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A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:dYzzzzBBBBqodYYYYYYYYYYY8888dddddddnddddddd7PC2XXP\  P6QXP.7UC2XXU4  pQX2I=.X &I\  P6Q&P.2N=.X&N4  pQ&BBddBdB%7777777777>>>1eOIIOC=OO%+OCbOO=OI=COOhOOC%%47%17171%777U7777%+77O77155;%%%%,%77O1O1O1O1O1bII1C1C1C1C1%%%%O7O7O7O7O7O7O7O7O7O7O1O7O7O7O7O7=7O7O1O1I1I1C1C1C1O7O7O7O7O7,7%7%%%7+O7bO=+N&27%177777"RR7!SS7R!%%117n%%77ln%1n%!N%<<>,?>77?%-77[U%%7>%7777777777>>>1eOIIOC=OO%+OCbOO=OI=COOhOOC%%47%17171%777U7777%+77O77155;N%71n77%n=%b%%11&7n%l+%OO%77777%S7>%S7,OOOOOO=7111111I111117777777<77777777,OOOOOO=7111111I111117777777<77777777PC2XXP\  P6QXP.7UC2XXU4  pQX2I=.X &I\  P6Q&P.2N=.X&N4  pQ&P,%XJ,\  P6QJPW!0(Xh0\  P6QhPy.C8*X/C\  P6QP]]]]]](1<'"5^*7FSS$77Sp*7*.SSSSSSSSSS77pppSffoxffxx7Jo]oxfxfS]xff]]A.AFS7SSJSJ.SS..J.xSSSSAA.SJoJJAC.CZ*7777C7SSfSfSfSfSfSooJfJfJfJfJ7.7.7.7.oSxSxSxSxSxSxSxSxS]JfSxSxSxS]JxSfSfSfSfSoJoJfJfJfJxSxSxSxSxSCS7S777SJxSoSAN:*WSASSSSSS.4}}S2~~S}277]]S77SS7]72N7[[pC`pSS`*7FSS$77Sp*7*.SSSSSSSSSS77pppSffoxffxx7Jo]oxfxfS]xff]]A.AFS7SSJSJ.SS..J.xSSSSAA.SJoJJAC.CZv7S]SS7S777]]:S7A7o]*ASSSS.S7~.Sp7~SC[227`W*724S}}}Sffffffoffff7777xoxxxxxpxxxxx]fSSSSSSSoJJJJJ....SSSSSSS[SSSSSJSdPn<ddzzzzzzzzzzBBBBozdddddddYYYYY8888dddddddndddddYd"5^2BTdd+BBd2B28ddddddddddBBdzzzzBYozzdozzooN8NTdBddYdY8dd88Y8ddddNN8dYYYNP7Pl2BBBBPBddzdzdzdzdzdYzYzYzYzYB8B8B8B8dddddddddoYzddddoYdzdzdzdzdYYzYzYzYdddddPdBdBBBdYddNNF2hdNdddddd7>d<d<BBoodBBddBoBddzzzzzzzzzzBBBBozdddddddYYYYY8888dddddddndddddYd\Id77=i`.=79\\ppppppzpppp====z|fp\\\\\\\zRRRRR3333\\\\\\\d\\\\\R\7PC2XXP\  P6QXP .7UC2XXU4  pQX2I=.X &I\  P6Q&P.2N=.X&N4  pQ&P,%XJ,\  P6QJPW!0(Xh0\  P6QhPy.C8*X/C\  P6QP{,C8*X3VC*f9 xQX?xxxXRbXx6X@DQX@5PC2X3f_XP*f9 xQXXo0J=.,3&J*f9 xQ&Xt?xxx,dXx6NhQXHman (TT)"5@^2BRdd$BBdq2B28dddddddddd88qqqY2iC X'e X' { Federal Communications Commission`+(#DA 971956   yxdddy + Before the X FEDERAL COMMUNICATIONS COMMISSION  X'PWashington D.C. 20554#Xj\  P6G;XP#ѐc  S' #&J\  P6Q &P#In the Matter of: ,)hh]pp  S|'` `  ,)hh]ppAAD No. 9567  ST'BPS Telephone Co. ,)  S,'Petition for Waiver of ,)  S'Section 69.605(c) ,)  S'of the Commission's Rules , ) MEMORANDUM OPINION AND ORDER ON RECONSIDERATION   S 'c Adopted: September 9, 1997,hh]Released: September 10, 1997  S'By the Chief, Accounting and Audits Division  SL'dI. INTRODUCTION  c1. On April 30, 1997, we issued an Order denying a petition for waiver filed by BPS  S'Telephone Company Inc. (BPS)5 X<4X` hp x (#%'0*,.8135@8:X@# #  3. Section 69.605(c) of the Commission's rules states, in pertinent part, that a telephone company that was participating in average schedule settlements on December 1, 1982, shall be deemed  SJ 'to be an average schedule company.@ J  Xp4X` hp x (#%'0*,.8135@8:X@#@ The Commission sanctioned the average schedule status of these ILECs based on the assumption that these small carriers lacked sufficient financial resources or expertise to justify a requirement that they perform jurisdictionally separated cost studies for determining their compensation for originating and terminating interstate telecommunications  S 'services.1 7  X4X` hp x (#%'0*,.8135@8:X@#ѯ 4. Average schedule settlement companies may convert to cost settlement status at any time. The Commission concluded, however, that an unrestricted opportunity for cost companies to convert to average schedule status would likely operate to the detriment of interstate ratepayers because the"a 0*&&qq;"  S'conversion may result in inflated interstate revenue requirements.  Xh4X` hp x (#%'0*,.8135@8:X@#@  SH 'Rn III. PETITION  \6. In its Petition for Reconsideration, BPS states that our requirement that it show individual  S 'hardship or inequity in order to be granted a waiver is contrary to precedent.  