WPC 2MBR Z Courierw Roman3|x'w RomanCourier Bold@`7X@XPPS - PSt 4M ROOM 228 LPT1XPPSPS.WRSSx  @G"jX@|D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxdt 4M ROOM 228 LPT1HPLA4MP0.PRSXj\  P6G;\ifXP2  3|S 'Courier New (TT)Romanpt RM 257HPLA5SPO.PRSx  @V!tX@2v/pkka8DocumentgDocument Style StyleXX` `  ` a4DocumentgDocument Style Style . a6DocumentgDocument Style Style GX  a5DocumentgDocument Style Style }X(# 2Fvt8a2DocumentgDocument Style Style<o   ?  A.  a7DocumentgDocument Style StyleyXX` ` (#` BibliogrphyBibliography:X (# a1Right ParRight-Aligned Paragraph Numbers:`S@ I.  X(# 2# x   n a2Right ParRight-Aligned Paragraph Numbers C @` A. ` ` (#` a3DocumentgDocument Style Style B b  ?  1.  a3Right ParRight-Aligned Paragraph Numbers L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph Numbers Uj` `  @ a. ` (# 2 U    a5Right ParRight-Aligned Paragraph Numbers _o` `  @h(1)  hh#(#h a6Right ParRight-Aligned Paragraph Numbersh` `  hh#@$(a) hh#((# a7Right ParRight-Aligned Paragraph NumberspfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph NumbersyW"3!` `  hh#(-@p/a) -pp2(#p 2Tech InitInitialize Technical Style. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technicala1DocumentgDocument Style Style\s0  zN8F I. ׃  a5TechnicalTechnical Document Style)WD (1) . a6TechnicalTechnical Document Style)D (a) . 2ua2TechnicalTechnical Document Style<6  ?  A.   a3TechnicalTechnical Document Style9Wg  2  1.   a4TechnicalTechnical Document Style8bv{ 2  a.   a1TechnicalTechnical Document StyleF!<  ?  I.   2<3a7TechnicalTechnical Document Style(@D i) . a8TechnicalTechnical Document Style(D a) . Doc InitInitialize Document Stylez   0*0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:5lb96$97l;8$^<Technical 3Technical 35 Technical 4Technical 46` hp x (#X` hp x (# X` hp x (#` hp x (#Technical 1Technical 17 Technical 7Technical 78` hp x (#X` hp x (# X` hp x (#` hp x (#22G9$>:@;B<ETechnical 8Technical 89` hp x (#X` hp x (# X` hp x (#` hp x (#toc 1toc 1:` hp x (#!(#B!(#B` hp x (#toc 2toc 2;` hp x (#` !(#B` !(#B` hp x (#toc 3toc 3<` hp x (#` !(# ` !(# ` hp x (#24N=dG>I?K@vMtoc 4toc 4=` hp x (# !(#  !(# ` hp x (#toc 5toc 5>` hp x (#h!(# h!(# ` hp x (#toc 6toc 6?` hp x (#!(#!(#` hp x (#toc 7toc 7@ 2VAfNBPCRDTtoc 8toc 8A` hp x (#!(#!(#` hp x (#toc 9toc 9B` hp x (#!(#B!(#B` hp x (#index 1index 1C` hp x (#` !(# ` !(# ` hp x (#index 2index 2D` hp x (#` !(#B` !(#B` hp x (#2ZEWFv.YGlYHrZtoatoaE` hp x (#!(# !(# ` hp x (#captioncaptionF _Equation Caption_Equation CaptionG endnote referenceendnote referenceH 2\IZJ}3[K[L8\head1 #I'd#2p}wC@ #a1Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfJ$ a2Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfK/` ` ` a3Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfL:` ` `  2_M\N]OD^P^a4Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfME` ` `  a5Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfNP  ` ` ` hhh a6Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfO[   a7Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfPf  2)bQ_Rr`S%aTraa8Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrfQq a2AgendaRa1AgendaAgenda ItemsS7D yP ) I. a3AgendaT2i([bAbQeVPgCourier New (TT)Times New Roman (TT)es New Roman Boldman ItalicTimes Roman Bold ItalicCourier New (TT)Times New Roman (TT)Courier New (Bold) (TT)p||D8D\dDXdXdXDdd88d8ddddDL8ddddX`(`lD4l\DDD4DDDDDDDDd8XXXXXX|X|X|X|XD8D8D8D8ddddddddddXdbdddpdXXXXXlX~|X|X|X|XdddldldD8DdDDDdplld|8|P|D|D|8dvddddDDDpLpLpLpl|T|8|\ddddddl|X|X|Xd|DdpL|Dd~4ddC$CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxH\dDXddddd8@d<@d<DDXXdDDxddzHxxHvppDXd<"dxtldpxxdCourierTimes New RomanCourier BoldTimes New Roman BoldTimes New Roman Italic7jC:,Xj\  P6G;XP?xxx,x `7X7nC:,%kXn4  pG;XldCdddddd/>/>/>/x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxIxIxWxIx{nInInInISSSWS]a?