******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) AAD 97-100 Petition for Waivers Filed by ) ) Ameritech Illinois Metro, Inc. and ) Central Telephone Company of Illinois ) ) Definition of "Study Area" Contained ) in the Part 36 Appendix-Glossary ) of the Commission's Rules ) MEMORANDUM OPINION AND ORDER Adopted: October 23, 1997 Released: October 23, 1997 By the Chief, Accounting and Audits Division Common Carrier Bureau: I. INTRODUCTION 1. On August 20, 1997, Ameritech Illinois Metro, Inc. ("Ameritech Illinois Metro"), a subsidiary of Ameritech Corporation and Central Telephone Company of Illinois ("Central"), a subsidiary of Sprint Corporation filed a petition for waiver of the definition of "Study Area" contained in the Part 36 Appendix-Glossary of the Commission's rules. The requested waivers would allow Central and Ameritech to alter their Illinois study area boundaries to reflect the sale of the Des Plaines and Park Ridge telephone exchanges from Central to Ameritech Illinois Metro. 2. On August 22, 1997, the Common Carrier Bureau ("Bureau") released a public notice soliciting comments on the petition. No comments were filed. In this Order, we find that the public interest would be served by allowing the petitioners to alter their study area boundaries. We therefore grant the petition as explained 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, ILECs operating in more than one state typically have one study area for each state, and ILECs operating in a single state typically have 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 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. In recent years the Commission has taken a number of steps to mitigate potential adverse effects on the USF. Beginning in 1993 it adopted a series of orders that established indexed caps on the growth of the total USF. In addition, earlier this year the Commission adopted an Order implementing the universal service provisions of the Telecommunications Act of 1996. In that Order, the Commission decided that, eventually, all high cost area support would be provided based upon a forward-looking economic cost methodology. The Commission also determined that an indexed cap on universal service support will remain in effect until all carriers, rural and non-rural, receive support for high cost areas based upon forward-looking economic cost mechanisms. The Commission also adopted a "one-percent guideline" under which no study area waiver would be granted if it would result in an annual shift in USF assistance in an amount equal to or greater than one percent of the total USF, unless the parties demonstrate an extraordinary public interest benefit. B. Pleadings 6. Central is a price cap company that currently serves 208,102 access lines in Illinois. It proposes to sell the Des Plaines and Park Ridge exchanges which serve approximately 132,000 access lines in northwest Chicago and ten nearby Illinois communities. Central seeks waiver of the rule freezing study area boundaries to allow it to remove these exchanges from its study area. Ameritech Illinois Metro is a new company set up to operate the two exchanges it is acquiring from Central. It seeks waiver of the rule freezing study area boundaries to allow the addition of the acquired exchanges to its parent's existing study area. Ameritech Illinois Metro states that it will comply with the "all-or-nothing" rule, by operating the acquired exchanges under price caps. 7. Petitioners state that Ameritech Illinois Metro intends to mirror Ameritech's rates and thereby reduce rates in these exchanges. In addition, Ameritech Illinois Metro plans to upgrade the central office processors, line cards, and central office transport equipment in these exchanges. 8. The petitioners state that they currently do not receive USF support and after the transfer they will not qualify for USF support. Ameritech Illinois states that its current study area cost per loop is $148 and when the purchased exchanges are added to its study area its cost per loop will increase to $150. Further, Central states that its current study area cost per loop is $237 and when the two exchanges are removed from its study area its cost per loop will increase to $276. Currently only carriers with average costs per loop exceeding $286 are eligible to receive USF support. C. Discussion 9. Request for waivers. We have reviewed the data the petitioners filed with the National Exchange Carrier Association ("NECA") and the estimates filed in this proceeding and have determined that grant of the requested waivers would not have an adverse impact on the USF total or on individual ILEC draws because neither company is eligible for USF support before or after the sale. In addition, the Illinois Commerce Commission states that it does not object to these requested waivers. Furthermore, Ameritech Illinois Metro plans to reduce customer rates and upgrade facilities that will enable it to improve customer service in the acquired exchanges. Thus, the petitioners have demonstrated that the customers in these exchanges will likely be well served by Ameritech Illinois Metro, and that 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 in this instance and that the waiver requests should be granted. III. ORDERING CLAUSES 10. 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 of Ameritech Illinois Metro, Inc. and Central Telephone Company of Illinois for waiver of Part 36, Appendix-Glossary, of the Commission's rules, 47 C.F.R. Part 36 Appendix-Glossary IS GRANTED. 11. 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