XZ4X` hp x (#%'0*,.8135@8:X@#ы In support of this assertion, BPS cites the Commission's grant of a waiver of section 69.605(c) to the New Castle  S 'Telephone Company, an ILEC of 1,550 access lines.   X4X` hp x (#%'0*,.8135@8:X@#] c 7. BPS, further claiming that the Order is inconsistent with the Commission's average schedule policy, argues that the waiver should be granted because the Commission has always acted"0*&&qq"  S'to protect small and rural carriers from burdensome administrative requirements.M Xh4X` hp x (#%'0*,.8135@8:X@#M BPS indicates that it "understands and appreciates the Commission's concern that 'reclassification of assets from cost study basis to average schedule settlement status can inflate interstate revenue requirements' and that  S'carriers may 'receive a windfall . . . if . . . permitted to elect to depreciate plant to the cross over'  Sb'point [under cost settlements] and then receive average schedule treatment,'"by X{4X` hp x (#%'0*,.8135@8:X@#у  S' H IV. DISCUSSION  Sr'\  SJ ' A. Commission Precedent  8. We reject BPS's contention that our precedent dictates that its petition for waiver be  S 'granted. We are not persuaded by BPS's argument that the waiver in New Castle was granted under circumstances that are closely analogous. Furthermore, we do not consider the factors relied upon in  S 'the New Castle Order to be the establishment of a four part test that can be applied generically in any  S^'section 69.605(c) waiver situation. At the time we granted the New Castle waiver, we were persuaded  S8'that New Castle Telephone faced "uniquely limited circumstances."D8 X4X` hp x (#%'0*,.8135@8:X@#D BPS has failed to show that a waiver of section 69.605(c) is warranted for its situation.  S'9. A petition for waiver of the Commission's rules may be granted for good cause shown.p X4X` hp x (#%'0*,.8135@8:X@#ĸ The Court of Appeals for the D.C. Circuit has stated that a waiver may permit a more rigorous adherence to an effective regulation by allowing the agency to take into account considerations of hardship, equity, or more effective implementation of overall policy on an individualized basis, while also emphasizing that [a]n applicant for waiver faces  S'a high hurdle even at the starting gate.  X^#4X` hp x (#%'0*,.8135@8:X@#Ѽ In WAIT Radio, the court explained that [t]he very essence"i 0*&&qqX"  S'of a waiver is the assumed validity of the general rule. . . .9 Xh4X` hp x (#%'0*,.8135@8:X@#9 Given the validity of the rule, the test  S'identified in WAIT Radio requires the party seeking the waiver to demonstrate that the rule is unjust as  S'  applied to the party given the unique circumstances of the situation.y X4X` hp x (#%'0*,.8135@8:X@#j Therefore, the test for whether BPS may be granted a waiver is whether it has shown special circumstances as individualized hardship or inequity that warrants deviation from our general rule that cost companies may not change from costbased  S'settlements to average schedule settlements.l5 X4X` hp x (#%'0*,.8135@8:X@#l 10. The special circumstances used to justify past waivers of section 69.605(c) fall into three broad categories. First, we have granted limited opportunities for exchange carriers serving 5,000 or  SJ 'fewer access lines to convert from costbased to average schedule settlements.>J  X4ԍ#X\  P6G;/P#5,000 Line Waiver Order, supra, n. 12; see also Petitions Seeking Average Schedule Settlements for Affiliated Cost Companies with 5,000 or Fewer Access Lines, Memorandum Opinion and Order, 3 FCC Rcd 6003 (Com. Car. Bur. 1988)(granting a "one time opportunity to all exchange carriers with fewer than 5,000 access lines" to elect average schedule settlements). More recently, we have considered and denied a request to extend a similar opportunity to exchange carriers serving 10,000 or fewer access lines. NECA Revision of Section 69.605 of the Commission's Rules to Allow Small Cost Settlement Companies to Elect Average  {O'Schedule Settlement Status, Order, 1996, 11 FCC Rcd 16504 (Com. Car. Bur. 1996).