/?]?9?]]WW]n/nKn9nCn/x]xx]x]SSxxIxIxI]?]?]?]WnUn9nax]x]x]x]x]x]xxWnInInIx]n9x]]?n9xSz+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNd<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddndddddddxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`L2Ψ@D@ZԂ@h"5@^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CC!CCPRCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYYddddooPoNoNCNodo8RoodȐYYoNoNNF2ldCddddddd<d<CCoodCCddCoCddzzzzzzzzzzCCCCozdddddddYYYYY8888dddddddndddddYdxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCd]]ddddddFddddFCCddd88ddzzdddkddCddF"ddd9dCCzCdzdoddCdYds]zUvdYYCCCCzzzozoYzNoYdYC8YooYdYzzdzddoYoYzzozzzzzCdoozYzzzzCCddddzdddooozCsdYC\   pxtll\tll@\@\`L2@@Į@b"5@^(1< h X!- ` 3x` ` #X\  P6G;pP#James T. O'Reilly, Administrative Rulemaking  3.08, p. 53; Yale Broadcasting Co. v. FCC, 478 F.2d  yO"-594, 599 (D.C. Cir. 1973).#Xj\  P6G; XP#> Interpretative rules  xthus serve an advisory function by explaining the meaning given to a particular word or phrase"QT 0*&&qq"  X- xin a statute or rule that an agency administers.! Xy-x` ` #X\  P6G;pP#O'Reilly, Administrative Rulemaking at  3.08.#Xj\  P6G; XP# In a somewhat similar manner, general  X- xKstatements of policy educate the public about a prospective guideline for some agency activity."y X-x` ` #X\  P6G;pP#Id.#Xj\  P6G; XP#ġ  xPolicy statements are not binding rules that determine present rights or obligations, but instead  X-are given prospective effect and leave an agency free to exercise its discretion.#* X-x` ` #X\  P6G;pP#City American Bus Association v. U.S., 627 F.2d 525, 529 (D.C. Cir. 1980).#Xj\  P6G; XP# 0  X- ` x 19. ` ` The One Percent Guideline is not a substantive rule that imposes legally binding  xobligations, but is at most an interpretive rule or a general statement of policy. In either case,  X_- xyit is excepted from the notice and comment requirements. In the PTI/Eagle Order, we provided  xour interpretation of one of the previously enunciated criteria used to evaluate study area waiver  xrequests. We intended that the One Percent Guideline apprise the public of the level of USF  ximpact that would, absent extraordinary circumstances, be likely to pose an undue adverse effect on the USF. x  X - ` `x 20. ` ` The Joint Petition of NTCA and USTA cites the recent case of U.S. Telephone  X - xAssociation v. FCC,$  XN-x` ` #X\  P6G;pP#28 F.3d 1232 (D.C. Cir. 1994).#Xj\  P6G; XP#Ѱ which held that a "policy statement" used to calculate monetary forfeitures  xxwas a substantive rule requiring notice and comment. The "policy statements" excepted from that  X- x<requirement turned on "an agency's intention to bind itself to a particular legal policy position."% X-x` ` #X\  P6G;pP#Id. at 1234.#Xj\  P6G; XP#Ѫ  X- x While the PTI/Eagle Order at various points uses mandatory language, such as the One Percent Guideline "must apply" or that "we shall apply," the Commission clearly indicated as follows: x  Xx"[W]e believe that no waiver should cause an aggregate shift in USF assistance  X%- in an amount equal to or greater than one percent of the total USF unless the  X-parties can demonstrate extraordinary public interest benefit."&=  X-#Xw PE37 XP#x` ` #c PE37 pP## X\  P6G;pP#PTI/Eagle Order at para. 14.