately 250,000 access lines in
South Dakota.  East Plains, Fort Randall, and Vivian are average schedule companies that serve
800, 4,100, and 15,200 access lines,respectively.  U S WEST proposes to sell eight exchanges
serving 4,053 access lines comprised of: one exchange serving 313 access lines to East Plains;
three exchanges serving 1,715 access lines to Fort Randall; and four exchanges serving 2,025 access
lines to Vivian.  U S WEST seeks waiver of the rule freezing study area boundaries to enable it to
remove these eight exchanges from its South Dakota study area.  East Plains, Fort Randall, and
Vivian seek waivers of this rule to allow each of them to add the exchanges they are acquiring to
their existing South Dakota study areas.

     7.  Petitioners state that the proposed changes would serve the public interest.  They state that
East Plains, Fort Randall, and Vivian intend to maintain an operating staff within their respective
service areas and, as a result, their customers will receive maintenance and other customer support
services on a more localized basis.  The petitioners also state that the buyers plan to replace
existing switches which will support CLASS and other SS7-related services.  In addition, the
petitioners state that the buyers plan to upgrade or replace outside plant by providing fiber in the
loop and to eliminate multi-party services.

     8.  Petitioners state that there will be no USF impact arising from these transactions. 
Specifically, petitioners state that neither East Plains, Fort Randall, Vivian, nor U S WEST currently
receives USF support for their South Dakota study areas and that neither East Plains, Fort Randall,
Vivian, nor U S WEST will receive USF support after the sale.  

C.  Discussion 
     
     9.  Request for waivers.  We have reviewed the data the petitioners filed with NECA and
the estimates filed in this proceeding and have determined that there will be no USF impact arising
from these transactions.  In addition, the Iowa Utilities Board, Nebraska Public Service Commission,
and the South Dakota Public Utilities Commission state that they do not object to these requested
waivers.  The petitioners state that the planned upgrades would enable the buyers to improve
customer service in the acquired exchanges.  We believe the petitioners have demonstrated that their
customers will likely be well served by the buyers, and therefore, the requested study area waivers
are likely to serve the public interest.  As a result, we find that the three-prong standard for granting
a study area waiver has been met and that the study area waiver requests should be granted.

                        III.  OTHER ISSUES

     10.  East Plains, Fort Randall, and Vivian seek waivers of Section 69.3(i)(4) to the extent
necessary.  That rule states that, if an ILEC elects to withdraw from participation in NECA tariffs
and then becomes subject to price cap regulation, neither the ILECs nor any of its withdrawing
affiliates shall be permitted to participate in any NECA tariffs.  Neither East Plains, Fort Randall
nor Vivian is subject to price cap regulation.  Thus, they do not require a waiver of Section 69.3(i)(4)
to participate in NECA tariffs. 

     11.  To the extent necessary, East Plains, Fort Randall and Vivian seek waiver of Section
69.3(e)(11) of the Commission's rules.  That rule requires that any changes in NECA common line
tariff participation and long term support resulting from a merger or acquisition of telephone
properties are to be made effective on the next annual access tariff filing effective date following the
merger or acquisition.  The buyers are concerned that under a strict interpretation of this rule, they,
rather than NECA, would be required to file a tariff on the next annual access tariff filing date. 
Assuming the buyers' acquisitions occur this year, East Plains, Fort Randall, and Vivian represent
that they plan to utilize NECA as their interstate tariff administrator.  Consequently, the buyers'
carrier common line costs will be included in NECA's 1997 filing.  We conclude that neither East
Plains, Fort Randall, nor Vivian is required to make a separate annual access filing for their carrier
common line costs, and therefore, a waiver of Section 69.3(e)(11) is not required.   
                                 
                      IV.  ORDERING CLAUSES

     12.  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
joint petition of East Plains Telecom, Inc., Fort Randall Telephone Company, U S WEST
Communications, Inc., and Vivian Telephone Company for waiver of Part 36, Appendix-Glossary,
of the Commission's rules, 47 C.F.R. Part 36 Appendix-Glossary IS GRANTED.
     13.  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 this
Order IS EFFECTIVE IMMEDIATELY UPON RELEASE.






                         FEDERAL COMMUNICATIONS COMMISSION




                                             Kenneth P. Moran
                         Chief, Accounting and Audits Division
                         Common Carrier Bureau