> Granting these  S" 'limited opportunities was a necessary approach to deal with industrywide changed circumstances. " I X 4ԍ#X\  P6G;/P#5,000 Lines Waiver Order at para. 4. Second, we have granted waivers to certain small exchange carriers that clearly lacked the resources to operate on a coststudy basis. Papago Tribal Utility Authority, serving fewer than 400 lines in a 700 square mile area and lacking the operational expertise of a parent company, falls into this category.  S 'The situation in National Utilities, Inc. and Bettles Telephone Co., Inc.,z!}  X!4ԍ#X\  P6G;/P#National Utilities, Inc. and Bettles Telephone Co., Inc. Petition for Waiver of Section 69.605(c) of the  {O"'Commission's Rules, Report and Order, 8 FCC Rcd 8723 (Com. Car. Bur. 1993)(National Utilities, Inc. and  {O"'Bettles Telephone Co., Inc.).z can also be seen as an accommodation for very small exchange carriers in light of significant changes in their state regulatory"\?!0*&&qq+"  S'environment."} Xh4ԍ#X\  P6G;/P#National Utilities, Inc. served 2,350 access lines from eleven exchanges, and Bettles Telephone Co.,  {OQ'Inc. served 50 access lines from one exchange.  Id. at n. 3. Changes in the Alaska Public Utilities  {O'Commission's regulations prompted the two companies to file their petition.  Id. at para. 3. 11. Finally, to ensure a smooth settlement process, we have granted section 69.605(c) waivers to average schedule companies that have acquired another company, and we allowed the combined  S`'companies to merge into one average schedule study area.#`  X 4ԍ#X\  P6G;/P#Petitions for Waivers Filed by Baltic Telecom Cooperative, Inc., East Plains Telecom, Inc., and US  {O 'West Communications, Inc., Memorandum Opinion and Order, 1997 WL 85478(F.C.C.), 12 FCC Rcd 2433  {O '(Com. Car. Bur. Feb. 27, 1997)(Baltic Telecom); Petitions Filed by Alpine Communications, et al,  {O 'Memorandum Opinion and Order, 12 FCC Rcd 2367 (Com. Car. Bur. Feb. 14, 1997)(Alpine Communications);  {OT 'Petitions for Waivers Filed by Accent Communications, et al, Memorandum Opinion and Order, 11 FCC Rcd  {O '11513 (Com. Car. Bur. Apr. 11, 1996)(Accent); Petitions for Waivers Filed by BEK Communications, Inc., et al,  {O 'Memorandum Opinion and Order, 11 FCC Rcd 10855 (Com. Car. Bur. Apr. 4, 1996)(BEK). "Because jurisdictional separations and USF calculations are performed at the study area level, all affiliates in a single study area must be  S'under the same settlement method."z$z  X*4ԍ#X\  P6G;/P#Baltic Telecom at para. 19. z In these special cases, we have attached three conditions to minimize the impact of the conversion and reduce the incentive to manipulate Commission rules. We required waiver recipients to: (1) report to NECA on a combined basis for interstate average schedule and USF purposes, and receive distributions on that basis as a consolidated company, (2) convert to costbased settlement status if an average schedule affiliate in that study area converts to costbased  SH 'settlements, or elects section 61.39 treatment,%H +  X4ԍ#X\  P6G;/P#Section 61.39 provides an optional method of filing Access Tariffs to certain carriers serving 50,000 or fewer access lines in a study area. 47 C.F.R.  61.39. and (3) maintain common control over average schedule affiliates, so that average schedule status terminates when any of the affiliates are sold,  S 'transferred, or otherwise assigned.J&  X<4ԍ#X\  P6G;/P#Accent, supra, n. 35, at para. 44, Alpine Communications, supra, n. 35, at para. 16, Baltic Telecom,  {O%'supra, n. 35, at para. 21, BEK Communications, supra, n. 35, at para. 39.J We have always intended for these conditions to "ensure that the waivers will not result in