#c PE37 pP# [emphasis added]  The Commission further stated: x  Xx"Study area waiver requests filed after the release date of this order shall be  subject to the condition that the transfer at issue and any other transfers involving  Qeither carrier, as purchaser or seller, may not cause a shift in USF assistance in  3an amount equal to or greater than one percent of the total USF for the year in"q &0*&&qq1"  X- %which the waiver request is submitted, unless the parties can demonstrate  Aextraordinary public interest considerations that would warrant the removal of  X-this condition."' XM-x` ` #X\  P6G;pP##X\  P6G;pP#Id. at para. 17. [emphasis added]   xLWe believe strongly that application of the One Percent Guideline will in many cases serve the  xpublic interest; nonetheless, we clearly stated that whether or not a waiver request, and previous  xiwaivers granted to parties to the request, cause a shift in USF assistance greater than one percent  xwill not be dispositive in every case. We do not intend that the Guideline specify a strict cap  xon the allowable shift in USF assistance, but that it enunciate the circumstances under which the  xCommission will engage in heightened scrutiny of a waiver request. The Guideline was  xannounced so that the public would better understand how the Commission, in its discretion,  xiwould interpret its adverse effect criterion for assessing waiver requests. We also were very clear  xthat as a statement of Commission policy, the Guideline would be applied only prospectively to  x waiver requests filed after its adoption. Because the One Percent Guideline falls within the  x{exception for interpretative rules or general statements of policy, no notice and comment procedure was required.  X-  X}< ` 2x 21. ` `  MCI's Proposal of a 0.05% Guideline: MCI asserts that the One Percent  xkGuideline is too broad and that a more appropriate guideline by which to determine whether  xKstudy area waiver requests would have an adverse effect on the USF would be a 0.05% aggregate  X9- xZshift in USF assistance.}(9y Xc-x` ` #X\  P6G;pP#MCI Petition at 7.} In our discussion of the One Percent Guideline in the PTI/Eagle Order, we stated the following:  XxWe recognize that we might have chosen another criterion, including a different  "percentage, for evaluating whether the proposed transaction would adversely affect  athe USF, contrary to the public interest. The criterion we have selected will  bensure that, during our ongoing review of the USF program, transfers of  exchanges do not cumulatively lead to substantial, unexpected changes in the USF  support needed to maintain local rates at reasonable levels. We believe that this  approach strikes a reasonable balance between the need to maintain adequate USF  assistance to carriers serving high cost areas and our desire to avoid interfering  with private business transactions. Our "adverse impact" standard, as clarified  herein, also preserves the opportunity for parties to a transaction to show that the  Aspecific circumstances of the proposed transfer justify unconditional grant of the  X-requested waiver.)* X$-x` ` #X\  P6G;pP#PTI/Eagle Order at para. 15.#Xj\  P6G; XP#Ѻ  " )0*&&qq,"Ԍ X- xWe find that the PTI/Eagle Order clearly stated our rationale for adopting a one percent limit  x[instead of another percentage such as 0.05%. MCI has offered no compelling rationale to alter that decision.  X-  X-xC. ` ` Clarification of Issues Raised by NTCA and USTA  Xx- ` `x 22. ` ` In their Joint Petition, NTCA and USTA raise a number of questions regarding  Xa- x=implementation of the One Percent Guideline..*aa X- ` x` ` #X\  P6G;pP#Joint Petition at 1012. We do not address the following questions raised in the Joint Petition:  x"Assuming that an individual petition does not exceed the threshold, how will cumulative effects be measured? Will  xthe first $7.25 million for a single seller preclude further petitions, or will the Commission hold all for a year and  xdetermine which are most beneficial to the public? Will the Commission deny others, impose a prorata conditional  xwcap?" Joint Petition at 11. These questions appear to be based on the erroneous assumption that the One Percent  yO - xGuideline is applied by aggregating the impact of all waivers granted within the past twelve months, rather than  xthe impact of the waivers granted to the request's petitioners within the past twelve months, as described in Paragraph 25 of this order.. We provide clarification of these issues in the following paragraphs.  