unintended effects on the petitioners' interstate revenue requirements or result  S 'in an administrative burden on the Commission or NECA."y'  Xg4ԍ#X\  P6G;/P#Baltic Telecom at para. 20.y  SX'12. Based on this review of our precedent, we now properly see New Castle as an aberration that cannot be relied upon to support a waiver request. At the time we granted New Castle's petition, we believed the necessary unique circumstances were present. This belief was predicated in part on  S'the de minimis impact on interstate revenue requirements and in part on the lack of any indication that the waiver recipient "contemplate[d] further exchanges of assets (below the study area level), or  S'further requests for waiver of . . . average schedule status . . . ."u( X'4ԍ#X\  P6G;/P#New Castle at para. 15.u In retrospect, we mistakenly"(,((."  S'attached greater weight to the de minimis impact on New Castle's interstate revenue requirements than to the danger of "giving the 'green light' to exchange carrier asset transfers that increase interstate  S'revenue requirements."u) X4ԍ#X\  P6G;/P#New Castle at para. 16.u 13. This is not an appropriate opportunity, however, to revisit the status of New Castle Telephone Company. Removing New Castle's average schedule status would arguably be a retroactive application of this decision. New Castle has operated in reliance on its waiver since 1992 and may continue to do so without being seen as a "green light" for coststudy exchange carriers to convert to average schedule status. 14. Even assuming that the situation in New Castle can still be seen as sufficiently unique to justify a waiver, BPS has not adequately demonstrated that its own situation is closely analogous to that of New Castle. We did not set out a fourpart test for section 69.605(c) waivers; these were simply factors that demonstrated, at that time, that New Castle presented a special situation. Again, we found New Castle's situation unique because: XX` ` (1) New Castle is a small telephone company (two exchanges, 1,550 access lines); (2) [the] transaction [did] not appear to be a part of a pattern of asset transfers . . . designed to materially increase interstate revenue requirements . . . ; (3) the effect  S 'upon interstate revenue requirements [was likely] to be de minimis; and (4) New  S'Castle . . . stated that USF revenue requirements [would] not increase.u*y X4ԍ#X\  P6G;/P#New Castle at para. 10.u(#` Although these four factors do not comprise a fourpart test, they do provide a guide for comparing the respective circumstances of BPS and New Castle. BPS, serving 3,373 access lines, is larger than New Castle. BPS is also larger than other small exchange carriers that presented similar, sizebased arguments. NUI, for example, served 2,350 lines when we granted its waiver; Papago served 400  S'access lines over a 700 square mile area; Bettles served only 50 access lines.+C* X4ԍ#X\  P6G;/P#See also The Island Telephone Company, Telephone and Data Systems, Inc., and Contel of Maine, Inc.,  {O'Petition for Waiver of Various Rules, Memorandum Opinion and Order, 7 FCC Rcd 6382, paras.1215 (Com. Car. Bur. 1992)(granting a temporary waiver of section 69.605(c) to an exchange carrier serving 448 access lines on two coastal islands). Nor does BPS share the significant changes in its regulatory environment like those experienced by NUI and Bettles, or the extremely rugged area of operations like Papago. 15. Although BPS indicated that the impact on its interstate revenue requirements would be  S,'de minimis, and thus its interstate revenue requirements would not increase, the potential exists for  S'starting an industrywide pattern. We have long recognized the incentives to "game" the systemH,5 X$4ԍ#X\  P6G;/P#Average Schedule Order at para. 14; see 5,000 Line Waiver Order at para. 5.; see also New Castle at  {O%'para. 12; National Utilities, Inc. and Bettles Telephone Co., Inc. at para. 8.H to the detriment of interstate ratepayers, and we have consistently stated that the purpose behind section" ,,(("  S'69.605(c) was to prevent this sort of opportunistic behavior.