X - ` ax 23. ` ` NTCA and USTA first ask whether, in applying the One Percent Guideline,  ximpact on the USF is compared against the amount of the total USF fund for the calendar year  X - x>in which the study area waiver request is filed.{+  X-x` ` #X\  P6G;pP#Id. at 10.{ While we recognize, as NTCA and USTA  xobserve, that a transfer generally will not cause a USF shift in the calendar year in which the  x>waiver is requested, we confirm that it is the appropriate year against which to compare the  x<estimated impact of the proposed transfer, added to the impact of transfers within the past twelve  xmonths to which either carrier has been a party. We find that this approach is reasonable and  xpractical because as a result of the indexed cap on the USF, the amount of the USF fund for the  xzcurrent year will be a close approximation of the amount of the USF fund for the succeeding years that the indexed cap remains in effect.  X- ` Qx 24. ` ` The Joint Petition raises a number of questions regarding how the annual USF  x\impact of an individual transfer should be calculated. NTCA and USTA inquire whether, in  xestimating the annual impact of a transfer, ILECs should calculate the impact for the first year,  X- xthe average impact over some period, or the highest impact over some period.,  X-!-x` ` #X\  P6G;pP#Id. at 1011.#Xj\  P6G; XP#ѫ The Joint  X- xPetition also asks what assumptions ILECs should apply in determining the estimated impact.0-yS  X#- ` x` ` #X\  P6G;pP#Id. at 11. NTCA and USTA ask if the USF impact is "to be a projected, 'goinglevel,' annualized  xiimpact with a set of standardized assumptions as to USF loop account differences with the study area change[.]  xYIf so, what are to be the standardized set of assumptions for modifying each account that affects the USF process?" "x%,0*&&%"  yO-Id.0 " X-0*&&qqS"  xWe decline to specify a detailed methodology for producing the required estimate because such  x[details, including the time period used to calculate the annual impact of a transfer, may need to  X- xvary in order to reflect the unique circumstances of each transfer..yX X- ` x` ` #X\  P6G;pP# For example, a purchaser of one or more local exchanges may intend to make a major investment  xin facility modernization during the second year after purchase, and may therefore wish to calculate the annual USF impact postmodernization, in order to produce the most accurate estimate. Moreover, it is in the  xZinterests of petitioners for study area waivers to assess realistically the USF impact of a proposed  xKtransfer, taking into account any firm plans for future investment, because we often grant waivers  xon the condition that the annual USF draw not exceed the estimated impact claimed in the  Xv- xpetition./v X -x` ` #X\  P6G;pP#Id. at note 3. For these reasons, we decline to provide the specifications sought by the Joint Petitioners.  X1- ` x 25. ` ` NTCA and USTA also ask if "the shift impact limit caused by the study area  x<change that involves at least two different [I]LECs [will] be evaluated on the net of what happens  X - x[with the acquiring company and what happens with the selling company."0 J X-x` ` #X\  P6G;pP#Id. at 11. In a petition for a  xstudy area waiver, petitioners estimate how the proposed transaction would change the draw of  xjthe seller and purchaser(s) on the USF. The One Percent Guideline specifies that the net effect  xiof the transfer, added to the net effect of other waivers granted to petitioners within the past year,  xshould not increase, by one percent or more of the total USF, the combined annual USF draw  X- xjof the petitioners, absent an extraordinary public interest.1y X<- ` x` ` #X\  P6G;pP#While the One Percent Guidelines is stated in terms of disallowing a "shift in USF assistance" of  yO%- xione percent or more in the PTI/Eagle Order, the Guideline was clearly developed in response to concerns about  yO-transactions that increase USF assistance. See, e.g., PTI/Eagle Order at paras. 1217. Each carrier is individually subject  Xy- xMto the Guideline; the one percent limitation applies to the aggregate impact of the proposed  Xb- x[transfer and of all transfers to which a carrier has been a party, either as a purchaser or a seller,  xfor which a study area waiver request was submitted within the twelve months preceding the filing date of the waiver request at issue, and for which a waiver was granted.  X- ` x 26. ` ` Finally, NTCA and USTA ask if the One Percent Guideline applies to acquisition  X- xtransactions that were "signed" before the release date of the PTI/Eagle Order, but for which  X- xystudy area waiver requests had not been filed as of the Order's release date.2<  X#-x` ` #X\  P6G;pP#Joint Petition at 1112. As stated in the  X- xZOrder, the One Percent Guideline does not apply to study area waiver requests that were pending  X- xxbefore the Commission on the Order's release date, regardless of when the acquisition transaction" 20*&&qqp"  X-was completed.3 Xy-x` ` #X\  P6G;pP#See id. at 1774.  X- xD.` ` Other Issues  X- ` x27.` ` MCI proposes that the burden of any increased USF assistance that results from  x=the sales of exchanges be borne only by price cap ILECs. Under MCI's proposal, an exchange  xtransfer would reduce the USF assistance of price cap ILECs, while the funds available to other  xcarriers would be maintained. We do not address this proposal because it is beyond the scope of this proceeding.  X - ` x28.` ` NTCA and USTA urge the Commission to remove the indexed cap on the USF.4 y XD -x` ` #X\  P6G;pP#Joint Petition at 1314.  X -We do not address this issue here because it is beyond the scope of this proceeding.5y * X- ` x` ` #X\  P6G;pP#USTA has raised this issue in a petition for reconsideration of Amendment of Part 36 of the  yO- xCommission's Rules and Establishment of a Joint Board, Report and Order, 9 FCC Rcd 303 (1993), filed on January 31, 1994 (CC Docket 80286).  X -5 V. ORDERING CLAUSES ĐTP  X - ` x 29.` ` Accordingly, pursuant to Sections 4(i) and 4(j) of the Communications Act of  X- xA1934, as amended, 47 U.S.C.  154(i) and 154(j), Sections 553(b) and 553(c) of the  Xy- x\Administrative Procedure Act, 5 U.S.C.  553(b) and 553(c), and Section 1.106 of our rules ,  x47 C.F.R.  1.106, IT IS ORDERED that the Petition for Reconsideration filed by MCI  xTelecommunications Corporation and the Petition for Partial Reconsideration filed by Pacific Bell ARE DENIED.  X- ` qx30.` ` IT IS FURTHER ORDERED that, pursuant to Sections 4(i) and 4(j) of the  xCommunications Act of 1934, as amended, 47 U.S.C.  154(i) and 154(j), Sections 553(b) and  xz553(c) of the Administrative Procedure Act, 5 U.S.C.  553(b) and 553(c), and Section 1.106  X- xof our rules , 47 C.F.R.  1.106, the Petition for Partial Reconsideration and/or Clarification filed  xby the National Telephone Cooperative Association and the United States Telephone Association IS GRANTED in part and IS OTHERWISE DENIED. x` ` x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x` `  hh@William F. Caton x` `  hh@Acting Secretary