- Xh4ԍ#X\  P6G;/P#See e.g., National Utilities, Inc. and Bettles Telephone Co., Inc. at paras. 79. We reiterate that "[e]ach waiver request is reviewed to ascertain whether it, or it in combination with prior waiver requests, will have a  S'material effect on interstate revenue requirements."u.y X4ԍ#X\  P6G;/P#New Castle at para. 16.u Isolated incidents of exchange carriers selecting average schedule settlements may not have a significant impact on interstate revenue requirements; the cumulative effect of many carriers switching from costbased to average schedule status will almost certainly have a sizeable impact. Stretching the comparisons between BPS and New Castle will only serve to create more opportunities and greater incentives to game the system at the expense of the ratepayers when similarly situated companies also demand the option to receive average schedule  S'settlements./C* X 4ԍ#X\  P6G;/P#Similarly, New Castle claimed that, because its situation closely resembled the circumstances in Papago,  {Os 'previous orders "required" a waiver. New Castle at para. 14. By rejecting these claims, we ensured that similarly situated exchange carriers would not take advantage of an opportunity to manipulate the system to the detriment of interstate ratepayers.  Sp' B. Average Schedule Policy 16. The Commission has consistently acted to protect small and rural exchange carriers from burdensome administrative requirements. BPS, arguing that a denial would be "against public  S 'policy,"~0 5 X4ԍ#X\  P6G;/P#BPS Petition for Reconsideration at 4.~ points to our actions in National Utilities, Inc. and Bettles Telephone Co., Inc. to support its  S 'wish for less expensive administrative burdens. Our decision in National Utilities, Inc. and Bettles  S 'Telephone Co., Inc. relied heavily on the specific showing of significant savings to interstate ratepayers. BPS makes no such demonstration. Moreover, several hundred exchange carriers serving fewer lines than BPS successfully operate on costbased status despite the additional administrative  S'burdens.1A  X4ԍ#X\  P6G;/P#Examples include Border to Border Communications (79 access lines), Hat Island Telephone Company (98 access lines), Beehive Telephone Company (553 access lines), Pottawatomie Telephone Company (2104 access lines), Egyptian Telephone Coop. Ass'n (2702 access lines), and Happy Valley Telephone Company (3067 access lines). NECA Universal Service Fund Submission of 1995 Study Results (filed October 1, 1996). A policy in favor of reducing administrative burdens simply does not outweigh the Commission's public interest obligation to protect interstate ratepayers or eliminate the requirement for unique circumstances to justify a waiver.  Sn' C. Conclusion 17. Based on the information provided in its Petition for Waiver and its Petition for Reconsideration, BPS has failed to show that a waiver of Commission Rule 69.605(c) is warranted. BPS presents no special circumstances that justify a waiver nor does it show that a denial of its petition compromises the Commission's average schedule policy. Accordingly, we deny BPS's Petition for Reconsideration. "V 1,(("Ԍ S'1 V. ORDERING CLAUSE Đ\ 18. Accordingly IT IS ORDERED, pursuant to the authority that is contained in 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 BPS's Petition for Reconsideration is DENIED. ` `  hhCqFEDERAL COMMUNICATIONS COMMISSION ` `  hhCqKenneth P. Moran ` `  hhCqChief, Accounting and Audits Division ` `  hhCqCommon Carrier Bureau  ? 4 #x6X@`7>X@#